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Friday, April 29, 2011

EDITORIAL

Living with risk

Just about a year ago, the oil rig Deepwater Horizon exploded in the Gulf of Mexico, triggering one of the largest oil spills in history. A year later, the full impact — economic, social, psychological and environmental — remains unknown. But the BP disaster, like the unfolding catastrophe at the Fukushima nuclear power facilities, is a reminder that risk is unavoidable and that we must better understand, anticipate and plan for crises. Thus far, we (as a species) have shown a remarkable tolerance for failure — even failures we did not need to accept.

On April 20, 2010, while drilling an exploratory well at a water depth of 1,500 meters, methane gas leaked into the bore hole, shot up the drill column and exploded when it hit the surface, killing 11 operators working on the Deepwater Horizon and injuring 17 others. The "blowout" resulted in a flood of oil leaking into the Gulf: It is estimated that 5 million barrels (about 779,000 cubic meters) of crude oil leaked for 85 days before the well was capped.

Experts and officials agree that the spill was the worst environmental disaster in U.S. history. Putting an exact cost on the damage has been difficult, however. BP, the owner and principal developer of the site being explored, set aside $20 billion to cover claims by victims of the disaster.

Thus far, it has received about 850,000 claims and dispersed around $3.8 billion. The handling of those funds has aroused controversy of its own, sparking claims that individuals have "gamed the system," introducing a new word to the Gulf Coast lexicon — "spillionaires." (For its part, BP suspended dividend payments last year for one quarter; even though the spill is estimated to have cost the company over $40 billion, it took a loss of "just" $3.7 billion in 2010.)

Most environmental experts concede that despite the magnitude of the disaster, the worst fears have not been realized and the region appears to be recovering. That does not mean that individuals and the environment have not been harmed or that we can say with confidence that all the damage has been done.

There are fears that another large storm will dredge up large amounts of oil currently in the depths of the Gulf of Mexico. But one expert gives the waters 69 out of 100 points on an ecological report card, a reduction of just 1 point from before the spill. Fishing restrictions have been lifted and tourist bookings on some places on the Gulf Coast are 15 percent higher than reservations before the spill. This was "the ecological disaster that wasn't."

The real question is what lessons will be learned from this incident. The first and most obvious is the need to better appreciate the externalities that are created by our insatiable appetite for energy. No society accounts for all the costs associated with energy consumption. This is evident not only in the gap between liability limits and costs resulting from such incidents, but in phenomena such as climate change that exact a huge toll but for which we seem to make little accounting (literally) or take little responsibility.

A second lesson — reinforced by the Fukushima disaster — is the need to better prepare for disasters and crises. The U.S. government ostensibly learned what not to do from the Hurricane Katrina disaster (2005), although bureaucratic stovepipes, political ideologies and the complexity of relief operations still managed to frustrate efforts to mitigate the damage after the Deepwater Horizon disaster. (And that assumes that bureaucrats are actually performing their regulatory functions — a dangerous assumption given the appalling record of the U.S. agency charged with overseeing deepwater drilling.)

Capping the well required specialized knowledge that has little value outside a narrow community of experts: It may be unreasonable to expect governments to be prepared to respond to such crises. Yet relying on private industry to respond can be a fool's errand. Its priorities are different — focusing on the (private) bottom line rather than the public good — and liability concerns may result in suboptimal responses.

A third lesson concerns how to deal with risk. Deepwater drilling is an extraordinarily complex operation that demands risk assessment at a variety of levels, and while those operations may be integrated into a single process, there is frequently little appreciation of how they interact.

In addition to design issues, there are operational concerns, management challenges and regulatory questions. The layering of those perspectives does not necessarily reduce risk; instead, layering can create new stresses and magnify dangers. Compliance concerns — complying with the law to minimize liability — can get in the way of managing and reducing risk.

Ultimately, we must accept that there is no such thing as risk-free operations. But even if we have to increase our tolerance for uncertainty and negative outcomes, that does not mean abandoning efforts to minimize risk.

Publics need to be better informed about risk and ways to reduce them. Only then can we make proper decisions and be ready to respond when the inevitable occurs.



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