BP Deepwater Horizon Gulf Spill: Complacency Led to Disaster

On January 11, 2011, the National  Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling released its final report on the causes and consequences of the BP Deepwater Horizon disaster, and proposed comprehensive reforms of both government and industry practices to overhaul the U.S. approach to drilling safety and greatly reduce the chances of a similar, large scale disaster in the future.

It is the conclusion of the commission that the accident could have been prevented, but as the Board that investigated the loss of the Columbia space shuttle noted, “complex systems almost always fail in complex ways”.

The immediate causes of the well blowout can be traced to a series of identifiable, preventable human and engineering mistakes made by BP, Halliburton, and Transocean that reveal such systematic failures in risk management that they place in doubt the safety culture of the entire industry. As offshore drilling took place in ever-deeper waters, safety precautions did not keep pace. Response plans to such a spill were inadequate, and had barely evolved since the 1989 Exxon Valdez oil spill in Alaska. Deepwater energy exploration and production, particularly at the frontiers of experience, involve risks for which neither industry nor government has been adequately prepared, but for which they can and must be prepared in the future. What went wrong in the broader context is that as the oil and gas industry moved down to depths of a thousand feet or more without having adjusted its response capability and/or its containment technology, to manage those new risks. At the time of the blowout, BP, and industry more generally, had no proven options for rapid containment in deep water other than attempting to close the blowout preventer. They just thought it couldn’t happen.

In the opinion of the Commission, baseline of prescriptive safety regulations applicable to offshore drilling should be toughened to address the increased challenges presented by drilling in deeper waters and less well known geologic areas, and by the changing nature of the oil and gas industry. Interior should also supplement those regulations with a risk-based performance approach, similar to the “safety case” approach used in the North Sea, that requires all offshore drilling companies to demonstrate that they have thoroughly evaluated all of the risks associated with drilling a particular well or other operation, and are prepared to address any and all risks pertaining to that well or operation.

Also, the oil and gas industry should create and maintain readily deployable resources for rescue, response, and containment and should ensure such resources are available in the immediate aftermath of a well blowout. The EPA should amend or issue guidance on the National Contingency Plan to establish distinct procedures for a Spill of National Significance, to increase state and local elected officials’ involvement in spill response planning, to update dispersant testing and use protocols, and to create a mechanism for expert oversight of well containment.

To assure human safety and environmental protection, regulatory oversight of leasing, energy exploration, and production require reforms even beyond those significant reforms already initiated since the Deepwater Horizon disaster. Broader consultations among federal agencies, including the Coast Guard and the National Oceanic and Atmospheric Administration (NOAA), prior to leasing and exploration will help identify and address risks. In particular, Congress should amend the Outer Continental Shelf Lands Act to provide the NOAA with a more formal consultation role relating to environmental protection in Interior leasing decisions.

Regulatory oversight was compromised by commingling two distinct missions within one agency: 1) responsibility for promoting the rapid expansion of offshore leasing and drilling; and 2) responsibility for ensuring its safety. Fundamental reform will be needed in both the structure of those in charge of regulatory oversight and their internal decisionmaking process to ensure their political autonomy, technical expertise, and their full consideration of environmental protection concerns.

Because regulatory oversight alone will not be sufficient to ensure adequate safety, the oil and gas industry will need to take its own, unilateral steps to increase dramatically safety throughout the industry, including self-policing mechanisms that supplement governmental enforcement. The technology, laws and regulations, and practices for containing, responding to, and cleaning up spills lag behind the real risks associated with deepwater drilling into large, high-pressure reservoirs of oil and gas located far offshore and thousands of feet below the ocean’s surface. Government must close the existing gap and industry must support rather than resist that effort. Existing conventional or “baseline” safety regulations should be expanded to address all features essential to well safety, and should be updated and enhanced to ensure safer drilling in all U.S. offshore operations—including drilling in deeper waters and less well-known geologic areas. These new regulations should be, at a minimum, at least as stringent as those regulations in peer oil-producing nations (such as Norway and the United Kingdom).

Scientific understanding of environmental conditions in sensitive environments in deep Gulf waters, along the region’s coastal habitats, and in areas proposed for more drilling, such as the Arctic, is inadequate. The same is true of the human and natural impacts of oil spills. The role of people that do have scientific competence and get more and better science into these key decisions must be  strengthened. In order to assure good decisions are made regarding where, when, and how to develop resources safely and reduce risk in frontier areas, additional comprehensive scientific, technical, and oil spill response research is needed.

Commission Co- Chair William K. Reilly says he was struck by the totally inadequate response plans that were in place. In an interview with Yale Environment 360, he talks about why it’s crucial to carry out the reforms needed to prevent future disasters.

 

Reconstruction in Queensland – But Where?

Today, Queensland Premier Anna Bligh announced the formation of a new Queensland Reconstruction Authority to determine if infrastructure, and even entire suburbs, should be rebuilt in flood-affected and flood-prone parts of Queensland.

The new Queensland Reconstruction Authority will replace and have more power than the recently established rebuilding taskforce under Major General Mick Slater. It will still need the approval of Parliament and will be the first item on the agenda when the House resumes next month.

She said

The reconstruction authority will be charged with working with local governments to determine, in some cases, whether we should be rebuilding exactly the same thing in exactly the same place, whether it’s a bridge, or whether it’s a suburb.

and

The last thing we want to do is rebuild in the same place and see that home flooded again in two or three years’ time.

Part of the task will be to speak with affected residents and discuss whether their homes need to be rebuilt on stilts or new sites altogether. This makes sense, and the different response to Victoria’s approach to rebuilding after the Black Saturday bushfires is commendable. While most Royal Commission recommendations were accepted or are being taken under consideration, the only recommendation rejected was the one referring to relocation.

Brisbane is built on the river’s natural flood plains. Brisbane has a subtropical climate. Relying on the dam system alone seems somewhat imprudent. And just as much as family homes were affected, so were businesses.

In our paper “Firm relocation as adaptive response to climate change and weather extremes“, we discuss significant disruptions to firm operations, for instance through droughts, floods, or sea level rise, which might ultimately create the necessity of a geographical shift of firm and industrial activities away from highly affected regions. The framework we propose may serve as a decision making tool, which can be of use to firms considering relocating or flood-proofing their facilities.

2011 Queensland Floods: Commission to investigate whether flooding could have been prevented

This Monday (17/01/2011), clean-up efforts continued in flood affected suburbs of Brisbane. While businesses in the CBD area recommenced their operations, 22.000 households were still without power. Supermarkets in several suburbs encountered supply shortages of fresh produce such as fruit and vegetables. There were also bottlenecks in the supply of fuel. Road closures and damages to transportation infrastructure caused problems with public transport. The City Cat ferry service, an essential part of Brisbane’s local transport, will be out of service for 90 days.

Prime Minister Anna Bligh meanwhile announced a Commission of Inquiry into the state’s flood disaster. The purpose of the commission is to investigate whether the flooding in Brisbane, Toowoomba and in the nearby Lockyer Valley could have been prevented. The Commission will be headed by Queensland Justice Cate Holmes, with Deputy Commissioners Jim O’Sullivan, a former Queensland Police Commissioner and Phil Cummins, an international expert on dams.

Subject to enquiry will be the disaster preparation and planning by federal, state and local governments. Large parts of the population were unprepared for a flood disaster. Past days have also seen the emergence of a debate on whether warnings from meteorologists were not sufficiently considered, and whether water from the Wivenhoe Dam should have been discharged earlier. The partial opening of the dam to prevent an overflow had contributed significantly to the flood disaster.

The Wivenhoe Dam was built after the major flooding in 1974 further upstream to protect Brisbane city from flooding, and to ensure a reliable water supply. In recent years, during the ongoing drought in Australia, water levels of the dam fell below 15% and caused concerns about Brisbane’s drinking water supply. However, due to the heavy tropical rains over the last weeks of the dam was filled to almost 200% of capacity.

An important question for Brisbane and the surrounding South-East Queensland region will be the future urban development. Large parts of Brisbane are built on flood plains, and the expansion of the city is continuing. The South-East Queensland region has seen a strong increase in population and a construction boom. Brisbane alone had a population increase of 2.7% in 2008/2009. The Intergovernmental Panel on Climate Change (IPCC) classified the region as hot spot for national disasters, especially flooding, storm surges and sea level rise.

2011 Queensland Floods: Economic Impacts of a Flood Disaster

The 2011 Queensland Floods severely affected a number of important industry sectors, including the coal industry, logistics service providers, the agricultural sector as well as retail, insurance, and construction. First estimates suggest that the floods will lead to significant cuts in Queensland’s exports of coal and agricultural production which could amount to up to AU$ 6bn or 0.5% of GDP – not including clean up costs.

Coal Industry
One of the industry sectors most affected by the Queensland Floods is the coal industry, one of Queensland’s most important industry sectors. Direct damages to mining operations were caused primarily by flooding of the mines, but mining companies also encountered logistical problems with coal transports due to flood impacts on transportation infrastructure. Many of the large mining companies have declared a “force majeure” event. Among the companies affected are Anglo American, Aquila Resources, Macarthur Coal, Rio Tinto, BHP, Peabody, Wesfarmers and Xstrata. First estimates suggest that about 75% of all mines are closed. The exact extent of the damage is currently unclear, as many companies have not yet released loss data and floods still persist in many areas. It can be expected that the floods will cause short to medium term supply shortages which are likely to result in revenue losses for affected companies and to bring about increases in commodity prices. Mining companies in Queensland primarily produce metallurgical coal used in steel production. Queensland exports about 150 Mt of coal per year, about 75% of which is metallurgical coal and 25% thermal coal. As a result of supply shortages, the price of steel is likely to increase. Some effects on prices for electricity generation can be expected as well, albeit to a lesser extent. Most affected by price increases will be the main buyers of coal from Queensland, including Japan and Europe, followed by India, Korea and Taiwan. Some of these countries have started to investigate raw material supplies from other regions in order to overcome supply shortages.

Road and Rail Traffic
Road and rail traffic across all flooded areas of Queensland was severely disrupted. Affected by the floods was the “Black Water Line”, a major rail line for coal shipments to the port of Gladstone in Queensland, the fourth-largest coal export terminal in the world. The Black Water line was closed temporarily. QR National, operator of the Black Water Line, expects that the line will be reopened at the end of next week (20 Jan). The exact economic losses from flood impacts on passenger and cargo traffic are still unclear. The Port of Brisbane was closed temporarily. Reports by Sydney Morning Herald suggest that there is already a 30 km line of ships off the coast of Queensland, waiting to be unloaded.

Agricultural Sector
Due to the extensive flooding of farmland a decline in agricultural exports can be expected, especially of wheat, sugar and cotton. As a direct response to the flood and supply shortages, cotton futures extended gains to a three-week high in New York. The exact impact of the floods on the agricultural sector is still uncertain; further crop losses may occur if the wet weather conditions continues. Prime Minister Julia Gillard, in a joint statement with Queensland Premier Anna Bligh, announced that small business owners and farmers in flood-affected areas of Queensland are to receive additional disaster assistance of up to $25,000 from the Commonwealth and State governments.

Retail
The retail sector suffered from supply shortages, brought about by panic buying, logistical problems with the delivery of goods due road closures, power and staff shortages. Supermarket chain Coles had to close 14 of its 148 shops, while Woolworth reported the closure of 13 of its branches. Several department stores were also affected. Prices for many food items have already risen considerably, such as for fruits (mangos, bananas, pineapples, papayas) and vegetables.

Insurance
According to initial estimates, insurance damages will amount to about AU$1bn, however, accurate damage reports are not yet available. It can be expected that the economic damage brought about by the floods will comparable to the damage caused by the 2009 Victorian Bushfires in the state of Victoria.

Construction Sector
Many infrastructure projects have come to a halt due to heavy rain and flooding. Leighton Holdings, for example, has temporarily stopped work on one of its biggest infrastructure projects, the AU $ 4.1bn Airport Link in Brisbane.

Other Impacts
Longer term implications for a range of sectors such as the tourism sector remain to be seen. The impact of flood runoff on tourist attractions like the Great Barrier Reef is unclear. It is expected that potential environmental damage could occur.

Overall Picture of Natural Catastrophes in 2010 – Very Severe Earthquakes and Many Severe Weather Events | Munich Re

Press release by Munich Re

Several major catastrophes in 2010 resulted in substantial losses and an exceptionally high number of fatalities. The overall picture last year was dominated by an accumulation of severe earthquakes to an extent seldom experienced in recent decades. The high number of weather-related natural catastrophes and record temperatures both globally and in different regions of the world provide further indications of advancing climate change.

Altogether, a total of 950 natural catastrophes were recorded last year, nine-tenths of which were weather-related events like storms and floods. This total makes 2010 the year with the second-highest number of natural catastrophes since 1980, markedly exceeding the annual average for the last ten years (785 events per year). The overall losses amounted to around US$ 130bn, of which approximately US$ 37bn was insured. This puts 2010 among the six most loss-intensive years for the insurance industry since 1980. The level of overall losses was slightly above the high average of the past ten years.

“2010 showed the major risks we have to cope with. There were a number of severe earthquakes. The hurricane season was also eventful – it was just fortunate that the tracks of most of the storms remained over the open sea. But things could have turned out very differently”, said Torsten Jeworrek, Munich Re’s Reinsurance CEO. “The severe earthquakes and the hurricane season with so many storms demonstrate once again that there must be no slackening of our efforts to analyse these risks in detail and provide the necessary insurance covers at adequate prices. These prices calculated by the insurance industry make it possible to assess the economic consequences of these otherwise difficult-to-evaluate risks.”

Major catastrophes dominate the list of losses

In all, there were five catastrophes last year assignable to the top category of “great natural catastrophes” based on the definition criteria of the United Nations: the earthquakes in Haiti (12 January), Chile (27 February) and central China (13 April), the heatwave in Russia (July to September), and the floods in Pakistan (also July to September). These accounted for the major share of fatalities in 2010 (around 295,000) and just under half the overall losses caused by natural catastrophes.

One of the most devastating earthquakes in the history of the past 100 years, the quake in Haiti on 12 January killed more than 220,000 people. Only the 1976 Tangshan earthquake in China claimed more lives (242,000). Whilst the earthquake in Haiti resulted in human tragedy on a staggering scale, it gave rise to only negligible losses for the insurance industry, as is so often the case in developing countries.

Five-hundred times more energy than in the Haiti quake was released by the earthquake that hit Chile just over a month later. With overall losses of US$ 30bn and insured losses of US$ 8bn, this quake was last year’s most expensive natural catastrophe. Chile is a highly developed country with very strict building codes to take account of the high earthquake exposure. As a result, there were comparatively few human casualties, despite the severity of the quake – the fifth-strongest ever measured – although people were killed in Chile, too.

In the summer, floods following extreme monsoon rainfall had devastating consequences in Pakistan. For weeks, up to one-quarter of the country was flooded. Countless people lost all their worldly possessions. The overall loss totalled US$ 9.5bn – an extremely high amount for Pakistan’s emerging economy.

A widescale catastrophe also resulted from the heatwave in Russia and neighbouring countries between July and September. Many places, including Moscow, experienced record temperatures. In some regions of central Russia, they exceeded 30°C for two months on end. Forests burned, with the fires threatening nuclear facilities and areas where the ground had been contaminated by radioactive fallout from Chernobyl. At least 56,000 people died as a result of heat and air pollution, making it the most deadly natural disaster in Russia’s history.

Hurricane season in the North Atlantic: Lucky escape

The hurricane season in the North Atlantic was benign – but only at first glance. Favourable weather patterns meant that the US coast was not hit by a single hurricane. In Mexico, however, a few storms caused substantial damage. Otherwise, the tropical cyclones turned away in a northeasterly direction over the sea, only grazing some islands in the Caribbean.

But what appeared benign was, in terms of the number and intensity of the storms, one of the severest hurricane seasons of the past 100 years. Altogether, there were 19 named tropical cyclones, equalling the number recorded in 1995 and putting 2010 in joint third place after 2005 (28) and 1933 (21). Twelve of the storms attained hurricane strength, with five of these falling into the top hurricane categories (wind speeds over 178 km/h). This means the forecasts of various institutes about the number of storms turned out to be very accurate. “The number of storms was indeed well above average. It is just that it is impossible to forecast whether and where such storms will make landfall”, said Prof. Peter Höppe, Head of Munich Re’s Geo Risks Research.

Right at the start of the 2010 hurricane season, the water temperatures in the tropical North Atlantic were up to 2°C above the long-term mean – and thus significantly higher than the level to be expected for the cyclical warm phase in the North Atlantic that has persisted since 1995. The water temperatures thus provided ideal conditions for the occurrence and high intensity of hurricanes. As from the beginning of August, atmospheric conditions also favoured the occurrence of Atlantic tropical cyclones (“La Niña” conditions).

“That is in line with the trend of the past 30 years, in which all ocean basins show an increase in water temperatures. This long-term trend can no longer be explained by natural climate oscillations alone. No, the probability is that climate change is contributing to some of the warming of the world’s oceans”, said Höppe. “This influence will increase further and, together with the continuing natural warm phase in the North Atlantic, is likely to mean a further high level of hurricane activity in the coming years.”

The strongest storm of the season was “Igor”, which reached wind speeds of up to 250 km/h over the open sea but grazed Bermuda as a weaker hurricane. The most expensive storm was Hurricane Karl, which caused overall losses of US$ 3.9bn in Mexico, US$ 150m of which was insured. By contrast, all the storms that arose in the mid tropical Atlantic east of Cuba and the Caribbean islands turned northwards over the ocean.

Asia and America most frequently affected by catastrophes

The global distribution of natural catastrophes in 2010 was comparable to that of previous years. Most catastrophes occurred on the American continent (365) and in Asia (310). 120 natural catastrophes were recorded in Europe, 90 in Africa and 65 in Australia/Oceania. North and South America also accounted for the largest portion of insured losses, namely around two-thirds. Some 17% of the losses were incurred in Europe, where the most expensive individual event was Winter Storm Xynthia, which mainly affected Spain and France and caused overall losses of US$ 6.1bn (€ 4.5bn). As is usual with windstorms in Europe, the share of insured losses was very high, totalling US$ 3.1bn (€ 2.3bn).

Natural catastrophes in Australia/Oceania gave rise to around 16% of global losses. The costliest event was the earthquake which occurred on 4 September in Christchurch, the third-largest city in New Zealand. Overall and insured losses were in the billions here as well. In Australia, there were two severe hailstorm losses, each of which caused overall losses of well over US$ 1bn in March.

Volcano on Iceland paralyses air traffic

Another, quite different natural hazard event in 2010 demonstrated the vulnerability of the networked global economy: the eruption of the volcano Eyjafjallajökull on Iceland in April. Owing to the dust particles thrown into the atmosphere, air traffic over northern Europe remained virtually paralysed for days. There was hardly any direct damage, but interruptions in supplies of important goods to industrial firms meant that gradually more and more sectors of the economy were affected. The event ended up costing the airlines billions.

“This volcanic eruption is an example of a case where insurance could have cushioned the effects of a natural hazard event for the economy. In principle, the consequential costs for the airlines would have been insurable. Munich Re sees itself as a pioneer in devising insurance solutions on the boundaries of insurability, including cover for business interruption due to natural hazards”, said Board member Jeworrek.

It is not yet possible to put an exact figure on the extreme floods in northeastern Australia. Since the beginning of December many places have been submerged under water and cut off from the outside world. Many mines have had to stop operations. Heavy rain in this region is nothing unusual and such weather patterns are accentuated by the prevailing “La Niña” conditions.