Tuesday, May 4, 2010

The Backup Plan

I'm no expert, but I've written several columns about risk management for small business.

In case of a natural or man-made disaster, companies are encouraged to put emergency systems in place. For instance, have files stored on remote servers with automatic backups. Have both print and electronic customer and employee files stored in several places on- and off-site. Arrange for an alternate location where work can get done if your facility is shut down by a fire, leak or what-have-you.

What continues to amaze me about the BP Gulf Oil spill is what seems to be the absolute lack of adequate risk management. There's apparently a blow-out valve on the well that has failed and so far can't be activated.

So, what do you do when there's a problem and your blow-out valve fails? There is no plan.

BP is brainstorming with the military and with other deep water drilling and oil companies to improvise a solution. One might be drilling another well, something with a three-month timeline. Another is fabricating containment chambers that might be placed over the leaks so that the leaking oil can be pumped up to ships instead of pouring into the ocean.

Let me emphasize that these ideas have rarely - or never - even been tried before. It's really hard for me to believe that this incredibly risky, monumentally expensive technology has been permitted without proven backup techniques in place. To my mind, rescue operations should have been designed and tested before oil drilling leases were ever granted.

I imagine that many of my insurance sources would agree with me. Here's what a worker on the rig told an attorney working on the case:

Another worker familiar with the rig told the lawyers that the company had chosen not to install a deep-water valve that would have been placed about 200 feet under the sea floor. Much like blowout preventers, devices that are meant to seal leaks, this valve could have served as a cutoff of last resort in explosions, the lawyers said.

“The company took their chances in not having the valve so they could save money,” said Mike Papantonio, one of the lawyers representing the shrimpers and fishermen.

How much more irresponsible can this whole situation get?


  1. The only good I can see in this (if there's any) is that it may halt future oil drilling projects. I sure hope so.

    In the mean time, I'm off to back up my computer.

  2. I'm generally an optimist, but after seeing a rundown of previous oil spills and the well-intentioned reforms promised that never materialized, I'm not optimistic about this one.

    As long as we run our economy/society on oil, I'm afraid there will always be enormous pressure to "drill baby drill."

    I'm actually more optimistic about some of the alternative fuel sources, such as biofuel, ultimately making drilling obsolete.

  3. Just heard that the BP lawyers are already trying to get out of their financial responsibility. They weren't at fault; it was the contractor.And the contractor wasn't at fault; it was the manufacturer of the equipment.

    Heavy sigh.

  4. I've actually been pretty impressed with BP CEO Tony Hayward:

    He's pointed out that BP was leasing the deepwater rig from Swiss firm Transocean, but I haven't heard him try to weasel out (I wouldn't put anything past his lawyers, of course).

    This is a good Q&A on liability and other oil spill matters:

  5. This is a great discussion of how lax/industry-driven regulation made this disaster possible, and answers my question about why there was no backup plan:


    The money quote:

    "Questions about the blowout preventers — which BP executives have said are at least partly to blame for the April 22 accident — date back at least to February 2000, when a rig in the Gulf of Mexico spilled oil into the sea after a crew member accidentally pushed the wrong button, severing the connection between the rig and its blowout prevention device, known as a BOP.

    “The rig was not equipped with a secondary system capable of securing the well in the absence of the primary BOP controls,” said a federal report on the accident.

    To combat this serious safety flaw, the agency warned oil companies in 2000 and again in June 2009, after yet more problems emerged with a blowout preventer, reminding them that they needed to have “a reliable backup system in place.” But the agency never tried to draft regulations that would detail the requirements for the backup systems."