The Spill Response Conundrum

Preventing Future Deepwater Horizon Disasters

A Proposal for Leadership to Inspire a Paradigm Shift on Spill Response

Wayne D. King

The outrage over the BP Deepwater Horizon Oil Spill continues in spite of declarations that the worst is over from BP and Government officials. Now we begin a period of retrospection where public policy makers, business and environmental leaders ask a lot of questions about how we can safely and reasonably regulate oil exploration to reduce the risk of such disasters in the future. From this we will surely see a series of new regulations and policies arise.

Important questions remain to be asked and answered by policy makers, despite the amount of public debate already taking place:

• Was the spill manageable from the start and simply mishandled?
• If so, what happened that turned a manageable spill into an environmental crisis?
• Why is the response methodology in Europe so dramatically different?
• Does one methodology work more effectively?
• Is there anything on the radar that indicates a shift is imminent?

Despite the fact that the spill remains at least a weekly staple of nearly every newscast there is little discussion about whether or not the spill was manageable from the very beginning. This is a key question if we are to learn the important historic and environmental lessons that this spill has to offer.

The answer, in my opinion, is unequivocally is that it was manageable. However, spills like Deepwater Horizon will continue to turn into environmental disasters until we see a paradigm shift on the Spill Response side of the cleanup methodology equation.

Within days of the Deepwater spill, many companies came forward with offers to help, the company for whom I work for example, insisted that use of our MOP loose sorbent could have contained the Deepwater Horizon Spill within 48 hours had it been used in the immediate aftermath of the spill. We stand by this assertion. However, we have legitimately been asked the question: If this is the case, why wasn’t MOP sorbent used? Furthermore, why are sorbents not used for every minor and major water-based spill? This brief OpEd piece and challenge is written in response to that question.

Unlike the European model, where the use of loose sorbent is the first response and where dispersants are eschewed, an early directive against the use of loose sorbents on the

Deepwater spill, coupled with the aggressive use of ineffective booms and toxic dispersants, virtually guaranteed that the, initially manageable, spill would spiral into an environmental nightmare.

Ironically, sources behind the scenes insist that the culprit behind this decision was not among the usual suspects, but rather the National Ocean and Atmospheric Administration. NOAA is said to have made the call that turned a manageable spill into a toxic stew.

Then there are the spill response companies.

Spill Response Companies, like most companies, are in business to make a profit. The traditional business model for spill response has always been one based on time and consumables. They are not evil and they are not profiteers at their core, but in order for them to make a profit doing what they are doing they use a business model that works for them and is easily understood by their client companies. In the earliest years they embraced the old standby methodology of “time and product” and have stayed with this ever since.

The net result of this business model is that even spills that are easily manageable have the potential to become environmental disasters because there is a dramatic disincentive for Spill Response Companies to clean up a spill fast. The longer it takes them and the more product that they are required to use, the better will be the profits for the Responder.

The hallmark of sorbents certified under EPA Guidelines, and ironically their greatest liability, is that these sorbents are by far the fastest and least expensive way to contain and clean up an oil spill. Quite simply, under the current “time and consumables” cleanup regime, they offers a much smaller profit margin for the Spill Response company because they are too fast and efficient a response.

While some sorbents are more cost-effective and performance-efficient than others, it is important to note here that there are several sorbents that fall into the category of fast and efficient responses.

In a recently updated white paper (2009), Cedre (the Centre for Documentation, Research and Experimentation on Accidental Water Pollution) a research institute funded by the European Union recommends the use of loose sorbent as the preferred approach for large spills on open water. Cedre is a non-profit organization, established in 1978 after the ''Amoco Cadiz'' disaster, in a bid to be more fully prepared for accidental water spills.

While the Cedre report does not take into account the cost-effectiveness of loose sorbent, it is possible to measure the likely costs of loose sorbent as compared with traditional responses by comparing our measured costs with historic figures. In figure 1 below, we offer a comparison of costs based on a spill the size of the BP Deepwater Horizon spill (at its highest estimated level). In the comparison, utilizing 1997 data on international spill cleanup costs, we show the cost, exclusive of disposal costs, of containing and cleaning up a spill of 60,000 barrels of crude oil. The cost of using MOP loose sorbent is dramatically less and offers the opportunity for very rapid remediation.

Based on the well-documented recommendations of Cedre and the comparison of known costs and historic costs, it is clear that existing methodologies for spill response are far more expensive than they need be and often take much longer, thereby creating more extensive environmental damage.

So the simple answer would seem obvious: get Spill Companies to change the way they attack and bill for cleanups. Alas, Spill companies are unlikely to change their model unless one of two things happens:

1. Client-Based paradigm shift : If a paradigm shift is driven by clients, we will see Spill Response companies change their approach immediately. This will require an oil company or a refinery or a shipping company to redefine the terms of engagement. One major oil company or a group of small companies could create the critical mass needed for the momentum to shift away from the status quo. Since such an approach would require that a spill existed to begin with if it were negotiated in response to an environmental spill, we would hope that a sizeable company would come forward instead with a contingency plan that makes it clear that the shift will happen with the next contingency incident.
   
   
2. Spill Company-based paradigm shift: One spill company can shift the paradigm if they can be “turned”. If it can be proven that a Spill Response company can make a profit that is as good, or better than, they would make under the status quo system, Spill Companies will respond to the market. This is most likely to happen with a new or smaller Spill Response company. Once they get tied down to expensive equipment like skimmers and ships then their capital costs drive their decision making and they won’t be changed unless it is a matter of survival.

Unfortunately, the market dynamic is not likely to shift on its own. Theoretically, in a free market system one company should be able to change the landscape by simply offering a service that is better and the result would be a dramatic shift to the better system. However, in order for this to happen with respect to oil spill cleanup someone will need to take a risk to make the shift occur. The risk would have to be on either the client side or the spill response side and neither appears inclined to take such a risk.

I wish that I could say that the chances of this happening were good. For a while, I thought that maybe the X CHALLENGE would help create the paradigm shift. They began with such lofty goals. Then they were hijacked by the vested interests and the X CHALLENGE has now deteriorated into a rubber stamp of the status quo with Shell playing the dominant role in writing their guidelines and effectively controlling 3 of the judges on the panel. What began as a broad search for the truth now is a toothless tiger examining how to make skimmers operate more efficiently. Skimmer technology amounted to 3% of the Gulf Spill cleanup and when all is said and done that will be where they are at when we confront the next spill.

A comparison between the estimated costs of containing a spill (figure 1) – even one as large as the Deepwater Horizon spill – shows such a dramatic difference between historic costs of cleanup and estimated costs with our sorbent that it may be possible to create an incentive-based solution to the problem.

While either of the two spill response shifts described above would precipitate a paradigm shift within the industry it might also be possible to craft a different response that would also help create the paradigm shift:

The concept outlined below is intended to create a new paradigm for spill response that is built around on two central components:

1. A Shared Spill Response Products Bank organized as a cooperative with each member a shareholder benefiting from the “insurance” value of the reserve and financially from cash flow that the cooperative generates through other activities, especially its instant accessibility in the event of a large spill.
   
   
2. A General Management Spill Response company called a Crisis Management Company (CMC) or Contingency Management Company (CMC) created as a joint venture between companies that bring high levels of expertise to the venture and functions as a general contractor in spill response with a fiduciary relationship to the client. The CMC manages the cooperative, creates relationships with service providers to assure the value of their services to the client company and looks after the client companies interest by securing the best value for them, providing PR, Communications and first level legal services.

Among the many things that have been learned over the past 20 years since the Exxon Valdez and more recently the Mercando/Deepwater Horizon Spill is that an environmental crisis is a poor environment for testing ideas and theories and an even worse environment for innovation and especially or accountability. There is no question that the current response model is not functioning in a way that serves the public interest or the company interests. The conflicts and dualities of interest that exist within the existing model begin to manifest themselves almost immediately and in almost every relationship that develops to address a spill there is a duality of interest that gravitates toward

inefficiency and waste.

The assumption in this paper is that by creating an entity that serves as a firewall for the client company and a systemic check on the excesses of the vendors and interest groups that the cost and the speed of the cleanup effort can be improved dramatically.

The Crisis or Contingency Management Company.
The CMC plays a role similar to a General Contractor in a construction contract. Their job is to protect the client company, provide a check on the excesses of the spill cleanup process and to keep all of the players honest.

Why use a CMC?

One of the critical problems when a company finds itself in the midst of an environmental emergency is that they don’t know who to trust and with good reason. Almost everyone has their own agenda and most of them are employing a business model that enhances their profitability but provides no incentive for getting the job done quickly and efficiently. In fact, they lose money if they get it done fast. Then there are the purchasing agents who make their profit on the difference between what they pay for consumables and what they sell them to the company in crisis for. This means they are rewarded for employing cheap and inefficient materials because they can tell the client what a great price they got as long as they don’t tell them that the product barely picks up oil. This problem was rampant in the Gulf and the Valdez spill. Contractors would buy the cheapest booms they could find, mark them up dramatically and then sell them. The more inefficient the products were the more would be needed for the cleanup and the more they would sell.

The CMC would develop relationships with companies based on the quality of their products and the efficiency and speed of their work. They do this long before the spill actually happens so they have a bank of providers that they know and trust as well as adequate time to do their due diligence on the products. So, for example, if a company like MOP manufactures a boom that is twice as expensive but 4 times more efficient, in reality the client will be paying ½ as much for the product. They verify the claims of course and then when there is a call for booms they know where to go that will provide the client with the best service at the lowest possible cost.

Spill Response Companies (SRCs) too are notorious for the duality of interest that exists in their business model. The longer they take to clean up the spill and the more consumables they use and bill the client for, the higher their profit will be. A CMC develops relationships with SRCs and forces them to use a different paradigm for cleanup by controlling the consumables and defining the terms of the cleanup based on speed and effectiveness.

The CMC may also provides a legal and public communications firewall between the client company and the media, public and regulators. Working closely with them but with the benefit of their environmental credentials they can serve as public spokesman, work with the public and the regulators to enhance communication quality and provide a buffer for the client.

The difference in the two models is expressed in figures 2 and 3 below

Oil Spill Contingency Cooperative and Strategic Response Reserve

The concept of a spill contingency strategic reserve cooperative can take many forms and presents itself as both an opportunity to sell the products within the reserve at a premium because the membership aspect allows each participating entity to pay less for the “insurance” but allows the CMC to sell the membership to multiple client companies.

Additionally the reserve represents a resource that could be used to generate additional profit streams over time, even as it lowers the overall costs for each member company. For example a certain percentage of products could be moved in and out of the reserve based on the needs created by smaller spills requiring fast response.

As additional incentive for becoming a member, the cooperative would make a percentage of containers of product available to any member for a smaller spill at the standard cost. This would permit a 24-48 hour response for spills of nearly any size. It would also allow the coop to cycle sorbent in and out of the reserve to keep it fresh.

Funding for the reserve – products, storage, maintenance etc. would be achieved by selling shares in the company and membership in the cooperative that would also benefit from some kind of shareholder equity.

About the author
Wayne D. King holds a BS Degree in Environmental Conservation and a Masters Degree in Science Education from the University of New Hampshire, Durham. He is Vice President of MOP Environmental Solutions, Inc., and an adjunct member of the faculty of Plymouth State University in Plymouth, NH.

A three term former State Senator from New Hampshire, Wayne King was the 1994 Democratic nominee for Governor. King is also the founder of The Electronic Community, a group of social entrepreneurs working on social and development issues in Africa under the non-profit umbrella of the MaxImpact Institute.

Senator King has served on the Board of Directors of many state and local organizations: he was a founding member of the NH Community Loan Fund, and served for almost 15 years on the board of the Northern Community Investment Corporation, one of America's foremost Community Development Corporations.

King has published two books, 2009 Author/artist of “Washday” (2009) – a photographic homage to the washline; and, "Creating Electronic Communities (1998), A Guide to Accessing and Utilizing the Internet" Authors: Wayne D. King, Chidi Nwachukwu, Philip Bates IIII

He is also the author of over one hundred editorial and political articles published in Christian Science Monitor, NH Union Leader, Concord Monitor, Boston Globe, The Keene Sentinel and a host of smaller publications. He has also authored over one hundred articles published in various lifestyle and living publications and various Blog publications as both an individual and syndicated blogger

King lives with his wife Alice, his son Zach and his two dogs Molly and Boof in Rumney NH where the family proudly flies both the Iroquois and American flags.