07/13/2010 03:28 pm ET | Updated May 25, 2011

Deepwater Moratorium Becomes "Suspension," But Still Needed

In response to two losses in federal courtrooms in the last two weeks, the Department of Interior issued a new order yesterday to suspend the drilling of deepwater wells in the Gulf of Mexico.  Besides the name change, this new order corrects the weaknesses in the previous order that was overturned by the courts and is more directed, focusing on actual forms of well control, rather than simple water depth.  The order makes a lot of sense.

The primary change is rather than restricting offshore drilling by depth (previously greater than 500 feet), it is restricted to floating rigs that use subsea BOPs (blowout preventers).  In justifying its decision, Interior cited failures in what it called "augmented tests" on the BOPs from the 2 rigs assigned to drill the relief wells, Transocean's DDII and DDIII.  Interior required these 2 stacks to be subjected to these additional tests, varying from the normal "stump" tests they usually receive prior to splashing (running them to bottom).  These 2 BOPs failed 4 tests, including failure of the EDS (emergency disconnect system), failure of the deadman system, both due to bad valves, and failure to close the casing shear rams due to a faulty control pod.  These failures are on BOP stacks owned by Transocean, built in 2004 and 2005.  I have to say that it's chilling that these state of the art BOPs suffered failures identical to the failures of the Deepwater Horizon's stack that failed so catastrophically in real life.

I understand the economic issues with a deepwater suspension.  I understand the stress and worry with which my colleagues in deepwater operations are experiencing; however, I have one question for all the industry lobbyists and representatives who are howling about this stoppage:

What caused every single safety system to fail on the Deepwater Horizon causing the loss of 11 lives, loss of the rig, and the largest environmental catastrophy in US history? 

Until someone can answer me that, and how it's been fixed, I cannot support just going back to doing the same thing we were doing before.  I am unwilling to put these folks lives at stake for money.  The money can be replaced by BP and other deepwater operators while this is fixed.

Virtually all of the industry opposes the dirlling suspension without qualification, ignoring the above question.  They cite loss of American jobs as one of the biggest reasons, as well as lost production from new wells.  Most objective people admit that a 6 month pause won't affect long term production in the deepwater that significantly, but everyone argues about loss of jobs, including all the politicians.  The problem is, the loss of jobs issue is created by the drilling companies in the way they are organized.  Most large drilling company rigs, including all of Transocean's, are foreigned flagged.  What that means is, that these rigs are inspected differently, and have different labor and wage regulations that US flagged rigs.  They do this so they can lower costs, especially if the rig moves.  Right now, if Transocean moves one of its rigs from the US to waters off another country, they will fire all the American crew, then hire cheap foreign workers when they get there.  If the US government required all rigs drilling in US waters to be US flagged, then 75% of the crew are required to be Americans.  So, if that rig goes somewhere else, then the vast majority of the crew keeps their jobs; their commute is just longer.  Employment problem solved.

I've been saying for weeks now that the US should change its offshore policy to if you drill here, you live here.  Instead of having a British company based in London, hiring a drilling company based in Switzerland that owns rigs built in South Korea and flagged in the Marshall Islands, serviced by a company whose CEO is based in Abu Dhabi, these companies should be required to domicile in the US.  I don't mean a subsidiary like BP America, I mean an autonomous company, incorporated in the US, whose CEO resides permanently in the US, within reach of US law.  Then, US workers get to build US rigs, US workers crew and service those rigs, and the federal government gets the benefit of royalty payments, can enforce US safety regulations, and everyone in our game has skin in our game.

How hard is that?