Posts Tagged ‘BP’

A Fatal Flaw

June 1, 2010

I try hard to keep politics out of my editorials about the energy world, but the major energy story today is the continuing oil spill in the Gulf of Mexico, and the really consequential parts of that story are all about politics.

The political philosophy which has reigned over the past 30 years says “Any regulation that restricts the oil industry’s freedom to operate is bad – doubly bad, if it comes from Washington. Accidents or mistakes? Don’t worry – market forces will incentivize companies to do the right thing.” On its surface, it’s an appealing policy. It has enabled the ‘can do’ attitude of great innovation in oilfield technology which has kept oil flowing to our gas tanks and factories. On a philosophical level, it satisfies our urge for personal freedom and the ability to earn great reward for great success.

Appealing as this philosophy might be, the way it has been implemented these past 30 years is fatally flawed. In this case, BP gambled big – perhaps by stretching its technology beyond its limits, perhaps by cutting safety corners – with little prudence or restraint. While BP will pay some of the costs of their mistakes, most of the assets they gambled with – the homes and livelihood of Gulf coast residents, the barrier islands which provide protection from hurricanes, the shrimp and oyster fisheries, and Gulf and Caribbean environment – weren’t theirs to wager.

The bottom line problem – it’s a problem that runs to the very core of American society – is that over the past 30 years, politicians of both parties have designed the rules so that the big and powerful can gain great rewards, while the government and society in general are there to back-stop their great failures. As the BP case illustrates, there’s no one sitting at the regulatory table who represents the interests of the average American people, making sure the Big Boys are not playing fast and loose with our assets.

As columnist David Brooks, certainly no friend of big government, said in a recent editorial:
If this disaster teaches anything, it is that we are a venturesome, entrepreneurial society. We rely on corporations like BP to bring us energy. At the same time, it is clear that even well-meaning corporations sometimes take shortcuts when it comes to controlling pollution and protecting worker safety.
So we want government to regulate business. We want regulation to be strong enough to reduce risk but not so strong as to stifle innovation. We want regulators to work cooperatively but not be captured by those they monitor.
We have known, for a long time, that regulation is about balance. The proper regulatory regime has to be set case by case and year by year.

The problem is that today, the balance between entrepreneurial freedom and the public interest is badly out of whack. Whether it’s the oil industry, Wall Street, or mortgage bankers, the existing regulations – and the way the regulators apply them – all too often allow the rich and powerful to get richer and more powerful, while the rest of us pick up their tab.

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“Drill, baby …” Oops, Never Mind

May 5, 2010

Not long ago, I wrote – pretty favorably – about Pres Obama’s decision to open up some offshore areas to more drilling and petroleum development. I said then that decades of technology improvements have substantially reduced the risks of accidents and spills.

Well, that statement was certainly factually true when I made it, and it’s no less true today. But the BP disaster off Louisiana shows that the risk isn’t ZERO. We don’t know yet just where the system failed – equipment malfunction, poor design, or human error – but there was a failure point, and it is within our ability to identify it, along with the culprits.

Oil producers and drillers have lots of incentive to avoid these disasters. It will cost BP many times more in clean-up costs and bad publicity than they could ever have saved by cutting safety and environmental corners. But even if a company has the best of intentions – and it’s pretty clear now that planning for potential spills by BP, Halliburton, et al was dreadfully negligent – familiarity always breeds complacency, and it’s easy to become lax when you’re policing your own behavior.

Better oversight and regulation – by an independent organization that doesn’t have a direct stake in getting oil out of the ground – must be a major part of the response to this mess. Taking $$$ out of the hide of unfortunate or negligent offenders is satisfying, but bancrupting BP isn’t going to clean up the mess in the Gulf, bring back the dead fish, birds and turtles, or replace the lost tourism and fishing revenues.

Energy development is vital to our individual economic health and to our country’s basic security. But debacles like the BP mess underscore the urgency of developing alternative sources, along with more effective and reliable regulation of oil and coal resources.

And the fact that our near term energy mix will have to include a fair amount of oil that’s not from the Middle East as a bridge to a non-fossil fuel future underscores the urgent need for an independent regulatory body with the resources and teeth to make sure industry doesn’t cut corners when it comes to safety and the environment.

Fuel Alcohol: 1C, 2C, 4C?

June 17, 2009

Up to now, most of the alcohols fuels action has centered on the 2-carbon alcohol, Ethanol (EtOH). The Brazilians have made a 3 decade success of their EtOH experiment – turning the liability of a huge sugar cane processing waste stream into an economic asset largely unencumbered by petroleum imports. And over the past few years, of course, corn-based fuel EtOH has flourished in the US on the strength of Federal mandate and the Midwest farm lobby.

Ethanol enjoys a large experience advantage today, and – in Brazil – a true competitive advantage. In the US, the economics of corn based EtOH is not nearly so clear – not to mention the political liability of diverting farmland and farming resources from food crops to gas guzzlers. But Ethanol isn’t the only potential fuel alcohol – maybe it’s not even the best. Both the simplest alcohol, 1-carbon alcohol Methanol MeOH, and 4-carbon Butanol BuOH present (alike with EtOH) and array of advantages – and, to be fair, some significant drawbacks.

Methanol is already a huge item of commerce, produced and traded in the many tens-of-billions of pounds per year. In a large sense, you can view MeOH as a handy way to move huge amounts of inconvenient and unusable natural gas from the Middle East to industrial users in the US, Europe, and increasingly, in Asia. And since MeOH is easily derived from nearly any carbon source, it may have a bright future as an environmentally less offensive way to tap huge coal reserves in the US and China.

Similarly, there is a large (although a couple of Zero’s less large than MeOH) commercial marketplace today in Butanol (primarily as an ingredient in paints, flexible plastics, etc). Today, nearly all BuOH comes from petroluem sources, so conventional BuOH for fuels doesn’t make much environmental or energy independence sense. But recently, there have been substantial improvements in bio routes to BuOH that (in some cases, at least) start with ag waste, not food or feed grains.

Lots of sources compare the properties of these fuel alcohols with the gasoline they might replace. I think this version (from ButylFuels, LLC – http://www.butanol.com) is especially easy to use.

Source: ButylFuel, LLC

Source: ButylFuel, LLC

Both 1-carbon MeOH and 2-carbon EtOH suffer from low energy density (poor miles-per-gallon) and an inconvenient propensity to pick up corrosion causing moisture from the air. The more carbon-rich BuOH behaves much more like conventional gasoline in the fuel tank. Indeed, some claim that most US cars on the road today can run quite well on BuOH. And some industry heavyweights – DuPont and BP, for example – are pushing for Butanol as the next motor fuel.

So, bottom line, there is no single right answer to the 1 vs 2 vs 4 in the alcohol fuels question. (And, indeed, there are strong manufacturing arguments favoring a mixture of these and other alcohols.) Each has it’s place – except the truly wasteful diversion of food resources into fuel tanks – and each can make important contributions during our transformation from a fossil fuels economy to one fueled by renewable energy.