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Weighing costs, benefits of oil safety

Oil containment booms (in orange and yellow at bottom) are staged at one of the entrance canals to Lake Pontchartrain in New Orleans, La.

TEXT OF STORY

Tess Vigeland: The Gulf coast oil spill is prompting calls for tougher safety regulations when it comes to offshore drilling. Some critics say BP and others involved in the project should have taken more precautions.

But as Sarah Gardner reports from the Marketplace Sustainability Desk, the decisions around precaution versus risk aren't so simple.


SARAH GARDNER: Some critics now point to the lack of a remote-controlled shut off switch on the Deepwater Horizon rig. It's required in Norway and Brazil, but not in the U.S. It costs half-a-million dollars.

Transocean, the rig's operator, wouldn't comment today, but a spokesman for the International Association of Drilling Contractors said the back-up device "hadn't been demonstrated to be effective." The thinking is that lots of leaking oil could block remote signals.

Lucian Pugliaresi is president of the Energy Policy Research Foundation.

LUCIAN PUGLIARESI: None of the companies that we're familiar deploy new technologies until they are convinced that they one, work, and two, that they're a net gain as a result of doing it.

And figuring "net gain" isn't so simple, say environmental experts. Cost-benefit analysts call events like this "low probability/high risk."

Matthew Kotchen, an environmental economist at Yale, says some safety decisions make more sense only in hindsight.

MATTHEW KOTCHEN: So just like it always seems as if it was an obvious decision to have bought flood insurance after a flood, it isn't always obvious that you should have bought flood insurance before the flood occurred.

Kotchen says calculating beforehand the full environmental costs of an oil spill are next to impossible since the extent of damage is clear only years later. One thing that is clear: this oil spill will most likely lead to new regulations. Finding out exactly why this accident happened should help shape those new rules.

I'm Sarah Gardner for Marketplace.

About the author

Sarah Gardner is a reporter on the Marketplace sustainability desk covering sustainability news spots and features.
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"net gain" is a nice way of saying, if BP was stuck paying for all the damage, then there'd be a net gain in doing anything they could to prevent the damage.

But donating to politians' re-election campaigns is cheaper than paying the damages. If they were stuck with the damages, then their insurance would go way up...and then you bet there'd be a net gain to put on a remote control shut off switch. The drilling company would even point out to the insurance company that other countries insist on it, as proof it works.

Interesting to note that an incident like this hasn't happened in Brazil or Norway.

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