The Loop in Action
How a $128,000 Expense Became a $65 Billion Liability
Last week I introduced The Loop, my framework for why organizations fail to act on information they already have. It emerges when synthesis failure, misaligned incentives, and institutional capture combine to create peripheral blindness and costly mistakes.
Today, I’ll show it in action.
On Thursday February 12, 2026, the Trump administration announced one of the most sweeping deregulatory actions in American history. The core of this move is the repeal of the 2009 Endangerment Finding. This Finding is a foundational legal and scientific determination that greenhouse gases like carbon dioxide and methane pose a threat to public health and welfare
The administration is not simply ignoring old laws. They are stripping away the legal foundation that allowed those laws to exist in the first place. They are eliminating environmental regulation based on a premise that the government never had the authority to impose them.
Let me make it clearer. Under the Clean Air Act, the EPA can only regulate a substance if it “endangers public health.” By officially finding that carbon dioxide, methane, and other greenhouse gases fail to meet the legal definition of a pollutant, the administration has effectively made it illegal for the EPA to regulate them. By weakening regulatory authority while simultaneously compressing review process timelines, the government eliminated the forced synthesis that makes oil companies connect the dots before they drill.
Simultaneously, the administration announced more surgical moves to protect the fossil fuel industry including delaying a regulation that targeted methane leaks for oil and gas operators. They also accelerated permitting for oil and gas drilling on national forest lands while issuing a new energy density policy that favors fossil fuels over renewables because they produce more energy per acre. The administration also scheduled two massive lease sales for oil drilling in the Gulf of Mexico and the Cook Inlet in Alaska.
Why does this matter? This is neither an environmental nor a political argument. It’s a systems argument. Accelerated timelines remove forced synthesis, the brake that makes people stop and consider the cost of speed. Regulation is far more than enforcement. It’s the thinking and planning that has to happen before you drill into a forest or below the ocean floor. Without that brake, catastrophe becomes predictable.
On April 20, 2010, the Deepwater Horizon drilling rig exploded in the Gulf of Mexico, killing eleven workers and injuring seventeen. For the next 87 days, oil poured from the Macondo well, located nearly a mile below the ocean surface, at a rate of roughly 60,000 barrels per day. By the time BP finally sealed the well, 134 million gallons of crude oil had entered the Gulf, coating over a thousand miles of coastline across six states. It was the largest marine oil spill in American history. Put in perspective, the Exxon Valdez spill in 1989 released 10.8 million gallons of crude oil into Alaska’s Prince William Sound. Deepwater Horizon was nearly 12 times worse.
The disaster was not the result of a single catastrophic failure. It was the accumulation of small decisions, each one trading safety for time and money. No one at BP, Halliburton, or Transocean connected the dots. Each shortcut, each safety compromise compounded the risks.
At the time of the accident, the well was 43 days behind schedule. BP and Transocean were burning roughly a million dollars a day in rig costs. The team was under tremendous pressure to get the well producing. The technicians and engineers ignored four separate safety warnings that, on their own, should have been sufficient to halt the project.
Halliburton’s own modeling software warned that BP needed 21 centralizers, devices to keep the pipe centered in the wellbore so cement seals evenly. BP went against their recommendation and only used six. When a BP engineer raised concerns, a colleague replied by email: “who cares, it’s done, end of story, will probably be fine.”
Halliburton told BP the cement was unstable. BP ignored the warning and continued to drill.
A Schlumberger crew was flown to the rig on April 18 to run a cement bond log, the only test that could confirm whether the cement had actually sealed the well. The test would have cost $128,000 and taken about twelve hours. BP canceled it and sent the crew home.
When the negative pressure test, a test to determine if anything is pushing back up the well, came back with anomalous readings that should have stopped operations, the crew talked themselves into a plausible explanation and kept going.
The blowout preventer, a mechanical device installed on the ocean floor to seal the well, was the last line of defense. It had known maintenance issues, including a hydraulic leak and a failed battery. Key components hadn’t been inspected in years. It failed. The result, millions of gallons of oil poured into the Gulf.
BP had all of the information. They simply didn’t synthesize it to create a unified picture of the compounding risk from the missing centralizers, the skipped cement test, the inconclusive negative pressure test, and the faulty blowout preventer valve. No one inside the organization with authority to slow the process had a complete understanding of the situation.
To date, the total cost to BP and its partners has exceeded $65 billion, with payments scheduled to continue through 2031. The savings from every shortcut, every skipped test, every ignored warning amounted to a few million dollars at most. BP saved $128,000 by not running the cement bond log. They saved perhaps $3 million by not using the recommended number of centralizers and running additional tests.
They were $58 million over budget and desperate to stop the bleeding. $58 million was .0000195 of BP’s 2010 revenues of $297 billion. That figure is immaterial. It’s a rounding error. A meaningless amount of money for a global energy behemoth.
Because of short-term pressures and incentive structures, BP executives made decisions that cost them a thousand times more than the budget overrun they were trying to fix.
But BP’s shortcuts were only half of the story. The agency responsible for catching those shortcuts wasn’t equipped or staffed to do its job. In fact, the Minerals Management Service collected $13 billion a year in royalties from the industry it was supposed to regulate. More drilling meant more revenue and more drilling meant more inspectors were needed. They had 55.
In 2010 there were roughly 3,500 offshore drilling and production platforms in the Gulf of Mexico. 90 of these were oil drilling platforms that, by regulation, required a monthly inspection. The remaining 3,400 production platforms required annual inspection.
3,500 platforms was the numerator.
55 inspectors was the denominator.
Each inspector had finite hours in a week.
The math simply didn’t work. Adequate federal oversight was a mathematical impossibility.
The AP confirmed that MMS missed at least 16 monthly inspections of Deepwater Horizon between 2005 and the time of the explosion.
The accident at Deepwater Horizon was neither unforeseeable nor unpredictable. A catastrophic accident on an offshore oil well is about as predictable a disaster as a NASCAR wreck in the banked turn at Daytona.
You are drilling a hole in the earth from a floating platform in the middle of the ocean. The hole starts by going down through a mile of water and then another two and a half miles into rock. You are sticking a straw into the earth looking for oil and gas bottled up under enormous pressure for millions of years. The oil company’s job is to keep the pressure contained until they are ready to extract the oil and gas through a sealed pipe.
BP simply chose, at every decision point, not to act on what they knew. This is a textbook example of the Loop. Synthesis failure, misaligned incentives, and institutional capture work together to create peripheral blindness and catastrophic failure.
Synthesis failure: BP had the information about the anomalous negative pressure test, the skipped cement bond test, and the compromised blowout preventer. No one connected the dots. Any one of these warnings alone should have been sufficient to stop operations. Together they ensured disaster.
Misaligned incentives: The project was $58 million over budget and burning $1 million a day. The report on the investigation of the accident at Deepwater Horizon concludes, “that the systematic failures at Macondo were rooted in a management culture where financial pressures likely biased decision-making in favor of time- and cost-savings.”
Institutional capture: The MMS knew it had missed inspections at Deepwater Horizon but was more focused on generating royalty revenue from the industry it was supposed to oversee. The inspectors they did have often lacked the technical expertise to evaluate complex drilling operations and had to rely on the companies they were regulating to tell them whether their own practices were safe.
Taken together, these three mechanisms create fertile ground for catastrophic failure.
The legendary UCLA basketball coach John Wooden used to ask his team, “Why is there never enough time to do it right but always enough time to do it over?” BP, Halliburton, and Transocean took shortcuts to keep up with a demanding project schedule and financial pressures. Instead of spending $128,000 to run the cement test, they skipped it. BP spent more than $128,000 on Post-it notes in 2010. The one-time $128,000 cost avoidance cost BP over $65 billion to date.
The government enacted reforms after eleven people died at Deepwater Horizon. It split MMS into three separate agencies to separate revenue collection from safety enforcement, doubled the inspection workforce, and created new standards for blowout preventers and well design.
The accelerated permitting timelines announced last week compress or eliminate the environmental reviews that force operators to think before they drill. Those steps forced synthesis. Without them, the decision-making process that failed at Deepwater Horizon gets faster, not better, and not more deliberate. Rolling back these guardrails doesn’t erase the underlying reasons for their creation.
The next Deepwater Horizon isn’t a black swan. It’s hiding in plain sight, and the government just weakened the guardrails designed to prevent it. That is the Loop operating in its purest form.