Commission Report Points to Systemic Problems for Offshore Drilling

On January 11, a Presidential commission charged with examining the causes of and responses to the massive 2010 oil spill in the Gulf of Mexico released its final report . The report concludes that many of the factors contributing to the April 20 explosion aboard the Deepwater Horizon oil drilling rig, causing the release of more than 200 million barrels of oil from the Macondo well, were not unique but systemic to the oil industry and government oversight of offshore drilling.

The report faults all three major companies involved in the platform’s operation — BP, Transocean, and Halliburton — but also concludes that many practices contributing to the accident are common across the industry. Halliburton itself is involved in a majority of deepwater drilling operations in the Gulf of Mexico and Transocean is the world’s largest offshore drilling company.

The report also provides numerous recommendations to improve safety standards and measures to prevent and respond to future spills, including:

• Creating an industry-run safety institute similar to the Nuclear Safety Institute;
• Substantially raising limits on corporate liability for oil spills above the current $75 million level;
• Including other federal agencies such as the National Oceanic and Atmospheric Administration (NOAA) in review and oversight of offshore drilling operations;
• Substantially increasing funds from government and industry sources to both implement recommended reforms and provide adequate resources to respond to oil spills effectively.

At the same time that the Commission made recommendations to better prevent and respond to major spills, the report highlights that the inherent risks of offshore oil drilling are increasing as exploration moves into deeper and deeper ocean basins. In essence, the challenge of preventing future spills is growing at the same time that industry and government need to improve current safety practices.

Many of the report’s findings and recommendations had been previewed in earlier Congressional testimony and other public hearings, and BP, Transocean, and Halliburton issued qualified responses to the release of the Commission’s final report that were consistent with previous comments. Press releases for each company often aim to distinguish what they were responsible for and how it depended on the actions of one or both of the other two (e.g. the work done by subcontractors was done to BP’s specifications). All three also noted there are other pending reports examining the causes of the spill, including a study undertaken by the National Research Council, and that full comments on the Commission’s report would be premature until all major reports were completed.

Some of the report’s recommendations would add costs to oil-drilling operations, which might normally be met with resistance from oil and gas companies. The incident, however, has made the entire industry extremely sensitive to safety concerns and consequences for their public image; public responses to the Commission’s report have either been muted or cautiously welcoming of at least some of the recommendations.