Assessing the Impact of Deepwater Horizon

As I noted Friday, it's still early to try to assess the full impact of the disaster that befell the Deepwater Horizon drilling vessel last week. Having known many people over the course of my career who were engaged in this kind of work, my first reaction is one of deep sympathy for the missing--now presumed lost--and their families, friends and co-workers, and to those who were injured. At the same time, speculation is mounting concerning the ramifications for US energy policy. For those of us who have supported expanded drilling off the US coastline, this accident comes as an unpleasant reminder that such activities can never be undertaken entirely without risk. If we are indeed going to resume drilling in regions beyond the central and western Gulf of Mexico, we should go into it with our eyes wide open: understanding the risks, but also putting them into perspective.

My grad school statistics professor always reminded us that whatever the odds of something happening might have been beforehand, after the fact they reduced to zero or one. If you were involved in a car accident today, it doesn't matter much to you that the chances were very low, or that a couple of hundred million other people weren't. But while reminders of the very low probability of accidents such as the destruction of the Deepwater Horizon (DH) drilling platform and the ensuing oil leak might seem a little lame at this point, it remains crucially important to any decisions on future drilling policies whether such events are rare or common. And the fact that a similar, though less catastrophic accident occurred in the Timor Sea off Australia last summer doesn't make offshore drilling blowouts frequent occurrences. In fact, they are rare as hens' teeth. According to the latest rig count data from Baker Hughes, there are currently 53 drilling rigs operating in US waters. Together with the more than 3,500 operating oil & gas platforms in the portions of the Gulf of Mexico tracked by the Minerals Management Service of the Department of Interior, that represents many thousands of offshore wells drilled, over many years, without an incident like the one we've just seen.

Another key aspect of assessing the risks of offshore drilling relates to the quantities of oil spilled. The well that DH was drilling now appears to be leaking around 1,000 barrels per day, or 42,000 gallons per day. If it has been leaking steadily at that rate since the platform sank last Thursday, then cumulative oil leaked so far is something like 5,000 barrels, or just under 210,000 gallons. That's hardly insignificant, particularly given the way even a small quantity of oil can spread out across a wide expanse of water as a thin film. Yet in relative terms, this is still modest, compared to other sources of marine oil spills. The shipping industry measures spills in tons of oil. On that scale, the volume that the DH well has presumably leaked so far works out to roughly 700 tons. The International Tanker Owners Pollution Federation Ltd. (ITOPF) has identified 444 oil spills of equal or greater magnitude since 1970, plus another 1,200 between 7 tons (50 bbls) and 700 tons. (The annual number of such spills has been declining steadily, even as the volume of ship-borne trade has grown.)

Nor are the production and shipping of petroleum the largest sources of oil leaked into the marine environment. According to a study reported by NASA in 2000, the annual oil seepage from natural sources in the Gulf of Mexico amounts to roughly twice the quantity spilled from the Exxon Valdez. On that basis, if the DH well leaked all year at its current rate, it would not equal the natural leakage rate in the Gulf. Now, it's a lot different having that much oil leak from one point on the seabed, instead of from hundreds of spots, which allows natural processes to break down most of it before it comes onshore. Nevertheless, as confirmed by a 2003 study published by the National Research Council, from 1990-1999 oil platforms contributed only a tiny fraction of the oil leaked into the global marine environment, with most of it attributable to natural seeps, spills during oil consumption, and shipping.

However we assess the cost of such spills when they happen, the benefits of offshore drilling are still compelling. Despite a 9% reduction in demand since the start of the recession, the US consumes more than 18 million bbls per day of oil, and as of last year, 52% of that was supplied by net imports. When you back out the oil we receive by pipeline from Canada, that works out to more than 9 million bbl/day of imports arriving by sea--with all the risks of tanker spills that entails. Even with oil prices as low as they were last year, the cost of our net oil imports accounted for roughly 11% of our total import bill in 2009, and thus for at least that much of our trade deficit. Even vigorous efforts to reduce oil consumption (and its associated emissions) by improving fuel economy and ramping up renewable energy do not diminish the need to produce as much oil from domestic sources as we can. Biofuels still meet just 4% of our liquid fuels needs, and additional wind, solar and geothermal power don't displace any significant quantity of oil, because oil accounted for less than 1% of US power generation last year.

All of this is small consolation to the residents of coastal communities that are worried that an oil slick could come onshore within a few days. I am also sympathetic to concerns such as those expressed in editorials like this one in a Pensacola, FL newspaper. I grew up in a beach town in California, where memories of the much larger Santa Barbara spill in 1969 still affect the public's view of offshore drilling. But rather than seeing Deepwater Horizon as a reason to call a halt to President Obama's plans to expand offshore drilling, I view it as similar to an aviation accident: a tragedy that calls for improved technology and procedures, not an end to flight. It also reinforces my conviction that it is only right and fair for states like mine that are adjacent to the federal waters in which drilling would occur to share in the royalties this will generate. Politicians in inland states might see those royalties as belonging to the whole country, but their states won't bear any of the risk, no matter how small it might be before the fact.