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Gulf Watchers Diary Schedule
Monday - evening drive time
Wednesday - morning
Friday - morning
Friday Block Party - evening
Sunday - morning

Part one of the digest of diaries is here and part two is here.

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Half a loaf, or no loaf at all. Or one ocean in danger, another with a temporary reprieve? The White House puts the brakes on drilling in the eastern Gulf of Mexico. From the New York Times:

Administration spokesman Ken Salazar says that after determining that weaknesses exist in Federal regulations to limit disasters in deepwater drilling after the BP blowout, the moratorium will be in force for seven years, until stronger environmental constraints are put in place.

The decision essentially reverses the much-disputed drilling plan announced in March, which would have initiated environmental studies and exploration activity in previously untouched areas off the Gulf Coast of Florida and along the East Coast from Florida to Delaware.

"As a result of the Deepwater Horizon oil spill, we learned a number of lessons," Mr. Salazar said in an afternoon briefing, "most importantly that we need to proceed with caution and focus on creating a more stringent regulatory regime."

After the BP spill, Mr. Salazar disbanded the discredited agency charged with regulating offshore oil and gas operations, the Minerals Management Service, and replaced it with a new bureau with enhanced powers. The agency was faulted for inadequate staffing, a cozy relationship with the oil industry, a failure to perform regular inspections of oil rigs and lax enforcement of environmental and safety rules.

Salazar said that exploration and production will continue in the central and western Gulf, but under enhanced restrictions, and any new leases will be subject to environmental studies before being undertaken.

The moratorium, however, does not halt exploration and drilling in the Arctic, but Shell Oil, holder of the current leases off Alaska's coast, must submit to new environmental reviews, which could delay plans for drilling by more than a year.

The Interior Department identifies areas for potential leasing by oil companies in five-year periods. It concluded that the enormous task of drawing up detailed rules, conducting environmental studies and drafting spill response plans for vast swaths of the Gulf and Atlantic where drilling has never taken place should not be rushed in preparation for that leasing phase.

The proposal to expand drilling to those areas, unveiled just three weeks before the BP accident, was part of a political plan to encourage more domestic oil production in exchange for Congressional action to limit carbon dioxide emissions that are contributing to global warming.

The eastern Gulf and the Atlantic Seaboard had been off limits to oil companies for years because of Congressional opposition, but lawmakers in Atlantic coast states have been pushing for offshore oil activity to reduce foreign imports and to generate tax and royalty revenue.

So, after the April blowout, the Obama administration was forced to drop back and punt...

Ultimately, Wednesday’s announcement was an admission that the Interior Department erred in deciding last spring to open up vast new areas offshore to drilling without adequate safeguards. And politically, the plan brought the Obama administration nothing.

The administration’s package fell apart as a result of the oil spill and the Senate’s refusal to take up comprehensive legislation on energy and climate change. Prospects for such legislation are even dimmer now after the Republican takeover of the House.

The administration imposed a moratorium in May on all deepwater offshore drilling while the new safety procedures were drawn up. Mr. Salazar lifted the ban in October, and oil companies have been seeking new permits to resume exploration in the gulf.

And wouldn't you know it, that paragon of environmental virtue, The American Petroleum Institute called the moratorium a bad decision at a time of economic stress, and will inhibit job creation, decrease government revenues, increase reliance on foreign energy, and cause dandruff...well, maybe not that last one. Just checking to see if you were paying attention.

"I’m surprised and disappointed by this decision, which will stifle investment and clearly stop the creation of tens of thousands of jobs," said Jack Gerard, president of the petroleum group. "This really compounds the problem with the existing de facto moratorium in the gulf. Eventually the oil and gas pipeline for production for the country will slow to a trickle."

Yeah, right, Jack... All you're worried about is your bottom line and your bonuses. Would you like a bit of cheese with that whine?

Environmental advocates, however, breathed a tiny sigh of relief on news of the reprieve.

"What it means is they’ve learned a great deal from the Macondo blowout and they’re taking a lot of places off the table that originally were going to be considered," said Marilyn Heiman, an oceans expert at the Pew Environment Group. She said she was troubled, however, by the decision to move forward with exploration off Alaska. "They still need to learn a lot more as it relates to drilling in the Arctic."

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Well, I guess that little ray of hope has been extinguished... The House Select Committee on Energy Independence and Global Warming, which has been chaired by Representative Edward Markey (D/MA) is being abolished by incoming Republican leadership. In a statement to the Boston Globe, Markey said he will continue in his mission.

"I am disappointed that the Republican leadership is not prioritizing energy independence and climate change as important issues to tackle, but that will not stop my efforts to cut carbon pollution and create American clean energy jobs," Markey said.

Since taking control of the House in the midterm elections on Nov. 2, Republicans have vowed to curb government spending and reduce taxes. Some Republicans contend the committee was tinged by politics and served solely as a launching point for such Democratic proposals as the cap-and-trade program, what they dubbed a national energy tax.

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Bob Cavnar says the moratorium on drilling does not go far enough. Whatever good comes from restrictions in the Gulf needs to be expanded in the Arctic but even then, due to the recently changed political climate, the restrictions may not be long-standing. Cavnar, from The Daily Hurricane:

The weird part of this new (new) plan, however, is that the offshore Alaska drilling program to be run by Shell will move forward; the only restrictions to this new program will be new safety regulations and development of spill control technology.  Since several of the new rules would require Congressional action, I maintain my prediction that the Republicans in the House will just stare at the President and do nothing.  The administration will cave, allowing new drilling in Alaska and the deepwater Gulf to go forward without substantial improvements in safety or spill control.

I just don't understand this latest decision.  I understand shutting down new area drilling, since the BP disaster proved that the industry really can't handle a catastrophic blowout and subsequent spill.  But allowing Shell to go ahead offshore Alaska?  What?  By the government's own assertions, spills are better handled in warmer waters since the oil just magically disappears (at least that's what they continue to say).  However, the Exxon Valdez proved that in colder environments, degradation of the oil and recovery of eco-systems takes not years, but decades.  The weather risk, environmental risk, and mechanical risk is much greater in the harsh environment of the arctic.  So.  What does the administration do?  Open the offshore arctic.  Bewildering.

Energy policy continues to be used as a weapon on both sides of the political spectrum for gain, even as we've lost control of our own energy destiny.  On top of that, we're now going back to drilling in precarious environments where the margin for error is razor thin with no real reform or improvement in technology.

We have only ourselves to blame.

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Oh, noes, it's going to cost twice as much! BP CEO Bob Dudley seems pretty happy these days - the stock market has been rather kind to his little operation, and now he thinks the total cost of the Deepwater disaster - although estimates for the total costs have doubled - will not hurt their bottom line too much... what's $40 billion? From Reuters:

Key to this sanguine outlook is confidence that the new estimate of the total cost of the spill -- $40 billion -- will be sufficient. "We think that $40 billion adequately provisions for the liabilities that are outstanding so far," said Mark Lacey, Fund Manager at Investec Global Energy Fund. Paul Mumford, fund manager at Cavendish Asset Management, went further, saying the provision is likely to be overly conservative: "You might well find that you get provision write-backs," he said, hinting the bill could be lower.

That optimistic view may turn out to be true. BP executives have said this is their "best estimate" of costs, adding they could turn out lower. But history shows there is ample scope for nasty surprises from BP. The London-based oil giant -- last year it was the biggest non-state controlled oil and gas producer in the world -- has so far consistently underestimated the scope and potential cost of the Gulf spill. It also has a track record of low-balling disasters, including the fatal Texas City refinery blast in 2005. Not only has the company underestimated the cost of repairing equipment and ecosystems in the past, it has also made overly optimistic assumptions about legal challenges.

That may be happening again.

Dudley says the $20 billion already agreed on by BP should cover all claims, but lawyers for the plaintiffs in the BP lawsuits don't think so.

"The total value of the claims already registered could exceed the amount of money that has been dedicated to pay the fund," said Texas-based trial lawyer Brent Coon, who represents victims of the explosion and subsequent spill and who was prominent in litigation against BP after Texas City.

"Then you have the claims that have not been filed yet, and claims from those indirectly impacted, and shareholder derivative claims ... You have very large potential claims that could, in total, be exponentially greater than the amount set aside."

Zygmunt Plater, Professor of Law at Boston College Law School, agrees. "In the short term, it's in everyone's interests within the company to low-ball -- but the portents are there for a realistic inflation of $20-$50 billon," he said.

The Reuters analysis states that the total fine for BP related to the spill could far exceed Dudley's confident estimates, especially if US courts find "gross negligence" on the part of BP in the months leading up to the disaster, and that BP's estimates are based on the assumption that it was not grossly negligent. However, initial investigations do not seem to bolster BP's contentions. Again, from Reuters:

BP's inability to gauge the true scope of the spill in the early days in April is well documented. After the Deepwater Horizon rig sunk, following an explosion which killed 11 workers, the company initially hoped to staunch the flow of oil from the well by activating shut-off valves with subsea robots. In case this didn't work, it started drilling a relief well to permanently plug the well from below. A week after the blast, the company said the well would take three months to complete and cost $100 million -- but that would be the most expensive part of the whole response operation. Combining this with the daily expenditure that BP reported at the time suggested a total bill of $200 million. BP hinted then that even this calculation was pessimistic.

As estimates of the spill flow increased -- it eventually became the worst in U.S. history -- so did the cost. From an initial 1,000 barrels per day to 5,000 bpd, it finally reached 62,000 bpd. In June, BP told analysts the cost of containing and cleaning up the spill would be $3-6 billion. By mid-September, the response effort alone, excluding damages claims, had cost BP $8 billion.

But proving "gross negligence" is not a slam-dunk; the process is usually convoluted, and assessing direct blame for any one incident problematic.

A "gross negligence" finding would require the Department of Justice to show a high degree of recklessness on the part of senior BP officials, rather than a mistake by a low-level worker. BP has blamed low-level employees and its contractors for the Deepwater Horizon rig blast.

On November 8, a report by the White House oil spill commission prompted many analysts to assume it was going to be tough to pin gross negligence on BP for the Gulf spill, and BP shares rose as a result. The commission said it had found no direct evidence of "a conscious decision to favor dollars over safety" in BP.

But the commission's co-chairmen, Bill Reilly and Bob Graham, subsequently stressed that its November 8 finding did not mean anyone was off the hook. They said a "culture that did not promote safety" had fostered misjudgments leading up to the disaster in all the companies involved.

And to pull an old chestnut from the cliche' vault...only time will tell...

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Don't forget tonight's Gulf Watchers Block Party, when your host will be Phil S 33. The theme for tonight is obscure and intrigiung. Drop in and find out why!

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PLEASE visit Pam LaPier's diary to find out how you can help the Gulf now and in the future. We don't have to be idle! And thanks to Crashing Vor and Pam LaPier for working on this!

Previous Gulf Watcher diaries:

Gulf Watchers Wednesday - 1990 Act of Congress Should Have Prevented Spill - BP Catastrophe AUV #434 - Yasuragi
Gulf Watchers Monday - Fire Feinberg says one Gulf newspaper - BP Catastrophe AUV #433 - shanesnana
Gulf Watchers Sunday - More Agencies Point Fingers at BP - BP Catastrophe AUV #432 - Yasuragi
Gulf Watchers Block Party - Come On, Baby, Light My Fire- Lorinda Pike
Gulf Watchers Wednesday - Critical Commission Document Pulled - BP Catastrophe AUV #431 - peraspera
Gulf Watchers Monday - Change in Oil Spill Fund Rules: Will BP Benefit? - BP Catastrophe AUV #430 - shanesnana
Gulf Watchers Sunday - New Charges Against BP; Barton Eyes Energy Chair - BP Catastrophe AUV #429 - Yasuragi
Gulf Watchers Block Party - Traveling Boomers - ursoklevar
Gulf Watchers Friday - Criminal Negligence - BP Catastrophe AUV #428 - Lorinda Pike
Gulf Watchers Wednesday - BP Bribes Schools to Brainwash Kids & NOAA Helps - BP Catastrophe AUV #427 - peraspera
Gulf Watchers Monday - Afternoon Edition  - BP Catastrophe AUV #426 - shanesnana

The last Mothership has links to reference material.

Previous motherships and ROV's from this extensive live blog effort may be found here.

Again, to keep bandwidth down, please do not post images or videos.

Originally posted to Lorinda Pike on Fri Dec 03, 2010 at 05:04 AM PST.

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