Until this horrifying video of oil barreling out of the well drilled by the now drowned Deepwater Horizon rig surfaced a few days ago, few Americans had given the deepwater wells of the Gulf much thought -- but all of us were getting more and more dependent upon them.
Between 1995 and 2004, deepwater production grew by 535 percent -- an unimaginably high, Madoff-like rate in a country with tapped oil reserves and a driving habit that gobbles up a quarter of the world's oil production. If we glimpsed these wells at all, they were in a Jules Verne-like dreamscape of triumphant technology presented in an oil company ad. Dangers? We didn't think of them. These wells were not on the east and west coasts, where the politically-empowered environmentalists worry about their views. And they weren't in the pristine white north, so dear to many of us who've never been there.
Deepwater wells were in the Gulf -- the official sacrifice zone for U.S. energy policy -- where a critical mass of our refineries, a tangle of marine terminals, the Strategic Petroleum Reserve, and many decades of oil exploitation have sullied waters and local politics as far back as anyone can remember. Until it appeared on YouTube, this was "magic" oil, miraculously plugging the gap in our unspoken energy policy of increasing imports while yakking ineffectually about energy independence. Magically, too, its seemingly sacrifice-free growth was projected to jump by 62 percent to 2.1 million barrels a day by 2016 -- nearly 43 percent of the whole U.S.'s straggling domestic oil production in 2008.
Now, as BP eerily prepares to drop a "top hat" over this ever larger spill, it's time to re-examine this magic oil, and the trick that brought it to us.
Deepwater drilling had an improbable, unbelievable, giddy rise from its birth in 1993. Every well was pushing the envelope, either of depth in the water or the depth of the drillbit beneath the crust. "Every well I did was the deepest ever," an oil industry professional told me, yesterday. "I worked on 20 wells that set records. Every guy that did my job had worked on 20 wells that set records. We were sprinting, breaking records right and left. Everything they did had never been done before." For 17 years the deepwater rigs were jamming on the edge of the envelope.
As the demand for deepwater oil grew, so did the demand for deepwater rigs, each differently designed than the last. "A year and half ago there were 35 drillships like the Deepwater Horizon," an officer on a Transocean drillship told me, "and by 2016 there will be 65. There's a very limited number of people with the experience to be officers on them. And that pool is getting diluted.The age of the captains on these ships is falling from the mid 40's to the mid-30's." The International Association of Drilling Contractors recently bemoaned a coming shortage of professionals.
And they were drilling into trickier and trickier formations. By 2008, 25 to 30 percent of remaining reservoirs in the Gulf had pressure issues, which the industry and the MMS were trying to figure out how to manage.
Deepwater was, in other words, an increasingly risky business in risky conditions, with new equipment, people, and practices. If it sounds a bit like the conditions that led to the financial meltdown, perhaps it was, particularly when you factor in the behavior of the regulator. The MMS, the proxy for American citizens, had put its faith in magic rather than in regular inspections and regulation. Like those of us driving around madly on land, who preferred not to think about the risks of this oil, the MMS didn't pay much attention to the details, and sometimes even violated the law to assist in oil extraction.
As industry sprinted, the MMS shuffled. Since 1997, it appears to have issued only one notice on Deepsea BOP (Blow Out Preventer) inspections ( NTL No.2009-G07). Puzzlingly, this notice issued some clarifications on modifications to the BOP's, which include an interesting sentence: "Failure of a choke line installed below a bottom ram could result in a blow out." (Perhaps that has something to do with some of the info on the lack of schematic drawings for the BOP's and the fact that they'd never been "emergency" tested since they had been placed on the seabed, according to Congressman Bart Stupak's statement.) In any case, here was a regulator trying to stay on top of an industry that was moving the needle with every well, and it only issued one notice on the BOP in 13 years.
In addition to the famous scandal around sex and drugs, the MMS had more insidious issues with industry. In 2001 it worked on Project Deep Sea Spill, which modeled an underwater spill much smaller than the Deepwater Horizon, but kept the information proprietary among the 12 cooperating oil companies for four years.
And so now, we are not only faced with an extraordinarily large, frightening, and nearly unthinkable oil spill, we are also facing the end of magical oil. Like the financial crisis, there are physical issues to deal with now, but in the future there will be a crisis of confidence in the oil industry and in government's ability to regulate it. And at the same time, all of that new oil will not flow magically toward our shores, lubricating our lifestyle, allowing us to glide on without an explicit energy policy. We shouldn't kid ourselves that this is merely a large oil spill. It is much more.