Note: Watch Need to Know on Friday, June 4, as we explore the effects the Gulf oil spill is likely to have on regional wildlife.
Need to Know’s Dreux Dougall spoke to Lisa Margonelli, Senior Research Fellow at the New America Foundation and author of Oil on the Brain, about the oil industry, the environmental movement, and what might happen when we start seeing oil-covered birds washing up on the Gulf Coast.
Dreux Dougall: In a recent New York Times article, you wrote that much of the environmental movement has been shaped by oil spills.
Lisa Margonelli: I think most people would say that the environmental movement started with Thoreau and kind of evolved again with Rachel Carson and “Silent Spring.” But it didn’t actually become a political movement until the blowout in 1969 off the coast of Santa Barbara, when a citizens group formed very quickly after the spill. It was called GOO – Get Oil Out. It kind of galvanized people’s will around the country to do something. That was when some of the first environmental regulations came into being. The next year, 1971 or 1972, we had the Clean Air, Clean Water Act.
Then what you had in 1989 when the Exxon-Valdez spill happened was a whole other level of political advocacy on the part of environmental groups. Their power and their efficacy grew out of a real national, even international, revulsion at the oiled birds and the sense that Exxon had betrayed the public trust in spilling the oil.
Part of the effect of the first two oil spills was to keep in place moratoriums on drilling on the east and west coast. Also to make the process of drilling in what was considered pure unspoiled land, like the National Arctic Wildlife Refuge, very difficult.
The Gulf is not seen as pure. It was not seen as a sacrosanct area, so where there were moratoriums on the east and the west, there certainly wasn’t one in the Gulf. The Gulf is a source of a third of our domestically produced oil, refines a quarter of our gasoline, and has a lot of our marine oil terminals for a lot of imported oil coming in. They’ve always had spills, they have a lot of refineries, a lot of air pollution, and a lot of people work in that industry.
For this current spill, one of the things that is very strange about it, is that the oil, which is in enormous volumes, has so far stayed under water. It hasn’t oiled the wildlife yet. There have only been a few birds’ pictures in, and so in a way we’re waiting for the public reaction. It’s definitely very bad. In that time that we’re waiting for the public reaction, this sort of feeling of dread is building. There’s more and more signs of phenomenal incompetence on the part of the oil companies involved and on the part of the federal regulators, the Minerals Management Service, and to some extent, the government response seems to have been spun by the oil companies. So we don’t know the size of the disaster we’re looking at and it may take some time to come into focus.
Dougall: Who do you think is to blame for the Gulf Oil disaster?
Margonelli: Well, first of all, oil spills don’t happen if people don’t use oil. I’m not going to blame the American public, but we use 25 percent of the world’s oil. When you are using oil, there is a certain inevitability that there will be a spill. Any individual spill can be prevented, but there’s an inevitability about spills. There’s no question that this one could have been prevented. Whose fault is it? My sense is that’s it’s everyone’s fault that is involved.
There were many levels of control that were breached, from the pressure expanding out of the hole, which normally doesn’t happen, to the blowout protectors failing, to the final defense against the blowout also failing – which is that they will drive the rigs off the well, very fast, to disconnect it and put out the fire. What happened in this case was that the fire that came up from the blowout set two of the engines from the rig on fire, which is supposed to be impossible. So you have multiple levels of failure. And I think the other thing is that the regulator is definitely at fault in this.
Dougall: There’s currently a cap on oil companies’ liability for spills like the one in the Gulf. Taxpayers would be stuck paying the rest. Some are likening this to a bailout for the oil companies. Should this cap be lifted?
Margonelli: Oh yes. The cap is basically an artifact. When the Exxon-Valdez had the spill the liability for oil shippers was raised to almost infinite. Ships contain a finite amount – if you crash your ship you won’t spill anymore oil than is what’s in your ship. But in order to ship oil, you have to carry a certificate of insurance showing that you can cover this high liability, even if you’re carrying a small amount of oil. What that meant was that the insurance industry gets in on the act of influencing the shippers behavior and saying what’s acceptable and what’s not. We also criminalize the oil spills. Captains of ships who spill oil can be held up on criminal charges.
None of that is in place for the spills from a rig, which is an enormous, limitless amount of oil potentially, depending on what’s in the reservoir.
So that $75 million cap is laughable, and it’s just an example of how out of touch we were. But the other thing is, both BP and Transocean were self insured, which means that there was no insurer in on the act. So what we need to do is raise the liability, get insurers in on the act of influencing that behavior in addition to the regulators. We might consider criminal charges too because that might change people’s idea of estimating risk.
Dougall: After the Exxon-Valdez spill, there were a lot of protests and boycotts of Exxon. But so far, there haven’t been that many protests against BP. Why do think that is?
Margonelli: I believe there is a protest of BP across the country today, but it may be rather small. I think people are still somewhat in shock. You know, the oil birds have not shown up, and that tends to be like dropping the crystal in the supersaturated solution. Everything all of a sudden moves very, very fast. So I think that might be waiting to happen.
I will say one thing about BP, though; they tend to be the cheapest oil brand in any market. So the people who are choosing BP might be choosing them by price. But I have no doubt that there will soon be a backlash against BP. There absolutely has to be a regulatory backlash even if there’s not a popular one.
Dougall: You mention gas prices. Will the spill ultimately affect gas prices or will they remain relatively low?
Margonelli: The price of oil per barrel today is already on low demand. In the medium term, this is actually going to affect gas a lot. The United States has three percent of the world’s reserves. We use 25 percent of the world’s production of oil – very disproportionate. Most of our reserves are fairly exhausted, so we’re pumping out old wells and working things over. This deepwater oil in the Gulf of Mexico was the only thing expanding fast. Between 1995 and 2003 it grew more than 500 percent. By 2020, the Gulf of Mexico, and particularly this stuff from deep water, was supposed to make up 40 percent of our domestic oil production. An enormous amount of oil was supposed to come from there, and it was seen by the public as magic, if it was seen at all. There were no rigs to look at. If you saw anything at all, there was this sort of magical extraction machinery that looked like something out of Jules Verne.
I suspect we are not going to find one simple cause of this blowout but rather a whole cascade of things. So you cannot go back to business as usual in the Gulf. You cannot keep drilling in deeper and deeper reservoirs under the water. Deepwater oil was our unspoken plan B or, I’ve joked, our methadone for oil addiction. This may be about to disappear. That has profound implications for the cost of gas.
Dougall: You’ve mentioned that you have a moral dilemma about offshore drilling. Can you explain?
Margonelli: What we tend to do in the United States, as people who are concerned about the environment, we say “no offshore drilling.” But because we confined that to mostly the east and west coasts, what that means is “no offshore drilling in my backyard.” So we have moved it to the Gulf where there is a lot of oil. And we rely more and more on imports. Basically all oil comes from someone’s backyard. In Nigeria last year there were 2,000 active oil spills. So we’ve essentially been importing the oil and offshoring the bad effects, like the spills.