Our [textbook] author notes that cargo owners are not liable for spills under the Oil Protection Act of 1990. This week in New Orleans, District Judge Carl Barbier ruled Transocean was able to escape liability for compensatory damage stemming from their Deepwater Horizon rig which exploded in the Gulf of Mexico a little over a year and half ago. The Judge upheld the pertinent parts of the lease agreement it had with British Petroleum (BP) that indemnified them. This is standard in the industry.
This decision comes at the back drop of “The number of offshore rigs world-wide is back within one percentage point of the all-time peak in 2008, with more than 90% of the world's ultra-deep rig-those that can drill in water more than 7,500 feet deep booked through the end of 2012, according to Barclays Capital.” WSJ. All of this seems quite remarkable when you factor in the future of off shore drilling in the Gulf was in doubt (at least in the U.S.) in the months that followed the Deepwater Horizon oil rigs explosion. The U.S. Department of Interior (DOI) declared a moratorium on new drilling permits a few weeks after the explosion which, on top of the hold on granting new leases, also put a halt on existing deep water drilling. This caused many of the lease holders to leave the area as well as pending lease recipients lost patience with permit delay and began drilling in other parts of the world. In my opinion, the moratorium was a pretty arbitrary stance to take since the goal was to clean up oil spill and they effectively stopped the use of functioning oil rigs that were unrelated. The moratorium and slowing of issuing permits also cost jobs in Gulf States, which were already suffering from high unemployment, as of this summer more than 60,000 jobs had been lost in the Gulf States alone since 2008. I believe the DOI, along with the administration reactionary approach to the oil spill which although was terrible; was overly burdensome for an oil and gas extraction industry that has a pretty strong safety record. According the Bureau of Labor Statistics, oil and gas extractions industry is lower than 89% of the total working industry groups. The factors that all led to the gushing oil was a high unlikely worst case scenario. The cleanup effort paired with the many species of bacteria and water currents all but eliminated much of the underwater oil and methane by the fall of 2010.This past week President Obama, at his State of the Union Address, set a goal of opening up 75% "of our potential offshore oil and gas resources." Although the specifics remain unclear, the President seems to have changed his stance. I do think that some regulation is necessary but also industry that self-regulates; it was economic and public relations disaster for BP, Transocean, Halliburton and the industry as a whole when the oil rig exploded. The Oil Pollution Act has held BP responsible for cleaning up the accident to which they have already paid out over 7.8 Billion with much more likely to come. Transocean, escaped liability in this case but the company still could be on the hook along with BP and Halliburton for fines between $5 and $20 Billion combined under the Clean Water Act. Some safety standards to prevent further accidents such as this are warranted but permit issues continue to hold back the development.
Offshore drilling is crucial to our economy it keeps a healthy check on the prices of oil, as the authors of our book detailed at length the dangers of what can happen when we lose the handle on our ability to keep the price of oil at a stable amount. Offshore Drilling in the Gulf is also essential to US Economy from 2001-2009, Royalty revenues and lease sales generated in excess of $75 billion dollars paid to the Federal Government. With unconventional sources of extraction expanding movement from the Middle East back West is under way. Oil reserves in Canada and Brazil experienced huge increases over the past decade as a result. As the major oil companies start to leave the Middle East for more politically stable countries, now should be the time to embrace the move instead of discourage by restricting the availability of offshore drilling on our coasts so that the price of oil cannot be manipulated by circumstances beyond our control.
http://online.wsj.com/article/SB10001424052970203363504577185284108934976.html Wall Street Journal
http://www.bls.gov/iif/oshwc/osh/os/ostb2071.pdf U.S. Bureau of Labor Statistics
http://www.noia.org/website/staticdownload.asp?id=45798 National Ocean Industries Association
http://online.wsj.com/article/SB10001424052970203718504577181782951904336.html?KEYWORDS=gulf+offshore+drilling
http://www.boem.gov/Oil-and-Gas-Energy-Program/Energy-Economics/Fair-Market-Value/econFMV.aspx Bureau of Ocean Energy management
http://online.wsj.com/article/SB10001424052970204479504576638731600191382.html?KEYWORDS=moratorium+gulf+
http://online.wsj.com/article/SB10001424052970203436904577150910025591788.html
No comments:
Post a Comment