RFF suggests putting deepwater risks in context

Resources for the Future, an independent economic research group, suggests that neither government or the oil and gas industry yet has adjusted to the high-risk context of deepwater operations. RAF recommends setting liability caps for individual wells at a level reflecting damages from worst-case spill scenarios.

Lynn Scarlett, RFF visiting scholar and former deputy secretary of the interior, made this comment during a Feb. 15 luncheon symposium hosted by ConocoPhillips at its Houston headquarters.

“One might argue it is rocket science,” Scarlett said of regulating drilling and production activities in the deepwater Gulf of Mexico. “No project is business as usual.”

RFF recommends that third-party insurance should be researched as a possible way to strengthen external monitoring of deepwater oil and gas operations. If insurance pools are used to assist smaller firms, fees should be related to risk, Scarlett said.

She said both government and the private sector lacked capacity and practices for performing adequate risk assessments.

‘You just don’t know what you don’t know,” Scarlett said, adding that risk assessment capacity and practices will be a key issue for both industry and regulators going forward after the April 2010 Macondo well blowout and resulting massive oil spill in the gulf.