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WebMemo #2888 on Energy and Environment

May 5, 2010

Gulf Oil Spill: Washington’s Response Should Not Preclude Future Exploration

By

America’s most serious offshore oil spill in 20 years is currently unfolding in the Gulf of Mexico, and massive cleanup efforts are underway to cap the leak and contain the oil. This comes at a time when Washington had been considering expanding domestic oil production, including the Gulf and other offshore areas.

For the most part, President Obama’s initial response has been sensible, calling for a freeze on any plans to allow new leasing while not interfering with ongoing energy production contracts or calling for permanent policy changes before the facts are in. No doubt, this spill can and should spark prospective policy changes regarding offshore energy production, but it should be done in a prudent manner and not preclude continued exploration and drilling in America’s waters.

First, Find Out What Happened—Then Make Any Appropriate Policy Changes

Perhaps the only good news is the fact that the Deepwater Horizon spill is the first major one since the 1989 Exxon Valdez tanker accident. Nonetheless, it happened, and it can happen again unless preventive measures are taken. However, it makes no sense to impose legislative measures until officials assess this incident and find out what really occurred at the Deepwater Horizon site 42 miles off the coast of Louisiana and 5,000 feet below the surface.

The first step is to learn the cause of the spill. Offshore wells are equipped with blowout preventers, which can be activated to stop the flow of oil from the sea floor. While blowout preventers have been a great success (for example, preventing major spills during Hurricane Katrina) the failure in this case should be thoroughly investigated.

Most distressing is the fact that the spill has persisted for weeks. Necessary cleanup equipment was, in some cases, slow to arrive, and only afterwards was a containment dome fabricated to be dropped over the well and hold in the petroleum. Perhaps one policy change would be to require more pre-positioned equipment and containment domes.

The silver lining from past spills is that they sparked technological and procedural advances—better cleanup methods after the Santa Barbara spill in 1969 and safer tankers and expanded Coast Guard authority after Exxon Valdez in 1989. The same can and should be done to minimize the risk of a repeat of the Deepwater Horizon spill, but those lessons cannot be applied until all the facts are in.

Make the Polluter Pay

BP and other companies involved in the Deepwater Horizon project should pay the cost of the spill. Indeed, major oil spills are major money-losing events for the companies involved—as they should be—which, along with safety regulations, explains why they are so rare. This includes the cleanup costs. The cleanup itself is largely undertaken by the Coast Guard and other federal agencies, but the bill should be paid by the responsible oil companies and not taxpayers.

There should be a discussion regarding whether laws like the 1990 Oil Pollution Act need to be prospectively updated to ensure that the polluter pays. But doing so should not be an excuse to impact existing contracts, simply make offshore drilling prohibitively expensive, or even prohibit it altogether.

Do Not Misuse or Misinterpret the Incident

Many activists and politicians are using the spill to push a pre-conceived agenda. For example, some are clamoring for increased alternatives like wind and solar or are cranking up the global warming rhetoric. But an offshore spill does not change the fact that alternative energy sources have a host of problems of their own or that cap and trade or similar measures to address global warming are a costly solution to an overstated problem.[1]

Nor should the offshore spill affect onshore drilling, where there is no risk of oil being dispersed into the water. And it certainly should not impede promising alternatives like shale oil, which currently being delayed by this Administration.

Nor should countervailing risks be ignored, such as the risk of spills from tankers carrying foreign oil to American ports. Every energy source carries some risk; policies should seek to minimize the risks in order to maximize the benefits.

Listen to the American People

Of course, much depends on how serious and lasting the environmental impacts of this accident prove to be, and it should be noted that the Exxon Valdez and Santa Barbara spills’ lasting damage was considerably less than the direst predictions at the time.

Before the spill, the American people supported expanded offshore drilling by more than two-to-one margins. That will change but perhaps not by very much—and, given history, probably not permanently. It may turn out that the public still supports offshore drilling—albeit with new safeguards based on what is learned from this spill—but not a moratorium on all offshore oil production. That would be a wise response from Washington.

Ben Lieberman is Senior Policy Analyst in Energy and the Environment in the Thomas A. Roe Institute for Economic Policy Studies at The Heritage Foundation.

Show references in this report

[1]See William W. Beach et al., “The Economic Consequences of Waxman-Markey: An Analysis of the American Clean Energy and Security Act of 2009,” Heritage Foundation Center for Data Analysis Report No. 09-04, August 6, 2009, at http://www.heritage.org/Research/Reports/2009/08/The-Economic-Consequences-of-Waxman-Markey-An-Analysis-of-the-American-Clean-Energy-and-Security-Act-of-2009.

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