Tag Archives: Gulf Coast

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7 Potential Disasters Worse than the BP Spill

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If forecasters were attempting to gauge the worst disasters that could happen, a major oil spill gushing for some 90-plus days into the Gulf of Mexico would probably have rated fairly high. By some estimates, this whole mess will cost BP around $60 billion. (Other, more conservative estimates have it costing closer to 1/10th that number.)

But while this might seem like the one of the worst things that possibly could happen on American soil, it isn’t. Forbes, in its latest issue, has a list of seven other incidents that could be even more catastrophic. Here’s a recap of their list.

nuclear plant

1. Nuclear Meltdown

Depending on the severity and location, a disaster at a major plant could wreak unfathomable carnage. Writes Forbes:

The industry has $19 billion set aside to pay for accidents. But what would a Chernobyl-type release of radioactive gases into the air do to death rates and the habitability of some large area? The Institute for Policy Studies says a spent-fuel fire could cost hundreds of billions of dollars.

While nuclear energy very may well be a good option in a country (rhetorically) trying to slow climate change and wean itself off of foreign oil, the possibility of a meltdown can be sobering — even when you realize that it has thus far been very effective and safe in some parts of the world for the past several decades.

gasland

2. Liquefied Natural Gas Explosion

With supertankers out there carrying some 100,000 tons of liquid methane, the explosive potential of a single ship is equivalent to the blast that would occur if two billion sticks of dynamite went off. The last major tanker explosion killed 128 people in Cleveland in 1944. The next one? Well, it would likely be much, much worse.

And anyone who has seen the controversial — and terrifying — documentary Gasland knows that there may be other, more subtle risks involved in natural gas extraction that deserve the attention of regulators and the industry.

Bhopal Union Carbide

3. Chemical Plant Explosion

The Bhopal disaster was the worst industrial accident in history. Recently — and very controversially — seven involved officials were sentenced to two years in prison and fined $2,000 for negligence more than 25 years after the 1984 Union Carbide leak of poisonous gases (mostly methyl isocyanate) that killed some 15,000 people directly (and up to 23,000 by some estimates) while also leaving another 500,000 with injuries and ailments related to exposure. Human rights groups, victims and Bhopal locals were outraged at the leniency given, particularly since proper clean-up efforts were never conducted and that the $470 million settlement paid by Union Carbide in 1989 now looks laughable by any standard.

If something like that were to occur today, it’s almost impossible to predict how much such a politically charged incident with so many casualties would end up costing. But Forbes lists a hypothetical plant explosion in Houston that kills 600 people as totaling $20 billion, according to Risk Management Solutions.

hoover dam

4. Dam Failure

I have never done any research into a major dam failure, but it sure doesn’t sound good at all.

One of the worst scenarios would be a cascading series of failures in the Columbia River Basin of the Pacific Northwest, where the dams start in Canada, pass the Department of Energy’s Hanford Reservation, with its 50 million gallons of plutonium-laced waste, and include the 6.8-gigawatt Grand Coulee Dam, the largest hydroelectric plant in the U.S. The odds of such a catastrophe are extremely low, but the costs would quickly exceed the $85 billion tab for cleaning up Hanford.

Hopefully, someone is looking into lowering the threat for all “one-third of the 80,000” U.S. dams that FEMA claims pose at least a “high” risk.

long island express 1938

5. Category 5 Hurricane Hits New York

A few years ago, I wrote an in-depth feature article for Risk Management about the hurricane potential for New York. Honestly, I’m not really sure a cat 5 hitting NYC is even close to likely over, say, the next 100 years or so, even if ocean sea-surface temperatures continue to rise to alarming extents. But a category 3 storm hitting the area is not only likely — it’s inevitable.

In 1938, the “Long Island Express” raced up the Atlantic coast at a breakneck pace, inundating Long Island, Connecticut and, particularly, Providence, Rhode Island, with floodwaters and storm surge that, while devastating even back then when the areas were sparsely developed, would lead to well over a $100 billion in losses today. The loss of life in this densely populated, frightening unprepared region could be even worse.

Here’s an excerpt from the piece I wrote about “The Northeast Unthinkable”:

Given its geography, population density and general affluence, New York’s Long Island in particular faces a tremendous risk. When the Long Island Express hit in 1938, it was eastern Suffolk County that endured the greatest winds, storm surge and flooding, resulting in approximately 50 deaths. According to 1940 census data, the population at the time was just under 200,000. Today, nearly 1.5 million people live in Suffolk. And another 1.34 million reside in the neighboring Nassau County compared to the roughly 400,000 there in 1938.

“What really drives significant catastrophe losses is a major event hitting a major metropolitan area,” says Clark. “Otherwise, you can have a lot of activity, but you’re not going to have a lot of losses. It’s those chance occurrences where you have major events hit Galveston, Houston, New Orleans, Tampa, Miami, the Mid-Atlantic or the Northeast—those are the real areas where you’re going to get the mega-catastrophes.”

According to a study by AIR, there is some $4.4 trillion worth of commercial exposure and $3.4 trillion in residential property from New Jersey to Maine. And with almost a million households in Long Island alone, this 1,200-square-mile strip of land accounts for over $1 trillion in combined commercial and residential exposure.

It is with this boom in population and wealth in mind that Roger Pielke, Jr., director of the Center for Science and Technology Policy Research at Colorado State University, set out to formulate new projections for the scale of destruction a replay of the Great New England Hurricane would cause now.

In today’s dollars, the 1938 storm caused over $4 billion in insured losses alone. But this adjusted figure only accounts for the elevated currency values and ignores 68 years of regional growth in population, infrastructure, industry and commercial enterprise. “You can’t adjust for the damages that never occurred,” says Pielke.

As someone who lives in New York, this — even more so than terrorism — is the possible disaster that disturbs me the most, in part, because I believe there is actually some sort of official developed to react to the next terrorist attack. I doubt there is any comprehensive, inter-county plan at all that will be effective in the days leading up to an following the category 3 hurricane that will someday hit.

sydney opera house

6. Ferry Capsizing

This one honestly sounds less plausible as a “worse than BP disaster” for the United States than it does elsewhere, but here’s what Forbes wrote:

Ferryboats and riverboats are extremely stable because of their wide, flat design, but they also often travel in dangerous waterways with lots of passengers. As many as 4,300 passengers and crew died after the Philippine ferry MV Dona Paz collided with a tanker, caught fire and sank in 1987.

I suppose that could happen anywhere, but it seems less likely than the others listed in the developed world — especially when compared to this last, but certainly not least, one…

volcano

7. Supervolcano

Forbes quotes a Lloyd’s report that volcanoes pose an $85 billion risk “including disruption and air travel” and includes Mount Vesuvius in Italy and Mount Rainier outside of Seattle as two of the scariest locations for a major eruption.

$85 billion sure is a lot of money, but anyone who has seen the History Channel’s “Mega Disasters” episode on what will happen when the Yellowstone Caldera blows probably has worse fears on their minds. Were this thing to erupt, the only adjusters and insurers left to tally the total will likely be roaches and reptiles.

You’ve been warned.

When the Fail-Safe Fails

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The New York Times today published the best, most comprehensive, most anger-inducing piece I have seen detailing the collective risk management failings that led to the Gulf oil spill. Clocking in at around 6,500 words, this thing is a doozy. But it is a report that everyone who wants to understand how this disaster really came to be needs to read.

The article focuses mainly on the failure of “blowout preventer,” a device attached to every well drilled in order to, you guessed it, prevent blowouts. While immensely complex and huge — it’s five stories tall and weighs hundreds of thousands of pounds — its purpose is to provide a shut-off method in case something goes wrong with the well.

Even more specifically, we get a wonderful lesson into the ultimate fail-safe: the “blind shear ram.” There are many components within the blowout preventer that must operate properly to shut off a well, but the blind shear ram is the final device that ultimately seals the thing. If it fails, the whole thing fails.

And all evidence is pointing to the fact that, on the Deepwater Horizon, it failed.

The process to activate the blind shear ram and seal the pipe is complex, but according to this article, the risks associated with that complexity were well known by all the players in the drilling industry. And on the Deepwater rig, no one did all that much to mitigate that risk. In contrast, in other instances, other companies and other rigs adopted redundancy as a way to ensure that a well shut-off would not be compromised.

These kinds of weaknesses were understood inside the oil industry, documents and interviews show. And given the critical importance of the blind shear ram, offshore drillers began adding a layer of redundancy by equipping their blowout preventers with two blind shear rams.
By 2001, when Transocean, now the world’s largest offshore drilling contractor, acquired the Deepwater Horizon, it had already begun equipping its new rigs with blowout preventers that could easily accommodate two blind shear rams.
Today, Transocean says 11 of its 14 rigs in the gulf have two blind shear rams. The company said the three rigs that do not were built before the Deepwater Horizon.
Likewise, every rig currently under contract with BP, which had been renting the Deepwater Horizon, comes with blowout preventers equipped with two blind shear rams, according to BP. While no guarantee against disaster, drilling experts said, two blind shear rams give an extra measure of reliability, especially if one shear ram hits on a joint connecting two drill pipes.
“It’s kind of like a parachute — it’s nice to have a backup,” said Dan Albers, a drilling engineer who is part of an independent investigation of the disaster.

Weaknesses were understood inside the oil industry, documents and interviews show. And given the critical importance of the blind shear ram, offshore drillers began adding a layer of redundancy by equipping their blowout preventers with two blind shear rams.

By 2001, when Transocean, now the world’s largest offshore drilling contractor, acquired the Deepwater Horizon, it had already begun equipping its new rigs with blowout preventers that could easily accommodate two blind shear rams.

Today, Transocean says 11 of its 14 rigs in the gulf have two blind shear rams. The company said the three rigs that do not were built before the Deepwater Horizon.

Likewise, every rig currently under contract with BP, which had been renting the Deepwater Horizon, comes with blowout preventers equipped with two blind shear rams, according to BP. While no guarantee against disaster, drilling experts said, two blind shear rams give an extra measure of reliability, especially if one shear ram hits on a joint connecting two drill pipes.

“It’s kind of like a parachute — it’s nice to have a backup,” said Dan Albers, a drilling engineer who is part of an independent investigation of the disaster.

In short, there were known issues with the ultimate, industry-standard fail-safe measure to prevent this type of spill. And in many cases — even most of those cases involving rigs constructed by Transocean and operated by BP — those issues were recognized and managed. But on the Deepwater Horizon, the most common method of managing that risk (redundancy) was not implemented.

Read into that whatever you like.

In fairness to BP and Transocean (something that’s hard to even try to provide anymore if I’m being honest), there is much, much, much, much, much more to all this. For example, the federal offshore drilling regulatory agency, the Minerals Management Service, knew all about these very same risks and never adequately ensured that any company do anything about them.

The federal agency charged with regulating offshore drilling, the Minerals Management Service, repeatedly declined to act on advice from its own experts on how it could minimize the risk of a blind shear ram failure…Even in one significant instance where the Minerals Management Service did act, it appears to have neglected to enforce a rule that required oil companies to submit proof that their blind shear rams would in fact work.

There is also ton of evidence that blowout preventers and blind shear rams — inherently — aren’t that great at stopping a well on an industrywide basis.

Using the world’s most authoritative database of oil rig accidents, a Norwegian company, Det Norske Veritas, focused on some 15,000 wells drilled off North America and in the North Sea from 1980 to 2006. It found 11 cases where crews on deepwater rigs had lost control of their wells and then activated blowout preventers to prevent a spill. In only six of those cases were the wells brought under control, leading the researchers to conclude that in actual practice, blowout preventers used by deepwater rigs had a “failure” rate of 45 percent.

Plus, there’s this:

More than three decades ago, the failure of a shear ram was partly to blame for one of the largest oil spills on record, a blowout at the Ixtoc 1 well off the Yucatan Peninsula in Mexico. Descriptions of the accident at the time detailed problems both with the shear ram’s ability to cut through thick pipe and with a burst line carrying hydraulic fluids to the blowout preventer.

In 1990, a blind shear ram could not snuff out a major blowout on a rig off Texas. It cut the pipe, but investigators found that the sealing mechanism was damaged. And in 1997, a blind shear ram was unable to slice through a thick joint connecting two sections of drill pipe during a blowout of a deep oil and gas well off the Louisiana coast.

Honestly, I could excerpt this whole article. It details so many instances where so many industry players did so little to solve the so very well known risks of drilling.

So infuriating.

So … really, you should just go read it in full. Additionally, here is the accompanying Times video that helps explain what exactly a blind shear ram is and how it works — in theory, of course.

BP Mismanages a Coffee Spill and the Best of @BPGlobalPR

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Not surprisingly, the whole world pretty much hates BP now. And more and more people are lashing out against the oil conglomerate with attacks. Some are vicious advocacy campaigns that include pocket-hurting measures like boycotts. Others are vicious satirical jabs at a company whose reputation is being destroyed, piece by piece, day by day.

Here is the funniest attack I’ve seen. From the Upright Citizens Brigade, it’s a spoof of how BP would try to handle a boardroom coffee spill. (There is one instance of NSFW language at the end.)

Good stuff.

And coming in at a close second is the fake BP public relations Twitter feed. If you’re not familiar, many companies use the social media site Twitter to inform the public of their latest news and offerings. And someone has created a satirical @BPGlobalPR account that sends out frequent humorous updates laced with acerbic cynicism for how BP is handling this mess. Often accompanied by the sarcastic “#bpcares” disclaimer, the account advocates charity causes such as offering “free bpcares” t-shirts that you can purchase for $25. (You can read more about @BPGlobalPR here and here.)

Here are the cleverest updates from the account so far:

SPOILER ALERT: The leak stops eventually, everyone forgets about it and we all buy another vacation home. #cantwait

Found driftwood that looks like Jesus crying oil. Not sure what it means but we’re charging 20 bucks to see it. #bpcares

If we’re being accused of being criminals, we want to be tried by a jury of our peers — wealthy execs who don’t give a damn. #fairisfair

I’ve gotta say, at night the gulf really doesn’t look that bad. #bpcares

OMG This isss ridciulsus. playing a drinking gamee where we drink a shot everytme we seeee an oily birdddd!!! LOL! so wasted!!11 #pbcares

What a gorgeous day! The ocean is filled with the most beautiful rainbows! #yourewelcome #bpcares

They want to fine us $4,300 for every barrel of oil spilled? Umm, we’re not spilling barrels, the oil is going directly into the gulf. DUH

A bird just stole my sandwich! You deserve everything you get, nature!!! #bpcares

If Top Kill doesn’t work, we’re just gonna toss a giant “Get Well Soon” card into the gulf and hope for the best. #bpcares

Just wrapped up a meeting with the EPA. Terry kept farting out loud at all the right moments. Not sure how he does it, but it’s SO FUNNY!

Funny, no one has thanked us for seasons 3-15 of Treme yet. #bpcares

The good news: Mermaids are real. The bad news: They are now extinct. #bpcares

Catastrophe is a strong word, let’s all agree to call it a whoopsie daisy.

Beverly Hillbillies marathon on TBS – now THESE guys knew what to do with an oil leak!

Not only are we dropping a top hat on the oil spill, we’re going to throw in a cane and monocle as well. Keeping it classy.

BP’s “Pattern of Neglect and Corner-Cutting”

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Two major, damning reports have surfaced in the past 24 hours that may make it impossible for BP’s reputation to ever recover. The spill itself was a major hurdle, but now we are seeing documents that “portray a company that systemically ignored its own safety policies” as well as first-hand accounts from Deepwater Horizon explosion survivors that company decision makers on the oil rig may have prioritized revenue over safety.

Here’s the video of Anderson Cooper discussing the rig’s last moments with the survivors in what “paints perhaps the most detailed picture yet of what happened on the deepwater rig — and the possible causes of the April 20 explosion.”

Here’s more from the CNN story on the workers’ comments:

The BP official wanted workers to replace heavy mud, used to keep the well’s pressure down, with lighter seawater to help speed a process that was costing an estimated $750,000 a day and was already running five weeks late, rig survivors told CNN.

BP won the argument, said Doug Brown, the rig’s chief mechanic. “He basically said, ‘Well, this is how it’s gonna be.’ ”

“That’s what the big argument was about,” added Daniel Barron III.

Shortly after the exchange, chief driller Dewey Revette expressed concern and opposition too, the workers said, and on the drilling floor, they chatted among themselves.

“I don’t ever remember doing this,” they said, according to Barron.

“I think that’s why Dewey was so reluctant to try to do it,” Barron said, “because he didn’t feel it was the right way to have things done.”

Revette was among the 11 workers killed when the rig exploded that night.

In the CNN interviews, the workers described a corporate culture of cutting staff and ignoring warning signs ahead of the blast. They said BP routinely cut corners and pushed ahead despite concerns about safety.

The rig survivors also said it was always understood that you could get fired if you raised safety concerns that might delay drilling. Some co-workers had been fired for speaking out, they said.

On top of these first-hand accounts comes a joint report from ProPublica and the Washington Post that shows that these issues were not just occurring on the Deepwater Horizon. Similar safety concerns have existed throughout many BP operations over the past decade.

A series of internal investigations over the past decade warned senior BP managers that the company repeatedly disregarded safety and environmental rules and risked a serious accident if it did not change its ways.

The confidential inquiries, which have not previously been made public, focused on a rash of problems at BP’s Alaska oil-drilling unit that undermined the company’s publicly proclaimed commitment to safe operations. They described instances in which management flouted safety by neglecting aging equipment, pressured or harassed employees not to report problems, and cut short or delayed inspections in order to reduce production costs. Executives were not held accountable for the failures, and some were promoted despite them.

Similar themes about BP operations elsewhere were sounded in interviews with former employees, in lawsuits and little-noticed state inquiries, and in e-mails obtained by ProPublica. Taken together, these documents portray a company that systemically ignored its own safety policies across its North American operations — from Alaska to the Gulf of Mexico to California and Texas.

The report gives a year-by-year breakdown of all the transgressions, but even to an untrained-to-the industry eye, the evidence seems overwhelming to suggest that their has been a legacy of ignoring safety — both for workers and the environment.

ProPublica sees it the same way.

It is difficult to compare safety records among companies in industries like oil exploration. Some companies drill in harsher environments. And bad luck can play a role. But independent experts say the pervasiveness of BP’s problems, in multiple locales and different types of facilities, is striking.

“They are a recurring environmental criminal and they do not follow U.S. health safety and environmental policy,” said Jeanne Pascal, a former EPA debarment attorney who led the investigations into BP. “At what point are we going to say we are not going to do business with you any more, bye? None of the other supermajors have an environmental criminal record like they do.”

Add all this up and the worst-case fears for BP offered this morning by the New York Times don’t seem so preposterous.

It seems unthinkable, even now, that the disastrous oil spill in the Gulf of Mexico could bring down the mighty BP. But investment bankers get paid to think the unthinkable — and that is just what they are doing.
The idea that BP might one day file for bankruptcy, particularly as part of a merger that would enable it to cordon off its liabilities from the spill, is starting to percolate on Wall Street. Bankers and lawyers are already sizing up potential deals (and counting their potential fees).

It seems unthinkable, even now, that the disastrous oil spill in the Gulf of Mexico could bring down the mighty BP. But investment bankers get paid to think the unthinkable — and that is just what they are doing.

The idea that BP might one day file for bankruptcy, particularly as part of a merger that would enable it to cordon off its liabilities from the spill, is starting to percolate on Wall Street. Bankers and lawyers are already sizing up potential deals (and counting their potential fees).

And even if bankruptcy and takeover is overstated the oil conglomerate’s fate, there are certainly those that agree that the company’s reputation will never recover.

There are many people — besides BP — who think even discussing the possibility of a bankruptcy or takeover is silly. But looking out a few years, that may be BP’s best, last hope.

“Even with a prepackaged bankruptcy, BP’s brand is permanently tainted,” said Robert Bryce, a senior fellow at the Manhattan Institute and author of “Power Hungry: The Myths of ‘Green’ Energy and the Real Fuels of the Future.” Yes, BP is financially sound now. It is unlikely to go bust near term, he said.

“Instead, BP will spend the coming decades circling the drain, mired in endless litigation, its reputation irreparably damaged, and its finances weakened,” Mr. Bryce said.

That, if you believe the bankers, is the optimistic outcome.

Yikes.

And, oh yeah, then there’s this latest “smoking gun” report of the company lying to the public. Plus, right, that whole President of the United States launching a quest to find out “whose ass to kick” thing.

Add it all together and, sure, just going bankrupt starts to sound like an even more and more optimistic outcome by the day. For other BP execs who are culpable in what is now likely to be the worst environment disaster in U.S. history, efforts to sidestep reputation damage may eventually pale in comparison to  efforts sidestep jail.