Are you the publisher? Claim or contact us about this channel


Embed this content in your HTML

Search

Report adult content:

click to rate:

Account: (login)

More Channels


Channel Catalog


Channel Description:

The latest news on Drilling from Business Insider

(Page 1) | 2 | 3 | newer

    0 0

    Al Gore

    Former vice president and activist Al Gore lambasted President Barack Obama's environmental policy Thursday, particularly the decision to allow exploratory wells to be drilled in the Arctic, which he said was “insane." Gore called for a ban of all oil and gas in the region. 

    Gore's remarks came days before Royal Dutch Shell plans to begin work drilling in the oil-rich Chukchi Sea in the Arctic under an Obama administration decision. The region is the last unchartered territory for oil production, with more than 20 percent of the world’s undiscovered, recoverable oil and gas. But Gore said there are too many risks that come with offshore drilling.

    “I think Arctic drilling is insane," Gore told the Guardian. "I think that countries around the world would be very well advised to put restrictions on drilling for oil in the Arctic ocean."

    In April 2010, a Deepwater Horizon oil rig explosion about 42 miles off the coast of Louisiana led to one of the most disastrous spills in history. More than 3.19 million barrels had leaked into the Gulf of Mexico by the time the BP oil rig was capped months later in July.  The disaster is considered to be the largest accidental marine oil spill in the world and the largest environmental tragedy in U.S. history.

    ARCTIC DRILLING“I think the Deepwater Horizon spill was warning enough," Gore said. "The conditions are so hostile for human activity there. I think it’s a mistake to drill for oil in the Arctic. I think that ought to be banned."

    Obama's environmental policy has been at the top of his agenda during his second term. Obama has released a new initiative every week on his vision since January, according to the Guardian.

    “I think he is doing essentially a very good job, but on the fossil fuel side I would certainly be happier if he was not allowing so much activity like the Arctic drilling permit and the large amounts of coal extracted from public lands," Gore said.

    Gore has long been an environmental advocate. He won an Oscar for his "An Inconvenient Truth"documentary about climate change.

    Join the conversation about this story »

    NOW WATCH: Scientists are astonished by these Goby fish that can climb 300-foot waterfalls


    0 0

    Russia Arctic Mecca

    Russia increased its attempts to stake a claim over a large portion of the Arctic Ocean when it announced plans to set up a $93 million dollar monitoring system in the region by 2025, the security company RTI systems said Friday.

    The announcement came after the nation submitted a bid to the United Nations Monday to incorporate 460,000 square miles of the Arctic into its territory, causing concerns by non-profits and government officials alike that Russia was becoming too aggressive in the Arctic.

    The security system, which will include both civilian and military aspects, was set to include surface radars, underwater lighting, an orbit space system, and remotely-controlled drones. Russian President Vladimir Putin has been steadily increasing the nation's presence in Arctic waters and said that the decision to do so was both for reasons of national security and access to natural resources.

    Putin said NATO's increasing presence on Russia's borders had caused Russia to want to increase its military presence in their border with northern European nations. The Arctic is also a very mineral rich zone that could be used to drill for oil.

    The Arctic has been warming over the past several years because of climate change, and its waters are no longer frozen year-round, making it much more accessible for military ships and drillships. The new security system was announced before the U.N. had decided whether Russia's claim to this vast expanse of territory was valid. The area would also include the North Pole, which has long been considered neutral territory. Proximity to northern Europe and Alaska have caused government officials and non-profits to voice their concern. 

    “The melting of the Arctic ice is uncovering a new and vulnerable sea,"said Vladimir Chuprov, a Greenpeace activist in the region. "Countries like Russia and Norway want to turn it into the next Saudi Arabia. Unless we act together, this region could be dotted with oil wells and fishing fleets within our lifetime," he said.

    SEE ALSO: Al Gore: 'Arctic drilling is insane'

    Join the conversation about this story »

    NOW WATCH: Here's the only way to get your passport renewed in 24 hours


    0 0

    A television reporter stands beside oil booms at the coast of South Pass, south of Venice, Louisiana, as oil leaking from the Deepwater Horizon wellhead continues to spread in the Gulf of Mexico, May 2, 2010.  REUTERS/Carlos Barria

    The Big Foot oil development deep in the Gulf of Mexico (GoM) was supposed to be a tangible sign that the area had moved back to normal after the Deepwater Horizon disaster a few years ago.

    It was also supposed to be a signal of intent from Chevron and the start of an important long-term opportunity to expand the firm’s production base. Chevron pushed ahead to start development of the Big Foot area in 2010 and the formation is estimated to have 200 million recoverable barrels of oil and a 35 year life. So earlier this year, Chevron moved to finally begin tapping those resources.

    Then almost as soon as the project started, everything fell apart for Chevron with Big Foot. It’s not clear exactly what happened with Chevron’s Big Foot project, but the mooring cables for the production platform sank in the GoM in June. The subsea installation tendons on the project sustained damage and Chevron has moved the platform to a sheltered area to assess the problem. The result is that production in the area won’t start this year as planned.

    For a company as big as Chevron, one production issue at one site is not an existential threat by any means. But the delay is an embarrassing set-back and with the development of such a huge reserve indefinitely on hold, it’s clearly emblematic of what is going on across the board in the oil sector right now. As one analyst wrote after the fiasco: “The mishap … is clearly a negative from production, cash flow and operational excellence standpoints.”

    With oil prices having collapsed, many formations that were once economically viable now no longer make sense. Deepwater production falls very much into this category. Not all deep water is created equal of course, but deep water is very expensive and requires massive upfront cash investments. Chevron made an ambitious bet on its $5 billion Big Foot platform, and that bet is not panning out so far.

    Now obviously Chevron is not going to let a $5 billion investment sit forever and it has already invested many of the sunk costs needed to make Big Foot viable. So sooner or later, the company will start producing from the project. For that matter, the production lifespan on Big Foot is so long that the price of oil today is almost immaterial compared with the expected price of oil over the next 30 years. I’m not alone in that assessment, but again the true significance of the Big Foot set-back is not related to Chevron.

    Instead investors need to see the Big Foot debacle as a symbol of the challenge that deep water drillers will face over the next couple of years. Chevron has a massive exploratory budget and the best technology money can buy. Yet even for that firm, deep water drilling proved challenging. In the context of $50 per barrel oil, it’s unlikely that many new deep water projects will get started.

    This will mean a dramatic decrease in activity for the entire deep water drilling sector. Investors should keep an eye on announcements from the majors, but until projects like Big Foot start getting a lot more enthusiastic response from executives, the deep water industry and all firms associated with it will remain under pressure.

    SEE ALSO: 3 charts that show it's possible crude oil will fall below $40

    Join the conversation about this story »

    NOW WATCH: All 460 Sports Authority stores are closing — here’s when clearance sales begin


    0 0

    Activists protest the Shell Oil Company's drilling rig Polar Pioneer which is parked at Terminal 5 at the Port of Seattle, Washington May 16, 2015. REUTERS/Jason Redmond

    The Obama administration granted Royal Dutch Shell final clearance on Monday to resume drilling for oil and gas in the environmentally fragile Arctic Ocean for the first time since 2012, a move green groups vowed to fight.

    The U.S. Department of the Interior permit allows Shell to drill in the oil-rich Chukchi Sea off the northwest coast of Alaska. Shell interrupted its drilling program in the region in 2012 after suffering a series of mishaps, including losing control of an enormous rig, from which the Coast Guard had to rescue 18 workers.

    Harsh conditions in the Chukchi have discouraged other oil companies from drilling there.

    The go-ahead for Shell comes after repairs were completed to the Fennica, an icebreaker the company leases that carries emergency well-plugging equipment. The ship had suffered a gash in its hull after hitting uncharted shoals off southern Alaska.

    Damage to the Fennica had stalled Shell's program, which the Interior Department had previously issued a permit for.

    Shell obtained the leases in the Chukchi during the administration of former President George W. Bush. Since then it has spent about $7 billion on exploration in the Arctic, though oil production is at least a decade away.

    The Arctic is home to what the U.S. government estimates is 20 percent of the world's undiscovered oil and gas.

    Shell's determination to drill there has spawned waves of protests and funding drives by environmentalists who want to protect whales, walruses and polar bears in a vulnerable region that scientists say is changing rapidly due to global warming.

    Late last month, 13 Greenpeace activists hanging from a bridge in Oregon temporarily blocked the freshly repaired Fennica from reaching the Pacific Ocean to return to Alaska.

    President Barack Obama "must change the course on Arctic drilling set eight years ago by former President George W. Bush and not perpetuate it," said Michael Brune, head of the Sierra Club, the country's oldest environmental group.

    The club urged Obama to cancel sales of oil-zone leases scheduled for 2016 and 2017 and to remove the possibility of drilling in the Arctic Ocean.

    Later this month, Obama will visit Alaska to speak at a conference on the Arctic and tour areas threatened by climate change.

    Curtis Smith, a Shell spokesman, said the company "looks forward to evaluating what could potentially become a national energy resource base."

    Shell is not releasing a timetable for its drilling program.

    SEE ALSO: Seattle has become Shell's Arctic base

    Join the conversation about this story »

    NOW WATCH: President Obama and former President Clinton cross paths on the golf course


    0 0

    Shell Oil Co. President Marvin Odum gestures while speaking to The Associated Press on Tuesday, Sept. 2, 2015, in Anchorage, Alaska. He says exploratory drilling is going well in the Arctic Ocean despite stormy weather last week that caused the company to halt operations for a few days. (AP Photo/Mark Thiessen)

    ANCHORAGE, Alaska (AP) — The president of Shell Oil Co. said Tuesday exploratory drilling off Alaska's northwest coast is going well despite stormy weather last week that caused the company to halt operations for a few days.

    And in an interview with The Associated Press Marvin Odum said he expects further protests against the company's plans for Arctic drilling like the ones in Seattle and Portland where activists in kayaks tried to block Shell vessels.

    Arctic offshore drilling is bitterly opposed by environmental groups that say a spill cannot be cleaned in ice-choked waters and that industrial activity will harm polar bears, walrus and ice seals already harmed by diminished sea ice.

    In Seattle, Shell faced protests on the water by "kayaktivists" upset over the company staging equipment in the city. In Portland, Oregon, Greenpeace USA protesters hung from the St. Johns Bridge to delay a Shell support vessel, from heading to the Arctic.

    "I think the right assumptions for me to make are, it's not going to go away," Odum said. "We saw quite a bit of very public opposition when we were in the Pacific Northwest."

    Odum said he's "110 percent ready" to work with people who want to find ways to improve drilling.

    "I do have an issue with those that oppose who use illegal means or put the safety of themselves or the safety of anybody associated with this operation at risk," he said.

    Odum said good progress is being made on the first well off Alaska's northwest coast.

    "We had a few days in the last week where we couldn't operate because of the weather," he said. "Now we're coming out of that and it looks like we're moving into a time period of good weather."

    President Barack Obama this week is in Alaska rallying support for measures to combat climate change, such as limits on carbon emissions.

    Odum is staying in the same hotel as the president — the Hotel Captain Cook.

    While environmentalists praise the president for curbing greenhouse gases, they pillory him for granting Shell permission to drill in the Chukchi Sea for the first time in 24 years.

    The U.S. Geological Survey estimates the Chukchi and Beaufort seas hold 26 billion barrels of recoverable oil.

    Oil will continue to be needed as the United States transitions to more renewable energy, Odum said.

    "Oil will be required for a long time," Odum said. "Let's take a really close look at developing our own resources, control how it's done and get all the benefits that go along with it."

    Shell in two years of exploratory drilling and with up to six wells hopes to confirm a vast reservoir of oil. If it's found, Shell could apply for production permits and move oil by undersea pipe to the Alaska shore and then overland across northern Alaska to the trans-Alaska pipeline. That could take more than a decade.

    Odum is confident exploration can be done safely, and the overriding factor dictating whether Shell completes an exploratory well this year will be safety.

    Shell is operating under strict Arctic rules put in place after the Deepwater Horizon disaster in the Gulf of Mexico. Arctic offshore drilling has been scrutinized in the courts in lawsuits brought by drilling opponents, Odum said.

    "It's probably fair to say, this is the most scrutinized, analyzed project — oil and gas project — probably anywhere in the world. I'm actually sure of that," he said.

    All the scrutiny, along with Shell's own internal review, have gone into safety considerations. It's in the company's best interest, he said.

    "We can't afford to have a problem here," Odum said.

    Join the conversation about this story »


    0 0

    In this April 24, 2015 photo, Carl Johnson, left, and his son, Justin, walk across a stretch of pasture left barren after an oilfield wastewater spill on their ranch near Crossroads, N.M.

    CROSSROADS, N.M. (AP) -- Carl Johnson and son Justin are third- and fourth-generation ranchers who for decades have battled oilfield companies that left a patchwork of barren earth where the men graze cattle in the high plains of New Mexico. Blunt and profane, they stroll across a 1 1/2-acre patch of sandy soil - lifeless, save for a scattering of stunted weeds.

    Five years ago, a broken pipe soaked the land with as much as 420,000 gallons of oilfield wastewater - a salty and potentially toxic drilling byproduct that can quickly turn fertile land into a dead zone. The leaked brine killed every sprig of grama and bluestem grasses and shinnery shrubs it touched.

    For the Johnsons, the spill is among dozens that have taken a heavy toll: a landscape pockmarked with spots where livestock can no longer graze, legal fees running into the tens of thousands and worries about the safety of the area's underground aquifer.

    "If we lose our water, that ruins our ranch," Justin Johnson said. "That's the end of the story."

    Their plight illustrates a largely overlooked side effect of oil and gas production that has worsened with the past decade's drilling boom: spills of wastewater that foul the land, kill wildlife and threaten freshwater supplies.

    An Associated Press analysis of data from leading oil- and gas-producing states found more than 180 million gallons of wastewater spilled from 2009 to 2014 in incidents involving ruptured pipes, overflowing storage tanks and other mishaps or even deliberate dumping. There were some 21,651 individual spills. And these numbers are incomplete because many releases go unreported.

    In this April 24, 2015 photo, a worker empties oilfield wastewater from a tank truck into storage tanks on Carl and Justin Johnson's ranch near Crossroads, N.M.Though oil spills tend to get more attention, wastewater spills can be more damaging. And in seven of the 11 states the AP examined, the amount of wastewater released was at least twice that of oil discharged.

    Spilled oil, however unsightly, over time is absorbed by minerals in the soil or degraded by microbes. Not so with the wastewater - also known as brine, produced water or saltwater. Unless thoroughly cleansed, a costly and time-consuming process, salt-saturated land dries up. Trees die. Crops cannot take root.

    "Oil spills may look bad, but we know how to clean them up and ... return the land to a productive state," said Kerry Sublette, a University of Tulsa environmental engineer and specialist in treating the despoiled landscapes. "Brine spills are much more difficult."

    In addition to the extreme salinity, the fluids often contain heavy metals such as arsenic and mercury, plus radioactivity. Even smaller discharges affecting an acre or two gradually add up for landowners - "death by a thousand bee stings," said Don Shriber of Farmington, New Mexico, a cattleman who wrangled with an oil company over damage.

    For animals, the results can be fatal. Ranchers, including Melvin Reed of Shidler, Oklahoma, said they have lost cattle that lapped up the liquids or ate tainted grass.

    "They get real thin. It messes them up," Reed said. "Sometimes you just have to shoot them."

    In this April 24, 2015 photo, pumpjacks work in a field near Lovington, N.M. As oil production in the United States rose in recent years, so did the spills of salty wastewater that is also pumped to the surface.

    The AP obtained data from regulatory agencies in Texas, North Dakota, California, Alaska, Colorado, New Mexico, Oklahoma, Wyoming, Kansas, Utah and Montana - states that account for more than 90 percent of the nation's onshore oil production. Officials in ninth-ranking oil producer Louisiana and second-ranking gas producer Pennsylvania said they could not provide comprehensive spill data.

    The spill total increased each year, along with oil and gas production. In 2009, there were 2,470 reported spills in the 11 states; by 2014, the total was 4,643. The amount of wastewater spilled doubled from 21.1 million gallons in 2009 to 43 million in 2013 before dipping to 37.6 million last year.

    The extent of land or water contamination is unknown; state and federal regulators make no such assessments. Texas, the nation's biggest oil and gas producer, had the most incidents, 4,783, and the highest volume spilled, 62 million gallons.

    Industry groups and regulators said much of the waste is recovered during cleanup operations or contained by berms near wells. Still, they acknowledged a certain amount soaks into the ground and can flow into waterways.

    "You're going to have spills in an industrial society," said Katie Brown, spokeswoman for Energy In Depth, a research and education arm of the Independent Petroleum Association of America. "But there are programs in place to reduce them."

    shale map

    Wastewater spills have dogged the oil industry from its earliest days more than a century ago, borne witness by barren sites from the Great Plains to the Pacific. A notorious symbol is the "Texon scar," where brine from a well drilled in 1923 near that tiny West Texas town created a desolate 2,000-acre swath dotted with dead mesquite trees. Efforts to restore the land continue to this day, said range conservationist Joe Petersen.

    Concentrated brine, much saltier than seawater, exists naturally in rock formations thousands of feet underground, a remnant of prehistoric oceans. When oil and gas are pumped to the surface, the water comes too, along with fluids and chemicals injected to crack open rock - the process known as hydraulic fracturing. Production of methane gas from coal deposits also generates wastewater, but it is less salty and harmful.

    The spills usually occur as oil and gas are channeled to metal tanks for separation from the wastewater, and the water is delivered to a disposal site - usually an injection well that pumps it back underground. Pipelines, tank trucks and pits are potential weak points.

    Accidents range from the mundane to the freakish; in 2010, a storage tank near Ardmore, Oklahoma, overflowed after a snake slithered into a panel box and blew a fuse. Most spills are caused by equipment malfunction or human error, according to state reports reviewed by the AP.

    In this April 24, 2015 photo, Justin Johnson looks at a torn lining at a tank and pipeline station adjacent to his ranch near Crossroads, N.M. Trucks bring oilfield wastewater to the station, where it is pumped through pipelines to a disposal well.

    Though no full accounting of damage exists, the scope is sketched out in a sampling of incidents:

    - In North Dakota, a spill of nearly 1 million gallons in 2006 caused a massive die-off of fish, turtles and plants in the Yellowstone River and a tributary. Cleanup costs approached $2 million. Two larger spills since then scoured vegetation along an almost 2-mile stretch and fouled a creek and a river.

    - Wastewater from unlined pits seeped beneath a 6,000-acre cotton and nut farm near Bakersfield, California, and contaminated groundwater. Oil giant Aera Energy was ordered in 2009 to pay $9 million to grower Fred Starrh, who had to remove 2,000 acres from production.

    - Brine leaks exceeding 40 million gallons over decades on the Fort Peck Indian Reservation in Montana polluted a river, private wells and the municipal water system in Poplar. "It was undrinkable," said resident Donna Whitmer. "If you shook it up, it'd look all orange." Under a 2012 settlement with the U.S. Environmental Protection Agency, oil companies paid $320,000 for new water wells and other improvements. Drinking water tainted with oilfield brine can cause high blood pressure, dehydration and other health risks, EPA spokeswoman Sarah Teschner said.

    In this April 24, 2015 photo, Carl Johnson, right, and his son, Justin, check a storage tank used for watering livestock on their ranch near Crossroads, N.M. For about 20 years, the tank was unusable because the aquifer that provided the water was contaminated with oilfield brine that a company disposed of improperly- In Fort Stockton, Texas, officials in February accused oil company Bugington Energy of illegally dumping 3 million gallons of wastewater in pastures. Paul Weatherby, general manager of the Middle Pecos Groundwater Conservation District, said he fears contamination of the area's groundwater table. The district levied a $130,000 fine but the company hasn't paid, contending the district overstepped its authority.

    - A pipeline joint failure caused flooding on Don Stoker's ranch near Snyder, Texas, in November 2012 and turned his hackberry shade trees into skeletons. Vacuum trucks sucked up some saltwater and the oil company paid damages, but Stoker said his operation was in turmoil. "I had to stay out there three days and watch them while they were getting the saltwater out, to make sure they didn't totally destroy the whole area."

    Government agencies acknowledge having a limited view of the accidents, which often happen in remote places and, unlike oil spills, don't produce dramatic images of birds flailing in black goo and tourist beaches fouled. Regulators rely on private operators to notify them, and it's not always required. For example, Oklahoma exempts reporting of most spills of less than 10 barrels, or 420 gallons.

    The loudest whistleblowers are often property owners, who must allow drilling access to their land if they don't own the mineral rights.

    "Most ranchers are very attached to the land," said Jeff Henry, president of the Osage County Cattlemen's Association in Oklahoma. "It's where we derive our income, raise our families. It's who we are."

    A big reason why there are so many spills is the sheer volume of wastewater extracted: about 10 barrels for every barrel of oil, according to an organization of state ground water agencies, or more than 840 billion gallons a year.

    In this April 24, 2015 photo, disposal pipes carry wastewater from pumping units to collection tanks in a field near Lovington, N.M.Sometimes, the exact cause is never determined. The Johnsons have yet to learn why an underground line ruptured in at least two places on the state-owned land they lease for ranching. A salty, oily odor wafted heavily on the breeze when Justin Johnson reached the site in October 2010.

    "I was just totally and thoroughly disgusted," he said.

    New Mexico Salt Water Disposal Co. acknowledged responsibility. No fines were levied because the leak was accidental. Vice President Rory McGinn blamed practices and materials the company no longer uses, saying in an interview that "an enormous amount of money" has gone into upgrades.

    The company said much the same in 2005 after earlier spills, telling the state in a letter obtained through a records request it had spent nearly $250,000 on higher-grade pipe, tanks and valves and "our objective and goal is to be 100 percent maintenance and environmentally safe in our operation."

    The company has had a dozen spills since 2003, said Larry Behrens of the New Mexico Department of Energy, Minerals and Natural Resources.

    Despite such incidents, relatively few farmers and ranchers complain publicly. Some get royalty checks for wells on their property. Others don't want to be seen as opposing an industry that is the economic backbone of their communities.

    "If they treat us right, we're all friends of oil," said Mike Artz, a grower in North Dakota's Bottineau County who lost a five-acre barley crop in 2013 after a saltwater pipeline rupture. "But right now, it's just a horse running without the bridle."

    Oil and gas developers said they have everything to gain from stopping spills, which cost them money for cleanup and soil restoration.

    Sara Hughes, spokeswoman for pipeline operator Kinder Morgan, said her company has lowered water injection pressure and installed additional leak-detection devices on its lines since its spill on Stoker's land.

    In this April 24, 2015 photo, Carl Johnson examines a pasture near Crossroads, N.M., where an oilfield wastewater spill killed vegetation."We are committed to public safety, protection of the environment and operation of our facilities in compliance with all applicable rules and regulations," Hughes said.

    In North Dakota, where the spills increased at a higher rate than the well count during the boom years of 2009-'14, pipelines near waterways must have leak prevention devices but not those elsewhere; critics said that shows the oil industry's political clout. Lynn Helms, director of the North Dakota Department of Mineral Resources, said more devices would be costly and wouldn't necessarily catch small leaks.

    Tessa Sandstrom, of the North Dakota Petroleum Council, said the industry is cooperating with scientists studying prevention and land restoration. When spills do happen, she said, most are cleaned up within a year.

    But Bottineau County grain farmer Daryl Peterson said it took years of prodding before regulators ordered an oil company to dig up 300 truckloads of tainted soil on his property and replace it. The soil is still salty, he said.

    Sublette, the University of Tulsa engineer, said soil excavation and replacement is unreliable because some operators "bring in the nastiest stuff they can find." He recommends extensive flushing with fresh water to remove salts from the zone where plants take root, then rebuilding the soil with nurturing additives. Even done correctly, it can take years to get plants growing again.

    Similar methods were used on the Johnsons' pastures, but father and son said the land has not come back to life.

    "It will never, ever be like it was," Justin Johnson said, giving a bleached-white stone a desultory kick. "It will never fully recover."

    Join the conversation about this story »

    NOW WATCH: These facts about Texas will blow your mind


    0 0

    Shell is giving up on its Arctic endeavor, and it's a huge win for environmentalists.

    Story by Tony Manfred. Editing by Adam Banicki.

    Follow INSIDER:On Facebook

    Join the conversation about this story »


    0 0

    U.S. President Barack Obama delivers a speech after touring Saft America Advanced Batteries Plant in Jacksonville, Florida February 26, 2016. REUTERS/Carlos Barria

    In a major reversal, the Obama administration says it will not allow oil drilling in the Atlantic Ocean.

    Interior Secretary Sally Jewell made the announcement Tuesday on Twitter, declaring that the administration's next five-year offshore drilling plan "protects the Atlantic for future generations."

    The announcement reverses a proposal made last year in which the administration floated a plan that would have opened up a broad swath of the Atlantic Coast to drilling. The January 2015 proposal would have opened up sites more than 50 miles off Virginia, North and South Carolina and Georgia to oil drilling no earlier than 2021.

    The Interior Department said the latest decision responds to strong local opposition and conflicts with competing commercial and military ocean uses.

    SEE ALSO: This country has oil prices set at $67 per barrel

    Join the conversation about this story »

    NOW WATCH: Adam Savage reveals why he and 'MythBusters' cohost Jamie Hyneman won't be working together anymore


    0 0

    texas oil rig

    Oil production is not only triggering earthquakes in Texas today, it was rattling the state as early as the 1920s.

    Researchers at the University of Texas looked back at the history of the state's tremors and found a long list that were likely the result of the state's oil boom, even if the reasons varied over time.

    Most of the state's current seismic activity is probably or "almost certainly" the result of human activity, but man-made quakes occurred as early as 1925, the study found.

    While Texas hasn't had the shakes as badly as neighboring Oklahoma, the number of noticeable earthquakes to hit the state has gone up from about two a year to about a dozen. The US Geological Survey recently added the Dallas-Fort Worth area to its seismic hazard map, warning that the risk of a damaging earthquake in a populated area has gone up significantly.

    Scientists have linked the increase in seismicity to the disposal of the salty wastewater that comes up from oil wells, which is usually injected deep underground. And the boom in hydraulic fracturing operations, which allow drillers to reach previously-inaccessible pockets of oil, has meant a huge increase in the amount of that water being pumped deep below the surface. 

    In a statement accompanying the study, Cliff Frolich, associate director of the Institute of Geophysics at UT-Austin, said the findings should put to rest the debate over whether humans are causing quakes in Texas — but some of the early quakes were the result of activities far different than what's happening now.

    The earliest human-induced quakes occurred when drillers would rush to drain an oil field, leading to underground cave-ins that set off seismographs; between the 1940s and 1970s, oil companies pumped water underground to drive oil toward the surface, making it easier to pump. That contributed to quakes as well, he said. 

    The results were published this week in the scientific journal Seismological Research Letters. The authors were critical of Texas state regulators, whom they said were "slow to acknowledge" the connection between oil operations and drilling.

    The Texas Railroad Commission, which oversees the industry, called the study "arbitrary" and "subjective," according to Reuters, and said the agency had also taken steps to reduce injection volumes.

    Regulators in Oklahoma and Kansas also have been trying to stop the shaking by telling oil companies to rein in the volume and depth of their injection operations. But Frolich said there's no easy solution to the problem. 

    "I think we were all looking for what I call the silver bullet, supposing we can find out what kinds of practices were causing the induced earthquakes, to advise companies or regulators," he said. "But that silver bullet isn't here."

    Join the conversation about this story »

    NOW WATCH: These secret codes let you access hidden iPhone features


    0 0

    oil barrelsOil prices could surge above $85 a barrel by the end of this year, according to analysis by Michael Rothman, considered to be one of the most astute oil experts on Wall Street, CNBC reports.

    Rothman heads the research firm Cornerstone Analytics, through which he advises governments from all over the world, the oil-rich Saudi royal family and its affiliates, and energy firms.

    Barrel prices hit a 13-year low on the 11th February this year. Last week, they surged to above $50—the first time they have done so since July last year.

    The Nasdaq price for a barrel of Brent oil stood at $50.20 on Monday.

    The Qatari head of the Organization of Petroleum Exporting Countries (OPEC) has said previously that new investment in the sector requires barrel prices to rise above $65.

    OPEC has made no strides in accelerating price growth over the past two months.

    Two separate pushes to reduce oil production in an effort to force prices upwards have been rejected by Saudi Arabia, who fears Iran’s rise if it does not join the proposed freezes.

    Russia, the 13-member bloc’s rival, said OPEC has “practically stopped existing as a united organization” before the proposed freezes failed to get approved for a second time on 2 June.

    Iranian officials have made it clear that they will not participate in production halts as the government works to restart the country’s economic engine. International sanctions lifted earlier this year had locked Iran out of the global oil trade for years.

    Under the present circumstances, the government and the Oil Ministry have not issued any policy or plan to the National Iranian Oil Co. (NIOC) towards halting the increase in the production and exports of oil," Rokneddin Javadi, who heads the state-run National Iranian Oil Co. (NIOC), said last month.

    Recent reports suggest the Shiite-majority country is on the verge of achieving pre-sanction export levels, with its shipments reaching European and Asian nations.

    SEE ALSO: The futures market is saying the oil glut is over

    Join the conversation about this story »

    NOW WATCH: We did a blind taste test of wings from Pizza Hut, Domino's, Papa John's, and Buffalo Wild Wings — the winner was clear


    0 0

    oil well sunset rigAmong stock market investors there is often no more welcome news than the news of an acquisition or buyout of a company the investor owns. Those buyouts usually come with a hefty premium attached – sometimes as much as 30 percent or more of the pre-acquisition stock price. But why is this the case? Why are acquiring firms willing to pay substantially more for a stock than investors were just days earlier in most cases? The answer is synergy values.

    Synergies result from additional cost savings and revenue generation that come from combining two firms into one larger firm. Synergies give economic rationale to M&A deals. Yet despite that, there have been very few M&A deals proposed during the current oil crisis, which suggests that energy companies could be missing an opportunity. To be clear of course, not all M&A deals work well for investors – but it’s unrealistic to believe that there are no attractive opportunities that could make energy investors on both sides of a transaction better off.

    For instance, offshore drilling companies which are combining might be able to share salesforce costs. Certainly only one CEO and corporate HQ will be needed for the combined firm. Beyond cost savings though, there are often cross-selling opportunities that arise from mergers. For instance, two industrial manufacturing companies that make related products used in the energy supply chain might be able to tap one another’s customer bases after a merger. Despite these opportunities, outside of the failed BHI/HAL merger attempt, there has been precious little M&A activity. That lack of activity may be due to dual pressures in the industry; larger firms lacking the balance sheet flexibility to do deals and smaller firms lacking the understanding of M&A benefits.

    The concept of synergies applies to firms of all sizes, from publicly traded goliaths to small privately-owned companies. While there are roughly 5,000 publicly traded firms in the U.S. today, there are hundreds of thousands of small and medium-sized privately owned firms. These small firms often enter into M&A deals as well, and unlike larger publicly traded firms, small firms often fail to account for synergy values. This is a missed opportunity that may derail many smaller firms from considering otherwise attractive deals. The reality is that M&A deals for small firms are complex enough as it is, and there is no reason for small firms to miss any opportunities unnecessarily.

    While there are small investment banking firms that help middle market companies with M&A transactions, synergies may or may not be included in any given IB-assisted transaction. Again, that’s a missed opportunity.

    Oil

    Synergy values have to be examined carefully. In many cases, publicly traded synergy values can be overly optimistic. In a few cases though, an acquiring company may have been acting opportunistically, thus short-changing existing shareholders. To determine which situation is more likely, various forecasting techniques should be used. Probably the most accurate and most defensible technique for doing this is regression forecasting.

    Regression analysis is a statistical technique that uses a set of existing data points to assign importance weightings to various facets of a question. For instance, when trying to determine the effect of an increase in interest rates on oil prices, regression analysis would determine the impact that a change in interest rates has, but it might also take into account the effect that that consumer confidence, industrial production, and gas prices have on oil prices. In other words, regression analysis allows one to determine the effect of an interest rate hike on oil prices after accounting for all other observable factors that would impact employment.

    This same concept can be applied to valuation work for firms. Regression forecasting can be used to determine the price that one would expect a company to be acquired for after accounting for characteristics of the target firm such as sales growth, profitability, assets, intangibles, and the industry the target and acquiring company operate in. Synergy values could also be included in this list.

    There are very few oil crises comparable to the current one. Valuations on natural resources firms are more depressed than they have been in decades. Small firms that are looking to grow should not waste the opportunity.

    SEE ALSO: GOLDMAN SACHS: Oil isn't recovering

    Join the conversation about this story »

    NOW WATCH: Sacha Baron Cohen recounts his 2003 Trump interview: 'I was the first person actually to realize that he’s a d---'


    0 0

    A logo of Shell is pictured at a gas station in the western Canakkale province, Turkey April 25, 2016. REUTERS/Murad Sezer Ben Van Beurden, Chief Executive Officer of Royal Dutch Shell has laid out an ambitious plan to overtake ExxonMobil as the number one oil company in the world.

    Prior to the 1990s, Shell was the leader in total shareholder returns, however, its rivals went on a deal-making spree to gain the lead, while Shell shied away from making any acquisitions. Now, Mr. Beurden believes that Shell will be able to regain its lost glory post the acquisition of the BG group.

    “I am determined to get us to that number one place,” Mr. Beurden said after outlining the company’s long-term strategy in London. “I want to create a world class investment case for Shell and our shareholders,” reports Bloomberg.

    Shell, with a market capitalization of $216.6 billion, has a lot of catching up to do if it wants to surpass Exxon’s market capitalization of $379.5 billion.

    Investors favor Exxon and give it a premium valuation if Price/Earnings, Price/Book or a few other metrics are considered. The reason for higher valuation is the confidence that Exxon is in a better position to tide itself over the current downturn in oil prices, and the fact that it is a better-managed company than Shell.

    Shell’s gross and operating margins, return on equity, and assets to cash flow are way below that of Exxon. Though Shell has narrowed the gap for total shareholder returns, Exxon still has an upper hand.

    After the purchase of BG, the total debt of Shell has increased to $81 billion, whereas Exxon with $43 billion of debt has options left on the table to borrow if needed.

    Shell plans to increase its free cashflow per share, improve its returns, and run the company conservatively. In order to do so, Shell has capped annual investments at $30 billion until 2020, and it has left options open to reduce spending below its lower target range of $25 billion in case crude price hovers close to the current levels of $50 per barrel or drops below it.

    shell oil barrels

    It plans to slow down investments in the liquefied natural gas business as well.

    Mr. Beurden has laid out an ambitious target to increase the return on capital employed to 10 percent at oil price of $60 per barrel by the end of this decade. This would be a quantum jump for the company, because from 2013 to 2015, Shell managed an average 8 percent return on capital when oil prices were ruling at $90 per barrel.

    If Shell manages to achieve this target, its free cashflow will increase to between $20 and $25 billion in another four years against an average free cashflow of $12 billion achieved in the last three years.

    Shell, which has operations in more than 70 countries, wants to sell its oil and gas operations in 10 countries. It also plans to offload 10 percent of its production by 2018, as part of its $30 billion asset sale strategy to concentrate on its operations in Brazil, Australia, and the United States.

    “Everybody really liked the focus on the cap on capex and also the reduced emphasis on investments in LNG because they’ve made a big investment already by buying BG,” said Iain Reid, an analyst at Macquarie Capital Ltd. in London. “They’ve got a good chance” of surpassing Exxon “if they can change the business in the way they outlined last week,” reports Bloomberg.

    The company highlights its medium-term priorities as the deepwater projects in Brazil and the Gulf of Mexico and its chemicals division in the U.S. and China. For the long-term, the company is targeting shale oil and gas production in Argentina and North America along with its alternative energy units of solar, biofuels, and hydrogen, reports Reuters.

    The investors will watch the level of execution of Shell because its year-to-date total return was negative 3.2 percent, reports Reuters. In Brazil, where a large part of BG group’s assets are in a partnership with the state-run Petrobras, they might run into trouble due to various corruption and bribery charges. The recent political upheaval will only delay the path to normalcy.

    Though Shell might not overtake Exxon in the next few years, its plans will benefit its shareholders. Meanwhile, Exxon will respond to the competition and take necessary steps to maintain its leadership position. At the end of it, it looks like this competition between the two oil majors will ultimately benefit the shareholders.

    SEE ALSO: The new Silk Road has the potential to soothe old geopolitical tensions

    Join the conversation about this story »

    NOW WATCH: We asked a Navy SEAL what he ate during training, and his answer shocked us


    0 0

    oil workerOPEC lost $349 billion in revenue last year because of low oil prices, cutting revenues almost in half from the year before.

    A report from the EIA in mid-June estimated 2015 revenues for OPEC countries at $404 billion, down 46 percent from the $753 billion the member countries earned in 2014. Revenues last year fell to their lowest level in eleven years.

    Worse still for OPEC is the fact that revenues could fall even further this year, as low oil prices sank to new depths, particularly in the first quarter of 2016. The EIA projects OPEC revenues this year to drop to $341 billion. That will result in per capita oil export revenues in OPEC countries falling from $606 in 2015 to $503 this year.

    OPEC net oil exports revenuesOPEC net oil export revenues by the numbers

    For its part, OPEC put out a more dire assessment of its own finances, putting its losses last year at $438 billion, much higher than the $349 billion estimated by the EIA. That came even though overall exports climbed by an average of 400,000 barrels per day, or a 1.7 percent increase, largely because of production gains in Iraq and Saudi Arabia. The plunging revenue led to OPEC members to post a current account deficit of $99.6 billion, the first deficit since 1998. That compared to the 2014 surplus of $238.1 billion.

    The largest losses came from Saudi Arabia, which saw revenues plunge nearly in half from $247 billion to just $130 billion last year. Of course, those losses merely reflect Saudi Arabia’s importance as the group’s largest oil producer and one of the largest producers in the world. The revenues that Riyadh earns from exporting oil accounts for one-third of total OPEC earnings.

    Obviously, whether or not OPEC sees a rebound in oil revenues depends almost entirely on what happens with crude oil prices, something largely out of the group’s control given that it no longer wants to cooperate on production limits.

    So what about crude oil prices? Oil is in a state of limbo right now, having rallied more than 80 percent to $50 per barrel in recent weeks from its lows in February. Following the “Brexit” result, crude oil prices crashed amid broader global financial turmoil. Barring lasting economic upheaval from the UK’s decision to leave Europe, the plunge in prices could be fleeting. The markets will turn back to a look at the fundamentals, although the fundamentals don’t exactly offer a clearer picture of what to expect.

    U.S. oil production continues to decline after a brief pause earlier this month. Last week output fell by another 39,000 barrels per day according to weekly EIA estimates, dipping to 8.677 million barrels per day. New projects coming online in the Gulf of Mexico will add 500,000 barrels per day to the U.S. total this year and next, offsetting much of the expected losses in U.S. shale, but the trajectory for the industry outside of the Gulf of Mexico is still down.

    OPEC is expected to keep production more or less flat – in fact, output has declined in several member countries because of unexpected disruptions (Iraq, Libya, Nigeria, Venezuela). Some output could come back from those countries, but nothing major is expected.

    All told, the markets are still heading towards a supply/demand balance later this year. The IEA, in its June Oil Market Report, sharply lowered its projected global supply surplus for the first half of 2016. Earlier this year the Paris-based energy agency expected the world to be producing 1.5 mb/d in excess of demand for the first half of the year, but this month it cut that figure to 0.8 mb/d, meaning that the markets are substantially tighter than previously thought.

    As a result, the IEA sees the oil market moving into balance in the second half of the year (i.e., the very near future). It even sees global oil inventories falling slightly in the third quarter before rising a bit in the fourth.

    So while the speed with which oil prices rise is highly uncertain, the “direction of travel seems to be clear,” the IEA concluded, suggesting that oil prices may rise and fall from day-to-day or week-to-week, but prices should trend in an upward direction.

    That means OPEC revenues should begin to rebound next year after two miserable years of low oil prices.Demand Supply Ballance until 4Q17

    SEE ALSO: How one company plans to overtake ExxonMobil and return to the top of the oil markets

    Join the conversation about this story »

    NOW WATCH: Forget Q-tips — here’s how you should be cleaning your ears


    0 0

    oilFew expected oil prices to crash below $30 per barrel earlier this year, but that is just what they did. Now that oil is back up near $50 per barrel, the worst is over…right?

    Not everyone thinks so. Over at Bloomberg View, A. Gary Shilling is making a headline-grabbing prediction: that oil will not only fall from today’s levels, but will fall to between $10 and $20 per barrel.

    Many in the energy world would roll their eyes at such a prediction, and it could be way off base. But a year ago when oil prices rose to $60 per barrel at the beginning of the summer of 2015, everyone also thought the worst was over. Companies began adding rigs back to oil fields, hoping to capitalize on a rebound in prices. But crude began crashing again at the end of the summer, culminating in a deep plunge below $30 per barrel in January and February of this year. Very few people saw that coming.

    Now, most analysts and oil companies, although more cautious than a year ago, again think that the worst is over. A. Gary Shilling disagrees.

    He says that the run up in prices over the past few months was due to temporary supply outages in Canada and Nigeria, not based on lasting fundamentals. And the fundamentals are weak. Iran is back, and aims to double production to 6 million barrels per day by 2020. Libya could bring production back. And Saudi Arabia and Russia continue to produce at elevated levels.

    Meanwhile, shale producers have become more efficient and successfully lowered breakeven costs. Indebted companies will continue to produce in an effort to pay back creditors.

    On the demand side, China’s economy is slowing. The West is becoming more energy efficient, needing less oil and gas for their economies.

    And crucially, oil inventories are still at record levels, forcing more oil to be stored at sea.

    All of that means that another price crash is coming…which could have bad economic consequences. Shilling is sticking with his bet that crude falls to between $10 and $20 per barrel. “An oil price drop to below $20 per barrel would be a shock reminiscent of the dotcom collapse in the late 1990s and the subprime mortgage debacle that produced the 2008 financial crisis -- both of which triggered recessions,” Shilling wrote.

    To be sure, Shilling’s prediction is not the consensus view. But given that the consensus view was also wrong last year ahead of price crash, Shilling’s prediction should not be ruled out.

    SEE ALSO: Saudi Arabia's oil reserves could be the answer to higher oil prices

    Join the conversation about this story »

    NOW WATCH: 9 phrases on your résumé that make hiring managers cringe


    0 0

    Ecuador has started drilling the first oil from Yasuní National Park, a pristine corner of the Amazon rainforest.

    ecaudor oil rainforest

    Vice President Jorge Glas toured the site with reporters on September 7 as state oil company Petroamazonas drilled the first barrel of oil from just outside the park.

    SEE ALSO: Mesmerizing photos show what life is like in the Amazon rainforest — before mankind destroys it entirely

    DON'T MISS: 7 natural wonders that humans could destroy within a generation

    Yasuní is a nearly 3,800-square-mile protected nature preserve on the Western edge of the Amazon.



    Scientists estimate 150 amphibian, 120 reptile, and 4,000 vascular plant species live in the area, which the Ecuadorian government began protecting in 1979.

    Source: United Nations Development Programme



    Yasuní is also a UNESCO site, since in addition to its unparalleled biodiversity, indigenous tribes also call the area home.

    Source: PLOS One



    See the rest of the story at Business Insider

    0 0

    Deepwater HorizonAbout 40 minutes into the new movie Deepwater Horizon, there is a scene in which crew member Jimmy Harrell is suddenly called into the dining area on the floating drilling platform of the same name. “Mr. Jimmy,” played by Kurt Russell, was the offshore installation manager (essentially the crew boss) on the vessel, and he’d been summoned to receive a special award for the rig’s excellent safety record.

    Like most of the scenes in the movie, this one is closely based on actual events the night of April 20, 2010, when the actual Deepwater Horizon was destroyed by an uncontrolled eruption of oil and gas. The explosion killed 11 crew members and set off the worst oil spill in U.S. history.

    In fact, the Deepwater rig had gone an extraordinary seven years without a single accident serious enough to halt operations. The rig, owned by the Switzerland-based Transocean Ltd., and its veteran crew were some of the best in the business. (BP, the world’s sixth largest oil company at the time, was leasing the rig, a bit the way a rich sportsman might a charter fishing boat and crew.) Just months earlier, BP and the Deepwater team had broken the record for deepest well ever completed. Yet, even as Harrell was being handed his award, high-pressure oil and gas were threatening to surge up the pipe from the sea floor. Despite all their experience and advanced technology, the crew members didn’t spot the signs of trouble and, once the blowout started, didn’t act quickly enough to contain it or save the rig.

    Like all Hollywood versions of actual events, Deepwater Horizon takes a few liberties with the facts. But that scene accurately captures the central paradox of most large man-made disasters: How could such well-trained experts make decisions that, in retrospect, appear so deeply flawed? Why didn’t they see the disaster coming or stop it in time? The film paints a gripping picture of a technological catastrophe, and it showcases some genuine heroism on the part of several crew members. But to answer the question of how the disaster happened in the first place, we need to dig a little deeper.

    The Dutch pilot-psychologist Sidney Dekker, one of the pioneers in studying large technological breakdowns, has written that the true cause of most disasters is not so much the initial accident “but the failure to identify the accident early in its birth.” The blowout of BP’s Macondo Prospect well was a case study in how a series of small mistakes and misjudgments, when not caught in time, can snowball into catastrophe.

    The movie places the blame squarely on the BP executives who helped direct the drilling operations. John Malkovich, playing Don Vidrine, BP’s “company man” on the rig, fairly drips malice as he pushes the crew to cut corners. In a gumbo-thick Louisiana drawl, he berates the Transocean men for being “nervous as cats.” The reality is more complex: BP consistently made some decisions that favored speed over safety, and the company had a reputation for being particularly hard-driving. But the Transocean crew was also involved in the dubious decision-making. And the federal regulators who supervised drilling in the Gulf of Mexico signed off on their plans at every stage.

    bp oil spill deepwater horizon

    The reality is that both BP and Transocean had grown dangerously overconfident and were pushing too close to the edge. Perhaps overly impressed by the team’s good safety record, federal regulators routinely rubber-stamped the BP/Transocean proposals. Moreover, despite claims to the contrary, none of the drilling companies in the Gulf had a workable scheme to cope with a massive oil spill. The entire industry had succumbed to risk creep: Over the decades, drillers gradually moved into deeper waters and sunk wells that involved much greater internal pressures and hazards. The technologies and regulations originally developed for shallow waters were updated in response, but not to a degree commensurate with the growing risks. So, even as drillers were getting more proficient, disaster was becoming more, not less, likely.

    The Transocean crew, the BP executives, the federal regulators—none of these were stupid people. BP may have had incentives to push its drilling teams hard, but even the greediest executive knows there’s no upside to a catastrophe that kills people, causes massive ecological damage, and costs the company tens of billions of dollars. Malkovich’s scenery chewing notwithstanding, BP’s company man Vidrine certainly didn’t expect that his decisions that day would lead to him to be nearly incinerated by midnight. There has to be a better explanation for why intelligent people sometimes make such terrible decisions.

    And there is. After the loss of the space shuttle Challenger in 1986, sociologist Diane Vaughan began a long investigation into the accident. Her findings would challenge many of our easy assumptions about how disasters occur. We like to think that accidents happen because bad people knowingly and carelessly let them happen. Vaughan discovered something more troubling: that even organizations staffed by smart, seemingly moral people can slowly slide into dangerous and unethical behavior.

    nasa challenger

    Vaughan, an expert in corporate malfeasance, wanted to know how NASA officials made the decision to launch the Challenger despite a serious last-minute safety concern. Very cold weather was forecast for launch day, and some engineers worried that the low temperatures might worsen a long-standing problem: The shuttle’s solid-fuel booster rockets had a tendency to leak small jets of hot gas during takeoff. The engineers urged a delay. NASA decided to launch anyway. The standard view of the accident holds that NASA brass overruled the nervous engineers out of concerns that allowing yet another launch delay would hurt NASA’s image with the public and Congress. From this view, the managers knowingly rolled the dice, bending the safety rules in order to stay on schedule.

    Vaughan spent nine years researching the question and determined just the opposite. In her monumental book, The Challenger Launch Decision, Vaughan demonstrates that NASA officials rigorously followed their own safety guidelines.

    “Managers were, in fact, quite moral and rule abiding as they calculated risk,” she writes. And yet they were flat wrong. “Following rules, doing their jobs,” she concludes, “they made a disastrous decision.” The managers weren’t “amoral calculators,” Vaughan says. Instead, they were fundamentally deluded about the risks posed by the leaky boosters. What’s more, over the years they had systematicallydeluded themselves, through a process she calls the “normalization of deviance.”

    Here’s how the normalization of deviance works: Early in the shuttle program, the appearance of small leaks from the booster rockets’ rubber seals was an unexpected and alarming event. NASA assigned a working group, which dutifully studied the issue and determined the leaks would be manageable as long as they didn’t exceed a certain threshold. “They redefined evidence that deviated from an acceptable standard so that it became the standard,” Vaughan writes. Sure enough, small booster-seal leaks were soon seen as routine during shuttle launches. The problem had been normalized. But as shuttle missions continued, the leaks kept getting bigger.

    Each time, NASA repeated the process, again determining that the seal failures were acceptable as long as it didn’t exceed certain, ever higher, thresholds. NASA had crept right to the edge of what would cause a mission failure, all the while convinced that it was operating safely. The fact that the shuttles kept flying reinforced its false sense of security. Then came something NASA hadn’t anticipated: a launch day so cold that it made the rubber seals hard and brittle. The huge resulting leak burned a hole in the shuttle’s external fuel tank.

    Vaughan’s normalization of deviance theory had a big influence on the growing branch of management studies dedicated to preventing disasters. Business and engineering schools started teaching the concept. (Vaughan herself now teaches at Columbia University.) Vaughan and other researchers argue that most high-risk industries are prone to normalizing deviance. We’ve all seen this, even in businesses that don’t involve life-and-death decisions: Managers focus on positive data about their operations and tune out small signs of trouble, safety margins get shaved in the name of efficiency, and small deviations from procedural rules are tolerated. But disaster researchers have also developed strategies to help counteract the tendency: tools to help managers be more aware of “weak signals” hinting at trouble, for example, and policies that empower whistleblowers. Companies that follow these and related safety strategies are known as high-reliability organizations—a concept with which BP and Transocean executives should have been deeply familiar.

    BP oil spill Louisiana

    But the evidence shows that the Deepwater Horizon rig was anything but a high-reliability organization. The movie realistically captures some of this dysfunction. In one scene, we see that the computer used by the rig’s chief electronics technician (played by Mark Wahlberg) is often on the fritz. In another, we learn that an office smoke detector is broken. In fact, many alarm systems on the rig were deliberately “inhibited” in order to prevent false alarms from waking up the crew. On the sea floor, a crucial structure of pipes and valves known as the blowout preventer was poorly maintained (and probably not robust enough in the first place). The blowout preventer was supposed to be the last-ditch defense against high-pressure gas and oil bursting out of the well. It failed utterly.

    In designing the structures that would stabilize the pipe and prevent leaks below the sea floor, BP repeatedly opted for the quickest, rather than the most secure, approaches. Though some choices were debated, there’s little sign that the drillers saw any of these decisions as necessarily or blatantly dangerous. (And the regulators certainly didn’t object.) Collectively, though, those aggressive choices nudged the whole operation toward higher risk. BP and Transocean had been working this way for a while. When the wells didn’t fail, the drillers—just like those NASA officials—saw that as a vindication of their methods. Even as their wells were getting more dangerous, they grew more confident and complacent. Researchers who study disasters tell us that a long period without an accident can be a big risk factor in itself: Workers learn to expect safe operation as the norm and can’t even conceive of a devastating failure. In such a situation, workers and managers with the most experience are often the last to recognize when risks are getting out of control.

    After every big disaster we naturally assume some reckless decision by a manager or a massive equipment breakdown must have been the cause. In the words of accident investigator Dekker, we look for “bad people, bad decisions, broken parts.” But in studying large industrial failures (including the BP spill), Dekker came to a very different conclusion about what causes such problems.

    Large accidents are more often the result of dozens of tiny contributing factors: misguided assumptions on the part of workers and managers; small, subtly flawed decisions; routine mechanical or digital glitches. Individually, none of these seem particularly noteworthy to the people on the front line—just another day on the job. It’s only after the accident that we see how this particular row of dominoes toppled. What Dekker, Vaughan, and others conclude is that large accidents are primarily the result of particular workplace cultures. In Vaughan’s words, “Mistake, mishap, and disaster are socially organized and systematically produced by social structures.”

    This new social science of disaster helps explain why the people involved never seem to see the accident coming. The people working in these cultures don’t think they are being reckless; they don’t recognize all the ways they’ve normalized deviance and let risks creep up.

    When the disaster finally strikes, they are as stunned as anyone. These findings also show why disasters are so hard to predict: According to Dekker, “Accidents can happen without anything breaking, without anybody erring, without anybody violating the rules they consider relevant.” The disaster, in other words, is not a violation of the daily routine, but a product of it. Some disaster researchers call these sorts of incidents“normal accidents” or “organizational accidents” to stress the way they emerge from the normal operation of the organization.

    BP’s Macondo Prospect blowout was a textbook case of an organizational accident. One scene in the movie shows the crew conducting two critical pressure tests to check the well’s integrity. The first test produced a confusing and worrisome result. So they ran a second test, using a different pipe, and got the result they wanted. (Forensic analysis later hinted that the pipe used in the second test may have been clogged.) The first test must have been wrong, they concluded. Everything was fine. The team had succumbed to the normalization of deviance, setting aside data that didn’t conform to their expectations and relying on information that did.

    The movie presents the discussion over the test results as a showdown between BP’s oleaginous Vidrine, pushing to ignore the bad test, and Transocean’s stalwart Harrell, urging caution. In reality, the confusion over the test results was shared, and the decision to move ahead despite ambiguous data was apparently not unusual. Of course, it’s hard to fault the filmmakers for amping up the venality of the BP execs onscreen. Movies need villains (and BP is hardly in a position to expect sympathetic treatment). But if we come away from the movie believing that disasters such as the Gulf spill are caused primarily by flamboyantly greedy and reckless executives, we are learning the wrong message. The kinds of decisions that lead to disasters are rarely telegraphed by malevolent executives twirling their mustaches. More often, they appear just like any other decision in a busy workday.

    bp oil rig

    The behavior of the Deepwater Horizon crew also indicated that none of them was particularly alarmed that work was proceeding despite the worrisome test. Over the next few hours, the crew overlooked several signs that pressure was growing in the well. When the explosive surge of gas and oil finally reached the drilling rig, Harrell was off taking a shower. The blowout caught the rest of the crew off guard as well. It took the crew on the bridge more than a minute to sound the general alarm and much longer to hit the disconnect button that would separate the rig from the well. By then it was too late. This doesn’t mean the crew members were bad at their jobs—it means they were human. In any complex business the expectation of normal operation runs deep. The same workplace culture that gradually normalizes risk-taking also makes it hard for workers to expect trouble. In many disasters, the front-line workers struggle even to comprehend what is happening; the unfolding events fall completely outside their mental models.

    To say that the Gulf oil spill was an organizational accident—something that grew organically out of the culture of the drilling platform—doesn’t mean BP wasn’t responsible. It was BP’s decision to attempt extraordinarily deep and hazardous drilling operations. And BP would reap enormous profits from a successful well. So the company deserves to pay every penny of the more than $60 billion in fines and settlements it has been charged with. Moreover, companies that operate in very hazardous fields have a heightened responsibility to understand modern thinking about how workplace cultures can incubate disasters.

    The various strategies that make up the concept of the high-reliability organization are not obscure or impossible to implement. It is hard to imagine a work environment more in need of those principles than an oil platform. An analysis by University of California–Berkeley’s Center for Catastrophic Risk Management concluded: “This disaster was preventable if existing progressive guidelines and practices been followed.” Instead, BP and Transocean doubled down on their aggressive style, convinced that their past successes were proof of their skill and invulnerability. In the words of the Berkeley group, “They forgot to be afraid.”

    So, by all means, BP deserves to be excoriated. And the Deepwater Horizon movie misses few opportunities on that front. (As one critic wrote, if “you need a corporate stooge who helped destroy the Gulf of Mexico to come off as absolutely evil, yes, you will want to hire John Malkovich.”) But if we think that we can prevent future accidents simply by pointing fingers at the people who caused the last one and exonerating ourselves as less corrupt, we are fooling ourselves. Preventing disasters requires a special kind of daily vigilance that needs to be actively taught and constantly reinforced. Only by admitting that, yes, it could happen to us too, can we take the steps to make disaster less likely.

    SEE ALSO: This is the first photo of the sun ever taken

    DON'T MISS: We asked President Obama how to improve the lives of US workers — here's what he said

    Join the conversation about this story »

    NOW WATCH: Animated map shows where your bottled water actually comes from


    0 0

    north dakota pipeline protestersThe Dakota Access pipeline operator chose the day of the US presidential election to announce that the final phase of its controversial construction project will begin in two weeks – marking a bold escalation in its response to the Native American protests.

    Energy Transfer Partners, the company overseeing the North Dakota oil pipeline, has already completed construction up to the river that provides water to the Standing Rock Sioux tribe and announced on Tuesday it would soon begin drilling at the site.

    The company said it would not halt construction, despite requests by federal agencies to delay the project as the US government reassesses permits and considers possible reroutes.

    In a statement, Energy Transfer Partners said it was “mobilizing horizontal drilling equipment” in preparation for tunneling under Lake Oahe, a reservoir on the Missouri river by the protest camps and Native American reservation. The corporation said it would be ready to start crossing the water in two weeks.

    The announcement came on a quiet election day at the encampments built by members of the Standing Rock Sioux nation and other indigenous people in opposition to the pipeline.

    After a string of clashes and mass arrests, rumors spread among activists that the pipeline, government and tribal leaders had negotiated a 30-day moratorium on both construction and protest or religious ceremonies on the “front lines” of the conflict.

    “I’m in shock. I’m speechless,” said Cheryl Angel, a Sicangu Lakota tribe member who has been at the Standing Rock camps since the spring. “It’s unconscionable and devastating. It’s almost as though they have no soul.”

    The announcement presents the final phase of construction as a done deal, and will be seen as a clear illustration that the oil company is aggressively moving forward with the $3.7bn pipeline in defiance of Barack Obama and the thousands of demonstrators who are camped out at Standing Rock to fight the project.

    Last week, Obama made his first remarks on the huge demonstrations since police arrested hundreds of unarmed protesters, who call themselves “water protectors” and say the pipeline is destroying sacred indigenous lands.

    Dakota Access Pipeline

    The president said the US army corps of engineers was exploring ways to “reroute” around Native American lands, and said the government was “going to let it play out for several more weeks, and determine whether or not this can be resolved in a way that I think is properly attentive to the traditions of the first Americans”.

    In September, the government said it would temporarily halt permits to dig on federal land near or under the Missouri river and requested that the company “voluntarily pause all construction activity within 20 miles east or west” of Lake Oahe.

    Energy Transfer Partners ignored that request and continued construction, recently approaching within a few miles of the river, causing widespread anger and sadness at the Standing Rock camps, which have been opposing the pipeline since April.

    Tuesday’s statement does not address the requests from the government for a delay. On the contrary, it suggests that the company is not giving consideration to alternative routes or Obama’s recent remarks.

    “Dakota Access previously received a permit from the army corps with respect the tunneling activities under Lake Oahe, and Dakota Access has all other regulatory approvals and land rights to complete the crossing of the Missouri river at Lake Oahe,” the statement said.

    The army corps did not respond to requests for comment.

    Asked about Obama’s comments, pipeline spokeswoman Vicki Granado told the Guardian: “We are not aware that any consideration is being given to a reroute, and we remain confident we will receive our easement in a timely fashion.”

    north dakota pipeline

    The company’s announcement comes as North Dakota regulators are moving ahead with a formal complaint against the corporation for failing to properly disclose findings of Native American artifacts along the construction route.

    Angel said the pipeline construction plan was “environmentally irresponsible” and “illegal” considering the army corps has yet to approve final permits. Noting that the Missouri river provided drinking water to millions, she added: “I’m in tears, because I can’t believe [the company] would do this to a whole group of people who don’t have any say.”

    This past Sunday, more than a hundred water protectors used boats to ferry across the Cannonball river and attempted to climb “Turtle Island” – a portion of army corps land where tribal members say there are 11 burial sites. Several tribal elders, including Darrel Killsinsight, implored everyone to return to the main camp, referencing the alleged 30-day agreement.

    But representatives of the tribe never officially confirmed that any such agreement was in place, and Tuesday’s statement flies in the face of any hope for a moratorium.

    Jan Hasselman, the attorney representing the Standing Rock Sioux in its permit litigation, said that the statement from Dakota Access was probably a response to an army corps spokesman telling Bloomberg that the company had agreed to slow construction. But, she added, Dakota Access does not have all the permits it needs to begin drilling, including the easement.

    “Starting construction without permits would be beyond the pale, even for Dakota Access,” Hasselman told the Guardian. “It is deeply irresponsible to keep putting investors’ money into this route when both the President and Senator Tim Kaine are openly discussing rerouting away from Lake Oahe.”

    dakota access pipeline protesters

    The timing of the announcement on election day instantly raised suspicion – and anger – among the activists gathered at Standing Rock. Activists have expressed frustration with the US presidential race, noting that Democratic candidate Hillary Clinton has refused to take a position on the conflict and GOP candidate Donald Trump has close financial ties to the pipeline.

    “With the election being so big, and North Dakota being so small, they think they can just sweep this under the rug,” said Danny Grassrope, a member of the Lower Brule Sioux Tribe. “I’m not really surprised. Snakes are sneaky, and this is a black snake. It blindsides everyone.”

    He added: “A lot of people are going to get angry, and this is where we need to stay positive. We need prayers more than ever now.”

    The protesters were also disappointed that Obama has not condemned the highly militarized police force in North Dakota, which has arrested more than 400 peopleand deployed Mace, Tasers, rubber bullets and army tanks to respond to demonstrations.

    A UN group is also investigating claims of inhumane jail treatment and other human rights abuses by law enforcement.

    “Are indigenous people so invaluable that now that Dakota Access is to the water, does it not matter to anyone that people are going to start laying down their lives?” asked Eryn Wise, a member of the Jicarilla Apache and Laguna Pueblo tribes.

    “I think that people need to seriously question the integrity of the work produced by DAPL right now, because they’re rushing,” Wise added. “Is it safe when they’ve been rushing like this?”

    Join the conversation about this story »

    NOW WATCH: JACK DANIEL’S MASTER DISTILLER: This is the real difference between scotch, whiskey, and bourbon


    0 0

    arctic oil drilling shell protests seattle

    Much has been made about President-elect Donald Trump’s plans to dismantle environmental regulations and streamline regulations that could lead to the construction of more pipelines. But there are a few other controversial energy issues that President Trump might ram through a Republican Congress, which would hand the oil and gas industry new areas for drilling that have long been off limits.

    No other place has been more contentious, more fought over, than the Arctic National Wildlife Refuge (ANWR), a large swathe of territory in northeast Alaska, east of Prudhoe Bay where much of the state’s drilling is located. As its name suggests, the refuge is home to scenic mountains, rivers and lakes rich in wildlife and biodiversity. But it is also thought to hold large volumes of oil and gas reserves, and has been the subject of heated debate since the late 1970s over whether or not oil and gas companies should be allowed to drill. Republicans have long sought to open ANWR up for drilling, but Democrats have stymied them for decades.

    But that deadlock could be broken with the unusually brazen President-elect, who is hoping to deregulate large sectors of the U.S. economy. And he has the allies in Congress to take on hugely controversial items. Alaska Dispatch News reports that the Alaskan congressional delegation, led by the powerful Senator Lisa Murkowski (R-AK), who chairs the Senate Energy and Natural Resources Committee, was shocked on election night (as was everyone else), and quickly thought to put ANWR on the table for President Trump’s agenda in his first 100 days. When asked about ANWR by a reporter on election night in Anchorage, Sen. Murkowksi voiced cautious optimism. "Well, as you know, we have been working to advance ANWR for decades now. And we need to have the support of the Congress," Murkowski said. "But if the numbers continue for us with the Senate and you have a president who has expressed support, I will be chairing the energy committee again, and I am going to look to push that early on," she added.

    "I would suspect that the opening of ANWR actually has a fairly good chance (when) Republicans hold" the House of Representatives, the Senate and the White House, Bob Gillam, founder of McKinley Capital Management, told Alaska Dispatch News.

    Opening up ANWR for drilling would fit perfectly into Trump’s plans to essentially drill everywhere in an effort to make the U.S. oil independent. Alaska’s Republican delegation sees only upside. "We might take people up north where we will discover that there's still a lot of oil up there if they just give us permission to go get it," Sen. Murkowski said on election night.

    In another sign that Alaska’s oil industry could win big from a Trump administration, former Alaskan Governor Sarah Palin has been rumored to be a candidate for Interior Secretary. That is important because the Interior Department oversees the stewardship of federal lands, including offshore. Palin, as readers might remember, did more than anyone to popularize the slogan “Drill, Baby, Drill.” There is little doubt that she would mark a sea change in the management of public lands. First off the bat could be to auction off offshore tracts in the Arctic Ocean in her home state, and to scrap regulations standing in the way of drillers. Sen. Murkowski has long criticized President Obama’s Interior Department for over regulation, which she says has held back drilling in the Arctic.

    The Obama administration is currently finishing up its five-year plan for offshore drilling for the years 2017 through 2022, but the draft document has not included plans to allow drilling in the Eastern Gulf of Mexico, the Pacific Ocean, or the Atlantic Ocean – areas that have long been off limits. Environmental groups have pressed President Obama to also withdraw the Arctic. Presumably, the Trump administration would be willing to open up drilling in all of these areas.

    Allowing drilling in remote corners of the U.S. where drilling costs are high is one thing. But with oil prices in the mid-$40s, drilling in any of these areas is probably not profitable, so there is little chance that there will be a drilling rush even if new lands, including ANWR, are opened up. Royal Dutch Shell indefinitely canceled plans to drill in the Arctic in 2015, after spending billions of dollars and years to drill an exploration well in the Chukchi Sea. Shell did not find economically recoverable oil reserves, and wrote down its Arctic program, essentially killing off Arctic exploration for years to come.

    On the other hand, oil prices won’t always be this low. Deregulation could also lower costs for the industry. And the industry has never had a shot at ANWR, where drilling could be much less costly than offshore. Either way, Donald Trump and the Republican Congress have the option of removing all barriers standing in the way of drillers, so we could find out if the industry is interested in drilling in ANWR and new offshore areas around the country.

    SEE ALSO: Trump is going to impact Canada's housing market

    Join the conversation about this story »

    NOW WATCH: A mysterious cloud moving 700,000 mph is going to collide with our galaxy — here's what will happen


    0 0

    Barack Obama

    U.S. President Barack Obama on Tuesday permanently banned new oil and gas drilling in federal waters in the Atlantic and Arctic Oceans, in one of his last environmental pushes before he leaves office next month.

    In protecting the waters, Obama used a 1950s-era law called the Outer Continental Shelf Act that allows presidents to limit areas from mineral leasing and drilling. Environmental groups said Obama's use of the law meant the incoming administration of President-elect Donald Trump could not simply reverse the action but would have to fight it in the courts.

    The ban affects federal waters off Alaska in the Chukchi Sea and most of the Beaufort Sea and in the Atlantic from New England to Chesapeake Bay.

    Join the conversation about this story »

    NOW WATCH: Donald Trump's 'strange' morning habit tells you everything you need to know about him


    0 0

    arctic

    In one of the final and most dramatic environmental actions of Barack Obama’s time in office, the president banned new oil and gas drilling in nearly all US waters in the Arctic Ocean.

    On December 20, the president used the authority granted by a 1953 law to remove the Chukchi and Beaufort Seas from the federal Arctic waters that are considered available for lease. Combined, the two seas make up 98% of the US Arctic water territory — a total area of more than 100 million acres.

    Obama’s action, which he announced in conjunction with Canadian Prime Minister Justin Trudeau, was applauded by environmental groups that have been fighting Arctic drilling practices for years. Environmentalists say the Arctic Outer Continental Shelf's underwater canyons provide essential habitats for sea animals, many of which are facing endangerment due to the extreme warming of Arctic waters. Drilling and excavation on the sea floor could lead to even more species extinction — not to mention the impact the extracted oil would have on the earth's climate once it gets burned. 

    The law Obama used as the basis for his action is called the Outer Continental Shelf Lands Act, and was passed under President Eisenhower. The act gave the president the ability to sell leases to oil companies who want the right to tap into oil reserves on the Outer Continental Shelf, the underwater land around the US.

    But according to one clause in the law, the president also has the ability “withdraw from disposition any of the unleased lands.” Obama took that power seriously yesterday. With almost all the unleased lands now considered protected (or unavailable for drilling), no new leases will be granted. (Oil companies who currently have leases will be able to stay, unaffected.)

    Because the 1953 act didn’t include any provision for reinstating Outer Continental Shelf lands for drilling after they've been withdrawn, the White House has defined the action as permanent.

    That claim of irreversibility seems specifically aimed at protecting Arctic waters from Donald Trump, who has promised to open more federal land to drilling and resource extraction. If the President-elect does try to undo Obama’s action once he takes office, he will likely face a court battle to determine whether it's legal to reinstate federal land that a former president has previously put under protection.

    arctic oil drilling shell protests seattle

    Oil industry advocates have already voiced opposition to the action, suggesting that Donald Trump will find a way to reverse it.

    “Blocking offshore exploration weakens our national security, destroys good-paying jobs, and could make energy less affordable for consumers,” Erik Milito, American Petroleum Institute’s Upstream Director, said in a statement.

    But not all oil producers seem shaken by the change.

    “It is important to realize that significant development or production from these deep-water areas will not happen in the current pricing environment, it will take much higher and sustainable prices,” Avi Mirman, CEO of Lilis Energy Inc, a Denver-based oil and gas exploration and production company, tells Business Insider.

    Mirman suggests that Obama's ban is largely symbolic, since Arctic exploration is such a risky, costly endeavor, and US shale now offers companies cheaper extraction options. (Plus, oil production in the Arctic makes up just 0.1% of the country’s oil production, according to the Washington Post.) Oil giant Shell illustrated Mirman’s point in 2015, when it abandoned its drilling operations after spending over $7 billion hunting for oil in the Alaskan Arctic.

    “Also, the infrastructure needed for such project is extremely expensive and will take many years to build given the climate and available times to work in those areas,” Mirman explains, suggesting that exploration and production companies like his will focus instead on more cost-efficient projects.

    Companies who still wish to pursue Arctic drilling, however, could do so in Alaska’s state waters — the same 1953 law gives states control over the underwater area 3 miles offshore of their coastlines. After that, it’s federal territory.

    Although the Arctic drilling ban represents a major milestone for environmental groups, many advocates immediately started using the action as an example of protections that could be extended to other parts of the Outer Continental Shelf.

    “We must afford the same protections to the people of the Gulf of Mexico, which has become an energy sacrifice zone,” Friends of the Earth Climate Campaigner Marissa Knodel said in a statement.

    Greenpeace US spokesperson Mary Sweeters echoed that sentiment, suggesting that the president’s current five-year energy plan puts residents of the Gulf Coast region at risk of damage from oil spills.

    “The job will not be done until no new leases are granted anywhere in US waters,” she said.

    SEE ALSO: America's first offshore wind farm just launched with GE turbines twice as tall as the Statue of Liberty

    Join the conversation about this story »

    NOW WATCH: This startling animation shows how much Arctic sea ice has thinned in just 26 years


(Page 1) | 2 | 3 | newer