Oil Industry's "Island Vacations" from Regulation

When BP CEO Tony Hayward left the Gulf oil spill disaster last week to captain his yacht, Bob, in the JP Morgan Chase Asset Management Round the Island race off the coast of England, it was seen as emblematic of the corporate leader's poor handling of the disaster.

Hayward may have sailed on a windward tack that day in the Round the Island race, but it has been his company, and others involved in this disaster, who have used wayward tactics. In fact islands, both real and self-constructed, are central to their ability to dodge regulations.

As was reported in the New York Times this week, BP has dumped a large pile of gravel 3 miles off the shore of Alaska in the Beaufort Sea with the intent of drilling for oil 2 miles deep and as much as 8 miles farther offshore. Yet by creating this "fantasy island" miles out from shore, BP was still able to certify this drilling as happening "onshore."

This island, and the project, is called Liberty. Whether the project is named for a liberation from regulation, or from the constraints of geographical definitions, is a question for BP.

And this isn't the only "island getaway." While no man is an island, the oil companies apparently think that islands are a no man's land for regulation.

Before the Deepwater Horizon rig took a fateful trip to the bottom of the ocean, after an explosion killed 11 men and triggered the greatest environmental disaster in U.S. history, it first cruised past American inspectors.

The rig, which is owned by Transocean, was registered in the Marshall Islands, located about 2,000 miles southwest of Hawaii.

Under Marshall Island law, rig owners are allowed to authorize private organizations to inspect their vessels. Transocean hired the Norwegian contractor Det Norske Veritas (DNV) to conduct inspections of the Deepwater Horizon rig.

At a Minerals Management Service and Coast Guard joint investigative hearing in Louisiana this May, an employee of DNV testified that his company discovered cases of overdue maintenance on equipment on Deepwater Horizon, and that some crewmembers had not been properly trained.

However, these issues didn't reach the level of "nonconformity" and therefore didn't stop the rig's recertification.

These "island vacations" from regulation are the exact reason Congress is investigating BP and the president has called for a temporary pause on new deepwater offshore drilling in the Gulf. The reality is that 97 percent of offshore drilling in the Gulf will continue through this timeout, giving the government time to ensure that the 33 exploration rigs that work in deep water will not endanger the region any further.

This safety pause isn't about ending offshore drilling, it is about ending the oil industry's practice of offshoring the safety of rigs by using various "island getaways" from regulation.