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.

 

Sustainability Reporting… So What?

Corporate Social Responsibility, Corporate Sustainability, Sustainable Development, Corporate Responsibility, Corporate Citizenship, responding to climate change, “the greatest moral, economic and environmental challenge of our generation“… There are many self-commitments by companies related to climate change, emissions management, sustainability, and a ‘green & clean’ image.

Sustainability reporting has become part of ‘good’ corporate reporting, demonstrating the “proactive stance” of companies towards fighting global warming, poverty, disease, and human rights violations. While some companies claim to have found value in practising sustainability, a large number of reports still are a response to external stakeholder pressures and expectations. So what does this mean for reporting? What is actually being reported in those sustainability reports? How meaningful are the commitments? How reliable is the information reported? And for whom are these reports written?

 

Some popular reporting guidelines/frameworks/indexes include:

• Global Reporting Initiative,
• Dow Jones Sustainability Indexes,
• Global Compact,
• FTSE4Good,
• Equator Principles,
• Carbon Disclosure Project,
• ICMM Principles,
• OECD Guidelines for Multinational Enterprises..

Take the Global Reporting Initiative (GRI) Guidelines for example. It has become the main point of reference for producing sustainability reports.  However, few companies are able to (or should) claim their reports – and therefore their actions – are ‘in accordance’ with the Guidelines. The issue here is that the GRI is a voluntary non-proprietary initiative, meaning that reporting `in accordance´ with the Guidelines is an option, not a requirement and self-declared by companies. So in a nutshell, a company producing a sustainability report based on the GRI Guidelines self-declares a reporting level (A, B, or C) based on its own experience of sustainability reporting and own assessment of its report content against the criteria in the GRI Guidelines. What’s more, a company can self-declare a “plus” (+) at each level (e.g., C+, B+, A+) if they have utilised an external assurance provider such as one of the big accounting firms – the same ones that until 4 years ago have declared climate change and sustainability a fad, but now are obviously “thought leaders”.

Or take the Dow Jones Sustainability Indexes. While one of the oldest sustainability reporting initiatives worldwide, it is has to be considered carefully. Similar to the GRI, it does rely on publicly available information, especially when it comes to environmental and social reporting. What is interesting here is that the allocation of vacant positions on those indexes is not always clear. BP has been recently removed from the Dow Jones Sustainability Indexes because of the oil spill in the Gulf of Mexico.  Halliburton took BP’s spot. This choice is not without controversy, as Halliburton has also been involved in the oil spill disaster and was less than transparent about it. Shell is no longer “on the list” -  , but companies such as Coca Cola or Dow Chemicals are. While having fancy sustainability statements on their website, Dow still refuses to clean up the site because – back then – it did not own or operate the plant. How does this go together with their sustainability reporting?

All that is not to say that there are a few good examples of corporate sustainability disclosure (e.g., Interface and Scandic Hotels), but the majority of companies still produce flashy PR documents with little content or significant commitment. Next time you read a sustainability report, be skeptical… be very skeptical. Do some background research. Don’t fall for the “frog-protection-scheme”, or the reduced office energy consumption of an Australian electricity generator. What targets has a company set? Is it significant? Is it an absolute or intensity target? What is the difference? How does this affect overall performance? How is a company performing in one country compared to another, and how is this reflected in reporting?

Sustainability reporting raises a lot of questions, but maybe they provide some food for thought. If all these companies are doing so great, how come we still have the same problems of pollutions, greenhouse gas emissions, poverty, exploitation, corruption, etc.? To use the BP example again – everyone was shocked to see the oil plumes, dying sea birds, communities losing their livelihoods. When BP (or any other petroleum company) drills for oil, and ships it to refineries where it is turned into fuels, plastics, etc., burnt and the emissions released into the atmosphere and plastic bottles filling up landfills, no one seems to care as long as we have a sustainability report.

What the UN ban on geoengineering really means – environment – 01 November 2010 – New Scientist

What the UN ban on geoengineering really means – environment – 01 November 2010 – New Scientist.

BHP Gets a B

Ater BHP CEO Marius Kloppers demanded action on devloping a proper climate change policy for Australia last week, the Carbon Disclosure Project (CDP) released this year’s Global 500 and S&P 500 results on Monday 20 September during New York Climate Week. BHP received a “B” for its disclosure of greenhouse gas emissions and climate change strategies.

The CDP is the only global climate change reporting system, attempting to harmonise climate change data from organisations around the world and develop international carbon reporting standards. The CDP acts on behalf of 534 institutional investors, holding $64 trillion in assets under management and some 60 purchasing organisations such as Cadbury, PepsiCo and Walmart. 2,500 organizations in some 60 countries around the world now measure and disclose their greenhouse gas emissions and climate change strategies through CDP, in order that they can set reduction targets and make performance improvements. Participation is voluntary.

Data is made available for use by a wide audience including institutional investors, corporations, policymakers and their advisors, public sector organizations, government bodies, academics and the public. Based on the data provided by BHP, the CDP gives BHP a Carbon Performance Score of “B” and a Carbon Disclosure Score of 71. In comparison, Rio Tinto scored a “B” and  89 respectively. Other mining companies include Xstrata (B/75), Newcrest Mining (C/57) and Newmont Mining (C/87) .

The Carbon Disclosure Score assesses the quality and completeness of companies’ reporting and carbon management.  The score is based on, e.g., the integration of climate change risks and opportunities into overall their corporate strategy, formal accountability for oversight and management, verification of emissions data through an external third party, and the implementation of energy or emissions and/or reduction initiatives.

The Carbon Disclosure Score is designed to aid investors making informed decisions about the carbon management of participating companies. The qualifying threshold to receive a performance score was a minimum disclosure score of 50. Carbon performance scores are based solely on information disclosed in a company’s CDP response and should be considered in conjunction with other carbon metrics to provide a more comprehensive picture of a company’s performance on mitigating climate change.

Top of the class are Siemens (A/98), Deutsche Post (A/97), BASF (A/96), and Bayer (A/95).

Deepwater Horizon’s Blowout Preventer Pulled From Gulf, FBI Present | Huffington Post

ON THE GULF OF MEXICO — A crane hoisted a key piece of oil spill evidence to the surface of the Gulf of Mexico on Saturday, giving investigators their first chance to personally scrutinize the blowout preventer, the massive piece of equipment that failed to stop the gusher four months ago.

By Huffington Post’s Harry R. Weber.

Minding the Sustainability GAAP | World Resources Institute

WRI’s Janet Ranganathan on how limited transparency around corporate sustainability risks can lead to investments that are bad for the environment, and investors’ bottom lines.

A very good summary of some of the more contemporary issues around sustainability reporting. There are a number of different (voluntary) reporting schemes out there… which ones ought an organisation to use, how do reporting requirements differ, what are the consequences of inaccurate reporting? The  International Integrated Reporting Committee initiative to “create a globally accepted framework for accounting for sustainability” seems like a good start.

While sustainability reporting is important, it should not distract from the fact that there also exist mandatory requirements such as pollutant inventories, energy and emissions reporting, emissions trading, and so on. It is crucial that any voluntary and mandatory reporting be combined into one comprehensive, meaningful statement about the reporting organisations’ intention, position on climate change and sustainability, and be of sufficient integrity. Saving some random rainforest frog seems more than insufficient.

Press Statement on the Cause of Oil Spills in the Niger Delta | United Nations Environment Programme (UNEP)

– Press Releases August 2010 – Press Statement on the Cause of Oil Spills in the Niger Delta – United Nations Environment Programme (UNEP) –.

A Study funded by Shell found that Shell is not to blame for the oil spill in Niger.

Employees key to corporate sustainability

Targeted employee programs are crucial to corporations successfully implementing sustainability practices say University of Queensland (UQ) Business School experts.

Martina Linnenluecke, a PhD researcher, and Professor Andrew Griffiths have developed insights into factors enabling corporations to realise and adopt sustainability-oriented culture change and into barriers that might hinder the uptake of such change.

Employees are paramount to successfully implementing corporate-wide changes to sustainability, according to Ms Linnenluecke.

“If individuals or groups of employees are not convinced by sustainability practices or if employee actions and motivations are discouraged by a rigid organisational culture, it will be hard to get changes made corporate wide,” she said.

“There are often significant differences within an organisation in how employees understand corporate sustainability. We therefore advise corporation leaders and managers to understand how their employees perceive and understand sustainability before undertaking any change management, and to identify why there might be differences in employees’ understandings. This information can be then used to develop more sophisticated and tailored programs aimed at educating their staff.

“Through our research, we found differences existed in how employees understood corporate sustainability. These differences can be explained partly due to the existence of corporate subcultures and individual differences in awareness of the organisation’s sustainability practices.

“In particular, we found that employees from a subculture with a stronger emphasis on hierarchical and bureaucratic values emphasised an economic understanding of corporate sustainability, meaning that these employees perceived that their organisation did not place much value on the pursuit of environmental or social goals.”

To successfully implement sustainable practices, the pair advised corporations to:

• survey employees’ understanding of sustainability,
• identify why employees might understand sustainability differently,
• identify any potential barriers to the uptake of corporate sustainability practices,
• develop a corporate strategy for sustainability,
• formulate clear corporate guidelines,
• communicate strategy and guidelines to employees, 
• execute a tailored employee education program, and
• incorporate sustainability goals into employee performance objectives.

Ms Linnenluecke also suggested corporations move away from hierarchical organisational structures and consider environmental and social as well as economic sustainability.

“Corporations with lower levels of hierarchy can adapt and change much more easily. Corporations with a focus on flexibility and innovation can involve employees and other stakeholder groups in decision making.

“In general, an organisation which is very open to outside views and information is concerned with what is going on in the environment and incorporates this into their decision making.”

Investment in sustainability by corporations can result in long term economic gain in cost and resource reductions, increased efficiencies and brand perception, as well as the adoption of innovative technologies leading to competitive advantages, according to Ms Linnenluecke.

The latest research paper of Ms Linnenluecke and Professor Griffiths was recently published in the Journal of World Business.

CEDA Information Paper: Sustainable Queensland

The third volume of CEDA’s Sustainable Queensland project is a detailed examination of how the state can cope with the growth expected in the years ahead.

The first paper on water infrastructure by Nick Apostolidis from GHD says South East Queensland already has a relatively comprehensive set of actual and proposed measures to expand water supply and restrain demand. Those measures should allow the region to cope with the extra 1.3 million people and the new industrial demand projected by 2051.

The second paper, by Professor Andrew Griffiths and Martina Linnenluecke of the University of Queensland Business School, explores the creation of corporate sustainability, arguing for leader from businesses as well as government.

The final paper, by Elizabeth Saxon and Tony Charters of Tony Charters and Associates, looks at the environment and ecotourism. It argues for measures to protect Queenslands environmental assets and to expand the states protected areas a measure it says would also help the fight against climate change.

The Sustainable Queensland project is run by a CEDA Queensland committee chaired by Professor Ken Wiltshire of the University of Queensland Business School.

The report is available for CEDA members via CEDA’s website.