Is it worth the risk to drill off Virginia’s coast?

This is a NASA satellite photo of the oil spill in the Gulf of Mexico:

As of this morning, the slick is 100 miles long and 45 miles wide. It’s twenty miles off the coast of Louisiana, and due to hit the shore this weekend. If this wasn’t enough of a disaster in the ocean, if this stuff washes up on shore, it’ll be a nightmare. It’s so bad that officials are considering lighting it on fire. That’s right—4,500 square miles of flaming oil slick is preferable to this stuff washing up, so nasty the consequences would be. It gets worse: the slick is growing, because although the offshore drilling platform exploded, burned, and collapsed beneath the waves (killing eleven), the oil is still gushing up from the ocean floor, through the twisted and broken pipe, and out into the surrounding water, at the rate of 42,000 gallons a day. BP said this afternoon that it’ll take months to stem the flow, though now they have a never-before-tested idea that they can float in an enormous dome and drop it down over the leak, and then drill another well to suck the oil out of to stop it from coming out of the busted on. They’ve got no idea if any of this stuff will work, but they’ve got to do it, because the alternative is admitting that the gulf coast is fucked. (Again.)

Fear not: there are ships working to clean up the spill. They’re in that satellite photo. But since each ship is significantly smaller than a pixel in size, relative to the image, you can imagine how much good they’re going to do. The task is Sisyphean.

Isn’t there some kind of a government safety system in place to prevent this from happening? Well, yes, but it’s purely voluntary. There’s a proposal to make it mandatory, but—as the WSJ points out—none of these rules would have prevented this from happening. Obviously, BP didn’t want to have their drilling platform explode—this represents an enormous economic loss to them. If the fourth largest business in the world can’t stop this from happening, then is it even possible to prevent this kind of an accident?

Never mind all that, though: Governor Bob McDonnell is a “drill here, drill now” kind of guy:

Bob McDonnell supports the safe offshore exploration and drilling for oil and natural gas 50 miles off the coast of Virginia. This is not only an issue of energy independence and national security, but the development of Virginia’s offshore energy reserves will mean thousands of new jobs, billions of dollars in new investment, and hundreds of millions in new tax revenue to the Commonwealth.

Like many Republican officeholders, he likes to say that drilling offshore is perfectly safe—technology solves all!—and that it’ll put lots of people to work. The latter, as we can see from the scramble underway in the gulf right now, is absolutely true. BP is about to put thousands of people to work building a giant dome, scrubbing down oil-slicked terns, and scrubbing crude off of a hundred miles of shoreline. Offshore oil is good for the economy in the same sense that me breaking my neck is good for the economy: think of all of the doctors, therapists, etc. who will be put to work! Whether there is such a thing as “safe” drilling for oil, though, remains to be seen.

The reality of offshore oil is that we have to pick: What’s worth more, our seaside economy or oil? Can you imagine the economic apocalypse in Virginia Beach that would result from their shoreline soaked in crude? In the Bay after fisheries are destroyed, and the remaining fish migrate out of the area? Offshore oil wells present a very real risk, and we are not well served by a faith-based attempt to balance these competing interests. We’ve got to do the math, figure out the real risk, and decide if we want to stake our marine economy on the safety of drilling off Virginia’s coast.

30 thoughts on “Is it worth the risk to drill off Virginia’s coast?”

  1. I heard the estimate for Florida is that they would stand to make about 2-3 billion from oil contracts but they would stand to lose between 50-60 billion in tourism revenue if an oil catastrophe would wash up on their shores. Seems like a bad gamble to me.

  2. The sad truth is that there is no risk at all in offshore drilling to Governor McDonnell. He’ll be out of office and on to other things long before any mishaps happen. The people killed in oil platform fires are workers, not him nor his friends. His rich constituents don’t vacation in Virginia Beach, they travel to other beaches of the world. This is simply a risk-free way for him to pander to under-educated voters and the oil companies… a win-win for him and he knows it.

  3. I heard the estimate for Florida is that they would stand to make about 2-3 billion from oil contracts but they would stand to lose between 50-60 billion in tourism revenue if an oil catastrophe would wash up on their shores.

    Wow. That’s just the kind of comparison that I’d hoped to dig up for Virginia, but it hadn’t occurred to me that other states would have done the math. Thanks for that, Kevin.

  4. That oil slick is drifting toward the second largest estuary in North America. The Chesapeake Bay is the largest. Estuaries are natures seafood factories, and are by definition flushed by seawater.

    I promise you petroleum tainted seafood will find it’s way into the human food chain. Those “dispersants” – they send the oil to the bottom.

  5. Perhaps someone with some Photoshop skills can superimpose the image of the slick onto Virginia’s coastline for comparison. I suspect the shape of the slick would be different in the Gulf Stream – it would probably get dragged straight up the coast, as opposed to the slow bloom in the calm Gulf of Mexico – but it would be a helpful illustration.

  6. Royalties! Yay!

    But… under current regulations, offshore drilling royalty payments go to the Federal government, not the state. See here.

    Thousands of new jobs? Well, maybe. But probably not for Virginians. Oil-rig jobs are highly specialized, and mostly temporary. The workers tend to be migratory, and would probably come from out of state.

    But maybe Virginia would get a shiny new refinery out of the deal. That’d be nice. They hardly ever blow up any more these days.

    Drill, baby, drill!

  7. This environmental problem won’t be solved until we stop relying on oil for just about everything we do. It’s obvious to say that, but sometimes we need a reminder.

    Although, I suppose you could make a case that land-based drilling in Saudi Arabia, etc. is environmentally safer, and that we should forego drilling off our shores and simply rely on domestic land-based drillsites and imports (although I suppose you can’t really force other countries to stop drilling off their coasts, so it would just be pushing more of the risk onto them and their coastlines… and anywhere else the oil drifts).

    My guess is that’s not a viable economic model, so in the end unless we change our addiction to oil, there will always be this threat.

  8. I have to admit that I had come around to believing that offshore drilling could be done safely….mostly based on the fairly positive experiences of the Europeans who are more eco-friendly than we are.

    My main objection to the drill here, drill now, garbage is that it somehow would cause our prices at the pump to suddenly drop.

    This event will surely slow any drill now rush. But it depends on how bad it gets to know for sure how it will affect things here in VA.

  9. I have nothing nice to say about BP. They don’t have the best of track records. Albeit this was a contractor and not them. I still haven’t seen anything telling us what caused the accident. It could have been preventable, like BP’s Texas City Refinery explosion was. So, the cause would certainly be a factor in determining whether this is a risk we can mitigate.

    The other point is that spills of this magnitude are rare. MMS has done studies of this. According to their last study, the spill rate for offshore platforms was 0.32 spills (over 1,000 bbls) per billion barrels of oil. There are higher likelihoods spills from pipelines, tankers and barges. Currently there are oil carriers that offload in Norfolk. They present a greater risk of spills, but yet we are not denying oil tankers from offloading at Virginia ports. Not a much greater risk though, tankers are 1.03 and barges are on the high end at 4.30.

    Florida has a greater chance of being hit by a a severe hurricane. In Miami, I think that would result in the 10s of billions of dollars range. Yet, we let people live in Florida. And we provide them subsidized flood insurance.

    Also, we don’t know what is off our coast. It could primarily be natural gas. And that would not present the same issues as oil production.

  10. This isn’t your grandad’s drilling Tex. This is deep water drilling. It’s bleeding edge. Your stats are meaningless. Welcome to the future of our oil addiction.

  11. The other point is that spills of this magnitude are rare. MMS has done studies of this. According to their last study, the spill rate for offshore platforms was 0.32 spills (over 1,000 bbls) per billion barrels of oil. There are higher likelihoods spills from pipelines, tankers and barges. Currently there are oil carriers that offload in Norfolk. They present a greater risk of spills, but yet we are not denying oil tankers from offloading at Virginia ports.

    Which is all interesting (truly; I worry that sounds diminutive), but the difference is one of quantity. The amount that can spill from a tanker is no greater than the contents of the tanker. As we’ve seen in this gulf spill, the amount that can spill is limited only by the quantity of oil under the ground.

    Florida has a greater chance of being hit by a a severe hurricane. In Miami, I think that would result in the 10s of billions of dollars range. Yet, we let people live in Florida. And we provide them subsidized flood insurance.

    Such comparisons are useful to illustrate what we consider an acceptable risk, but it provides a false comparison between something that we are powerless to prevent (a hurricane) and something that we can (an oil spill). Also, the fact that we take one risk doesn’t make another risk a good idea. I drive in a car every day, which is really quite dangerous, but that doesn’t mean I should take up smoking. :)

  12. MMS has current information on spills. And it still looks like the data fits the 1974-1999 study with rates of occurrence much lower than in the past. And the years with high incidents are ones with major hurricanes.

    Bubby, I don’t see your point.

  13. Waldo, most of the largest spills have been from tankers. Despite the fact that there is a limit to that amount, it can be quite a lot. A ULCC, for example, can carry over 2 million barrels of oil.

    My point was really relative risk of catastrophic occurrences. And to your point on powerlessness, risk can be accepted, avoided, mitigated, or shared. Risk are what they are though. A probability of a peril. I know of no way you can mitigate the risk of a hurricane occurrence. But you can certainly avoid the risk. And that is what you are suggesting we do with offshore drilling. Instead of mitigation, you are proposing avoidance. Driving is perfectly good example. In this case, you adopt a range of risk responses. You do some mitigation (driving behavior, seat belts, airbags). You do some sharing (insurance). And you do some acceptance of residual risk. But you don’t avoid it entirely. And that is certainly the varied approach we can take towards this risk.

    However, not knowing what caused the accident in the first place, prevents us from assessing how effective we can mitigate a catastrophic indecent like this. On the cost versus the benefit, it really depends on what the probability of a catastrophic occurrence is. That in relation to the economic benefit we will get from production which is currently unknown. On that point, I think it helps us to do exploration. That in concert with an accounting of this and other catastrophic incidents on platforms would help us best assess the risk. And we can potentially insure against that risk.

    The other thing I will come back to is that it could very well be primarily natural gas off our coast. You would not have the same issue with natural gas production.

  14. My point is that deep water drilling is a new thing. So your statistical population is skewed to blow outs where a hard-hat dive team can go down and fix the blow-out valve. This FUBAR is under a mile of ocean and 500 feet of twisted steel – well beyond the reach of men.

  15. I guess it depends on what you mean by new thing. Deep water exploration has been going on for sometime now. >5k ft deep wells go back as far as the early 1990s. I don’t know that we are talking bleeding edge. Certainly, we started building a lot more ultra-deep water production facilities in the last decade. But I still don’t know that it constitutes something so new as to make MMS data irrelevant. And even if we are not talking about ultra-deep, deep water production has been going on for a while. And I’m not sure you can get a dive team down 1,000+ feet.

    If depth is the concern, according to MMS’s map of the lease sale, 50 miles out is still only 200 meters of depth. And the deep, deep areas are close to 80 miles out. The other question I have on the suggested peril is whether a spill of this magnitude were one to ever occur would even float towards VA’s coast or into the Chesapeake Bay. If it’s spilling from that deep, I would think ocean currents would push it up the East Coast and out to sea.

    Senator Mary Landrieu just gave a speech on the Senate floor today making a similar argument to mine on risk. I just though that was neat.

  16. My mom is cancelling the trip that my family was taking for her 25th wedding anniversary to Destin, FL because of the oil spill. I hope this doesn’t become the norm; but I’m not too optimistic.

  17. It’s unimaginable that drilling off the Virginia coast would still be considered in light of this. Don’t they know that after the Polish president was killed in a plane crash, all airlines were shut down around the world? Sheeesh.

  18. Oh I get it. You’re being facetious. Planes really did continue to fly. So I guess we should drill here, drill now. I don’t think this catastrophic accident will forever spell the end of off shore drilling off the east coast. But the proponents can no longer point to a virtually unblemished environmental safety record. Safety concerns will get a lot more scrutiny. A lot will depend on how expensive the cleanup is and how badly the environment will be damaged. These are things we just don’t know yet.

  19. After plane crashes, we conduct extensive, enormously expensive investigations into the cause of them. If it’s determined that the problem is a class of airplanes, then they are grounded for significant modifications to prevent the problem. And if it’s a fundamental flaw, then that’s the end of that line of airplanes entirely. There’s no reason why we should treat oil rigs any differently. It’s entirely possible that near-shore ocean drilling rigs are equivalent to consumer-grade amphibious automobiles: a neat concept, but entirely too dangerous to be legal.

  20. The issue is, are the benefits to drilling offshore worth the potential risks?
    That’s not a question that the McDonnell administration seems to have asked before pushing forward to get approval for drilling.
    Under the current law, as others have noted, Virginia will get NO royalties from off-shore drilling.
    But we will put the state’s profitable tourism and fishing industries at risk.
    Republicans say the technology has improved and they are right. But it only takes one spill like this to wipe out tourism in Virginia Beach. The technology doesn’t need to be better, it needs to be perfect. That’s a fragile beach that require constant maintenance as is.
    I don’t hink it’s asking too much to ask the “drill, baby, drill” crowd to do this simple cost/benefit analysis, in public, for the benefit of the voters and taxpayers of Virginia, before embarking on this course.

  21. I guess I haven’t been paying attention, but I’m surprised to learn that VA would get no royalties. Does anyone get royalties? What would be in it for those who are not directly involved in the business end of it?

  22. As with many issues, it’s important with drilling to consider the possibility that you’re wrong. That is, could I be persuaded that it’s a good idea to drill off Virginia’s coast? In my case, I’m confident that the answer is “yes.” If a sufficient quantity of oil could be recovered, if the risk could be shown to be low enough, and if steps could be taken in advance to limit the impact of a possible spill, then, yes, I’d support drilling off Virginia. I think that’s probably not true of the biggest opponents of drilling, and I know it’s not true of the biggest supporters of drilling. No matter how little oil, no matter how great the risk, there are some folks who are—and I cannot understand why—really, really excited about BP (or whomever) drilling off our coasts.

    Robert, to answer your question, the royalties are for the federal government, because the oil is on federal land outside of Virginia. We might regard it colloquially as a Virginia issue, but it’s really a matter for the feds. The governor argues that it would be good for Virginia’s economy, because whoever is drilling will have to employ people to build the rig, and people will have to work there. And, sure, that’s no doubt true. But the idea that this will have any meaningful impact on funding transportation—which is McDonnell’s concept—is just a fantasy. The math just doesn’t support it.

  23. “If a sufficient quantity of oil could be recovered, if the risk could be shown to be low enough, and if steps could be taken in advance to limit the impact of a possible spill…”

    What would constitute a sufficient quantity of recoverable oil OR natural gas? What amount of risk are you willing to accept? In terms of demonstration of risk, there is data currently out there both nationally and internationally. There is the Offshore Technology Conference held every year in Houston, TX if you are really interested. JR Hoeft went to it, I believe, last year. It ends tomorrow though. But there is always next year. There is not a 100% probability though that a spill of a great magnitude would never occur. Even if we don’t explore off our coast, the risk is not reduced to zero. There is a lot of oil transported into and across the state via sea, road, and pipeline. In terms of what can we do upfront, do you mean safety measures employed by the operators? Or technology to cleanup spills when they occur?

    The reason I am a supporter is that we continue to need a vast amount of oil and natural gas every day. If we don’t expand our supplies, then the price shock to consumers is going to be great. In addition, it is safer to produce and transport here than it is to put it on tankers and ship it here. We need to be doing this in concert with other actions to reduce our overall demand though. Taking a comprehensive approach will ease our transition away rather than making it painful and abrupt. Though it may be anyway as the public and politicians are averse to any real solutions here.

  24. What would constitute a sufficient quantity of recoverable oil OR natural gas? What amount of risk are you willing to accept?

    Take the odds of an accident in a given decade, the economic loss resulting from that accident, and the amount of revenue to the state in that decade. (After all, over a long enough time frame, a spill is certain. Monkeys pounding on typewriters and all that.) Does the state at least break even?

    As a gut matter, this thing happening in the gulf right now shouldn’t be possible. The very fact that this has happened tells me that the risk is too high. I’m OK with thorium nuclear reactors, for instance, because they can’t melt down. It’s not possible. The worst-case scenarios are incredibly minor. If the worst-case scenario with an oil spill is that you have a well pumping up 10,000 barrels of oil a day into the ocean for weeks or months at a time, then screw that. That’s not worth it.

    In terms of what can we do upfront, do you mean safety measures employed by the operators? Or technology to cleanup spills when they occur?

    Neither. I want technology to stop a problem from being able to get this big.

    Consider how large ships are built. One way to deal with safety would be to say “OK, we’re going to train our ship operators to never, ever crash the ship.” Well, that’s nice, but it’s not realistic. Another way is to add a bunch of safety measures, such as the use of radar and GPS to stop a ship before it can crash into another one, ram a dock, etc. That’s also nice, but it’s not enough. So the ships are constructed in such a away that, if they start to take on water, the leaking part of the ship can be sealed off, preventing the water from swamping the ship. And they have pumps, so that the sealed-off portions of the ship can have the water removed, to keep the ship from listing.

    If oil rigs have anything like the system employed by ships, it ain’t working. Without a series of fail-safes like that, I cannot see that having oil rigs in the ocean is a sensible idea.

  25. I can understand a ship running aground or any oil rig blowing up (I didn’t think crude was so flammable) but there should be some way to absolutely guarantee that a well can be shut off barring some sort of sabotage. Or at least pretty darn close to guarantee.

    Slightly off topic but related to the oil industry. If I were a very well organized terrorist with plenty of resources and I wanted to really cripple the US economically and I didn’t have access to nucs. I would get about 40 guys and train them to fly medium to small planes with conventional incediaries or hijack non-passenger jets such as a cargo jet. And then all on the same day crash them into all 40 of our oil refineries setting off catastrophic fires that would shut down our entire gas and diesel industry for probably months. Fat lot of good the oil in the salt domes will do us.

  26. If your concern is the worst case scenario irrespective of the probability of occurrence, then you really can’t be convinced. I don’t know what the cost of this spill will be. So, that is a limiting factor. If you want to look at a 10 year interval (1999-2008), according to EIA data we have produced 5 billion barrels of crude from the Gulf of Mexico. If you take the annual first purchase price of that crude (an average mind you), you come up with a rough nominal (not inflation adjusted) value of $210 billion. If we were to price that using today’s prices (because we are unlikely to ever see crude below $40 unless we fall into a steep recession again), then the value of that production is double.

    I don’t know of an instance where you have inherent risk that you can mitigate 100% where there is absolutely no residual risk. That said, we don’t know all that happened that caused this accident. There is a much longer discussion on TheOilDrum if you are interested in the technology that is out there to prevent blowouts. Different countries have different requirements than we do, and maybe had we had place those requirements, this wouldn’t have happened. Again, this is something only a full investigation will tell us.

    As to ship technology, that didn’t prevent the Eagle Otome from spilling 460,000 gallons of oil in January of this year when it struck a barge. It didn’t sink though. So, another shipping tech success! =)

    Avoidance is a perfectly valid response to any risk though. So, if the standard for public policy is the same as the standard you have outlined for yourself, then we should shut down all state and federal offshore drilling. The Gulf Coast has a far larger fishing industry than we do. Without accessing any data, I would assume the same would be true for coastal tourism. If the worst case scenario should prevent us, then it should also prevent them, right? In which case, we can export this one risk of oil consumption to the rest of the world. We still won’t be rid of the risk of tankers spilling in our coastal waters though.

  27. If your concern is the worst case scenario irrespective of the probability of occurrence, then you really can’t be convinced.

    Oh, I didn’t say that. I said that there shouldn’t be any chance of this thing that happening right now of happening again. And although the probability might be low, here we are. :) Until the odds are down around pigs-will-fly territory—that is, there are precautions taken beyond “let’s hope nothing happens”—I think it’s probably a lousy tradeoff, though I don’t know enough about the variables to do the math myself.

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