Risk and Security LLC

“Drill, baby, drill.”   We have heard that before – being from California and being a tree-hugger, I didn’t think that was a great idea, especially since I know our oceans are already struggling, but I did not expect something this bad to happen.

The politicians who were so busy expanding oil leases and the profit-rich oil companies who are raking in billions,  don’t spend much time on assessing the potential risks AND the potential losses for a catastrophic oil spill.

Maybe we should require them to do REAL risk assessments on the total possible impact of an oil disaster.    It would not be an environmental impact statement, which downplays the risk by putting in lots of scientific jargon and ASSUMES that proper safety controls and contingency plans are in place.  But obviously that either was not done;  or it was not accurate, or it was done and burned so no newsperson would ever see the smoking document (or should I say, the oily document).

If we go back to the classic risk model – we are by listing the assets at risk:

1. The Cost of the Original Rig and Drill Equipment – $500,000,000
2. The Value of the Lives of the 11 workers who died –    25,000,000
3. The Value of the Oil itself, with replacement value
   (5 million gallons at  $2.00 per gallon = $10 million dollars)
4. BP’s Reputation as a good company – $2 million
5. Gulf Fishing and Shrimp Industries Value – $2.5 billion dollars for

Just Louisiana – add in Alabama, Mississippi and Florida and quickly     the bill runs up to $10 billion dollars.

1. Value of Summer Beach Tourist Business in the Gulf – $20 billion
2. Value of lives of 20,000 – 50,000 shorebirds; 10,000 turtles; 0ther assorted marine mammals, birds, and fish   – $25 million.

So we have a resource worth about $33.5 billion dollars – that is potential loss estimate.

What we will lose if a threat materializes?    Keep in mind, for comparison purposes, that BP had recently doubled it’s profits from $3 billion to $6 Billion a quarter,  which calculated out to about  $24  Billion Dollars a Year.

Next we factor in the likelihood of a threat occurring.  Reviewing the frequencies of and problems problems with oil rigs, and oil spills, we find:

There are an average of about 2000 oil spills a year of various degrees.

There are an average of 1 million gallons spilled each year (going back 7 years).

(Already you can start to get a idea of how terrible this spill is.)

Next we list all the problems (vulnerabilities) that could or would have made it more likely to have a disaster occur,  you will recognize many of these from the latest news conference

1. New,  untried technology
2. No recovery plan if secondary shut offs fail
3. Difficulty of working on deep ocean
4. No reliable oil containment systems have ever been developed

SO – if British Petroleum is making $24 BILLION A YEAR and because of this spill, BP loses about $1 billion dollars. That’s not a bad Return.

The problem comes in with the $30 Billion dollars that is borne and felt, not by BP, who goes on to drill somewhere else, but by the citizens of the affected states and the whole United States due to the incalculable environmental damage.

The last thing we look at in a risk assessment model is the potential controls that could have been put in place to reduce the likelihood of the threat materializing, and the cost of those controls that could either reduce the threat, or, and even more important in this case, minimize the damage if the threat occurs anyway.

What controls could have been improved in this model?

Development of effective oil capping techniques BEFORE a disaster

Better training of oil rig workers

Better fire controls which might have saved the rig from sinking.

Accountability Increased for the Materials Management Service (MMS)

Tougher Regulations for Oil Companies

Better oil containment tools

Better oil absorption tools

Regular drills so that workers are better prepared in an emergency like this.

I’m still here watching the news coverage but I have learned why this happened – because BP was making so much money, it just didn’t have that much to lose from a disaster.  So it avoided improving its technology and spending money on controls that might have helped.

And the former and current U.S. administrations are to blame for not requiring accountability from the MMS.  And the rest of us, including the bluefin tuna, the birds, the jellyfish, the crabs, the shrimp, bottlenose dolphin, sperm whale, dozens of varieties of sharks, manatees, oysters, warblers, terns, swallows, egrets, plovers, sandpipers, pelicans,  loggerhead turtles, Ridley’s turtle, diamondback terrapins, and alligators.

According to the Louisiana Department of Wildlife and Fisheries,   here are the numbers of species that will be affected:

445 species of fish,

45 species of mammals

32 species of amphibians and reptiles

134 species of birds,
and the ocean itself, and all of us.