When regulation is not ‘very costly’

The congressional grilling this week of representatives of British Petroleum and other companies involved with the oil-rig disaster in the Gulf of Mexico, along with officials from the U.S. Department of Interior who oversee the drilling, has the air of a show trial. Senators will have the opportunity to harrumph loudly about what has occurred and visibly display their displeasure before the cameras.

For all the grandstanding, however, there are legitimate questions that deserve answers, both from the oil company executives and the Interior Department.

One involves the decision by the Interior Department to exempt BP from a requirement that it conduct a full environmental analysis of its operations in the gulf. The second has to do with a backup shutoff system called an acoustic switch, which is designed to use sound signals from the surface to close oil valves on the ocean floor if all other methods fail.

The Deepwater Horizon oil rig that exploded last month, killing 11 people and spewing millions of barrels of oil into the Gulf, did not have such a switch. The United States doesn’t require them on offshore oil rigs. But many other countries with heavy offshore drilling — including Norway and Brazil — do require the devices. And BP has voluntarily installed them in other locations.

No one is certain that an acoustic switch would have prevented this disaster. While the technology appears functional, acoustic switches have never been tested in a severe deepwater accident, such as occurred in the Gulf.

Even so, the Interior Department’s Minerals Management Service began considering them a decade ago, and at one point appeared ready to require them. But three years later, after lobbying from oil companies, Minerals Management had an independent study conducted and concluded the acoustic switches weren’t necessary.

“Acoustic systems are not recommended because they tend to be very costly, and there is insufficient data available on system reliability in the presence of a mud or gas plume,” the 2003 report said, according to The New York Times.

The cost, according to a Wall Street Journal article on the acoustic systems, is about $500,000. BP reports it is spending about $6 million a day fighting the oil spill.

Last year, the same Minerals Management Service granted BP an exemption from doing an environmental analysis of its Gulf operation after the company lobbied for it. BP claimed the prospect of an oil spill at the Deepwater Horizon was “unlikely,” and said that no extra mitigation measures should be required.

In fact, according to The Washington Post, BP was pushing Minerals Management to expand the exemptions for drilling operations in the Gulf in the weeks just before the Deepwater Horizon explosion.

So the Interior Department under the administrations of both George W. Bush and Barack Obama acceded to the wishes of an oil giant to reduce or forestall regulatory requirements that the oil companies found too expensive.

However, if the half-million dollar acoustic switch had worked, the return on BP’s investment would have been incalculable. In fact, we might not now be having a national discussion about offshore oil drilling and cleaning up an environmental catastrophe.

Similarly, if it had proceeded last year with an environmental analysis of its drilling in the Gulf, that analysis might have determined that an oil spill was not as unlikely as the company suggested, and it may have come up with other mitigation procedures that could have been put in place more quickly to contain the oil slick.

The same holds true with drilling regulations adopted by the state of Colorado last year. We will never know how many environmental disasters or health emergencies they prevent. It is only in the aftermath of such an event, when needed regulations weren’t in place, that the less-regulation option begins to look like a “very costly” alternative.


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