Practical Lessons From Major Accidents

Vol. 3, No. 3 

This Special Edition of the Practical Lessons bulletin focuses on two presentations at the 2011 Offshore Technology Conference (OTC), which was May 2-5, 2011, Houston, Texas:

  • Lunchtime keynote address by Michael Bromwich, head of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), and
  • Panel discussion: "Offshore Energy Development Through a Post Spill Reality"
    Obama's Man Issuing Permits to Drill in the Gulf Using Same Faulty Blowout Preventers

    A tough interview with MSNBC's Rachel Maddow: Obama's Man Issuing Permits to Drill in the Gulf Using Same Faulty Blowout Preventers

    (10 min)

     

     

     

     

Taking the Stage

Monday, May 2, 2011, Michael Bromwich took the stage in a crowded room at Reliant Center in Houston to address at an OTC lunch. OTC attendees comprise primarily oil and gas industry professionals. Nearly a year ago, after the Macondo blowout in the Gulf of Mexico, Bromwich was appointed to head the BOEMRE -- the agency that regulates safe and responsible oil and gas development and which has since undergone an extensive reorganization and has implemented new regulations aimed at increasing safety in the industry's operations.

 

"The tragic loss of life and the enormous damage to the environment was a wake-up call for industry and government alike," Bromwich said, "sending a clear message that we had to take a good, hard look at existing safety technologies, practices, and regulations and make immediate, and lasting improvements."

 

Bromwich reviewed reforms of the last year, most of which were not news to the industry professionals in the audience, many of whom have worked with professional groups and regulators to improve safety industry-wide or who have tracked the progress, including:

  • Rules and regulations that enhance safety and environmental protection
  • Requirement that operators have a plan and demonstrated ability to manage a deepwater blowout
  • Structural and procedural reforms to reduce conflicts of interest between regulators and industry

Contractors will not be beyond reach of the new regulations, Bromwich said. "We can exercise such authority as we deem appropriate," he said, adding "We will be careful and measured in extending our regulatory authority to contractors."

 

The Reorganization

Soon after the 2010 spill in the Gulf of Mexico, the former Minerals Management Service (MMS) became BOEMRE or BOE, for short. By October 1, 2010, the BOE was reorganized and three agencies would oversee offshore energy regulation:

The primary goals of BSEE are to (1) evaluate risks of offshore drilling, (2) promote development of safety cultures, and (3) keep pace with technological advances. These goals will be supported with a sufficiently strong and effective organization that "can carry out the critical safety and environmental protection functions that are central to its mission and that have been historically slighted and underfunded within MMS," Bromwich said.

 

In addition, a new BOEM position of Chief Environmental Officer will assure that environmental considerations are managed and a new, dedicated environmental enforcement and compliance program is being created in BSEE.

 

A new National Offshore Training Center is being created and that director will develop national training strategies and programs to maintain and improve technical capabilities of offshore inspections and compliance personnel.

 

Progress to Date

New regulations for offshore energy development aim to raise standards, in particular safety standards, for operations on the OCS, including:

  • Drilling Safety Rule: new standards for well design, casing, and cementing; new well control procedures and equipment; and requiring independent third-party inspections and certification that blowout preventers meet new standards, which included:
    • Notice to Lessees No. 6 (NTL-6): providing guidance to operators about complying with regulations for the oil spill response plans to include a well-specific blowout and worst-case discharge scenario as well as inspections and certifications
  • Workplace Safety Rule: requires identifying facility and operation-specific risks and establishing barriers to reduce human and organizational errors, introducing performance-based standards similar to those used by regulators of North Sea operations and requiring Safety and Environmental Management Systems (SEMS) that require hazard and risk reduction strategies for all phases of activity

Two containment systems have been developed by the Marine Well Containment Company and the Helix Well Containment Group. The mid-February 2011 announcements that these containment systems were ready for use led to the February 28, 2010, issuance of the first new deepwater drilling permit since April 2010.

 

Looking Ahead

The agency's "meager" budget has received a boost, Bromwich said. In April, the legislature and the President approved a total of $68 million above FY 2010 funding levels to the Department of the Interior for both BOEMRE and the Office of Natural Resources Revenue. BOEMRE will receive about $47 million of that amount.

 

"That is far less than we need, but it is a significant sum," Bromwich said, "especially in a constrained budget environment where the funding of most other agencies is being cut." BOEMRE may now begin recruiting inspectors and training them through the new National Offshore Training Center.

 

"We need to learn from our shortcomings, address our weaknesses, and figure out better and more efficient methods for doing our work," Bromwich said. Along that vein, he recapped activities to date and efforts of such organizations as the new Ocean Energy Safety Advisory Committee and the OCS Scientific Committee."

 

He said that continued collaboration with international regulators also is part of the long-term strategy.

 

"The recommendations of the President's [Oil Spill] Commission stress the importance of sharing experiences across different international systems and establishing global standards and best practices," he said. "We agree with that."

More change is on the horizon, Bromwich said, but probably will not come so quickly and will include:

  • A major rulemaking designed to further enhance offshore drilling safety and reduce risks of a major blowout
  • Enhancements to the SEMS rule so operators will "comprehensively and responsibly identify, address, and remediate the risks of offshore drilling...."

"I want to be absolutely clear about something," Bromwich said. "the process of making offshore energy development both safe and sufficient to help meet the nation's and world's energy demands will never be complete. It is a continuing, ongoing, dynamic enterprise.

"[Regulation and the agency responsible for it] are not wristwatches or carburators that can be fixed like a mechanical object. They need to constantly evolve and adapt."

Read the full text of Bromwich's remarks and the nine elements for his vision for the future.

         

 

 

On Another Note

 

Panelists at the 2 p.m. session were less supportive of efforts to date and of the federal government's energy policies. The first panel comprised directors of departments of natural resources (DNR) from the states of Louisiana, Virginia, Alaska, the Texas General Land Office, as well as Haley Barbour, the governor of Mississippi.


All criticized a general deficiency in U.S. energy policies that support domestic production, pointing to lack of drilling onshore and offshore the U.S. and on Alaska's North Slope, which "spans 150,000 square miles of high oil and gas potential" according to Dan Sullivan of Alaska's DNR.  


"In the time that Shell has drilled one well in the Outer Continental Shelf," Sullivan said, "they have drilled 400 in other parts of the world."


Doug Domenech, Secretary of Virginia's DNR, said "Director Bromwich discussed additional administrative hoops to jump through." Domenech cited Federal Lease Sale 220 for commercial drilling offshore Virginia, which was initiated in March 2010 and was cancelled in May 2010 by President Obama in response to the Macondo incident. [Editor's note: The U.S. House of Representatives passed legislation May 5, 2011, to begin leasing sites off the coasts of Virginia and the Gulf of Mexico.] 


"Other countries like China are exploring right off our coast," said Alaska's Sullivan, "but somehow we don't see it [U.S. oil and gas exploration] as a benefit to our country." 


The second panel spoke to the topic of jobs for U.S. citizens. Jack Gerard, President of the American Petroleum Institute (API) said that the U.S. oil and gas industry has the potential to create one million new jobs and $100 million per day "if given the opportunity."


"Sixty-nine percent (69%) of the people are for more drilling, but our [U.S.] policy is the exact opposite," said Karen Harbert president and chief executive officer of the U.S. Chamber of Commerce's Institute for 21st Century Energy. Harbert urged attendees to visit the websites of two of the Institute's projects: 

Lori LeBlanc of the Gulf Economic Survival Team, was deemed to have the last word when she said, "When gas gets up to four dollars a gallon, people will start wondering what we're doing sitting on U.S. national resources."  


About the OTC


The OTC is billed as "the world's foremost event for the development of offshore resources in the fields of drilling, exploration, production, and environmental protection." OTC attendance this year, at 78,150, was the highest since 1982. The mission of the OTC is "to promote and further the advance of scientific and technical knowledge of offshore resources and environmental matters." 

 

Editor's Note

On the whole, this issue perhaps is too faceted for any one person to objectively understand or relate.

 

Bromwich says the federal government and industry, working together, are doing a great job increasing safety and issuing drilling permits. But other special interest groups and individuals say the U.S. has no national energy policy other than to stop exploration and production here, to buy overpriced foreign oil and gas, and to create more (unnecessary) regulations.

 

In fact, one OTC panelist said there is no drilling happening in the U.S. and it's the federal government's fault. The industry could provide millions of jobs and boost the economy, they said, but the AFL-CIO labor leader for Alaska said if they had heard anything about jobs they'd get behind industry in the "fight" with regulators to get exploration and production going again.

Industry reps say the future of gas exploration is in hydraulic fracturing (fracking) but environmental groups argue differently. In fact, May 11, 2011, the Texas House of Representatives passed a bill requiring that gas drillers disclose the chemicals used in fracking. The Texas Senate is considering a similar bill.

In Alaska, while the DNR director pushes for free exploration and production on the North Slope, the U.S. Coast Guard says it couldn't currently help to mitigate a Macondo-sized spill there. Clearly this should be managed with a measured approach. 

Seemingly opposing "facts" are being tossed about, and certainly the truth and "right" answers lie somewhere between the lines and the special interests. But the questions seem to be who's going to decide what the truth and right answers are, how long will that take, and what "anomalies" might occur in the meantime.

 

Reportedly some OTC attendees said that the feeling of this 2011 OTC was more optimistic than 2010, more "back to normal." But other factions, including Bromwich, hope that doesn't mean that complacency has set in.

 

Some industry professionals believe that the Macondo incident was an anomaly and it won't happen again. But, unfortunately, the ERM Risk Practice has seen history disprove that belief. Many have said "it won't happen here." The United Kingdom, for example, had Piper Alpha in 1988. India had Mumbai High North in 2005. Australia had the Montara in 2009. Oil and gas exploration and production is an inherently hazardous industry onshore or offshore. Two movements in the right (safe) direction are inherently safe engineering design of facilities and a strong safety culture. Both require commitment to safety. A commitment such as the ERM Risk Practice has, striving to protect lives and improve production by shaping the design and operation of hazardous facilities.



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Morris Burch, Partner
ERM North America Risk Practice

 

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