Are We Destined to Repeat the 2010 Gulf of Mexico Oil Spill?

Four years after the infamous 2010 Gulf of Mexico oil spill, is offshore deepwater drilling really any safer?

Jul 16, 2014 at 10:00AM

April 20 marked the four-year anniversary of the infamous 2010 Gulf of Mexico oil spill, in which BP's (NYSE:BP) Macondo well blew out, destroying the Deepwater Horizon semi-submersible rig and causing the worst accidental oil spill in history.

In addition to the tragic loss of 11 workers onboard the rig, the accident has caused widespread environmental damage -- the extent of which is still hotly debated -- and has cost BP tens of billions of dollars in fines and penalties.

But with Gulf of Mexico drilling activity poised to grow sharply over the next several years, many wonder whether BP and other oil companies' approaches to drilling are any safer than they were four years ago. In terms of safety, has anything fundamentally changed, or are we destined to repeat history?

Progress so far
Let's start with the progress that has been made since Macondo. For one, the Minerals Management Service, the regulatory body tasked with overseeing Gulf drilling, has been split intro three new agencies that separately issue leases, collect royalities, and oversee drilling safety. This restructuring has greatly improved the safety of Gulf drilling, according to a report issued last year by the Oil Spill Commission Action, an investigative government panel set up in the aftermath of the spill.  

One of these new agencies, the Bureau of Safety and Environmental Enforcement, or BSEE, has also enforced a number of new safety regulations. Last year, it finalized a new set of rules that require new cementing integrity tests and casing/cementing plans to be independently verified by a professional engineer. BSEE also now requires Gulf operators to have a Safety and Environmental Management System outlining specific steps to limit human error.

BP's new measures
BP also says it has taken key steps to reduce the risk of another major accident. In 2011, it set up a new monitoring center in Houston that provides 24/7 real-time communications between its Gulf rigs and its onshore engineers. The company is also testing whole systems, as opposed to individual parts, to more accurately simulate real-world conditions.

It is also pushing rig equipment past rated limits to better understand how the equipment will react under extreme conditions. BP also points out that it now has a team of 36 people exclusively dedicated to improving the reliability of blowout preventers, a key piece of equipment designed to cap a well in the event of a blowout and whose failure was key in exacerbating the severity of the 2010 spill.

Threats remain
But despite this progress, major threats to deepwater drilling safety remain, according to Elizabeth Birnbaum, the former director of the Minerals Management Service. In a recent New York Times opinion piece, she specifically points to the lack of progress in improving the safety of blowout preventers.

She argues that federal regulators failed to act on the findings of a December 2011 report by the National Academy of Engineering, which highlighted numerous shortcomings with Deepwater Horizon's blowout preventer and recommended that new safety standards be implemented.

Though regulators agreed to set new standards for blowout preventers by the end of 2012, they have yet to even propose new rules much less enforce new standards. Meanwhile, drilling activity in the Gulf continues to grow with many operators still using older blowout preventers.

Conflicting challenges
Though the oil and gas industry and federal regulators appear to have made significant progress in improving the safety of offshore drilling in the four years since the Deepwater Horizon tragedy, major concerns still remain, especially with regard to the safety of blowout preventers.

Another concern is how exactly Big Oil companies will balance the conflicting challenges of improving safety measures while simultaneously cutting costs. For BP, cost cutting and a lack of corporate oversight on safety and accident prevention measures were key reasons that led to the tragic 2005 Texas City refinery explosion.

That's why I can't help but wonder if this renewed focus on cutting costs might lead Big Oil companies drilling in the Gulf of Mexico to cut corners on safety and precautionary measures, potentially inviting another major oil spill. What do you think?

Do you know this energy tax "loophole"?
You already know record oil and natural gas production is changing the lives of millions of Americans. But what you probably haven't heard is that the IRS is encouraging investors to support our growing energy renaissance, offering you a tax loophole to invest in some of America's greatest energy companies. Take advantage of this profitable opportunity by grabbing your brand-new special report, "The IRS Is Daring You to Make This Investment Now!," and you'll learn about the simple strategy to take advantage of a little-known IRS rule. Don't miss out on advice that could help you cut taxes for decades to come. Click here to learn more.

Arjun Sreekumar and The Motley Fool have no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information