meeting 2, attachments #5-6

8/8/2019 Meeting 2, Attachments #5-6

http://slidepdf.com/reader/full/meeting-2-attachments-5-6 1/79

National Comm ission on the

BP DEEPWATER HORIZON OIL SPILL

AND OFFSHORE DRILLING

Attachment 5

Written Testimony and Presentation of J. Robinson West

PFC E nergy



Bahra in (973) 7705-8880Be i j ing (86 10 ) 6599 9111

Hous ton (1 713 ) 6 "22 -4447

Kua i a L u r r~ r (6 0 3 ) 21 72 -3400La u sa n n e ( 4 1 2 1 ) 7 2 1 - 14 4 0

P ar is (331 ) 4 770 -2900W ash ing ton DC (1 202 ) 872=1199

National Com mission on the B P Dee pwater Ho rizon O il Spi l l and O ffshore Dri l ling

Meet ing 2, August 25, 2010

Pane l I: History and Exp ansion of Offsho re Drilling

J. Robinson W est , Founder, President and CEO of PFC Energy

M y n a m e i s R o b i n W e s t . I a m f o u n d e r , P re s i d e n t a n d C E O o f P F C E n e r g y , w h ic h a d v is e s m a n y o f th ewor ld ’ s lead ing o i l and g as com pan ies , p roduc ing g overn me nt s and f i nanc ia l i ns t i tu t i ons o n o i l i ndus t ry

s t r a te g i e s a n d m a r k e t s , e n e r g y p o l it ic s a n d e c o n o m i c s a n d m a r k e t s t ru c t u r e a n d d y n a m i c s . O u r c li e n t s

i n c lu d e m o s t o f th e l e a d i n g c o m p a n i e s i n t h e i n d u s t r y . W e h a v e b e e n r e t a i n e d b y B P o n c e r t a in m a t te r s

r e la t in g t o t h e M a c o n d o s p i ll , a n d c a n n o t c o m m e n t o n i t.

F r o m 1 9 8 1 t o 1 9 8 3 , I s e r v e d a s A s s i s t a n t S e c r e t a r y o f th e I n te r i o r fo r P o li cy , B u d g e t a n d A d m i n is t r a ti o n

w i t h respo ns ib i li t y fo r US o f f sho re o i l po l icy . In t h i s capa c i ty , I in i t ia t ed t he f ive-yea r Ou ter C on t inen ta l She l f

L e a s i n g S c h e d u l e a n d m a n a g e d t h e $ 1 4 b i lli o n - p e r -y e a r O C S p o l ic y , th e la r g e s t n o n - f in a n c i a l a u c t io n i n

t he wo r ld a t t ha t t ime.

D u r in g m y t i m e a t I n t e r io r , t h e o f fs h o r e l e a s i n g p r o g r a m w a s s u r r o u n d e d b y b i tt e r c o n t r o v e r s y . I w a s

conf ron ted by what John G ardne r re fe r red t o as " un lov ing c r i t ic s " and "un c r i ti ca l l overs . " The un c r it ica l

l overs u rg ed u s t o o pen a l l f edera l wa ters t o l ea s ing a nd v i r tua l ly g ive t he l eas es t o t he indus t ry w i t h li tt le

o r n o r e g u l a t io n . T h a t s t r u c k m e t h e n , a n d s t r i ke s m e n o w , a s a v e r y b a d , a s w e l l a s i l le g a l , i d e a .

L i ke w i s e , t h e u n l o v in g c r it ic s d e m a n d e d t h a t w e p r o v e a n e g a t iv e , t h a t th e r e w a s n o r is k o f a n y p o s s i b le

d a m a g e f r o m o f fs h o r e o i l a n d g a s o p e r a t i o n s . T h e o n l y w a y to s a t is f y th e m w o u l d h a v e b e e n t o s h u t th e

p r og r a m d o w n . T h a t , too , s t r uc k m e a s a r e a l ly b a d i d e a . T h e c h a l le n g e , t h e n a s n ow , w a s t o f in d

cons t ruc t ive com promises .

Al l na t i ona l go vernm ent s , i nc lud ing t he US, have a re spo ns ib i li t y t o v iew t he i r o f fsho re hydroca rbon

reso urces in a num ber o f d if fe ren t ways , wh ich requ i res comprom ise . They mus t cons ider :

¯ T h e a m o u n t o f o i l a n d g a s t h e y c a n p r o d u c e a n d p r o v i d e f o r t h e n a t io n ’ s e n e r g y s e c u r i ty ;

S t r a te g i c A d v is o r s i n G lo b a l E n e r g yB a h r a i n . B e i jin g . H o u s t o n . K u a t a L u m p u r . L a u s a n n e . P a r i s . W a s h i n g t o n D C



¯ T h e t e r m s u n d e r w h i ch t h e y c a n o p e n u p t h e s e r e s o u r c e s ; h o w t o d e c i d e w h i ch c o m p a n i e s c a n

par t ic ipate, based on nat ional i ty , technical capabi l i ty or o ther cr i ter ia;

¯ The po ten t ia l reven ue s t o the s t a t e f rom leas e bonu ses , roya l t ies , t axes and p roduc t i on shar ing ;

¯ A p p r o p r ia t e s a f e t y a n d o p e r a t in g s t a n d a r d s , i n cl u d in g w o r k e r a n d e n v i r o n m e n t a l s a f e t y ;

¯ Las t , bu t by no mea ns l eas t , the e mployme nt and econo mic deve lopmen t impac t s fo r the

domes t i c economy.

Man y fa il to app re c ia te t he sca le o f t h i s indus t ry in t he US. I t is no t j us t a Gu l f C oas t indus t ry . M i l li ons o f

h igh -pay ing , expor t -gen e ra t ing j obs a re a t s take . On e sm a l l exam p le is t he he l icop te r indus t ry . The

o f f sho re o i l and gas indus t ry is t he l a rges t use r o f me d ium and he avy he l i cop te rs a f t e r the Pe n tago n 1 .

The se he l icop te rs a re no t bu i lt in Lou i s iana o r M iss i ss ipp i, bu t in s t a t es su ch as Pe nns y lvan ia and

C onn ec t icu t . The re a re hun d reds o f su ch exam p les . In t o ta l , t he U.S. o i l and na tu ra l gas indus t ry i s

es t ima ted t o p ro v ide , d irec t l y and ind i rec t ly , 9 .2 m i l li on fu l l- t ime and par t - t ime j obs , o r 5 .2% o f t he na t i on ’ s

t o ta l emp loymen t2 .

I shou ld no te t ha t severa l o f ou r in t e rna t iona l go vernm ent c l ien t s a re ex t reme ly i n t e res ted in us ing t he i r o i l

a n d g a s i n d u s t r ie s t o c r e a t e t h e s e k in d s o f h i g h q u a l it y jo b s . A t p r e s e n t , g i v e n t h e s i ze a n d t e c h n o l o g i c a l

l eadersh ip o f t he US indus t ry, i t i s very d i ff icu l t fo r t hes e o ther cou n t r ies t o com pete .

Every coun t ry , faced w i t h t hese po l icy dec i s ions , dec ides in favo r o f deve lop ing i t s o f f sho re res ou rces .

T h e n e t b e n e f it s t o t h e c o u n t r y a r e s i m p l y to o la r g e t o b e d i s c o u n t e d . T h i s is t r u e e v e n i n c o u n t r i e s w e

t h in k o f a s h a v in g h i g h e r l e v e ls o f e n v ir o n m e n t a l a w a r e n e s s , a n d b e i n g l e s s " p r o - b u s in e s s , " th a n t h eU n i t e d S t a t e s . F o r i n s t a n c e , D e n m a r k , fa m o u s f o r b ic y c le s a n d w i n d m il ls , p r o d u c e s t h e e q u i v a le n t o f

127 % o f i ts dome s t i c ene rgy needs by agg ress ive ly deve lop ing o f fsho re o i l and gas 3. Braz i l, a co un t ry

w i th a r e p u t a t io n f o r r u n n i n g o n h y d r o e l e c t ri c po w e r a n d s u g a r c a n e e t h a n o l , p ro d u c e s o f fs h o r e t h e

equ iva lent o f 45% 4 o f i ts dom es t i c energy ne eds an d i s p lann ing d ramat ic inc rease s in o i l p roduc t i on f rom

i PFC En ergy est imates that 22% of the over 4,800 civ i l ian hef icopters with maximum take-off weight above 7,000

Ibs is used in the o i l and gas industry2 PriceWaterhouseCo opers: The Econom ic Impacts of the Oi l and Na tural Gas Industry on the U.S. Economy:

Employment , Labor Income and V a lue Added . Amer ican Pet ro leum Ins t itu te , 2009

3 In 2009, D enmark prod uced 12 .9 mi l f ion tonnes of oi l and 7.6 m i ll ion tonnes equivalent of gas, for a com bined 20.5mil l ion tonnes o f oi l equivalent, compa red with total domes t ic consumption of al l types of energy of 16.1 m i l liontonnes of o i l equiva lent (Data source." B P S ta t is t ica l R e v i e w o f W or l d E ne rg y , June 2010)

4 In 2009, Brazi l produced approximately 88.2 tonne s of oi l and 13.6 tonne s of oi l equivalent of gas offshore,

compared w i th 225. 7 mm tonnes o f o i l equ iva len t p rimary energy demand (Data sources: PFC Energy, Nat iona lPetroleum Ag ency (ANP), B P S t a t is t ic a l R e v i e w o f W o r ld E n e r g y , June 2010)

S t r a t e g i c A d v i s o r s i n G I d : ) a l E n e r g yB a h r a i n . B e ij i n g ¯ H o u s t o n . K u ~ a L u m p u r . L a u s a n n e . P a r is . W a s h i n g to n D C



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t h e d e e p w a t e r . I n m o s t c a s e s , o f fs h o r e o i l a n d g a s p r o d u c e r s o p e r a t e i n c lo s e p r o x im i t y to s h o r e a s w e l l

as i n ac t i ve f i sh ing g roun ds .

B e f o r e t h e s p i ll, th e U S o f f s h o r e i n d u s t r y h a d a n e xe m p l a r y s a fe t y r e c o r d . B e t w e e n 1 9 7 1 a n d 2 0 1 0 , a

t o ta l o f 24 .7 b i ll ion ba r re l s o f o i l were p rodu ced f rom US waters . Over t he sa me per iod , o i l sp i l ls as a

r e s u l t o f b lo w o u t s w e r e 1 , 7 1 5 b a r r e ls . T h i s w a s a n a v e r a g e o f 4 4 b a r r e ls p e r y e a r , o r o n e o u t o f e v e r y 1 4

mi l li on bar re l s p ro duced 5. Mo st o i l sp i ll s in US a nd g loba l wa ters cam e f rom a cc iden t s i nvo lv ing t an kers ,

p ipe l ines and l oad ing fac i l it ies .

I o f ten s ay t ha t t he complex i t y, sca le an d t echn ica l cha l leng es o f deepwater E&P are com parab le t o

l a n d in g a p e r s o n o n t h e m o o n . Y o u m i g h t s a y t h e c h a lle n g e i s e v e n g r e a t e r , s in c e a h u m a n c a n w a l k o n

t h e m o on , b u t n o t i n 5 , 0 0 0 ’ o f w a t e r . Y e t n e i t h e r ou r o f fs h o r e r e g u l a t ion s n o r o u r t e c h n o l og y f o r c o n t a in i n g

and c lean ing u p a f te r acc iden ts have ke p t pace w i th our ab i l it y to f ind and p roduce o i l and ga s . W e have

g on e f rom e x p lo r i n g i n w a t e r d e p t h s o f 1 , 5 0 0 f e e t in t h e 1 9 8 0 s t o o v e r 5 , 0 0 0 f e e t in 20 1 0 . R e m e m b e r ,

t oo , t ha t d r i ll ing m ay go an add i t i ona l 15 ,000 t o 20 ,000 fee t be low the m ud l ine . It is an e x t raord ina ry

accompl i shme nt , requ i ri ng som e o f t he l a rges t com mi tment s o f cap i t a l and t echno logy o f any indus t ry on

ea r th . Each we l l, le t a lone the indu s t ry as a who le , i s a mass ive under tak ing . C lea r ly , con ta inmen t and

c le a n u p t e c h n o l og i e s d i d n o t k e e p up . T h e i n d us t r y d id n o t i n v e s t in t h e m b e c a us e t h e y w e r e n o t

c o m m e r c ia l . A n d g o v e r n m e n t d i d n o t s u f fi ci e n t ly i m a g i n e t h e p o t e n t i a l ri s k s t o m a k e t h e n e c e s s a r y

i n v e s tm e n t o r r e q u i r e i n d us t ry t o i n v e s t . T h e M a c o n d o b l ow ou t h a s b e e n a s i g n if ic a n t a n d e x p e n s i v e

le a r n i n g e xp e r i e n c e t h a t h a s f o r c e d g o v e r n m e n t a n d t h e i n d u s t r y t o b e g i n t o i m p r o v e a n d e xp a n d o u r

con ta inme nt and sp i l l r espon se capa b i li ti es .

A t t h e p r e s e n t s t a g e o f o u r d e v e l o p m e n t , th e d e e p w a t e r G u lf h o l d s th e l a r g e s t a n d m o s t p r o d u c ti ve o i l

r e s o u r c e s i n t h e U S . W e p r o d u c e a b o u t 1 . 8 m i ll io n b a r r e l s o f o i l e a c h d a y f r o m f e d e r a l a n d s t a t e w a t e r s i n

t h e G u l f o f M e x i c o , a b ou t 3 0 % o f ou r d o m e s t i c p r od uc ti on . In c om p a r is on , w e i m p o r t a n a v e r a g e o f a b ou t

on e m i l li on ba r re l s a day f rom Sau d i Arab ia . In fac t , we p roduce m ore o i l i n t he Gul f o f Mex ico than we

impor t from a l l Pers ian Gu l f sou rces com bined6 .

I n t he sho r t te rm , every bar re l o f o i l we do no t p roduce do me s t i ca ll y mu s t be impor t ed . Th i s usu a l ly

me ans b r ing ing i t by tanke r , w i th t he a t t endan t r i sks . And i t i s qu i t e l ike ly t ha t t he ma rg ina l ba r re l wou ld be

produ ced o f f sho re i n a co un t ry l ike Me x ico , Braz i l , N iger ia o r Ang o la .

5 PFC Energy ana lys is based on data pub l ished by U S D ept o f In ter io r Bureau o f Ocean E nergy Management ,

Regulat ion and Enforcement at http : / /www.boemre..qov/ incidents/spi l ls 1 996-2011 . htm

S t r a t e g ic A d v i s o ~ in G l o b a l E n e r g yB a h r a i n . B e i ji n g . H o u s t o n , K u a l a L u m p u r . L a u s a n r ~ . P a d s . W a s h i n g to n D C



P a g e 4

To m e, t he econ omic , po li ti ca l and m ora l conc lus ion fo r pub l ic po l icy is t ha t we mu s t use t he reso urces o f

t h e G u l f o f M e x i co , a n d u s e t h e m r e s p o n s i b ly . T h is m e a n s t h a t t h e e x t r e m e c a u t io n , r i s k -a v o i d a n c e

c o u r s e o f s t o p p in g d e e p o f f s h o r e E & P i n t h e G u l f is n o t a n o p t i o n . U S p u b l ic o p i n io n a g r e e s 7 .

O n t h e o t h e r h a n d , t h e M a c o n d o i n c id e n t s h o w e d t h a t o u r e x i s ti n g l e v e l o f c a r e fu l n e s s - - a s e m b o d i e d i n

ou r l a w s , re g u l a ti on , p ra c t ic e s a n d e n f o r c e m e n t - - is n o t g oo d e n o ug h . A r e p e a t o f t h e i n c id e n t i s

u n a c c e p t a b le . N e v e r a g a i n c a n w e a l lo w s u c h a p o w e r f u l b lo w o u t fr o m s u c h a la r g e f i e ld t o r u n f o r s o

lo n g . W e mus t i m p r o v e o u r t e c h n o l o g y a n d s y s t e m s f o r p r e v e n t in g a c c id e n t s , c o n t a in i n g t h e m , a n d

c lean ing up a f t e r them .

I h a v e s p e c i fi ca l ly b e e n a s k e d t o c o m m e n t o n t h e c o m p a r is o n b e t w e e n U S a n d i n te r n a t i o n a l re g u l a to r y

r eg imes .

The h i s t o ry o f g l oba l o f fsho re regu la t ion i s punc tua ted by trag ic acc iden t s t ha t a re beyond t he p r i o r

imag in ing o f t he indus t ry and i t s regu la t o rs . Each i s f o l lowe d by a comm iss ion o f i nqu i ry and a repor t .

The n go vernme nt s and t he indus t ry i n t roduce be t t e r ru l es and p rac t ices t ha t a re i n fo rmed by t he acc iden t .

T h e M a c o n d o b lo w o u t h a s b e e n h i s t o r y ’s l a r g e s t s u c h e v e n t i n t e rm s o f t h e v o l u m e o f o i l s p i ll e d , t h e l e v e l

o f me d ia a t t en t i on , the s ca le o f t he c lean up e f fo r t , and t he f i nanc ia l respon s ib i li ty assu me d by the

ope ra t ing compa ny . Ru t it is no t the f i r s t trag ic o f f sho re i nc iden t . The No r th Sea e xper ience d t h ree

def in ing eve n t s . Af te r t he Eko f isk Bravo b lowou t in 19 77, ’ the f i r s t in t he No r th Sea, b l owou t p reven ters

w e r e ma n d a t e d o n a l l w e l l s . I n 1 9 8 0 , a fi re o n t h e Alexander K ei lland accommodation unit in the

No rweg ian sec tor k i ll ed 123 peo p le . In 1988 the P ipe r A lpha p roduc t ion p la t fo rm e xp los ion in the UK

sec to r k i ll ed 167 pe op le and t r i ggered wh at were , un t i l now , reco rd insu ran ce c la ims.

I n C a n a d a , t h e 1 9 8 2 O c e a n R a n g e r acc iden t caus ed 84 de a ths . E leven peop le d ied when B raz i l’ s P -36

p la t fo rm in t he Ro ncado r fi e ld exp loded in 2001 . Mos t recen t l y , i n 2009 , a f t e r a b lowo ut on the M on ta ra

p la t fo rm in A us t ra l i a ’s T imo r Sea i t t ook f i ve t r ies over m ore t ha n 70 d ays t o k i l l t he we l l and e nd t he s p i ll8 .

Af t e r the se d i sas te rs , no coun t ry chos e t o s t op o f f sho re a c t iv i ty , and ne i the r shou ld t he US. Jus t las t

~ Source: PFC Energy based on data publ ished by the US Energy Information Administrationz For instance, 48% of respondents to the AP-GfK Rope r pol l conducted August 11-16, 2010 favored increasing

dri l l ing for oi l and gas in coastal areas around the United States (36% opposed increasing dri l l ing). Source:http ://www.pollin~treport. com/ene~qy, htm

~ Th e com mission of inquiry ’s report on this event has been w ri tten, but st i ll not released.

S t r a t e g i c A d v i s o r s in G l o b a l E n e m j yB a h r a i n . B e i jin g ¯ H o u s t o n . K u a l a L u r r # ~ . L a u s a n n e . P a d s . W a s h i n g to n D C



Page5

w e e k , f o r i n s ta n c e , a C a n a d i a n S e n a t e c o m m i t te e c o n c l u d e d t h e r e i s n o c a u s e t o h a l t o f fs h o r e d r ill in g i n

C a n a d a9.

I b e l ie v e t h e f u n d a m e n t a l c h a l le n g e a l l r e g u l a t o r s f a c e i s t h e p o t e n t ia l m i s m a t c h b e t w e e n v e r y d y n a m i c

b u s i n e s s p r o c e s s e s a n d s t a t ic r e g u l a t o r y s y s te m s . In e v e r y b u s i n e s s t h e r e i s a t r a d e o f f be t w e e n

p r o d u c t io n a n d s a f e t y. T h e o f fs h o r e i n d u s t ry p r o g r e s s e s , a n d m e e t s t h e g r o w i n g g l o b a l de m a n d f o r o i l, b y

c o n s t a n t ly a d v a n c i n g t h e b a r r i e r s o f w h a t i s p o s s i bl e a n d s a f e . A s t a t ic r e g u l a t o r y s y s t e m c a n n o t k e e p u p

in t h is dynam ic env i ronm ent .

S ta t i c , p resc r ip t ive reg u la t i ons re su l t i n s t a t i c, p resc r ip ti ve sa fe t y p rac t i ces . W hat we ne ed in s a fe t y i s t he

s a m e d y n a m i c p a r a d ig m t h e b e s t c o m p a n i e s u s e t o e n s u r e q u a l it y . S o m e k e y f e a t u r e s o f t h is a r e :

1 . E v e r y o n e i s r e s p on s i b l e f o r s a f e op e r a t i on s ;

2. Safe ty i s cu l t u ra l , a wa y o f t h ink ing t houg h an d an t i c ipa t ing po ten t ia l p rob lem s t ha t a f fec t a l lact iv i t ies ;

3. S a f e t y is a b o u t ac t ive per fo rmance , ra ther t han de fens ive compl iance;

4. Res pons ib il it y li es w i th t he ope ra to rs and the i r con t rac tors and su pp l ie rs ; regu la to rs superv ise and

a u d i t r a t h e r t h a n i nspec t and a p p r o v e ~ ;

5. The goa l i s no t "good en ough, " bu t z e r o f a il u r e s : no a ccidents , no fa ta l it ies , no s p i ll s ;

6. Safe ty encompasses not only persona l sa fe ty , b u t s a fe t y o f t h e e n t i re p r o c e s s , i n c lu d in g

env i ronmenta l sa fe t y ;

7. W e d e s i g n , i m p le m e n t a n d a u d i t per formance ma na.qement sys tems, r a t h e r t h a n r u l e s ;

8. There i s ac t iv e c o l l abo r a t i on , t r u s t and s ha r i nq be tween o pera to r s , con t rac to r s , emp loyees a nd

regu la t o rs ;

9. We s ee m i s takes and near - m is s es as o p p o r t u n i ti e s t o le a r n , r a t h e r t h a n oc c a s i on s t o f in g e r t h e

g u i lt y o r , e v e n w o r s e , c o v e r u p s y s t e m i c w e a k n e s s e s ;

1 0 . W e h a v e g r e a t e r tr a n s p a r e n c y b e t w e e n d i ff e r e n t o p e r a t o r s , c o n t r a c to r s a n d r e g u l a t o r s t o

acce le ra te t ha t k ind o f lea rn ing ;

1 1 . Organ iza t iona l s t ruc t u res and mot i va t ion /compen sa t i on sys tems p r om o t e s a f e t y , ra t h e r t h a n

unde rmin ing i t;

9 S tanding S enate Comm ittee on Energy , the Env i ronment and N atura l Resources: Facts do not Jus t i fy Bann ingCana da’s Current Of fshore Dr i ll ing O perat ions: A Senate R eview in the Wa ke of BP’s De epwater Hor izon Inc ident ,August 2010. www .parl ..qc.ca/40/3/par lbus/commbus/senate/com -e/en~q-e/rep-e/repO8au g lO-e.pd_f

lo The No rwegian Pe troleum Directorate replaced the term "inspect ion" with "supervis ion" and issues "consents"

rather than "approvals." ht tp. . //www .pt i~.n~/new s/fr~m-prescr ipt i~n-t~-perf~rmanc e-in-petr~eum-supervis i~n-article6696- 79. html

S t r a te g i c ,a ~ M s o r s i n G l o b a ! E n e r g yB a h r a i n . B e i ji n g . H o u s t o n . K u a l a L u m p u r . L a u s a r ’r ~ . P a d s . W a s h i n g t o n D C



Page6

1 2 . W e h a v e s e a m l e s s , un i f ie d s y s t e m s t h a t c ov e r op e r a t o r s a n d c o n t r a c to r s , n o t m a r in e s y s t e m s f o r

r ig s a n d b o a t s a n d d i f fe r e n t o n e s f o r p la t fo r m s , a n d n o t p a t c h w o r k s o f f e d e r a l a n d s t a t e o r

r e g i o n a l r u le s t h a t c a n b e p la y e d o f f a g a i n s t o n e a n o t h e r ;

1 3 . R e g u l a t io n s a r e n o t f ix e d d i r e c ti v e s , b u t a p p r o a c h e s t h a t flexibly a c c o m m o d a t e c h a n g in gs i tua t ions;

1 4 . A p rocess o f con t inuou s improvemen t and ad ius tmen t a d d r e s s e s n e w r i s k s , w h ic h w i ll a lw a y s

a r i s e f ro m n e w t e c h n o l o g y , a n d f r o m a d a p t i n g o l d e r i n s t a lla t io n s t o d o t h in g s t h a t w e r e n o t

imag ined wh en t hey were f i rs t des igned.

I am no t advoca t ing " se l f- regu la t ion . " Mak ing o pera to rs ac t i ve l y respo ns ib le unde r the v ig i lan t supe rv is i on

o f a we l l des ign ed and w e l l resou rced regu la to ry sys tem i s no t the s ame th ing as " j us t le t t ing t he indus t ry

regu la t e it se l f ." It requ i res compe ten t and t ime ly su perv i s i on by regu la t o rs wh o un ders tan d t he r isks o f t he

ope ra t ions an d can p roper ly eva lua te the mi t i ga t ions t he o pera to rs p ropose .

You h ave rece ived a copy o f a PFC E nergy repo r t t ha t desc r ibes t he o f fsho re sa fe t y regu la t o ry sys tems in

1 2 f o r e ig n c o u n t r ie s . T h e d i ff e r e n c e s i n s y s t e m s a r i s e f ro m d i ff e r e n t g o a l s a n d c o n s t r a in t s . H o w

" e f fi ci e n t " d o c oun t r i e s w a n t t o b e ? H ow c a p a b le a r e t h e r e g u l a to r s ? H ow m uc h p o l it ic a l c a p a c it y d o t h e y

h a v e t o w r it e r e g u l a t io n s , i m p le m e n t r e g u l a t io n s , a n d e n f o r c e r e g u l a t io n s ? H o w i n d e p e n d e n t d o t h e y w a n t

t o be o f t he o i l indu s t ry? Faced w i t h t hese qu es t i ons , d if fe ren t coun t r i es ’ sys tems es sen t ia ll y fa ll in t o t h ree

grou ps : (1 ) p resc r ip t ive (wh ich i s how we w ou ld ca tego r i ze t he cu r ren t US sys tem ) , (2 ) se l f- regu la t i on , in

wh ich compa n ies l a rge ly regu la t e t hem se lves , usu a l ly due t o t he ho s t coun t ry ’ s low po l it ica l capac it y , f o r

i ns tance in Ang o la , and (3 ) approaches ba sed o n t he " sa fe t y case, " wh ich was f i r s t i n t roduce d in the UK

and i s how we wou ld ca tego r i ze t he regu la t ions in Norway , Aus t ra l ia and Ca nada.

I wou ld

1 .

2.

l ik e t o f o c u s m y r e m a r k s o n t h e U n i t e d K i n g d o m . I ch o o s e t h e U K f o r a n u m b e r o f r e a s o n s :

The UK Nor th Sea i s a ma jo r o f f sho re p rov ince o f c r it ica l impo r tance t o t ha t na t ion ’ s eco nom y;

The UK use d t o have a p r imar i ly p resc r ip ti ve sys tem l i ke ou rs , bu t 20 years ag o in respo nse t o t he

P iper A lpha a cc iden t rad ica ll y trans fo rm ed i t t o i nco rpora te t he k inds o f p r inc ip les I have l a id ou t ;

The B r it ish sys tem appe ars t o have been succes s fu l in con t ro l li ng ma jo r o f f sho re a cc iden t r i sks ;

and

The UK s ys tem i s w ide ly admi red and ma ny coun t r i es mo de l the i r regu la t o ry approach on i t .

Som e h i s t o ry : be fo re t he P iper A lpha acc iden t , as desc r ibed in one acade mic paper :

. . . the approach of [ the] government agencies was to micromanage the specif ics of design and

proce dures, rem oving, in ef fect , the respon sibi l ity for the result ing degree o f safety from the

S t r a te g i c A d v i s o rs i n G l o b a l E n e r g yB a h r a i n . B e i j in g - H c u s t o n ¯ K u a l a L u m p u r . L a u s a n n e . P a r i s . W a s h i n g t o n D C



P a g e 7

operat ing oi l com panies as long as they com pi led with governme nt specif icat ions. This pof icy

s imp l i fied the task o f the o f fshore ope ra tors who s im p ly had to show tha t they sa t is fied the

requiremen ts. Everyth ing being pe rmit ted unless expl ic it ly forb idden, the em phasis was n ot on

the actual level of safety achieved bu t on sat isfy ing regu lat ions w i thout ser iously consider ing the

resu l ting r isk. These regula tions were o f ten incom plete because the regula tor cannot a lways

keep up wi th deve lopm ents and expa ns ions in the produ ct ion area. The refore, th is process

could eve n sti f le safety innova tion i tseff1 1 .

Af te r Lo rd Cu l len ’ s pub l ic i nqu i ry i n t o t he 19 88 P iper A lpha d i sas te r , the U K in t roduced t he O f fsho re

Ins ta l l a t i ons (Sa fe ty Case ) Regu la t ions . Be fore beg inn ing ope ra t ions on a p ro jec t , and eve ry f i ve yea rst h e r e a f te r , U K o f fs h o r e o p e r a t o r s m u s t f il e a c o m p r e h e n s i v e " S a f e t y C a s e " w i t h H S E ~ 2 . T h e S a f e t y C a s e

m u s t d e m o n s t r a te t h a t t h e o p e r a t o r h a s a n t i ci p a te d e v e r y h a z a r d t h a t c o u l d p o t e n t ia l ly l e a d t o a s e v e r e

a c c id e n t a n d h a v e d e v e l o p e d m a n a g e m e n t s y s te m s a n d e m e r g e n c y r e s p o n s e s t o a d d re s s t h e m . It m u s t

address t he ro l e o f con t rac to rs and sub-con t rac to rs and cons ider how t o keep acc iden t s f rom e sca la t ing i f

t h e m a n a g e m e n t s y s t e m s d o n o t w o r k .

I u r g e y o u t o l o o k s e r i o u s l y a t t h is a p p r o a c h a n d c o n s i d e r w h a t o u r r e g u l a t o r y s y s te m c a n l e a r n f r o m i t . I t

i s a r i g o r o u s , b u t n o t a d v e r s a r ia l , s y s t e m u n d e r w h i c h t h e i n d u s t ry , g o v e r n m e n t a n d o t h e r s t a k e h o l d e r s

have a l l worked s uccess fu l ly fo r c lose t o twen ty years .

i t is a l s o e s s e n t ia l t h a t o u r g o v e r n m e n t i n v e s t i n p e o p le o f t h e h i g h e s t q u a l it y to o v e r s e e t h is i n d u s t r y .

L e a s t c o s t b u r e a u c r a ti c re s p o n s e s w o u l d b e a f a ls e e c o n o m y .

H a v in g a m o r e e f fe c t iv e r e g u l a to r y s y s t e m w i ll r e d u c e t h e r i s k o f a m a j o r a c c id e n t . B u t w e m u s t a l s o p l a n

f o r t h e w o r s t , w h i ch m e a n s r e d u c i n g t h e i m p a c t o f a n y a c c i d e n t t h a t c o u ld s t i ll o c c u r . M a c o n d o h a s t a u g h t

us t ha t we a re no t p repared t o acce p t a "wors t case" acc iden t in wh ich t ens o f thou san ds o f bar re l s o f o il

f low e ach day in t o waters t ha t a re se ns i t ive ecos ys tems , and c ruc ia l fo r f ish ing an d t ou r i sm.

W e m u s t u p g r a d e o u r c a p a c it y fo r s u b s e a c a p p in g , c o n t a in m e n t a n d c le a n u p . T h i s m e a n s o u r ~c a p a c it y , n o t j u s t o u r l a w s a n d r e g u l a t io n s . A s p a r t o f i ts r e s p o n s i b i li ty t o m a n a g e o u r o f fs h o r e r e s o u r c e s ,

t h e f e d e r a l g o v e r n m e n t m u s t e n s u r e t h a t w e h a v e t h e n e c e s s a r y te c h n o l o g y t o c a p s u b s e a w e l ls q u i c k ly ,

con ta in an y o i l tha t i s sp i ll ed , and c lean up co n tamina ted w a te r and land . The co s t o f bu i ld ing a nd

o p e r a t i n g t h e n e c e s s a r y s t a n d b y e q u i p m e n t s h o u l d b e b o r n e b y t h e i n d u s t r y , w h i c h m e a n s u l t im a t e l y b y

t h e c o n s u m e r . In s h o r t , w e m u s t b u i ld t h e c o s t o f e c o l o g i c a l i n s u r a n c e i n t o t h e c o s t o f t h e o i l w e p r o d u c e

o f f sho re .

I be li eve we a l ready ha ve t he ma k ings o f a respo nse s ys tem tha t w i l l d rama t ica l ly reduce t he r i sks

a s s o c ia t e d w i t h o f fs h o r e o p e r a t i o n s . T h e M a c o n d o s p i ll h a s t r ig g e r e d e x t r a o r d in a r y c o o p e r a t i o n b e t w e e n

d if fe r e n t op e r a t o r s , s e r v ic e c om p a n i e s a n d g o v e r n m e n t a g e n c i e s . T h e y h a v e l e a r n e d a g r e a t d e a l . W ec a n b u i ld o n t h i s e xp e r i e n c e t o c r e a t e th e t e c h n o l o g y a n d r e s p o n s e s y s t e m s w e n e e d . A n u m b e r o f t h e

~1 P at#-Comell , M. El isabeth: Learning from the Piper AIpha A ccident: A Postmortem A nalysis of Technical and

Organ izat ional Factors. In Risk Analysis, VoL 13, No. 2, 1993

12 Th e Health and S afety Execut ive is an indepe ndent regulator whose m ission is "the prevent ion of death, in jury and

i l l health to those at w ork and those affected by work act iv i t ies"

S t r a te g i c A d v i s o rs i n G l o b a l E n e r g yB a h r a i n . B e i jin g . H o u s t o n . K u a l a L u r n p u r . L a u s a n n e . P a d s . W a s h i n g to n D O



P a g e 8

la r g e s t o p e r a t o r s h a v e a l r e a d y a n n o u n c e d a $ 1 b i lli o n p l u s M a r i n e W e l l C o n t a i n m e n t S y s t e m j o i n t v e n t u r e

tha t w i ll bu i l d a s t andby sys tem o f vesse l s , p ipes and equ ipment t ha t can be dep loyed w i t h in 24 ho urs a t

w a t e r d e p t h s o f u p t o 1 0 , 0 0 0 f e e t .

T h a n k s t o w h a t g o v e r n m e n t a n d i n d u s t ry h a v e l e a r n e d i n r e s p o n d i n g t o t h e M a c o n d o s p il l, o u r s a f e t ysys tem i s a l ready be t t e r t han i t was o n Apr i l 19 . Even a s we t rans i ti on t o a mo re dynam ic sys tem, wh ich

w i ll ta k e t i m e , w e s h o u l d u s e e v e r y th i n g w e h a v e l e a r n e d f r o m t h i s e v e n t t o g e t o u r o f f s h o r e p r o g r a m b a c k

to work .

I t i s a ls o c l e a r t h a t m u c h o f th e d e p r e d a t io n t o w h i c h t h e G u l f o f M e x i co h a s b e e n s u b j e c te d h a s n o t h in g t o

do w i t h o f fsho re opera t ion s in fede ra l wa ters . Ac t i v it ies i n s t a t e waters a nd on se ns i t i ve sho re l i nes ha ve

b e e n g o i n g m u c h l on g e r . T h e q ua l i ty o f r e g u l a t ion a n d s a f e g ua r d s t h e r e h a s g e n e r a l ly b e e n l ow e r . T h eg oa l o f p r o t e c t in g a n d r e s t o r in g t h e G u l f is n o t ju s t a f e d e r a l on e . I w ou l d u r g e y ou r C om m i s s ion t o

cons ide r th i s i s sue as we l l.

Fina l ly , the Gu l f o f Mex ico e cosys tem i s c r it ica l no t on ly fo r t he US , bu t a l so as par t o f t he wo r ld ’ s ocean s .O f fs h o r e e xp l o r a ti o n a n d p r o d u c t io n t a k e s p l a c e i n s o m e v e r y e xp e r ie n c e d a d v a n c e d e c o n o m i e s . B u t i t is

a lso tak ing p lace in o the r sens i t i ve p rov inces , such as the Gu l f o f Gu ine a and the N ige r D e l ta . I wou ld

u r g e t h a t t h e U S c o n s i d e r t a k in g a l e a d e r s h i p r o l e i n e s t a b l is h i n g a n i n te r n a t i o n a l c le a r i n g h o u s e f o r b o t h

i n d u s t ry a n d g o v e r n m e n t s t o c a t a l o g a n d d i s tr ib u t e l e s s o n s l e a r n e d a n d b e s t p r a c ti ce s . J u s t a s w e c a n

l e a r n fr o m t h e U K a n d N o r w a y , s o c a n o t h e r s l e a r n f r o m o u r v e r y e xp e n s i v e r e c e n t e xp e r i e n c e s . O f fs h o r e

regu la t ion , opera t i ons an d sa fe t y shou ld be cons tan t l y improv ing , everywhere .

S t r a te g i c A d v i s o B i n G lo b a l E n e r g yB a h r a i n . B e i j i n g ¯ H o u s t o n . K u a ~ a L u m p u r . L a u s a n n e . P a r is - W a s h i n g t o n D C



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National Com mission on the

BP DEEPWATER HORIZON OIL SPILL

AND OFFSHORE DRILLING

Attachment 6

Presentation by J oe Leimkuhler

Shell Exploration and Produ ction



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