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Offshore drilling in hurricane central… with no insurance

August 26 2009 | Oil Pollution, Jim's Blog,
by Jim

One of the unfortunate characteristics of the information explosion we're living through is the challenge of connecting the dots in real time. It's increasingly difficult to understand why one story is important when taken in the context of another.

A good example of this is can be seen in Friedman pointing out global ramifications in pithy campaign hooks.

This morning on a deep page in the WSJ I scanned this story.

The opening line hooked me...

"Many energy companies are facing the late-blooming Gulf Coast hurricane season without insurance against storm damage to their offshore platforms, pipelines and drilling rigs."

I'm guessing most people think energy companies are insured. It is assumed. If that wasn't the case, how could it be possible that we're having a national dialogue on making it law for all people to have health insurance, yet NOT have energy companies operating in the middle of a hurricane zone without insurance?

Ok, let me bring this back into focus... let me tell you why this is smack dab in the center of our mission.

Hurricane Katrina hit New Orleans and we all saw the on-land destruction streaming non-stop to our screens. Meanwhile, there were 4,000 offshore oil platforms - and 34,000 miles of pipeline on the seafloor that were also hit.

Then, Hurricane Rita hit. Again we were focused, righty so, on the human tragedy. But we should also be aware that 7-9 million gallons of oil spilled from damaged pipelines, refineries and storage tanks. Here's an image that depicts the extent of that damage.

Hurricane Ike yielded carnage as well. 500,000 barrels of oil into the Gulf. Heck, we even LOST an oil rig... these aren't exactly small pieces of equipment. Losing a rig? Think about that for a second... it must have been a very, very serious storm to take an entire rig out to the extent that they can't even find it.

In the months that followed, the US government and industry representatives repeatedly claimed no "significant" spills in the Gulf. If one is just channel surfing they don't pick up on the subjective definition of "significant." Here is the government report on the damage. Here is the summary:
  • 113 platforms totally destroyed
  • 457 pipelines damaged (101 of those major lines with 10" or larger diameter)
  • 743,000 gallons were spilled from 124 reported sources
  • Image of damage here
Now, back to the headline above... the offshore oil debate is oversimplified. The details are much more challenging.

To summarize.
  • Offshore drilling is risky. In the Gulf, where it is most prevalent in the United States, it is so risky that insurance companies have raised their rates in order to deliver appropriate coverage.
  • Insurance rates for offshore drilling in the Gulf are so high that many companies are choosing to not have coverage. This makes them increasingly exposed.
  • Hurricanes are a known, ongoing threat to offshore drilling. Ongoing damage assesments are notable. Damage to our coastal waters is high.
  • In the end, consumers will foot the bill via higher fuel prices for failures in this industry due to hurricanes.

photo: oil pipeline damage image, wonkroom

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