Spill panel seeks overhaul of safety culture, regulation

Bob Tippee
OGJ Editor

HOUSTON, Jan. 12 -- The report by a presidential commission studying last year’s Macondo well disaster in the Gulf of Mexico calls for overhaul both of the oil and gas industry’s safety culture and of offshore regulation.

Published Jan. 11, the report to President Barack Obama from the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling faults regulations in place when the Macondo well blew out on Apr. 20, destroying the Transocean Deepwater Horizon semisubmersible drilling rig and killing 11 workers. It also excoriates the industry.

“Government oversight must be accompanied by the oil and gas industry’s reinvention: sweeping reforms that accomplish no less than a fundamental transformation of its safety culture,” it says.

In separate chapters of the 398-page report, the commission recommends a broad range of changes by the industry and federal government.

Industry changes
For the industry, the report embeds recommendations in a long discourse critical of the safety cultures of the oil and gas business generally and of BP particularly.

Under the heading “Absence of Adequate Safety Culture in the Offshore US Oil and Gas Industry,” it says, “The pervasive riskiness of exploring for and producing offshore oil and gas does not explain the extent to which approaches to safety differ among companies nor why they differ within companies depending on where they are working.”

During 2004-09, the report says, fatalities in the offshore oil and gas industry were “more than four times higher per person-hours worked” in the US than they were in Europe.

“This striking statistical discrepancy reinforces the view that the problem is not an inherent trait of the business itself but rather depends on the differing cultures and regulatory systems under which members of the industry operate,” the report says.

At the company level, effective safety culture requires “unwavering commitment to safety at the top of an organization.” Across industry, “leadership needs to come from the CEOs collectively, who can apply pressure on their peers to enhance performance.”

The report contrasts the US and European systems for safety regulation. The US uses prescriptive regulations with inspections in conjunction with voluntary recommended safety practices developed by the industry.

In response to offshore accidents in the 1980s, the UK, Norway, and Canada have adopted systems, known as safety cases in the UK, in which governments set minimum standards for structural and operational integrity but put the burden on industry for identifying risks and demonstrating that each offshore facility can manage those risks.

The report faults the American Petroleum Institute for resisting efforts to move US regulation in that direction with an approach using “safety and environmental management systems.”

It also expresses regret about diminishing research and development related to safety.

“Safely managing industrial hazards for oil and gas drilling requires experience and knowledge,” it says, adding, “Such knowledge and experience within the industry may be decreasing.”

The report also calls for enhanced self-policing by the industry “as an important supplement to government oversight.”

It describes a nonprofit organization set up by the nuclear power industry after the meltdown in 1979 of the radioactive core of a unit at the Three Mile Island generating plant near Harrisburg, Penn. The mission of the organization, the Institute of Nuclear Power Operations (INPO), is “to promote the highest levels of safety and reliability—to promote excellence—in the operation of commercial nuclear power plants.” INPO’s work includes inspecting 104 reactors operated by 26 utilities at 66 nuclear sites every 24 months.

“In the aftermath of the Deepwater Horizon spill,” the report asks, “could the oil and gas industry similarly improve its safety culture by creating a self-policing entity like INPO as a supplement to government oversight?”

Beyond improving its safety culture, the report says, the industry must improve its capacity for containment and response when spills occur.

It approvingly notes two initiatives in these areas that followed the Macondo tragedy, the Marine Well Containment Co. and Helix Energy Solutions Group, but says they have limitations.

One is that “the systems are not designed to contain all possible catastrophic failures, only the next Deepwater Horizon-type spill.” The other limitation is that neither group, the report says, “is structured to ensure the long-term ability to innovate and adapt over time to the next frontiers and technologies.”

Recommendations for government
The commission bases its recommendations for the government in part on what its report calls “inadequacies” of federal standards evident in decisions leading to the Macondo blowout.

“Federal authorities lacked regulations covering some of the most critical decisions made on the Deepwater Horizon that affected the safety of the Macondo well,” the report says, citing the lack of “meaningful regulations” governing well cementing and negative pressure-testing of well integrity—two areas of concern in the blowout.

“On many of these critical matters, the federal regulations either failed to account for the particular challenges of deepwater drilling or were silent altogether,” the report says.

These are the report’s specific recommendations for the government, edited only to clarify meaning:

• The Department of the Interior should supplement the risk-management program with prescriptive safety and pollution-prevention standards that are developed and selected in consultation with international regulatory peers and that are at least as rigorous as the leasing terms and regulatory requirements in peer oil-producing nations.

• Interior should develop a proactive, risk-based performance approach specific to individual facilities, operations, and environments, similar to the “safety case” approach in the North Sea.

• Working with the International Regulators’ Forum and other organizations, Congress and Interior should identify those drilling, production, and emergency-response standards that best protect offshore workers and the environment, and initiate new standards and revisions to fill gaps and correct deficiencies. These standards should be applied throughout the Gulf of Mexico, in the Arctic, and globally wherever the international industry operates. Standards should be updated at least every 5 years as under the formal review process of the International Organization for Standardization (ISO).

• Congress and Interior should create an independent agency within Interior with enforcement authority to oversee all aspects of offshore drilling safety (operational and occupational), as well as the structural and operational integrity of all offshore energy production facilities, including both oil and gas production and renewable energy production.

• Congress and Interior should provide a mechanism, including the use of lease provisions for the payment of regulatory fees, for adequate, stable, and secure funding to the key regulatory agencies—Interior, Coast Guard, and National Oceanic and Atmospheric Administration (NOAA)—to ensure that they can perform their duties, expedite permits and reviews as needed, and hire experienced engineers, inspectors, scientists, and first responders.

• The Council on Environmental Quality and Interior should revise and strengthen the National Energy Policy Act policies, practices, and procedures to improve the level of environmental analysis, transparency, and consistency at all stages of the Outer Continental Shelf planning, leasing, exploration, and development process.

• Interior should reduce risk to the environment from OCS oil and gas activities by strengthening science and interagency consultations in the OCS oil and gas decision-making process.

• Congress, by enacting legislation, and Interior, through its lease provision, should require the oil and gas industry to pay fees that support environmental science and regulatory review related to OCS oil and gas activities to enable cooperating agencies to carry out these responsibilities.

• Interior should create a rigorous, transparent, and meaningful oil spill risk analysis and planning process for the development and implementation of better oil spill response.

• The Environmental Protection Agency and the Coast Guard should establish distinct plans and procedures for responding to a “spill of national significance.”

• EPA and the Coast Guard should bolster state and local involvement in oil spill contingency planning and training and create a mechanism for local involvement in spill planning and response similar to the regional citizens’ advisory councils mandated by the Oil Pollution Act of 1990.

• Congress should provide mandatory funding for oil spill response research and development and provide incentives for private-sector research and development.

• EPA should update and periodically review its dispersant-testing protocols for product listing or preapproval and modify the preapproval process to include temporal duration, spatial reach, and volume of the spill.

• The Coast Guard should issue guidance to establish that offshore barrier berms and similar dredged barriers generally will not be authorized as an oil spill response measure in the national contingency plan or any area contingency plan.

• The National Response Team should develop and maintain expertise within the federal government to oversee source-control efforts.

• Interior should require offshore operators to provide detailed plans for source control as part of their oil spill response plans and applications for permits to drill.

• The National Response Team should develop and maintain expertise within the federal government to obtain accurate estimates of flow rate or spill volume early in a source-control effort.

• Interior should require offshore operators seeking its approval of proposed well design to demonstrate that:
1. Well components, including blowout preventer stacks, are equipped with sensors or other tools to obtain accurate diagnostic information—for example, regarding pressures and the position of blowout preventer rams.
2. Wells are designed to mitigate risks to well integrity during post-blowout containment efforts.

• The Coast Guard, through the federal on-scene coordinator, should provide scientists with timely access to the response zone so that they can conduct independent scientific research during an oil spill response and long-term monitoring in the future.

• The trustees for natural resources should ensure that compensatory restoration under the natural resource damage assessment process (under the Oil Pollution Act) is transparent and appropriate.

• EPA should develop distinct plans and procedures to address human health impacts during a spill of national significance (statutorily defined as one “that due to its severity, size, location, actual or potential impact on the public health and welfare or the environment, or the necessary response effort, is so complex that it requires extraordinary coordination of federal, state, local, and responsible party resources to contain and clean up the discharge”).

• Congress, federal agencies, and responsible parties should take steps to restore consumer confidence in the aftermath of a spill of national significance.

• Congress should dedicate 80% of the Clean Water Act penalties to long-term restoration of the Gulf of Mexico.

• Congress and federal and state agencies should build the organizational, financial, scientific, and public outreach capacities needed to put the restoration effort on a strong footing.

• The appropriate federal agencies, including EPA, Interior, and NOAA, and the trustees for natural resources should better balance the myriad economic and environmental interests concentrated in the gulf region going forward. This would include improved monitoring and increased use of sophisticated tools like coastal and marine spatial planning. Many of these tools and capacities will also be important to manage areas of the OCS outside the gulf.

• Congress should significantly increase the liability cap and financial responsibility requirements for offshore facilities.

• Congress should increase the limit on per-incident payouts from the Oil Spill Liability Trust Fund.

• Interior should enhance auditing and evaluation of the risk of offshore drilling activities by individual participants (operator, driller, other service companies). Interior, insurance underwriters, or other independent entities should evaluate and monitor the risk of offshore drilling activities to promote enhanced risk management in offshore operations and to discourage unqualified companies from remaining in the market.

• The Department of Justice’s Office of Dispute Resolution should conduct an evaluation of the Gulf Coast Claims Facility once all claims have been paid out in order to inform claims processes in future spills of national significance. The evaluation should include a review of the process, the guidelines used for compensation, and the success rate for avoiding law suits.

• Increase and maintain congressional awareness of the risks of offshore drilling in two ways. First, create additional congressional oversight of offshore safety and environmental risks. Second, require the appropriate congressional committees to hold an annual oversight hearing on the state of technology, application of process safety, and environmental protection to ensure these issues receive continuing congressional attention.

• Congress should enact legislation creating a mechanism for offshore oil and gas operators to provide ongoing and regular funding of the agencies regulating offshore oil and gas development.

Contact Bob Tippee at bobt@ogjonline.com.

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