Course:ECON371/UBCO2011WT1/GROUP5/Article6

• Econ 371 Winter 2011 Main Page

Summary

This article outlines the loosening up of offshore oil drilling regulations in Canada in the past few years. On December 31st 2009, the Conservative government quietly published new rules allowing oil drilling companies to set their own regulations. However, the companies still view these new rules as restrictive and are calling for a further loosening of the rules. Canadians have become increasingly worried about a spill similar to the one in the Gulf of Mexico occurring off of Canadian shores. The Liberal opposition has opposed these new changes in the rules and states that" if a spill were to occur at the site of Chevron’s new oil rig off the shore of Newfoundland, it would take 11 days to get a ship to the site". Up until the article was written, approximately a year and a half ago, only ten percent of oil spilled in an offshore oil disaster has ever actually been recovered. However, Ministers Jim Prentice and John Baird stated that the regulations currently in place in Canada are sufficient enough so that Canada does not have to worry about an offshore oil spill. The article ends by stating that blowouts, rig fires, and spills are all relatively common in the industry, and that a new oil well, Canada's deepest offshore, is currently being built by Chevron. The drilling of this well has since been completed in September of 2010.

Chevron Canada is drilling the ultra-deepwater Lona O-55 well in the Orphan Basin off Newfoundland with the Stena Carron Drillship.

Analysis

The article regards the negotiation between the canadian government and the oil companies, even though the new rules have already loosened up. The two sides still hold different opinions. There are a several questions that should be discussed.

1. Should the rules be further loosened up, as requested by the oil industry?

Theoretically environmental policies should be efficient, fair, enforceable, and morally considerate. however, it is very difficult to maintain the four factors.

A few suggestions for the situation mentioned in the article.

- The oil companies mentioned that the Canadian government should further loosen up the policies for offshore drilling, but they have not stated what kind of policies do they want. Instead of accommodating or coming up with different rules that could be opposed, the Canadian government and the companies should have meetings of constructing an offshore drilling rules that both are satisfy with. It might take a long time for both to come into an agreement, but it is still better than arguing whether the rules should be loosened up or not.

- It would be hard to find negotiations because of the trade offs that would be needed like money of oil exports vs the risk of a spill and the effects that would have on society. The risk of a spill could cause many environmental problems that are nearly impossible to recover. Why would the government loosen up the rules while increasing the risk of water pollution, marine life degradation, and many other possible impacts at the same time. The trade offs is that: either restricting the offshore drilling rules for a lower possibility of oil leak, which protect Canada's environment as well, or loosening the rules with a bigger profit for the oil companies. This particular trade off is tough for the Canadian government to come up with rules that solves the negotiation.

2. Should the Canadian government allow chevron on the drilling?

NO: Canada should not take the risk of causing another catastrophic oil spill like the one in the Gulf of Mexico, and that the canadian government should stand against the oil industry, insisting that offshore drilling will not go ahead without costly safety measures to limit mass oil spills As the article stated, "if a spill were to occur at the site of Chevron’s new oil rig off the shore of Newfoundland, it would take 11 days to get a ship to the site" implies that if an accident occur during the drill, the safety operations would not be able to reach to the site on time to stop the pollution or to protect the environment from oil spill. Therefore no matter how well the safety operations were set before action, there is no guarantee that offshore drilling is safe.

In addition, the trade off might not be big enough to make up for the risk of a potential oil spill. What if the workers are careless and accidentally let the oil leaks out to the ocean. Is the short term profit worth it for a long term recovery or a nearly impossible recovery.

YES: Canada should trust Chevron and let the company runs exploratory and production operations in Atlantic and northern Canada, as well as in the Alberta oilsands.

"We're quite confident in our ability to drill in these water depths," Mark MacLeod, Chevron's vice-president for Atlantic Canada, said. "The water depth at the Lona location is 2,600 metres. Chevron has drilled at depths greater than that." (Reference: http://www.cbc.ca/news/canada/story/2010/06/10/chevron-canada-drilling-newfoundland-orphan-basin.html)

Based on the reference article, it outlines that the government worries too much of the risk of oil spill, and ignores the fact that offshore oil could bring a huge profit to the country, which could then also correlate to a further reduction in regulations. However, another question comes up of how much further can we deregulate until it will for sure be harmful?

Chevron Offshore drilling remain controversial, but we can hope for better offshore drilling rules in the future that benefits our environment and our country at the same time.

Conclusion

Off shore drilling will always have its risks but are taking these risks worth slackening the regulations that are in place for the potential profit? Slacker policies would leave the waters off Canada's coast line at risk of a oil spill and further still the spill could do more damage with regulation of clean up. Canada can not afford to be slack on clean up policies because the fisheries and environmental diversity of the area is crucial to the foundation of the province of Newfoundland. So what does Canada do moving forward? The government should be more strict on how spills and how drilling should be conducted off the coasts of the country because there is going to be future need for oil and people will always be looking for more oil to drill even if it is off shore.

Prof's Comment

The oil industry's preference is zero abatement, which in this case is no expenditures on safety, beyond that which protects firm profits, and no liability for spills. Would this be efficient? What could result in efficiency? Strict liability, if enforceable, would. How could it be enforced?

6.5/10