deepwater 8-14-19

In 2010, the Deepwater Horizon drilling rig blew up in the Gulf of Mexico, killing 11 crew members and leaking hundreds of millions of gallons of oil into the Gulf. Perhaps you saw the movie about the disaster, which came out in 2016. The immediate cause was a “blowout” of the well—oil under enormous pressure from thousands of feet below the seabed burst into the well and forced itself up to the surface, where it caught on fire. But that release of oil was the result of a series of problems that BP, the owner of the well, had ignored. The problems that led to the Deepwater Horizon disaster have eerie parallels to what is happening with Sunoco and the Dragonpipe (Mariner East pipeline system).

The story is laid out in full detail in the report that President Obama commissioned. You can download the whole 400-page document here. I will refer to this as the “Report”.

There is no need to wade through the whole thing, but I do recommend reading the first chapter, a riveting description of the events of April 20, 2010, when the blowout took place.

I did read most of the Report, however, because I was interested in the lessons it holds for us as we deal with Sunoco’s hurried and clumsy attempts to complete the Dragonpipe. The similarities are disturbing. In this blog post, I will describe some of the major circumstances that led up to the disaster, and the analogous conditions that we are witnessing now.

The parallels between the two projects fall into two broad categories: company culture and regulatory environment. I’ll start with the features of company culture that are similar (and troubling) in both cases; then I will address the flawed regulatory environments: the lack of federal oversight that enabled problems on the Deepwater Horizon and the corresponding lack of state oversight that is permitting them here.

Similarities in company culture

Short-term objectives and unrealistic schedules. The Deepwater Horizon crew, under pressure to complete a well that was behind schedule, ignored issues that may have contributed to the disaster. For example, one of the final steps involved installing a liner inside the well. It was kept centered in the well by spacers (called “centralizers”) at intervals. At the last minute, the crew found that only six of the spacers were available, rather than the 14 called for in the plans. They decided to go ahead with just six, rather than wait for more to be delivered. Similarly, the cement seal at the bottom of the well was not properly tested. There was also a “negative pressure test” that failed, indicating leakage into the well, but it was ignored.

We see that kind of pressure in the Dragonpipe context. In every quarterly report to investors, top management at Energy Transfer promises unrealistic completion dates for its pipelines. That is certain to lead to shortcuts in the field, some of which are listed in the next section.

“Rush work” culture. On the Deepwater Horizon, the rush to get the well completed resulted in many dangerous shortcuts. The decision not to wait for more centralizers was one. Not waiting for final test results on the cement that was used to seal the well was another. The Report lists nine such cases of haste to complete the well that may have contributed to the blowout.

Locally, Sunoco is frequently rushing to get things done, without sufficient concern for safety. They take time-saving shortcuts that could lead to major problems later. The cobbled-together “Frankenpipe” that Sunoco calls “ME2” is a prime example. Initial reports from the Beaver County pipeline explosion suggest that many shortcuts were taken in that project. Sunoco was caught in the act of installing damaged pipe by a PHMSA inspector. The “green water”, probably from hydrostatic testing, that Sunoco claimed to have tested (and later admitted it hadn’t) is another example. The risky strategy of putting two pipes together in one casing that Sunoco is now using in some spots is yet another.

“No bad news” culture. On the Deepwater Horizon, bad news was discouraged. On-shore headquarters was told the cement seal at the bottom of the well was good, when there was reason to believe it might not be. Problems on the rig were hidden from visiting dignitaries.

Locally, we don’t know exactly what is being reported back to Energy Transfer headquarters. But we do know it took management years to learn that “every place is not Texas”, and practices that worked in Energy Transfer’s home state could not be used here. And we have seen practices that suggest the avoidance of bad news, such as failing to report a pipeline strike by a backhoe or immediately filling in a sinkhole without waiting for regulatory approval.

Lack of a whole-picture view by top management. BP’s management did not get much information about what was really happening on Deepwater Horizon. And, since the rig was owned and operated by a contractor (Transocean), the only BP employees on the rig were two managers. The rest of the 120-plus crew were employees of Transocean or other contractors.

Again, we don’t know what kind of detailed reporting Energy Transfer management gets. But chances are it is minimal and positive. That would explain why, in comments to investors, management often speaks of the Dragonpipe as “99% complete”. For example, in the most recent quarterly conference call for investors and analysts, Kevin Smith (ET’s Executive Vice President for Engineering and Construction) said, “We still have a number of HDDs and [water] crossings to complete. That’s all going per the plan… We’re still very confident that we’ll be able to put ME2X in service by end of the fourth quarter.” That statement ignores the fact that the DEP is not issuing any permits, that construction is not permitted in part of Chester County, and that various lawsuits and regulatory actions are pending. Is Smith really aware of those issues? Are any of his colleagues in the boardroom?

Habituation (“nothing has gone wrong in the past”). Aboard the Deepwater Horizon, the crew was comfortable that nothing disastrous would happen. The rig had drilled many wells and, although there had been problems, nobody had been killed. They were too quick to assume that the cement at the bottom of the well was properly sealed.

This attitude was reflected in Sunoco’s handling of cathodic protection on ME1, for example.The company’s own testing records showed signs of deterioration, and yet these were ignored until one day gas started bubbling up from the ground near Morgantown.  Only luck and a report by a sharp-eyed resident prevented a disaster there.

Self-deception among decisionmakers. On the Deepwater Horizon, decisionmakers were sometimes unwilling to face up to information that suggested a problem. In particular, they ignored indications that the cement seal at the bottom of the well was leaking.

Sunoco shows the same behavior. The company did not face up to the fact that the “green water” referred to earlier might indicate a leak. They insisted on continuing work at Lisa Drive in Exton, even with an active sinkhole next to a pipeline that was full of explosive material. The PUC had to issue an emergency order to shut the pipeline down.

Similarities in regulatory environment

Deregulation. The regulatory body in charge of offshore drilling at the time of the Deepwater Horizon disaster, the Minerals Management Service (MMS—part of the Interior Department) was suffering through a series of yearly budget cuts at the same time as off-shore drilling was getting more common—and more complex. The MMS was short-staffed and lacked people who understood offshore drilling in many critical positions. It often depended on operators for input to crucial decisions.

For example, four days before the explosion, BP requested permission to set a cement plug in the well at 3,000 feet, a much deeper location than in its permit application. The Report states: “An MMS official approved the request in less than 90 minutes. The official did so because, after speaking with BP, he was persuaded that 3,000 feet was needed…. It is not clear what, if any, steps the official took to determine whether BP’s proposed procedure would ‘provide a level of safety … that equaled or surpassed’ a procedure in which the plug would have been set much higher up in the well.”

We have seen the same type of thing with the Dragonpipe. For example, when residents began to request serious analysis of Dragonpipe risks, the PUC actually wrote to Sunoco asking for confirmation of the risks—presumably because it did not have an independent capability to assess them. When Sunoco created plans that skirted air pollution requirements at Marcus Hook, the company persuaded a DEP official to sign off on them. The plans were later found to be deeply flawed.

Conflicting objectives for the regulator. The Report describes how Secretary of the Interior James Watt, in creating the MMS, “combined, in one entity, authority for regulatory oversight with responsibility for collecting for the U.S. Treasury the billions of dollars of revenues obtained from lease sales and royalty payments from producing wells. From birth, MMS had a built-in incentive to promote offshore drilling in sharp tension with its mandate to ensure safe drilling and environmental protection.”

That same conflict exists in Pennsylvania’s Public Utility Commission (PUC), which has a dual mandate to promote utilities and to keep the public safe. When these objectives come into conflict, the PUC tends to side with the utility.

Cozy government/industry relations. The MMS experienced problems with a “revolving door”—employees, once they were trained, leaving for higher-paying industry jobs. There were also incidents of employees receiving gifts from companies they regulated. In at least one case, an MMS employee was conducting inspections at the same time as he was negotiating a job with the company being inspected.

Here in Pennsylvania, we have witnessed the Governor’s office being used by Sunoco to put pressure on the DEP to release permits prematurely. And many key PUC executives have close ties to the oil and gas industry.


I could go on, but you get the idea. The factors that were at work on the Deepwater Horizon, and that led to the disaster, are present here.

Let us hope our story doesn’t end the same way.