Fixing a Worst Case Scenario

Planning for the worst case scenario does not mean it has to be cast in stone. Just having a loosely devised plan is usually sufficient. One does not plan for an unknown accident or failure. But have a base plan as a reference point that can be modified to suit the unfortunate incident can really save time and can even ensure confidence that you've covered all the bases.

And doing this is not done by incompetent ametuers.

p911

There are a few things that come to mind based on media and internet 'information' that has come out.

They could have used a functioning BOP (blow out preventer). There have been numerous reports and video footage that indicate the drillers knew that the BOP had been damaged during installation (one of the gaskets had been mangled by the manipulator arm of the unmanned subs). The previous big blow out in the gulf in '79 was traced to a faulty BOP, so clearly they understood the importance. Based on my meager understanding of the drilling process, it appears that the drillers can pump drilling mud (or other materials) down the boreshaft, and can reverse the pumps and suck it back up. Doing this prematurely appears to have been the likely trigger for this event. Apparently since they are currently pumping mud into the well, they can do so at high enough pressure to at least temporarily force the oil back down the pipe. This suggests that they could test the BOP in place by pumping mud down through it and then reversing the pump direction. With the flow reversed they could trigger the BOP, and if it is working it should be able to stop the return flow.

Right now they are drilling a second well to intercept the current well near the oil pool to either (depending on which reports you read) plug the current well from the bottom, or reduce the pressure at the broken well head enough to plug it at the top. My understanding is that Canada and Brazil require that this second fail safe well should be drilled at the same time as the main well, eliminating the weeks or months it takes to drill it once a problem occurs.

As I see it the technical problems and solutions are important but perhaps less so than the human problems:

• a regulatory agency (MMS) that is literally and figuratively in bed with the oil industry
• a legal system that discourages effective sanctions against polluters that would cause them to think long and hard about the consequences of their actions
• a political system that lets the oil companies write the regulations
• a fragmented private oil industry that is too small to compete with the larger nationalized industries, and is therefore in danger of falling behind the competition in the technology needed for drilling in extreme environments
  

Planning for the worst case scenario shouldn't be seen as an imperative, but identifying it, at the very least, should be.

I'd have more respect for BP et. al. if they said: "We considered the possibility of an uncontrolled wellhead breach, and based on the XX,XXX,XXX:1 probability considered the the cost to be burdensome." Then when confronted by a Committee member trying to score political points, *STICK WITH THE ASSESSMENT*

As bad as the spill is, it could become worse, so BP still isn't out of the woods, nor have they taken a stand, they are still being reactionary.

People have to stop stating the obvious and pretending it's a defense. Excess precautions can make *any* project uneconomical to execute. There is *always* a dividing line between prudence and recklessness. Judgment enters the equation, sometimes it's good, sometimes it misses.

The problem when the worst case is considered is that there is no bond great enough to cover certain potential risks. That does not mean they should not be undertaken. It simply means that the ultimate stake holders, you and me, are on the hook whether we want to be or not.

Should BP go down for this? I don't know. Who would be better served by their destruction? Should BP stockholders get wiped out by the catastrophe? If that's what happens, then *ABSOLUTELY YES* -- That's the risk owners take!

But wiping out shareholder value and liquidating the company should not be confused or co-mingled.

Much as I hate government interference, this is one of those times when it's needed. Trading of BP stock should have paused on news of the accident, (ok, ok, a snapshot taken). Those are the owners of the company at the time of the disaster and those owners are the first party responsible for the cleanup costs. The value or market cap of the company at that moment is their ceiling of liability. Because asking/demanding for more than that is illogical.

At that point, a budget is established and the only goal of the company (management) is to correct the problem, and to do it under budget, or they're out! It seems quite simple, if they fail the company is bankrupt and their bonuses are forfeit, so would their back of deferred compensation, their stock options, etc., because there is no *cash* to pay them. But since the hard assets of the company are not at risk, a new group of investors would be able to bid/buy them and as new owners install their new slate.

While the government might still have to absorb the cost if the disaster is bigger than the company, the *feeling* of the recovery would take on the dynamic of a natural disaster because there would be *certainty* that those *responsible* would have been thoroughly punished.

The other upside, is that the remnants of the company, the hard assets would still be in usable form. Little or no value will be wiped out by the stroke of a pen, and the new owners would be free of the previous responsibility, but liable for any future events. Sure there will be a transition cost, but the scale favors the survival of the asset and the value of the whole being greater than the sum of the parts.

Just my $0.02