Deepwater Oil Risks Greater Than Industry Admitted
By: Scott Cohn | CNBC Senior Correspondent
More than two months after the Deepwater Horizon sank, it is now clear the energy industry doesn't know exactly how to stop a blowout in deepwater or how to clean up a massive spill.
At a hearing on June 15, when Congress pressed oil executives on their readiness to handle the worst-case blowout scenario, Exxon Mobil CEO Rex Tillerson responded frankly, "We are not well equipped to handle them. There will be impacts." He added, "That is why the emphasis is always on preventing these things from occurring." (Watch video of the oil CEOs testifying at the Congressional hearing below.)
So why are we out there in the first place? In the push to drill, drill, drill, did the oil industry, government and the public delude themselves into believing that deepwater drilling is safer than it truly is?
"This is a precious public resource. It doesn't belong to BP or Shell or me. It belongs to the public," said University of California Berkeley Professor Robert Bea. "And if we, in fact, need that resource, then perhaps that can be done safely, acceptable to the American public, acceptable to the government, acceptable to industry, and God sakes acceptable to the environment."
Bea has investigated every major industrial disaster in the past 50 years and is leading an independent study of the Deepwater Horizon.
"I think it's fair to ask the question, were we too aggressive as an industry? Did we have the proper regulations when we transitioned from shallow water to deep water? Did the regulations transition with them?" said Frank Glaviano, who just retired after 34 years at Shell, most recently in charge of exploration and production in the Americas, including the Gulf of Mexico.
"But should the deepwater Gulf of Mexico be explored? The deepwater around the world is being explored, and needs to be explored. The world consumed 80 million barrels a day in oil, the last time I checked. And all the easy oil's been found," Glaviano said. "Going into deep water was a natural, technological evolution driven by the need for oil companies to grow and replenish their reserves, and keep supply up. That's what we do, that's how we sustain ourselves." (Watch more of Glaviano's comments in the video below.)
Former oil industry geologist John Amos has been warning it was only a matter of time before a disaster like this happened. "I think that anybody who's watched this industry closely knew this day was going to come," he said. Amos founded the non-profit organization SkyTruth, which uses satellite imagery to call attention to environmental hazards.
Exactly five months before the disaster, Amos testified at a Senate hearing alongside a BP executive who insisted deepwater drilling is safe. He pointed to an oil rig that exploded of the coast of Australia in just 250 feet of water making the case that if it happened there, it could happen anywhere. That well spewed millions of gallons of oil for ten weeks.
Louisiana Senator Mary Landrieu attended that hearing and challenged Amos, but now recants some of her statements. "What I did say then that I know wasn't true today, but I held up the sign of that rig on fire off the cost of Australia. And I said emphatically, this could not happen offshore in America today, because we have strict regulations. We have greater oversight than is oft the case of Australia. What we found out is, that burning rig did catch fire right off the coast of Louisiana. Not the same rig, but because of what we think now is human error."
Oil executives continue to insist that a disaster like this couldn't happen at their firms. The practices at their companies are safe and environmentally sound, they told Congress, and this disaster—BP's disaster—was preventable.
"Nothing can be done with absolute safety. We can't give anybody absolute assurances for anything, including life," said Bea. "What we need to do is start to get honest. And start to say there are risks involved."
Molly Mazilu contributed to this story.
For an in-depth look at the oil industry and the development of alternative sources of energy, watch a CNBC special presentation, "America's Crude Reality," Wednesday, June 30 at 8pm ET, hosted by Melissa Francis.