Let’s circle back around to last week’s excellent Los Angeles Times and Chicago Tribune report on the Deepwater Horizon.
Did you know the Deepwater Horizon rig (which is technically a ship) itself was flagged and thus regulated by the Marshall Islands, whose population is just under that of Oshkosh, Wisconsin? I didn’t until this story.
While American regulators oversaw (well, were supposed to have overseen) BP’s oil-well drilling, they weren’t in charge of the ship. Marshall Islands outsourced that to a private corporation.
Under International law, offshore oil rigs like the Deepwater Horizon are treated as ships, and companies are allowed to “register” them in unlikely places such as the Marshall Islands, Panama and Liberia — reducing the U.S. government’s role in inspecting and enforcing safety and other standards.
The LAT has a fantastic lede that shows how U.S. regulators were out of the loop at just about every stage of the Deepwater Rig’s globalized history:
The Deepwater Horizon oil rig that exploded in the Gulf of Mexico was built in South Korea. It was operated by a Swiss company under contract to a British oil firm. Primary responsibility for safety and other inspections rested not with the U.S. government but with the Republic of the Marshall Islands — a tiny, impoverished nation in the Pacific Ocean.
Regulatory arbitrage: maritime edition.
I mean, come on! It’s not like U.S. regulators have been known for their fearsomeness in some time. But even that’s not enough for Transocean, and Tribune reporters Tom Hamburger and Kim Geiger found the lax enforcement may have undermined safety on the rig:
“Over the years, the manning dwindled down and down,” said Douglas Harold Brown, chief mechanic aboard the Deepwater Horizon, who had been assigned to the floating drilling rig since shortly after it was manufactured in 2000. “I believe that safety was compromised by this,” he said in an interview.
Brown’s lawyer and others say the Marshall Islands licensed the Deepwater Horizon in a way that allowed rig operator Transocean Ltd. to place an oil drilling expert — the so-called offshore installation manager — ahead of a licensed sea captain in making decisions on the day of the explosion.
The dual command structure created confusion that delayed an effective response to the growing crisis aboard the Deepwater Horizon, he and others allege.
There are a couple of holes in the story, alas. Tribune reports that the Marshall Islands outsourced inspections to a private corporation, but it never names that company nor tells us where it’s located or what it does—or tells us it couldn’t find out.
And I don’t think the story is clear enough in delineating who was responsible for what. From what I can tell, the Marshall Islands was responsible for ship safety, but the U.S. was responsible for well safety. But it’s hard to tell from this story.
I would have liked to have seen at least a flacky quote from Transocean on its reasons for registering the ship in the Marshall Islands. Here’s a quote from the Guardian:
The International Transport Workers’ Federation claims such flags are simply a way of avoiding taxes, paying cheap registration fees and enabling ship owners to employ cheap labour.
Which misses the regulatory point. Tribune gets at that here:
Some members of Congress are expressing concern about the Marshall Islands and other countries that outsource their inspection responsibilities to private companies. Coast Guard officials confirm that more rigorous inspection procedures apply to the relatively small number of rigs registered in the U.S.
A foreign vessel will be reviewed by the Coast Guard, but the inspection is relatively cursory, relying on inspection reports prepared by outside firms that have been paid directly by the owners of the vessel.