Why BP Wants to Low-Ball The Oil Gush Rate
BP has maintained that oil is leaking into the Gulf from its Deepwater Horizon site at 5,000 barrels per day. This estimate is based solely on aerial surveillance of the size of the oil slick floating on the surface, but does not include large volumes of oil spreading at depth. Dr. Steven Wereley of Purdue University last week gave members of the House Energy Subcommittee a very different picture – 70,000 to 95,000 barrels per day is based on videos of leak on the Gulf floor and computer analysis (particle image velocimetry). Other experts concur that the rate is much higher than BP’s estimate. However, on May 21 BP challenged the Wereley estimate as being too high. The methods used in his predictions are described in this ABC article.
In response to enormous pressure from the public and congress, federal officials have agreed to set up an expert team to provide its own estimates; the team will consist of the Coast Guard, Energy Department, Minerals Management Service,
and the National Oceanic and Atmospheric Administration. Also, officials have formally requested that BP release all data related to measurements of the leak, as well as air and water quality and dispersant use. Video footage is the key to accurate leak calculations and BP had to be pressured by Rep. Ed Markey to make videos public. See the live stream from BP here.
Look for BP to keep the number as low as possible, here’s why:
Numbers have political impact: Oil has been gushing now for more than a month and BP officials acknowledge that it will take two or three months to stop the leak. Multiplying 5,000 barrels/day by 100 days, we get a total of 500,000 barrels. However, if we use a more realistic estimate, e.g. 100,000 barrels per day we get a total of 10 million barrels or nearly half a billion gallons of oil in the Gulf in 100 days – bigger headlines.
Liability is based on quantities: The impact of an oil release is related to the quantity of oil released. The bigger the spill, the larger the impact zone, the greater the damage to ecosystems and the region’s ecologically dependent economies and the costlier the cleanup. According to a McClatchy article, legal experts believe that having credible leak estimates provides critical information used in litigation. “The size of the Exxon Valdez spill in Alaska, for example, was a significant factor that the jury considered when it assessed damages against Exxon.” For BP, downsizing the gush-rate makes perfect sense.
Royalties are based on quantities: According to today’s Bloomberg Business Week, BP may owe the U.S. government $1.1 million per day on the oil flowing into the Gulf of Mexico. BP’s drilling lease with the Minerals Management Service (Department of Interior) for the Deepwater Horizon operation calls for the company to pay a royalty fee of 18.75 percent on the value of oil or natural gas “lost or wasted” if a leak is due to the company’s negligence. The $1.1 million figure is based on upper end estimates (100,000 barrels per day rather than BP’s 5000 bpd). Watch for BP to (a) deny negligence (b) continue to low ball gush rates.
Leakage rate is a function of drilling depth. While drilling in 5,000 feet of water has been emphasized, an even more important factor is that BP’s Deepwater wells extract oil from nearly 6 miles into geological deposits below Gulf floor. The tremendous pressure and high temperatures at such depths makes blowouts more likely and more difficult to stop oil from gushing following a blowout. For a good discussion of this problem, see this article in Popular Mechanics. Perhaps BP doesn’t want us to focus on the risks inherent in drilling in the high pressure reservoirs miles below the sea floor.