Replies to This Discussion

Permalink Reply by drilltheshale on June 23, 2010 at 2:55

RB,

I have to believe there is some point where we know we need money, but it doesn't rule every decision. I think a 6-month moratorium for the safety panel to assess where we are on deep-water drilling is reasonable-- and it won't destroy the economy. As for the 7-member Salazar panel, it was actually a 16-member panel, and the rest did not voice an objection. Remember, government convenes advisory panels to advise, but Salazar is paid (and gets the upside or downside) to make the final decision.

And, "All those other companies you mentioned and probably others as well pretty much did use the same emergency spill plans, except for the letterhead they were basically identical, but that doesn't speak to me too much more about their liability in all this than the porn-watching federal people who should have insisted on much more responsible and detailed plans." --The sleeping cop doesn't excuse the bankrobber. The government didn't spill this oil and the bald fact is we all know if this happens tomorrow, not a single deepwater driller has the ability to handle it.

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Permalink Reply by P.G. on June 23, 2010 at 3:12

I think a 6-month moratorium for the safety panel to assess where we are on deep-water drilling is reasonable-- and it won't destroy the economy.

Just the economy for those who they are trying to save, huh?
Yes it's horrible Louisiana has to suffer through a spill but now will have to suffer the loss of thousands of good paying jobs..
More thought on the weight of the consequences of a ban needs to be exercised here don't you think?
I'm betting those responsible companies who haven't had a serious spill won't want to go down the road BP is travelling and will take what ever precautions to see it doesn't happen to them.

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Permalink Reply by The_Baron on June 23, 2010 at 3:29

This was out on the LA emergency prepardness website:

JUST THE FACTS: Drilling Moratorium's Impact on Louisiana's Families and Economy
More Than 41,000 Have Already Signed GEST Petition Calling On President To End Drilling Moratorium

BATON ROUGE (June 14, 2010) - The six-month drilling moratorium in the Gulf of Mexico will cripple Louisiana's economy and leave thousands of families without income, particularly in coastal Louisiana, where one in three jobs is related to the oil and natural gas industry. In Louisiana, oil and gas production can be divided into three industries - oil and gas extraction, refineries and pipelines - which in 2005 supported more than 15 percent of the total household incomes earned in the state.

To date, more than 41,000 people have joined the Gulf Economic Survival Team (GEST) and signed the petition calling on the President to end the drilling moratorium. The petition can be found online at www.GEST.LA.gov.



How much oil comes from the Gulf of Mexico?


•Around 33 percent of domestic oil in the United States comes through the Gulf of Mexico;
•Eighty percent of the Gulf of Mexico's oil and 45 percent of its natural gas comes from "deepwater" operations that occur in more than 1,000 feet of water.



How many jobs does the oil and gas industry provide in Louisiana now?


•The Louisiana Department of Economic Development estimates that the active drilling suspension alone will result in a loss of 3,000 to 6,000 Louisiana jobs in the first two to three weeks;
•The ban could cost Louisianans more than 10,000 jobs within a few months;
•The state risks losing more than 20,000 existing and potential new jobs during a 12 to 18 month period, if the federal panel takes longer than six months to do their reviews and write their reports;
•Coastal Louisiana, where one in three jobs is related to the oil and gas industry, services around 90 percent of deepwater operations in the Gulf of Mexico;
•The Louisiana Department of Natural Resources estimates that an average of two supply boats per rig work every day with rates of $15,000 to $30,000 a boat, which means that suspension of drilling activity will result in a nearly $1 million loss per day in supply boat rental income. Each drilling rig job supports four other jobs in local communities.



What is the overall impact of the Oil and Gas Industry in Louisiana?


•Oil and gas production directly and indirectly supported $12.7 billion in household earnings in the state, representing 15.4 percent of total Louisiana household earnings in 2005;
•The industry supported, directly and indirectly, more than 320,000 jobs and $70.2 billion in business sale in Louisiana in 2005;
•In 2006, more than 58,000 Louisianans worked in extraction, pipeline and refining jobs.



How much does the oil and gas industry contribute to Louisiana's state revenues?


•For the 2006 fiscal year, the oil and gas industry paid more than 14 percent of total state taxes, licenses and fees collected by the state of Louisiana;
•This revenue amounts to more than $1.4 billion - a substantial portion of Louisiana's budget;
•Because this sector generated $12.7 billion in Louisiana household earnings, state government collected more than $890 million in related taxes in the 2006 fiscal year.
How much does the oil and gas industry contribute to local government revenues in Louisiana?
•Using conservative estimates, the oil and gas industry paid more than $172 million in ad valorem taxes to local governments in Louisiana in 2005;
•In 31 of Louisiana's 64 parishes, these taxes exceeded $1 million and in 12 Louisiana parishes they exceeded $5 million;
•Because this sector generated $12.7 billion in household earnings, more than a half billion dollars ($560 million) was added to the treasuries of local governments in the 2006 fiscal year.

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Permalink Reply by drilltheshale on June 23, 2010 at 3:02

DW,

Well said, but courts generally give very wide latitude (as law and precedent require) to such agency decisions. As for a hurried order, this decision had to be made fairly quickly or it would have been useless. I imagine we'll see the injunction overruled by the 5th Circuit. Salazar is already preparing to re-issue the moratorium with more detailed reasoning but the scope and duration will apparently be the same.

I think it's a wise decision.

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Permalink Reply by The_Baron on June 23, 2010 at 3:10

only a wise desision if you want to ruin the economy of the producing gulf states. I have several friends already laid off due to the moritorium. Their jobs will go overseas as the rigs leave. The rigs will leave with long term contracts elsewhere. To date, I have seen no definitive proof that other operators like Chevron or Exxon Mobile are operating in the reckless manner that it appears BP did.

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Permalink Reply by Rosebud on June 23, 2010 at 3:51

Jindal knows what's going on, doesn't he? It's so obvious it hurts! BirdDawg said something in another discussion about being a brain surgeon. What if Dr. BP was a brain surgeon - a physician with a long list of negligence and incompetence complaints against him but no medical authorities were paying attention, they were basically as negligent in performing their responsibilities to protect patients as the doctor was to operate on them. Then one day a patient died. Whoever the patient was, he was known around the world and suddenly Dr. BP's record of malpractice and the medical board's negligence were both center stage for all to see.

Would it make sense to stop all brain surgeons from operating for six months while the irresponsible medical authorities suddenly took their responsibilities seriously and investigated each doctor?

Would it make sense that the first surgeon investigated and probably cleared to do surgery had to sit idly by while all his colleagues were investigated? What if all the surgeons proved to have good records, there'd been absolutely no reason for them to let patients suffer for six months? Because no brain surgeries were performed for six months, the hospital operating rooms and specialized equipment grew unaffordable and was sold off. Countless hospital support people with the unique knowledge and skills to assist with brain surgery lost their jobs. Sure, they could entertain themselves by maybe mopping the hospital floors but only a few such jobs were available.

I hate the term "Drill Baby Drill" for the way it sounds so loosely managed and reckless when I have to believe, from the reports I've seen, that like reputable brain surgeons shouldn't be restricted from using their unique skills to save patients neither should reputable oil producing companies be shutdown because of the negligence and irresponsibility of one.

One bad teacher doesn't shutdown education, one bad airplane doesn't shutdown air travel, one ship's problems don't stop the cruise industry, one food producer's mistake doesn't close grocery stores, one bad drug doesn't mean nobody can get medicine - it simply doesn't make sense.

Who is Salazar going to turn to for advice as to what to include in his new moratorium? Will it be more O&G scientists and experts or people he knows for a fact are going to go along with Obama's agenda? When you look at this administration's record for following through with threatened or promised lawsuits, how long do you think it'll be before Salazar even comes up with another moratorium? Maybe he can get Eric Holder to put the new moratorium on his "to do" list.

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Permalink Reply by Dion Warr, CPL on June 23, 2010 at 4:17

Drilltheshale:

IMHO, if Salazar simply reissues the moratorium, you'll have the same injunction extended to include same, until such time any such ruling from Interior is no longer adjudged to be "arbitrary and capricious". Unless Interior specifically narrows their reasoning or scope, it will continue to give the impression of "we've lined up and heard from all the experts, we'll take it under advisement, shut it all down."

Not to be arbitary and capricious, and from the POV of someone who does not design, engineer, drill, or operate wells in the Deepwater GOM, but a 90-day moratorium would have seemed to make more sense. Thirty days to have all impacted operators turn over their data and study the problem and draft preliminary measures (which they did), followed by thirty days of inspection and compliance review (which they have; actually they did some of this during the first 30 days), followed by thirty days of implementation and go forward by those shown to be in compliance with the new requirements. Anything more than that is unfairly punitive to the parties that have done their homework, stood up to focused scrutiny and corrected any deficiencies that have been identified. Skilled workers and tradesmen are not cheap, and service companies do not keep them around for months on end with nothing to do with regards to their respective specialties. Those folks will get laid off by the thousands in an extended shutdown scenario. Six months is 'forever' in that business.

If I had to guess, I think what will be found is that the root causes of the failure of the MC252 well and subsequent spill will be found to be that the engineering, equipment and implementation was pushed too close to the margin of error, and that a combination of factors working upon that system revealed that weakness in a tragic and catastrophic fashion. In light of such a failure, those in the industry and the planning and design will have to rethink their process and change their assumptions, much like bridge builders had to rethink suspension bridges after Tacoma Narrows, or dam builders had to rethink massive damworks after the St. Francis disaster. But we didn't stop building suspension bridges or building large dams. I don't think that it will be as simple as "an evil greedy corporation", or a "rogue buffoon tanker captain" (OK, the tanker captain existed), or an inspector "too cozy with the corporation". That rarely exists outside the realm of Hollywood script writers, the mainstream press, or grandstanding politicians.

Or in the minds of the purveyors of 1-800-BIG-SPILL. (Believe me, not an endorsement.) Not to get too far off-topic, and I understand that liability lawyers can't let a good catastrophe go to waste and need to get their name out there in a memorable way, but does anyone else find this just a bit gauche?

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Permalink Reply by drilltheshale on June 23, 2010 at 6:06

"IMHO, if Salazar simply reissues the moratorium, you'll have the same injunction extended to include same, until such time any such ruling from Interior is no longer adjudged to be "arbitrary and capricious"."

Probably moot--none of the drillers will risk resuming until the whole case plays out.

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Permalink Reply by Dion Warr, CPL on June 23, 2010 at 6:42

If that is the case, the jobs are lost already, and service contractors from Lafayette to Houma and beyond will start clambering for air and shucking jobs shortly.

Based upon the fact that the contractors sought the injunction have some depth in their collective pockets, and the fact that they can bill for services performed until specifically enjoined from doing the work, IMHO they'll work to keep working, at least during the early rounds.

At this point, nothing else to do but wait and see.

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Permalink Reply by The_Baron on June 23, 2010 at 7:05

I'm sure the 33 wells that were currently drilling will get back to it in the hope of completing the wells in time...I hope.

Hopefully the Appeals court will rule quickly, either way, so we at least have some assurances as to what the situation will be.

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Permalink Reply by Mary Alison Anders Knighton on June 23, 2010 at 4:38

Yes!!! The judge had the sense to do what is right...finally some good news coming from our "government".
"Don't Tread On Us"

Mary Alison Knighton

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Permalink Reply by Mac Davis on June 23, 2010 at 7:12

Reissuing the moratorium

Unfortunately, I think this will probably pass muster and have the desired effect of keeping everything shut down.

The judge listed a number of legal problems with the moratorium order. I think the basic problem was that the old order just said, "I'm in charge and I'm shutting this down." The judge decided that this order didn't pass legal muster. However, the judge listed the defects with the order as issued. The government will probably issue a new order and say specific things that give the impression of meeting the judges objections. The judge expressed reluctance to overrule the technical judgment of the regulators, but was willing to overrule the "I'm shutting you down because I say so" nature of the order.

The new order will probably list "mechanical technical" reasons for the shutdown. They'll probably say something like "we've discovered that existing blowout preventer design regulations are inadequate," or "technical analysis of cleanup plans indicates they are inadequate," or "review of the standard illudium q-36 flow modulator design parameters indicate problems." I'm sure that there are tons of minor objections they can claim to have "discovered" when they reviewed GOM drilling that can be used to justify drilling.

I suspect all they have to do is issue a new moratorium that takes the judge's objections into account.

I think this is probably the end of US offshore drilling for quite a while, if not forever. What company is going to risk having the US government capriciously rip a $20 billion slush fund out of corporate funds before the company has their day in court? Who's going to risk spending millions of dollars on a well, only to have the US shut them down on a whim before they start production? Or to shut down production on a whim even after production has started?

I suspect that all the rig owners are making plans to evacuate their assets to places outside US jurisdiction as quickly as possible. I know RIG (Transocean) moved their corporate identity to Switzerland some years ago. I suspect that they'd be glad to get as many of their hard assets as possible out of the reach of Obama and Congress before they decide that RIG needs to put up another $20 billion slush fund for the Deepwater Horizon incident.

Sadly, there is no longer "the rule of law" in the US in terms of O&G production. You're subject to being shut down on a whim by the government. There are too many other countries where the financial risks to your company aren't as bad. It's not that difficult to move your operations outside the reach of the US government.

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