Criminal negligence

The following excerpt is from a letter to the WSJ regarding the Deepwater Horizon disaster:

The BP testimony to the House Committee on Energy and Commerce on May 25 says it all, but perhaps that material needs to be explained. From looking at that evidence, this is what we know:

1) When cementing the production casing the cementing crew, which was being supervised by BP, had difficulty landing the top plug into the casing shoe. This was the first "red flag" because a satisfactory cement job to the production string is fundamental to the safe operation on a go forward basis. The fact that the cement job did not go as planned should have caused the testing operation that followed to be carefully scrutinized, it clearly was not.

2) As is normal practice, the integrity of the pressure tight seal was tested by pressuring up on the casing and observing the pressure response. If pressure bleeds off there is clearly a problem with the pressure integrity of the shoe, However, industry practice dictates that a positive test, that is no pressure drop, is not diagnostic, simply because the reservoir pressure is sufficient to retain the pressure being applied. A negative test is useful because it is diagnostic of a failed cement job. In this case the test was positive.

3) Again, as is normal industry practice a negative pressure test was run, with pressure released from inside the casing and the pressure response was measured. In this case evidence has been bought before the committee that there was a 1,400 psi pressure response. This response is highly diagnostic and is therefore the second "red flag" and at this point the BP supervisors should have concluded that they had what the industry calls a "wet shoe." That is that the cement job had failed to form a seal at the casing around the reservoir which we know contains high pressure oil and gas.

4) At this point a decision should have been made to do a remedial cement job; this is an expensive operation, but having seen a 1,400 psi response, there was no choice.

5) The BP engineers then proceeded with the balance of the operation to temporarily abandon the well. This meant replacing the 14-pound-per-gallon mud that was in the wellbore with 8.5-pound-per-gallon sea water. The denser mud had been, up until this time, the primary pressure control and was keeping the hydrocarbons in place despite the lack of an adequate cement job at the casing shoe.

Given the two red flags that had been thrown up previously, one would have expected that as a precaution a cement plug would have been placed somewhere in the wellbore as a secondary pressure seal before this primary pressure control system (heavy mud) was evacuated from the wellbore. But at the very least the mud replacement operation should have been heavily scrutinized. Clearly it was not.

6) Evidence provided at the hearing, including the pressure data transmitted from the rig for the last two hours before the explosion, is diagnostic. At 8:20 p.m. on the day of the explosion the pressure data suggest there was a constant flow of sea water being pumped into the drill pipe that was displacing the heavier mud system which was the primary pressure control for the well. The rate going in was 900 gallons per minute, but the flow data of mud coming out was steadily increasing from 900 gallons a minute at 8:20 p.m. to a rate of 1,200 gallons per minute at 8:34 p.m. During this 14-minute period one can conclude that hydrocarbons were flowing and pushing more fluid from the wellbore than was being pumped in.

This letter which was written by the president of Samson Oil and Gas clearly illustrates that it really was sheer negligence by BP that caused the explosion which sank the rig. Every industry standard of safety and protocol was ignored. The question I ask is, how would more regulation have stopped such negligence?

Less Rigs, less work, more unemployed

From CNN:

The White House responded Thursday to concerns that the ban on drilling for oil in the deep waters of the Gulf of Mexico will cost the region thousands of jobs.

"The six month moratorium on deepwater drilling was instituted for a clear reason," White House spokesman Ben LaBolt told CNN. "The President believes we must ensure that the BP Deepwater Horizon spill is never repeated."

But Louisiana Governor Bobby Jindal said that prohibiting deepwater drilling could cost the state up to 6,000 jobs this month, and 10,000 jobs over the next few months, in a letter sent Wednesday to president Obama.

If the ban continues for an "extended period," Jindal said, the state could lose up to 20,000 existing and new jobs by next year.

The moratorium was extended last week from 30 days to six months pending the outcome of an investigation into what caused an oil rig operated by BP to explode and sink last month.

The ban requires all Gulf wells in more than 500 feet of water to shut down, and also prevents permits from being issued for any new deepwater drilling.

However, there are 4,515 shallow-water wells in the Gulf that will not be affected, according to the Louisiana Mid-Continent Oil and Gas Association (LMOGA)...

...According to the LMOGA, roughly 33 floating drilling rigs in the Gulf will be idled as a result of the ban. Jindal said 22 of those deepwater rigs are off the coast of Louisiana.

And the group estimates that as many as 1,400 jobs are at risk for each of the 33 idled rigs.

Those jobs pay an average of $1,804 per week, which means the potential for lost wages for all 33 rigs could be as much as $330 million per month, LMOGA said.

Comment: I understand that people are upset about this horrible spill that continues unabated as I write this, but there is already a strong indication coming from the Obama administration to curtail or prevent future off-shore drilling. Some of this is to appease the radical "greenies" in the Democratic party but also to look like he is being tough on BP and Big Oil. Less drilling for our resources means less American jobs and less tax revenue. It also means more reliance on foreign sources for a product that, despite what "greenies" tell us, we will continue to use and need for decades to come.

Obama's Katrina?

This piece by Charles Krauthammer on the BP oil spill is too good to go unmentioned:

Here's my question: Why were we drilling in 5,000 feet of water in the first place?

Many reasons, but this one goes unmentioned: Environmental chic has driven us out there. As production from the shallower Gulf of Mexico wells declines, we go deep (1,000 feet and more) and ultra deep (5,000 feet and more), in part because environmentalists have succeeded in rendering the Pacific and nearly all the Atlantic coast off-limits to oil production. (President Obama's tentative, selective opening of some Atlantic and offshore Alaska sites is now dead.) And of course, in the safest of all places, on land, we've had a 30-year ban on drilling in the Arctic National Wildlife Refuge.

So we go deep, ultra deep -- to such a technological frontier that no precedent exists for the April 20 blowout in the Gulf of Mexico...

...Federal officials who rage against BP would like to deflect attention from their own role in this disaster. Interior Secretary Ken Salazar, whose department's laxity in environmental permitting and safety oversight renders it among the many bearing responsibility, expresses outrage at BP's inability to stop the leak, and even threatens to "push them out of the way."

"To replace them with what?" asked the estimable, admirably candid Coast Guard Adm. Thad Allen, the national incident commander. No one has the assets and expertise of BP. The federal government can fight wars, conduct a census and hand out billions in earmarks, but it has not a clue how to cap a one-mile-deep out-of-control oil well.

The problem with regulation

Can you say regulatory capture? Economists have been studying this phenomenon for decades but some people simply are not convinced that it really does happen.