Nick Snow
OGJ Washington Editor
WASHINGTON, DC, July 27 -- The Macondo well blowout, rig explosion, and oil spill in the Gulf of Mexico show closer regulation of the oil and gas industry is needed offshore, US House committee chairmen said July 27 as they explained an oil spill bill that was released the night before. That same bill is slated for floor debate on July 30.
“This terrible accident could have been prevented. Even the outgoing CEO of BP admitted that, and other oil company CEOs admitted they wouldn’t have taken the same steps in one of our committee’s hearings,” Energy and Commerce Committee Chairman Henry A. Waxman (D-Calif.) told reporters. “So the oil industry has to take some responsibility, but the government can’t defer to it. [The industry] can’t simply certify that it can drill safely at these depths but must meet specific requirements to show it can do this safely.”
The bill, HR 3534, is the Comprehensive Land, Energy, and Aquatic Resources measure introduced by Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.) and approved by the committee on July 16, with some significant deletions as well as additions.
The original bill’s onshore components are gone, leaving a measure focused entirely offshore, Rahall said. So is the provision which committee Republicans promoted establishing a commission including oil and gas experts to investigate the Apr. 20 accident at BP PLC’s Macondo well. House majority leaders decided it would be more productive to support President Barack H. Obama’s similar effort, Rahall said. Republicans have charged that the White House commission’s members are either outright opponents or have very limited knowledge of offshore oil and gas.
The additions include provisions from HR 5626, which the Energy and Commerce Committee passed on July 15, establishing blowout preventer, well design, and cementing requirements for deepwater wells; requiring oil company chief executives to certify that the well design is safe, the BOP has redundant systems for all foreseeable blowout scenarios and failure modes, and that a blowout can be promptly controlled and stopped if the backup systems fail; and certification by independent third parties selected by the federal regulator but paid for by the producer.
Liability provisions
The final bill also includes provisions from HR 5629, which the Transportation and Infrastructure Committee adopted on July 1, that remove liability limits and amend earlier laws that were more appropriate for tankers and other seagoing vessels than for offshore rigs, according to its chairman, James L. Oberstar (D-Minn.). “The limitation for offshore facilities is just wrong, going back to the Torrey Canyon, Argo Merchant, and other tanker incidents in the 1960s and ’70s that dealt with specific amounts. In deepwater wells, we’re dealing with unknown quantities,” he said.
“If BP is found to be responsible for this spill, they’re responsible for paying for all of it,” he continued. “We removed the limitation for these offshore facilities faced with the reality, as BP is, that damage to the fish and shellfish sector cost 330,000 jobs in the Gulf of Mexico. They have to be held accountable. If they are, they’ll be more careful in the future.”
Oberstar also noted that the final bill contains a provision passed by the committee he chairs, which would require any offshore rig operating in US waters to be domestically flagged. Oil industry observers have said this would effectively drive offshore rigs from the US Outer Continental Shelf because they are all registered overseas. Oberstar said the change is needed to give the US Coast Guard adequate time to conduct inspections. “It is limited to 7-hour inspections of foreign-flagged vessels, whereas with a US-flagged vessel, it would have 2-3 weeks,” he said.
“Our two hearings showed the Coast Guard has no internal mechanism to deal with operations that could release oil from the ocean floor,” he maintained. “Our legislation would add 300 personnel to their work force and set new standards to understand ocean temperature 5,000 ft below the surface, the effects of dispersants, and operation of currents. These are the kinds of skills the Coast Guard does not have now and must have.”
The bill also contains a so-called “bad actor” provision which Education and Labor Committee Chairman George Miller (D-Calif.) introduced as a Natural Resources Committee member during the measure’s markup, which would bar a producer from bidding on new offshore leases unless it had a very good safety record. “BP essentially brought a record that was a horror show when it submitted the winning bid for this well,” he said, citing the 2005 explosion and fire at its Texas City refinery which killed 15 and injured 180 people, leaks from corrosion during 2006 in its Alaska North Slope crude oil gathering system, and subsequent repeated safety violations at its Texas City and other US refineries.
‘Egregious’ record
“Its record on safety is egregious, and it should not be allowed to participate on the OCS, particularly in the deepwater,” said Miller. “We need to assure the American people that we only accept companies that act responsibly.”
He said he also plans to offer an amendment to protect whistleblowers working aboard or around offshore rigs who bring problems to their employer’s attention. “One worker on the Deepwater Horizon, Jason Anderson, told his wife that he needed to get his will and affairs in order. This is appropriate for someone who’s going to war, not for someone who’s going to work,” Miller said. “Those who engage in this very sophisticated, very difficult work need to be protected from reprisals if they refuse to perform work that is too dangerous or violates the law. It’s absolutely fundamental and reminiscent of coal miners who are forced to continue working to keep costs down. Here, there was a rush to get things done because it was costing money to keep the rig working.”
In a teleconference with reporters immediately prior to the one with the House committee chairmen, American Petroleum Institute President Jack N. Gerard expressed concern over several of the bill’s provisions. A requirement that rigs working in US waters be domestically flagged would undermine jobs Americans hold on foreign-flagged rigs, he said. “We don’t even have the capacity in the US today to build the vessels they are talking about,” he added. “We’ll have to look more closely at the labor provision. Such a significant step is clearly an overreach.”
Independent producers are worried about proposals to remove liability limits offshore. “The insurance industry has indicated that unlimited liability will push out the small and medium-sized producers and leave the gulf to the largest major oil companies and national oil companies from countries like China and Brazil,” said Gerard. Asked about this in the teleconference that followed immediately, Oberstar said talks were under way with independents and the White House to assure that smaller producers would still be able to get insurance and operate offshore.
Gerard also questioned inclusion of provisions dealing with deepwater blowout preventers, well design, and cementing from the Energy and Commerce Committee’s bill. “If Congress narrowly prescribes well design and practices going forward, it will stifle innovation going forward and freeze it at the current generation,” he warned. “We also do not yet know the root cause of what happened with the BOP in the Gulf of Mexico. It’s like going into surgery without having a diagnosis. We believe the most appropriate approach is to understand why the BOP failed and not unilaterally prescribe legislation.”
Not frozen
“I think it makes a lot of sense to put in the requirements making sure that the BOP works and the well design is adequate,” Waxman responded. “We don’t freeze this in place, but we do know that mistakes were made. We spell out the redundancy for the BOP to make sure it has the emergency controls to function should there be an emergency, and the well design to function properly. We also give the Interior secretary flexibility to adopt different standards if they will provide more safety. I don’t know what Mr. Gerard’s concerns are, but he can argue them with the secretary.”
Oberstar added that when Gerard testified before the Transportation and Infrastructure Committee, he was asked if BOPs had been tested at various depths and responded that he did not know. “His organization designed the BOP and certified it would work. That’s wrong,” the federal lawmaker said. “We don’t allow the aircraft industry to certify its own equipment and standards; that’s up to the [Federal Aviation Administration].”
Rahall said the final bill’s message remains a strong response to the Gulf of Mexico accident and spill while trying to prevent future problems offshore. “Whether it’s a coal miner in West Virginia or a rig worker in the Gulf of Mexico, I firmly believe no one should have to risk their life to earn a living,” he said.
“Unfortunately, it’s become clear that the former US Minerals Management Service was asleep at the switch while letting the industry write its own rules,” the Natural Resources Committee chairman continued. “We need professional, highly trained safety inspectors who are asking the tough questions and holding the oil companies accountable. This Deepwater Horizon tragedy is a tragic example of why greater regulation is needed. It’s become abundantly clear that this is a game-changer in how we manage offshore oil and gas resources.”
Gerard said that as API responds to oil spill legislation expected in the US Senate as well as the House’s bill, it will emphasize the importance of enacting measures that do not hamper a US economic recovery and put people out of work. “We believe the best approach right now is to not only retain the current jobs, but to do all we can to create additional jobs,” he said.
Contact Nick Snow at [email protected].