Inquiries into gulf well blowout, oil spill take shape

May 10, 2010
Congressional responses to the gulf drilling rig accident and subsequent crude oil spill took sharper focus last week as a US Senate committee prepared to consider broader policy implications, while a US House subcommittee concentrated on the accident's possible causes.

Congressional responses to the gulf drilling rig accident and subsequent crude oil spill took sharper focus last week as a US Senate committee prepared to consider broader policy implications, while a US House subcommittee concentrated on the accident's possible causes.

The House Energy and Commerce Committee's Oversight and Investigations Committee will hold a hearing May 12 to examine the adequacy of the companies' safety measures and emergency response to the Apr. 20 accident and the status of recovery efforts.

Transocean Ltd.'s Deepwater Horizon semisubmersible rig drilled the Macondo well for BP Exploration & Production Inc. about 52 miles southeast of Venice, La., in 4,992 ft of water near Rigel gas field. The Macondo well struck oil and associated gas at more than 18,000 ft TD. An explosion and fire left 11 crew members missing and presumed dead. The Deepwater Horizon later sank.

As OGJ went to press last week, an estimated 5,000 b/d was still flowing while spill response teams work to stop the flow of oil.

US Reps. Bart Stupak (D-Mich.), the subcommittee's chairman, and Henry A. Waxman (D-Calif.), who chairs the full committee, sent letters to BP America Inc. Chairman LaMar McKay, Transocean Chief Executive Steven Newman, and Halliburton Co. Chairman David J. Lesar. The letter asks them to testify.

Stupak and Waxman announced the hearing on Apr. 29 as they sent letters to McKay and Newman requesting copies of the inspection reports of the rig and the blowout preventer (OGJ Online, Apr. 29, 2010). They also requested documents related to the companies' policies on using remote control acoustic shut off switches, and to Lesar regarding Halliburton's cementing activities at the Deepwater Horizon.

The hearing will come a day after the Senate Energy and Natural Resources Committee's hearing about the accident and spill's possible impacts on federal offshore oil and gas policies, including the US Minerals Management Service's recently announced proposed 2012-17 Outer Continental Shelf strategy. Originally scheduled for May 6, the committee moved it to May 11.

One committee member urged a measured, careful response to the accident and spill. "We must apply the lessons of past tragedies to this one, so we can make the best and wisest decisions that will instruct us about how to move forward," US Sen. Mary L. Landrieu (D-La.) said in an Apr. 29 floor speech. "I don't believe we can react in fear. I don't believe that we should retreat."

Two choices

Landrieu said the US could respond as it did following the Three Mile Island nuclear power plant incident in 1979, when new nuclear power plant plans were scrapped and France took the global technology lead in the next 30 years. The nation also could respond as it did following the Challenger space shuttle's explosion in 1986 by striving to find and eliminate the accident's causes while continuing the space program, she said.

"No one has ever claimed, including myself, who's an unabashed proponent of the industry, that drilling is risk-free. The people of my home state of Louisiana know these risks better than anyone, both to the safety of the rig workers and to the environment itself. But we also know that America needs 20 million b/d of oil to keep this economy moving…. So let's be careful in the way we move forward. Let's be measured. Let's be open to hear the facts. Let's hold people accountable for what happened, understand what happened and prevent it from happening again," she said.

But US Sen. Bill Nelson (D-Fla.), who opposes expanding OCS oil and gas activity, sent a letter on May 3 to Mary Kendall, the US Department of the Interior's acting inspector general, requesting an investigation of MMS regulations regarding reliable back-up systems for capping underwater wells.

"More specifically, MMS allowed oil rigs not to have audio control devices capable of remotely activating a wellhead's blowout preventer. At least two other major countries that permit offshore drilling require rigs to carry such devices," Nelson said in his letter. "Also, newly published accounts indicate regulators didn't act on other concerns that oil-drilling safety equipment may not function in a deep-water environment." He asked that the investigation also examine whether the oil and gas industry exercised undue influence as the regulations were formulated.

Nelson's letter followed his Apr. 29 announcement that he plans to introduce a bill which would prevent DOI and MMS from proceeding on developing a new 5-year OCS schedule and suspend any new OCS exploration and production activities until the federal investigation of the accident and spill is completed.

Liability limit bill

Three US Senate Democrats opposed to expanded oil and gas activity on the OCS introduced a bill on May 3 that would raise the liability limit for a company deemed responsible for an offshore spill to $10 billion from $75 million.

The bill's sponsor, Robert Menendez (NJ), said, "We're glad that the costs for the oil cleanup will be covered, but that's little consolation to the small businesses, fisheries, and local governments that will be left to clean up the economic mess that somebody else caused. We can't let the burden fall on the taxpayers—we should ensure that those who cause the damage are fully responsible. There is no such thing as a 'Too Big to Spill' oil well, which is why we need this economic protection in place."

Menendez said the measure would also eliminate a $1 billion/incident incident cap on claims against the Oil Spill Liability Trust fund and give community responders access to the fund immediately instead of making them wait to be reimbursed. If damage claims exceed the amount in the fund (currently $1.6 billion, the senator said), claimants could collect from future revenues with interest under the bill. It also would eliminate a $500 million cap on natural resources damages.

OCS safety board formed

US Interior Secretary Ken Salazar announced on Apr. 30 that DOI will establish a new OCS safety oversight board, fully review offshore drilling safety and technology issues, and further tighten oversight of industry equipment testing.

The board's recommendations and findings of the US Coast Guard and MMS's joint investigation of the accident and spill will help guide implementation of the 5-year OCS strategy which the Obama administration announced on Mar. 31, he said. But it will be some time before the accident and spill's full impacts on federal OCS policies can be determined, Washington observers generally agreed.

Frank A. Verrastro, senior vice-president and director of the energy and national security program at the Center for Strategic and International Studies, suggested it is too early to speculate beyond a likely increase in regulatory scrutiny, calls for more redundant systems and testing, and enhanced spill containment plans.

'Thoughtful, pragmatic'

"While some groups and politicians have used the accident to reinforce calls for reimposing a moratorium on further offshore drilling, the Obama administration has taken the thoughtful and pragmatic approach of delaying new leasing decisions pending a determination of what really caused the accident and a spill of this magnitude," he said. "It should be commended for doing so in the face of political pressure."

Michael D. Olson, a former deputy US Interior secretary for lands and minerals management who now is counsel at Bracewell & Giuliani's Washington office, said it's also important to consider what actually was in the Obama administration's Mar. 31 OCS program announcement.

"The mainstream media interpreted it as a big expansion into new areas. That's not exactly what the president did," he told OGJ. "In reality, it was basically the identification of a certain number of areas which the administration would study and analyze for purposes of proceeding with development of a 5-year program."

Olson said the accident and spill's causes will affect federal OCS oil and gas policies. "But the bottom line is that the analyses the administration and president announced will take 2 years, and no drilling was going to take place before 2014," he continued. "There were going to be a significant number of environmental analyses before the Deepwater Horizon incident."

Second House panel inquiry

A second US House committee began to examine the spill on May 3 as Rep. Darrell E. Issa (R-Calif.), the Oversight and Government Reform Committee's ranking minority member, asked Salazar if MMS's safety and operating regulations are working.

"News reports indicate that MMS may have sidelined regulatory efforts that would have brought the US oil industry in line with prevailing industry safety standards, which mandate the use of remote-controlled acoustic shutoff switches," Issa said in a letter to Salazar. "If true, MMS will need to explain why it chose to do so."

Issa said the committee also will investigate whether MMS improperly awarded safety certifications to BP, Transocean, and the Deepwater Horizon rig.

"Reports indicate that the Deepwater Horizon appears to have had a faulty 'dead-man' shutoff switch which, if functioning properly, could have averted this massive spill," said Issa. "The malfunctioning 'fail-safe' device raises serious questions about any safety inspections or audits conducted by MMS or third parties during the certification process. This, in turn, casts serious doubt on any safety awards that MMS may have granted to BP and-or Transocean within the past year."

He asked Salazar to supply the committee with information about regulations and their enforcement, safety awards and certifications, audits and inspections, emergency response plans, and other matters by May 7. "We are keeping Congress informed on a daily basis and will respond as appropriate to these types of inquiries," a spokeswoman for Salazar told OGJ on May 4. "Our priority at this time is to contain and remediate this oil spill."

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