Chris Philips, Managing Editor
On April 20, an explosion on the British Petroleum drill rig Deepwater Horizon in the Gulf of Mexico killed 11 workers and injured 17 more.
The rig burned and sank, and started a massive ongoing offshore oil spill in the Gulf of Mexico, which is now considered the largest in US history.
The tragedy, of course, is the loss of eleven lives. The Coast Guard searched continuously for three days with an effort consisting of 28 air and surface sorties, covering approximately 5,375 square miles. On April 23rd, the US Coast Guard suspended the search for survivors, and our condolences go out to their families. The news of their deaths, as well as the successful rescue of the other 126 souls aboard the rig, was quickly overshadowed by the massive spill.
On May 6th, with oil still gushing out of the broken well into the Gulf, President Obama announced a six-month deep water drilling ban, based on a report by Interior Secretary Ken Salazar claiming a panel of experts had recommended the ban. Secretary Salazar has come under scrutiny, and the report itself has come into question, because the experts consulted by Secretary Salazar specifically recommended against a blanket moratorium, and have been vocal in their support of continued drilling.
Immediately, oil companies started looking at other countries where their expensive rigs could continue to operate.
Back in August of 2009, the US government loaned billions of dollars to Brazil’s state-owned oil company, Petrobras, to finance exploration of the huge offshore discovery in Brazil’s Tupi oil field in the Santos Basin, near Rio de Janeiro.
Reuters reported late last month that, with an estimated 35 oil rigs idled in the Gulf of Mexico, companies are looking to move their operations to Brazil, where vast discoveries in recent years may soon turn the country into a major crude exporter.
“What is bad for some may be good for others,” said Fernando Martins, Latin America Vice President for GE Oil and Gas, which provides services to drillers in Brazil. “Since operators are shutting down at least temporarily in the US Gulf, some companies are planning to move their rigs to Brazil now,” he said.
The potential loss of the deepwater oil jobs is a catastrophe.
Prince William Sound was devastated by the Exxon Valdez spill in 1989. The safeguards put in place since then, both mandated and voluntary, have virtually ensured that no such spill will happen again, and the area has largely recovered (although the legal issues remain, and could for decades). If the President at the time had imposed a six-month moratorium on oil shipping, the resulting chaos would have affected the entire coast. Thousands would have been unemployed, and ship owners, who have to keep their ships full or they lose money, would have sought greener pastures.
Oil tankers are obviously much more mobile than deepwater drill rigs. After a six-month hiatus, the West Coast oil transportation industry would have come back to serve the pipeline terminus in Valdez.
At press time, a federal judge in New Orleans had halted the deepwater drilling moratorium, saying the government never justified the ban and appeared to mislead the public in the wake of the Gulf of Mexico oil spill.
The Washington Times reports Judge Martin L.C. Feldman issued an injunction, saying that the moratorium will hurt drilling-rig operators and suppliers and that the government has not proved an outright ban is needed.
Feldman also said the Interior Department misstated the opinion of the experts it consulted. Those experts from the National Academy of Engineering have consistently opposed the blanket ban.
White House press secretary Robert Gibbs says the administration will appeal the decision, and intends to ask Feldman to stay his ruling pending an appeal.
Oil company executives last moth told Congress they lose up to $1 million a day per idle rig, and said there are opportunities elsewhere. The uncertainty injected by the White House is almost as damaging as the ban itself. The Obama Administration’s initial ban could have been seen as a knee-jerk reaction by an inexperienced manager trying to manage the situation. The subsequent “amended” report by Interior Secretary Salazar falsely claiming scientific support for the ban could be seen as political meddling at best and borders on malfeasance.
The continued attempt by the White House to prolong the ban can only be seen as an attempt to destroy the deepwater oil industry in the Gulf.
The US needs oil, and we’ll take it from wherever we can get it. If we can’t get it from our own backyard, we’ll pay more for it.
If the deepwater rigs leave the US Gulf Coast for Brazil, they might not be back. The newer, safer rigs are in higher demand, and they will be the first to leave. Many, if not most, are owned by foreign companies, which will just as easily hire Brazilian labor, thereby leaving thousands of US family-wage jobs on the beach. This is the real cost of the of the Deepwater Horizon disaster.
While the oil will eventually dissipate, if the rigs leave for good the Gulf economy could take decades to recover.
