Major Accidents: Prime Time to Regroup

A report (1) released in December 2011 by the National Academy of Engineering notes a fundamental deficiency with the safety culture of the offshore drilling industry.  This culture, the independent Academy describes, is rooted in an attitude which does not prioritize comparing risks in business decisions. (2)  Yet as the BP Deepwater Horizon Oil Spill of April 2010 exhibited, risks always exist.  Since the BP accident, there have been three other oil leaks by major companies at drilling locations off the coasts of China, Brazil, and the North Sea. (3)  As the nuclear power industry revamped its regulatory system following the Three Mile Island accident in 1979, the oil industry could use the BP spill as an opportunity to step back and revamp its safety measures as well.

With the massive scope of operations associated with offshore drilling, oil companies and regulatory agencies involved are expected to achieve high standards of safety.  But these standards, including overall safety preparedness, the ability to handle the complexities of deep-water drilling, industry oversight of operations, and personnel competency training, have been questionable.  While reports acknowledge that some improvements have been made since the BP spill, they point out that much more should be done, and that Congress has failed to pass legislation that addresses the safety gaps.  Meanwhile House Republicans are passing bills to jump-start offshore drilling, and operations continue to expand – including by BP. (2)

In the past year BP rose by 379 spots on the Forbes Global 2000 to 11^th place, primarily due to a remarkable comeback in profitability.  The company plans to bring 15 large new projects online by 2015, which is expected to help increase free cash flow by 50%. (4)  With a recent accident still underlying its public relations, international pressure to improve safety measures, and comfortable profits, there may never be a better time for BP and the industry to focus on its safety and regulatory systems.  While it may not be necessary to shut down operations (as Japan has done with nuclear power since the Fukushima accident) the industry has an opportunity now to vigorously address the safety culture rather than pursue expansion.

In a recent report (5) released by the Oil Spill Commission – part of President Obama’s response to the BP spill – “Safety and Environmental Protection” receives a grade of B in improvements across industry, the Department of the Interior, and other federal agencies since the accident.  Like others, this report acknowledges some significant improvements which have taken place since the BP accident. (5)  For example, new safety standards on everything from how wells are drilled, cemented, and tested to how risks to workers are minimized now exist, and the Interior Department has decoupled the safety oversight and revenue collection divisions. (3)  But the reforms still aren’t enough to satisfy the analysts.  The new Center for Offshore Safety, for instance, isn’t fully independent of the American Petroleum Institute (API), the industry’s primary lobbying organization.  In comparison, the Institute of Nuclear Power Operations (INPO), which was created after the Three Mile Island accident, is independent of the industry and has been notably successful in promoting improved safety and environmental protection measures. (5)

While consistent production and expanded operations are necessary to meet growing energy demands, companies and regulatory agencies should be cautious of waiting until a major accident to address safety protocols.  And when an accident does occur, they should seize the opportunity to regroup.  With the involvement of politics, stakeholders, and market competition, there may never be a better time to hone in on necessary improvements in safety protocols and technology.

 

(1)    http://www.nap.edu/catalog.php?record_id=13273#toc

(2)    http://www.huffingtonpost.com/2011/12/14/bp-oil-spill-safety-culture_n_1148412.html

(3)    Taylor, Phil. “New Rules on Way to Protect Workers, Prevent Spills – BSEE chief.” Greenwire. April 20, 2012. Accessed online April 29, 2012.

(4)    http://www.forbes.com/sites/christopherhelman/2012/04/18/bp-is-booming/

(5)    http://oscaction.org/wp-content/uploads/OSCA-Assessment-report.pdf

A Glance at Germany Post-Fukushima

It’s strange that nuclear power plants would shut down in the West for something that happened in the East.  This sentiment was one of many which Dale Klein, former Chairman of the Nuclear Regulatory Commission, expressed to me in an interview last October.  In the early weeks following the earthquake last year in northern Japan, one country after another – especially in Europe – seemed to be announcing plans to scale back its nuclear power generation programs.  One case that particularly stands out is that of Germany where, by the weekend after the Fukushima incident, Chancellor Angela Merkel had suspended plans to extend the lifespan of aging nuclear plants in the country.  By May Mrs. Merkel had announced a full-fledged nuclear phase-out of all 17 reactors by 2022.  Germany would now have to figure out how to make up the 23% of its power previously generated by nuclear. [1]

As German leaders headed noble moves toward a non-nuclear energy revolution, the crisis in Fukushima was still unfolding.  As I sat in my office in Tokyo with eyes fixed on the streaming coverage in April, the uncertainty of what was going on kept the room eerily silent.  Reporters could only speculate on what had caused the explosions or why radiation was leaking, and it wasn’t until months later that officials had conducted thorough investigations to determine the nature of the situation.  So when a government on the other side of the world – namely Germany – completely halts its nuclear program within weeks amid looming uncertainty, politics rather than rationality seem to be steering.

Mrs. Merkel had earlier established policies that would extend the lifespan of its nuclear plants – a decision widely unpopular among the voters of Germany while favored by industry constituents close to the conservative party.  In a country with strong anti-nuclear sentiments, the Fukushima incident ignited protests over nuclear power.  Mrs. Merkel watched her Christian Democratic party then lose a strong-hold state for the first time since 1953 in regional elections in late March. [1] Within this context, the pressures faced by the government in appeasing sentiments of its voters are apparent and significant.

In what some label as Germany’s “Energy Revolution,” the decision to rid the country’s power generation portfolio of nuclear power has already proved challenging.  Part of the plan to move off of nuclear power includes increasing renewable energy capacity to 35% by 2020 – renewables currently make up about 17% of Germany’s energy portfolio. [2] While Mrs. Merkel’s government maintains that the cost of such a transition would only reflect modestly on electricity bills, experts have projected the costs could be 5 times more expensive than the government’s estimate of 1 cent/kWh. Even with nuclear power in the mix, Germans paid upwards of 13 billion Euros per year in renewable energy subsidies. [3] With the proportion of renewables planned to double and CO2 emission reduction goals still at play, many are skeptical of more costs not being passed on to customers.

Perhaps most importantly, the dynamics of imports and exports of electricity are likely to shift as a result of the swift German policy change.  While the country used to be a net exporter of electricity, it is now a net importer.  As a result, neighboring countries like France are expected to import electricity from the UK and other surplus generators, thus shifting to overall balance in the region. [4] Furthermore, as Germany looks for more energy from its neighbors to meet its own demand, it inevitably imports nuclear power being generated just across its borders. [5]

 

[1] http://www.nytimes.com/2011/05/31/world/europe/31germany.html?_r=1

[2] http://www.spiegel.de/international/germany/0,1518,771646,00.html

[3] http://www.spiegel.de/international/business/0,1518,776698,00.html

[4] http://uk.reuters.com/article/2012/02/06/uk-france-britain-imports-idUKTRE8150Z820120206

[5] http://www.spiegel.de/international/business/0,1518,786048,00.html

Image: World Nuclear News http://www.world-nuclear-news.org/NP_No_nuclear_back_up_for_Germany_3108111.html