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Learning lessons from Deepwater Horizon Commission says new safety culture needed for the oil industry, improved regulatory oversight, better spill response preparation Alan Bailey Petroleum News
On the basis of turning a disaster into an opportunity, the report to President Obama of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, published on Jan. 11, identifies some lessons learned from the Deepwater Horizon disaster and then proceeds to list a series of recommended actions, to prevent a similar tragedy happening again.
A continuing strong demand for petroleum products is driving the oil industry into ever more challenging areas in the search for new petroleum resources, leading to remarkable new drilling technologies such as the Deepwater Horizon rig that BP was using to drill a well more than 13,000 feet deep in 5,000 feet of water, the report says.
“The remarkable advances that have propelled the move to deepwater drilling merit comparison with exploring outer space,” the report says. “The commission is respectful and admiring of the industry’s technological capability.”
Significant risk But operating an offshore drilling rig involves some significant safety risks, and for several years neither industry nor government regulators have adequately addressed those risks. And the absence of crises coupled with “remarkable financial returns” has led to a false sense of security and a culture of complacency that affected both industry and government, the report says.
“Both government and industry failed to anticipate and prevent this catastrophe, and failed again to be prepared to respond to it,” the report says.
The damage from the oil spill has become a wake-up call, alerting people to the more general issue of industrial degradation of the Gulf of Mexico, driving a new focus on restoring the landscape while also recognizing the importance of the oil industry to the region’s economy, the report says.
BP’s safety culture The report examines BP’s safety culture, both in the context of the Deepwater Horizon disaster and in the context of previous well-publicized accidents such as the Texas City refinery explosion in 2005 and the Prudhoe Bay pipeline leak in 2006. It appeared from these accidents that, although BP had placed much emphasis on individual worker safety, the company has paid insufficient attention to the safety of industrial processes, the report says.
Following a highly critical report by an independent committee assessing the Texas City accident, an independent expert, appointed to monitor BP’s progress in implementing that committee’s recommendations, reported in 2009 that the company was indeed making good progress in improving its process safety performance.
“In recent years in the Gulf of Mexico, BP’s safety offshore drilling record was reportedly excellent,” the Deepwater Horizon commission wrote in its report.
But that apparent improvement in BP’s safety performance came to naught in April 2010 when the Deepwater Horizon rig exploded.
“BP’s safety culture failed on the night of April 20, 2010, as reflected in the actions of BP personnel on- and offshore and in the actions of BP’s contractors,” the report says. “BP, Halliburton and Transocean did not adequately identify or address risks of an accident — not in the well design, cementing or temporary abandonment procedures.”
Contract complexities While BP had ultimate responsibility for the drilling operation on the Deepwater Horizon rig, the complex interplay between BP and its contractors compounded the difficulty of safety management.
“The extensive involvement of those contractors in the mistakes that caused the Macondo well blowout underscores the compelling need for a fundamental shift in industry culture that extends beyond BP,” the report says. “… Whatever the specific contractual relationships, operating safely in this environment clearly demands a safety culture that encompasses every element of the extended drilling services and operating industry.”
Fatality rates on offshore rigs in recent years have been four times higher in U.S. waters than in European waters, even although many of the same companies operate in both regions, the report says.
As illustrated by events on the Deepwater Horizon, inadequate government regulation of offshore drilling allowed critical safety-related decisions on the rig to take place without challenge. And although the American Petroleum Institute has developed oil and gas industry safety standards, the institute’s role as an industry lobbyist compromises its role as an industry standard setter, the report says.
Other industries At the same time, experience in other industries such as nuclear power and aviation has demonstrated that it is possible to manage catastrophic process failure risks, the report says.
Borrowing ideas from those industries, the report recommends improving the oil industry safety culture through two routes: industry self-policing and improved government regulation.
Industry self-policing, motivated by companies’ recognition of the negative impacts of industrial accidents, can be especially effective in industries characterized by technical complexity, requiring expert personnel, and where significant revenues hinge on an industry’s safety performance. On the other hand, self-regulation by businesses has a highly checkered history, demonstrating the importance of effective government oversight and regulation, the report says.
The report recommends the establishment of an oil industry organization akin to the Institute of Nuclear Power Operations, the nonprofit organization formed to promote nuclear power station safety and reliability in the wake of the Three Mile Island power station accident in 1979. The fragmented and diversified nature of the oil industry would require some rethinking of the INPO concept, but an independent organization of this type could drive the needed transformation in the oil industry safety culture, the report says.
Agency overhaul On the government regulation side of the safety oversight equation, the report recommends a major government agency overhaul, much along the lines of what the Department of the Interior has been doing in replacing the U.S. Minerals Management Service with new agencies that separate the revenue collection, resource management and regulatory oversight aspects of government management of outer continental shelf oil and gas exploration and development.
However, the report also recommends the establishment of a new independent agency within Interior, to oversee the safety of offshore drilling and energy production. And companies must be required to use a systematic approach to risk management, assessing risks involved in each specific operation.
From the perspective of oil spill containment and response, the report commends new industry initiatives to build on technologies and ideas developed to contain and collect oil spilling from BP’s Macondo well. However, these technologies would not be capable of dealing with certain types of oil spill disasters and there is a risk that the organization established to manage and operate the new oil containment equipment would end up underfunded and lacking in innovative ideas, the report says.
And so there should be an independent advisory board, with representatives from industry, the federal government, state and local governments, and from environmental groups, to help steer spill containment initiatives over the long term, the report says.
Response planning overhaul There needs to be an overhaul of oil spill response planning, using meaningful oil spill risk analyses. In addition, rather than depending on industry plans for responding to the major spills where the federal government takes charge of the response effort, the Environmental Protection Agency and the U.S. Coast Guard need to develop their own response plans. And Congress needs to provide funding for new oil spill response research and provide incentives for oil spill research by industry.
The report also questions the current cap of $75 million on the liability for damages caused by an offshore oil spill. On the one hand, the damage caused by the Deepwater Horizon disaster greatly exceeded the liability cap and higher liability limits would provide a strong incentive for companies to pay greater attention to safety. On the other hand, a rise in liability insurance rates resulting from a higher cap could make working in the Gulf of Mexico an uneconomic proposition for many small, independent operators, to the detriment of the region’s oil economy.
Risk management Among a long list of specific recommendations, the report argues for a new approach to offshore risk management, with government mandated safety and pollution-prevention standards and a pro-active approach to government oversight of the safety of specific facilities, operations and environments. The way in which the National Environmental Policy Act is applied in the context of offshore drilling needs to be revised and strengthened, in particular with reference to the tiering of environmental reviews when moving from initial lease sale activities through exploration to eventual field development. The categorical exclusion of certain activities from environmental review also needs to be reconsidered.
There also needs to be much more effective interagency consultation, to achieve the appropriate balance between resource development and environmental protection, the report says.
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