As the oil release in the Gulf of Mexico passes the one month mark, most people have figured out that we do not really know how to respond to this ecological and economic disaster. We don’t know how to stop it, and we don’t know how to clean it up. We know how to use oil and we know that our lifestyles depend on cheap and plentiful fuel, but we do not have the knowhow or the technology needed to stop this slow motion disaster. This means that either the risk of off shore oil drilling is greater than we have been told, or the people running this drilling operation are particularly incompetent.
The story of this disaster is beginning to emerge and the Advisory Commission recently appointed by President Obama will unearth more detail. However, we already know a lot about this explosion and its aftermath. Many of us watched a compelling and disturbing 60 Minutes interview with Mike Williams, the Chief Electronics Technician of the Deepwater Horizon, the Oil Rig that blew up and caused the disaster. Williams described a series of problems with the drilling operation that damaged vital safety equipment. Rather than slow down the drilling process and repair the safety equipment, BP management decided to speed up drilling and took short cuts in order to reduce costs and accelerate the opening of a productive well.
This type of behavior is easy to predict. The incentives within the corporation are to move ahead aggressively to maximize profits. The goal is to keep costs down and generate revenues as soon as possible. When a gallon of gasoline costs $2.50 instead of $3.50, we all benefit from this drive for efficiency. The company’s shareholders and even some employees also benefit from the company’s profits. However the value of protecting worker safety and the environment was ignored during this rush to production. It is clear from the interview with Chief Williams that the explosion and spill were not caused by technical incompetence or a lack of organizational capacity, but by explicit management decisions to ignore events that should have resulted in a cessation of drilling.
The issue I want to focus on is prevention: How do we change this calculus and convince the organization to pay more attention to the risk to workers and the environment? How do we change the organizational culture inside of BP to place a higher priority on worker safety and environmental protection? One motivator of organizational change is catastrophe. The disaster in the Gulf of Mexico will not soon be forgotten, although it is a lesson that comes at a very high price. Perhaps the lesson has already been learned.
Catastrophe can change organizational culture. Here in New York City over two decades ago, Con Ed presided over its own environmental disaster. According to the David Pitt of the New York Times, on August 19, 1989:
“…a Consolidated Edison steam pipe exploded like a volcano under their street, killing three people, injuring 24 and terrifying thousands. But the explosion was only the beginning; for nearly four hours after the blast, a huge column of steam rose from the shattered street, coating buildings all over the neighborhood with a mist of brown mud.”
Con Ed was slow to respond to the disaster, communicated poorly with the public, and did not do enough to protect their own workers from danger. Con Ed in 2010 is a very different place. They are more careful and pay more attention to occupational safety and the environment. When a steam pipe burst in Times Square in the summer of 2007, the utility did a much better job in terms of response and community outreach. While far from a perfect system, Con Ed’s workers are now better protected and issues of environmental quality are taken more seriously. In Con Ed’s case, it was clear to senior management that operating in New York City was like working in a fishbowl and the utility would never escape from close and constant scrutiny. They did not need to wait for pressure from government to change their approach. One Gramercy Park disaster was all it took. What about BP and the other companies in the Gulf of Mexico? Is there any chance they will self-police?
No. It is too easy for them to operate out of sight and away from scrutiny. Writing in the New York Times recently, my Columbia colleague Timothy Crone and his co-authors were reduced to the use of satellite images and computer models to estimate the size of the Gulf spill. BP has not provided data on the spill. We cannot count on these folks to respond the way Con Ed did to their smaller scale disaster. While it is true that insurance companies and share holders may exert some leverage to ensure safety, the risks are too great to count on a system of self- policing.
Instead, the federal government needs to develop a highly trained and well funded team of oil rig inspectors with the authority to close down any facility considered unsafe. The definition of unsafe must be rigorous, clear and unforgiving. Inspections must be frequent and penalties for noncompliance must be high and certain. Government policing is essential. The Department of Interior is too compromised by its relationship with the energy industry to perform this function and so another agency must be given the job of developing and overseeing the development and implementation of a serious system of regulation.
Graphic evidence of the Interior Department’s approach to the energy industry was provided by the recent revelation by Ian Urbina in the New York Times that despite President Obama’s moratorium on new drilling permits and environmental waivers, “since the April 20 explosion on the rig, federal regulators have granted at least 19 environmental waivers for gulf drilling projects and at least 17 drilling permits.” We need a far stronger and more assertive form of regulation if we are to simultaneously exploit and protect our natural resources. The Department of Interior is not up to the task.