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Monday, May 3, 2010

Deepwater Horizon

You've almost definitely heard about this story. There was an accident at an offshore BP oil drilling rig in the Gulf of Mexico, near Louisiana. The name of the drilling rig was "Deepwater Horizon". Eleven workers are missing and presumed dead.

The well is leaking 5k+ barrels of oil per day. It hasn't been stopped yet.

Initial reports were "1k barrels of oil per day". That estimate has been raised to "5k barrels per day". It's amusing how State agents underreport the severity of a problem.

This story was really interesting. The amount of leaked oil might be 25k barrels per day, and not the current official estimate of 5k. The rate of leakage might be increasing. The gushing oil is probably eroding the pipes and equipment already there.

Oil trapped underground is sometimes under pressure. This creates the risk of a blowout or "gusher". That's what happened in this accident.

When people first started drilling for oil, blowouts/gushers were common. In the early 20th century, they started using safety plugs/valves to prevent blowouts. Superficially, a gusher seems good, because it means you found a lot of oil. However, a blowout wastes oil. It damages the drilling rig and equipment. It can injure employees. The spilled oil causes environmental damage, even on land. Oil drillers rapidly developed blowout prevention tools.

If there's a spill on land, only the area surrounding the well is contaminated, although the spill can reach the water table. A spill on water is much more dangerous, because a lot of coastline can be contaminated. Water carries the spill to a large area. It only takes a thin coating of oil to cause damage, killing fish/shrimp and wildlife/birds.

In some ways, the Deepwater Horizon spill is worse than an oil tanker spill. An oil tanker contains a fixed amount of oil. This blowout is spilling more oil every day. It hasn't officially reached "Exxon Valdez" levels yet, but it might before it is stopped.

There was one severe risk I read about. The oil is coming out under pressure. It also contains sand and rocks. The blowout is eroding the pipes and equipment already there. This could lead to an increase in the oil leakage rate over time.

There was one really offensive part of this accident. There was only one blowout cap. I heard different versions of this from different sources. One source said a second backup blowout cap could have been purchased for an additional $500k. Another source said that the blowout preventer should have had a remote-control shutoff feature. BP didn't want to spend the extra money. Such a cap is used in other countries. Some US companies use it, even though they aren't legally required. US regulations don't require this safety feature due to lobbying by corporations like BP.

This is the usual "captured regulators" problem. The oil drilling regulators answer to the interests of insiders, rather than recommending genuine best practices. They lobbied for a regulation that allowed them to cut corners. BP's liability is limited. Therefore, it might have made economic sense for them to cut corners on safety, even though they made a huge payout. The huge payout this year might be more than offset from extra profits in other years.

It's easy to say now that BP should have paid the extra $500k. If you compare the cost of an accident with the cost of the extra safety feature, it seems obvious. However, the extra $500k would be paid for every single well; it's still probably justified.

It was amusing to hear President Obama say "No new offshore drilling! (for awhile)" Oil industry insiders will wait a few years until people forget, and then lobby for more offshore drilling.

It was interesting to see the alternatives for dealing with the problem. That is hard, because the oil is under pressure. The oil is coming out with force, rather than merely leaking.

They are trying to close the malfunctioning safety valve, via remote-control underwater submarines. That isn't working. If that was going to work, they would have succeeded by now.

They are making a steel cap to cover the well. That will contain the oil so it can be pumped away. However, it will take a few weeks to make a steel cap. Why didn't they make one ahead of time?

They can drill a 2nd relief well into the original one. That would be used to pump dense mud into the ground, to stop the leak. It isn't used to directly relieve the pressure, although that's what the name sounds like.

One interesting solution is to bomb the ocean floor. The debris would cover up the leaking well. Why didn't they try that? The only drawback is that it's make the current well unusable.

Catching the oil after it leaks to the surface is the hardest way to do it. When oil comes into contact with water, it spreads out over the surface.

Also, State agents waited a few days before deploying containment booms. That makes it harder to contain the spill, because it's already spread.

The problem is that people have no choice but to rely on the government defense monopoly to clean up after the accident and stop the leak. It's very hard to tell if they're doing a brilliant job or barely competent job. Most likely, it's a barely competent job.

It's amusing that this is being referred to as "Obama's Katrina". When Bush was president, the Federal government did a lousy job after Hurricane Katrina. Now, with Obama as president, the Federal government did a lousy job after the oil spill. The common theme is not Democratic/Republican president. The real problem is that government does a lousy job, because it has a monopoly. Most low-level State employees are the same no matter who is President; they're the ones who do the actual work.

Is offshore drilling a bad idea? You can't conclude that from this incident. The real problem is that State law encourages negligent behavior. Just because BP executives did something stupid, doesn't mean everyone should be banned from drilling for oil offshore. BP will only be required to pay compensatory damages; punitive damages are capped.

Another interesting bit is the the oil underground is owned by the Federal government. BP's contract specifies a fee per barrel for oil drilled. Does BP have to pay for the oil they're spilling?

The Deepwater Horizon accident is an example of government endorsing dishonest behavior. The mainstream media portrays the government as heroes, because they're the ones trying to fix the problem they caused. This is an excellent example of "captured regulators".

1 comment:

Anonymous said...

You were right about this one! The problem is corruption between BP and the US government.

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