This is Part 7 of a paper written following the BP Oil Spill in 2010 regarding US offshore safety. In this chapter, we offer some additional offshore drilling policy recommendations to improve offshore safety and prevent future disasters.
Secondly, it is important for the United States to encourage a stronger focus on safety, rather than focusing purely on spill prevention. Throughout the United States’ history with offshore drilling, regulatory change and development has consistently been shaped by a focus on preventing oil spills. The Santa Barbara oil spill, the Itzoc oil spill, and, just this year, the Deepwater Horizon accident, have all dramatically shaped public opinion through the environmental consequences of a devastating oil spill.
Consequently, in the North Sea and Canada, public opinion has consistently been shaped and focused by safety, as accident after accident has killed workers. There have been extremely few major spills in the North Sea; in fact, the only major spill in the North Sea was the 1977 Ekofisk Bravo spill. Apart from this minor spill, one that carried no legislative consequences, all accidents in the North Sea have been directly related to safety issues. From the examples of these nations, it is evident that the focus on safety is an effective policy for the United States to embrace.
Ultimately, embracing regulation that specifically tackles safety will invariably impact the incidence of spills. A focus on safety can reduce occurrences of blowouts, fires, collisions, and explosions, effectively eliminating the chance of a spill.
In an interview, Amy Jaffe, a fellow in Energy Policy at the Baker Institute for Public Policy, provided an anecdote that effectively demonstrates this effect. She detailed a rig manager who once told his men that he would like the deck to be whitewashed every week. Regardless of cost, or cleanliness of the deck, the manager wanted the deck whitewashed every single week. While undoubtedly confusing and probably frustrating at first, this policy ultimately significantly reduced any oil spilling. As the workers maintained a stringent focus on keeping the deck clean, they invariably also dramatically reduced spills and the subsequent risk of a major spill or accident. Similarly, in the realm of offshore drilling regulation, a strong focus on safety will invariably result in a much lower risk of spills.
There are several elements of United States regulation that do not adequately compel rig operators to adhere to higher safety standards. To ensure a more compliant offshore industry, the United States needs to enforce harsher penalties and fundamentally transform the nature of inspections. According to a recent study by Lloyd’s, the most serious violations of regulations are given fines of only around $32,000 on average. Even though the potential fines for these serious violations are extremely high, actual penalties have been miserably low. This is in sharp contrast to nations such as Norway and the United Kingdom.
In Norway, while exact numbers are unavailable, it is a specific rule that the penalty for a breach of regulations must ensure that the breach is unprofitable for the operator. In the UK, while average penalties are also relatively low, the potential penalty for a breach is unlimited. In many cases over the past few years, companies have been fined extravagantly up to well over $200,000. In addition, in both Norway and the UK, serious non-fatal safety breaches can be criminal charges punishable through imprisonment of key executives. This does not exist in the United States.
Secondly, US inspectors make an embarrassingly low number of inspections. In the UK in 2001, each inspector made approximately 251 inspections of facilities; in the United States, each inspector only made around 35 inspections. In order to develop a more successful and thorough regulatory system, it is imperative that the United States adopts stricter and more stringent inspection standards; only through effective inspections can regulations actually be consistently enforced.
This is Part 6 of a paper written following the BP Oil Spill in 2010 regarding US offshore safety. In this chapter, we offer some offshore drilling policy recommendations to improve offshore safety and prevent future disasters.
Following the disaster of Deepwater Horizon, it has become increasingly evident that offshore drilling in the United States faces significant obstacles to success. Other nations in the world have had similar disasters, and, as a result, they have been able to successfully develop and implement new regulations that have dramatically improved offshore drilling safety. As the United States works to develop a new regulatory regime, it would be well advised to further examine the lessons of other nations across the globe. The following measures have the potential to create a much safer and more prosperous offshore drilling regime.
First of all, the United States should move towards much more goal-based, goal setting regulations. Unlike the vast majority of developed nations in the world, the United States continues to support a prescriptive, top-down regulatory system.
While this prescriptive system has some benefits, particularly as it gives the federal government the authority to specify exact requirements, it also has significant drawbacks. In particular, this approach leaves the nation’s regulators vulnerable to the impact of the rapidly changing nature of the offshore industry. As the offshore industry invests heavily in research and development, drilling deeper and deeper, regulations instituted several years ago are already obsolete. It is next to impossible for a regulatory agency to continuously re-write regulations to keep up with its counterparts in industry.
Secondly, a strictly prescriptive approach discourages any innovation. There is some value in dictating exactly what a company is required to do. However, there is also significant value in encouraging a company to find a better, more innovative way to achieve safety standards. In addition, the institution of more goal-based regulation has the ability to force companies to create entire departments devoted solely to safety. With that approach, safety becomes an intrinsic part of the drilling process, rather than just another technicality. Norway, the UK, and Canada have all instituted top-down regulations to tremendous success; it is time for the United States to follow their example.
More specifically, it is important that the United States require each company to provide a comprehensive and statistically based risk assessment for every platform that will be involved in production. Following in the steps of the United Kingdom, the requirement for a safety case is the only method that can fundamentally ensure company involvement and participation in safety.
The recent BOEMRE adoption of a SEMS safety program is a step in the right direction. However, simply requiring a safety plan is not enough; a safety case requirement fundamentally transfers safety responsibility to the company. Some evidence of this can be found in BP’s involvement during the recent Deepwater Horizon accident. Royal Dutch Shell recently confirmed that they create safety cases for all of their drilling projects across the globe, regardless of the local regulations. Consequently, BP does not require safety cases on all of its wells at all and did not develop one for Deepwater Horizon. If the United States had a safety case requirement and had instituted it to ensure BP’s compliance, this accident may have never happened. As Royal Dutch Shell’s example, and the example of many other nations, demonstrates, safety cases are an important and essential part of the safety process.
Prior to beginning drilling, each company should be required to comprehensively demonstrate that each part of the installation is safe. In addition, similar to the model used in Norway, the BOEMRE should offer a set of suggested guidelines that companies can look to when drafting their own safety plan. Nevertheless, ultimately the approach should be up to the discretion of the individual rig operator.
The largest argument against safety case legislation is the costs and expense associated with it. In a presentation on the subject, Ken Arnold, a senior technical advisor at WorleyParsons, argues that the adoption of safety case regulation would require a substantial financial investment, alongside a significant time and expertise commitment from both regulatory agencies and industry. In particular, he mentions that the cost of retroactively developing safety cases for the over 3000 platforms currently operating in the Gulf would be enormous.
This argument does have some validity; safety cases would no doubt add some additional expenses. In fact, Norway also supports this perspective, not forcing companies to create extremely comprehensive safety case documents, instead only requiring a risk assessment. Nevertheless, safety cases are essential to develop strong and stringent safety standards within companies.
In fact, while there may be some large financial commitment right now, ultimately, less prescriptive safety-case legislation has the potential to reduce costs. Rather than being forced to comply with strict set of exact regulations, companies would be able to experiment with their options, perhaps finding less expensive and more effective methods to achieve the same safety standards.
In addition, while the estimate $1 million/safety case in the United Kingdom may seem extravagant, it is very insignificant when compared to the devastating impact of an accident or spill cleanup, a cost which can often be in the billions. Ultimately, a safety case approach could offer significant benefits for industry, developing a safer, more efficient, and potentially less expensive offshore environment.
This is Part 5 of a paper written following the BP Oil Spill in 2010 regarding US offshore safety. In this chapter, we take a look at the history of offshore drilling, offshore safety, and offshore policy in Canada, including a brief look at the Ocean Ranger disaster.
When examining incidents that can be compared to the Macondo spill, it is invaluable to look at Canada’s example. In many ways, Canada’s offshore industry shares countless parallels with that of the United States. Just as the United States federal government must share many powers with the states, much of Canada’s regulatory framework is also federalist, with the federal government mandated to share power with individual provinces.
Just like the UK and Norway, much of Canada’s history with offshore drilling has been shaped by disaster. The Ocean Ranger was a semi-submersible rig that began operations off the coast of Newfoundland in 1980. On February 15, 1982, tough weather conditions caused the rig to capsize, killing all 84 crew members. The accident ultimately revealed significant design and structure flaws in the rig, as well as a lack of any formal safety procedure. The crew also lacked any safety training or equipment.
Following the disaster, a Canadian Royal Commission spent two years looking into the incident and developing suggestions for a stronger and more powerful regulatory regime. The commission ultimately concluded that there were significant design and structure flaws in the rig, alongside gaping holes in the national regulatory regime.
In addition, the Royal Commission recommended that significant changes be made to the national regulatory regime for offshore drilling; however, much like the United States’ response, the bulk of these regulations were again prescriptive in nature. Ultimately, many of these changes to the regulatory system were outlined in the Atlantic Accords between provincial and federal Canadian governments- in particular, this ensured that there was one, central authority governing the safety of Canadian offshore drilling, instead of the myriad of different agencies that had controlled drilling in the past. In addition, the incident instigated the creation of the Offshore Safety and Survival Center, offering training as well as yearly funding into research and development for emerging technologies.
Unlike Norway and the United Kingdom, Canada did not follow up on the disaster with any particularly significant transformation in its regulatory regime, continuing its emphasis on prescriptive regulations. However, just last year, in 2009, the Canadian legislature passed groundbreaking legislation that move towards significantly more goal-based regulation. In this sense, the Canadian government decided to follow the success of similar regimes in Norway and the United Kingdom.
As Gaétan Caron, Chairman and CEO of the National Energy Board has stated, “The new regulations require companies to demonstrate that they can operate safely in specific situations, using the most advanced technology tailored to their circumstances. The onus is on industry to demonstrate to us that they can protect their workers, the public and the environment. If the operator cannot demonstrate this, they cannot drill.” Just like the countries that operate in the North Sea, this new regulatory system has aimed to move the burden on to the companies to develop stringent safety standards and ensure low accident risks.
One of the most interesting aspects of Canada’s offshore drilling regime is a requirement regarding the drilling of relief wells. The Canadian policy mandates that a company must be able to demonstrate the ability to drill a same-season relief well in the Arctic, before drilling may commence. They do not need to actually drill the well; they just need to successfully demonstrate that they have the capability to drill one.
While Canada has followed a very different path from Norway and the UK, and while their movement to results-based regulation is not directly the result of an accident, their similarities to the United States make their experience a very powerful one to study.
This is Part 4 of a paper written following the BP Oil Spill in 2010 regarding US offshore safety. In this chapter, we take a look at the history of offshore drilling, offshore safety, and offshore policy in Norway, including incidents such as the Bravo and Alexander L. Kielland in the Ekofisk.
Also bordering the North Sea, and sharing its bountiful petroleum resources, is the Kingdom of Norway. Norwegian offshore drilling first began in 1966; the first drilling regulation was enacted in 1970, following the discovery of the massive Ekofisk field in 1969.
After a few years of relative peace, poor Norwegian regulations led to a string of accidents. In 1977, an oil blowout occurred at the Ekofisk Bravo platform, only six years after it had begun producing. As a post-incident report demonstrated, the spill was caused because the crew had mistakenly installed the surface blowout preventer upside down, a mistake that was exposed during routine maintenance.
While all the crew was safely evacuated, the blowout resulted in an oil spill of an estimated 202,000 barrels of oil. Following several failed efforts, the well was capped 7 days later, surprisingly without any particularly significant environmental impact. The oil did not reach the shore. Nevertheless, it is valuable to point out that this remains to this day the only significant oil spill in the North Sea.
Following the accident, regulators instituted an order requiring blow out preventers on all wells, alongside a safe job risk analysis of all operations. Ultimately, no fundamentally radical steps were taken as a result of the accident. As the next few years would consistently demonstrate, only the death of workers and human safety issues could actually instigate regulatory action.
Just three years later, in 1980, a second incident occurred that truly shocked the Norwegian public and spurred regulators into action. On March 27, 1980, extremely harsh weather caused the collapse and capsize of the Alexander L. Kielland platform, also in the Ekofisk field. The incident and subsequent lack of contingency or safety plans caused the death of 123 people. A later inquiry discovered that the incident was caused by fundamental structural flaws in the rig’s construction. In addition, there was a clear lack of authority or safety plans in place for abandonment or assessment in the case of an emergency situation on the rig.
Together, both of these incidents were able to significantly impact Norway’s regulatory regime for North Sea drilling. A direct result of the incidents was the formation of the Norwegian Petroleum Directorate, one organization given sole power over all offshore drilling regulation and replacing the wide myriad of industries previously in control.
In 1985, a new Petroleum Activities statute created a fundamentally transformed regulatory regime in Norway. The new statute moved away from a prescriptive regulatory regime to one that was much more focused on results and statistics. The new rules made specific requirements on the functions and safety levels that must be met; the exact methods and solutions that the company uses are up to their own discretion.
Nevertheless, the central regulatory agency still offers a set of industry-approved safety guidelines that are, in some sense, general prescriptive regulations. If any company is able to demonstrate that a different method works with equal or greater success, they are able to file for that method instead. As a result of this multi-faceted approach to regulation, Norwegian regulators are able to guarantee strict industry safety standards, while allowing industry to develop new and productive solutions.
Interestingly, unlike the United Kingdom, Norway does not require safety cases from companies, stating that “a regulator’s acceptance of a Safety Case inevitably transfers parts of the operator’s responsibility to ensure compliance with statutory requirements on to the regulator.” However, Norway requires its companies to create comprehensive risk assessments, systematically identifying all risks and explaining how they can be controlled. Similarly, it is the responsibility of the operator to ensure that there are no particularly significant safety issues; the operator is also responsible for any parties working for it (ex. contractors).
Overall, these regulations served to transform the ultimate responsibility for safe offshore behavior from the government to the operator; if a company wants to drill in the North Sea, they are required to conclusively ensure that there is an extremely low risk of any significant safety issues.
In addition, in the years since the incident, there has been a significant emphasis on improving safety conditions. This is an important detail to note. While both the Ekofisk Bravo spill and the Alexander Kielland accident were significant offshore drilling disasters, Norwegian regulators and public opinion only truly shifted following the Alexander Kielland incident, and the subsequent deaths of many workers. The Ekofisk Bravo spill, although relatively significant for environmental reasons, did not drive any substantial legislative shift. As this demonstrates, Norwegian regulation regarding offshore drilling has traditionally and consistently focused on safety features, with a specific goal of maximizing safety, not maximizing the risk of a spill occurring.
Just as in England, Norway has had one of the world’s best safety records for offshore drilling for much of the past 30 years. This is again epitomized in the fact that there have been no major or devastating accidents since Alexander Kielland in 1980. Just like the United Kingdom, Norway has been characterized by a consistently increasing safety standards over time. This is yet another example of how goal-based legislation can encourage innovation and movement towards an accident-free offshore drilling experience.
This is Part 3 of a paper written following the BP Oil Spill in 2010 regarding US offshore safety. In this chapter, we take a look at the history of offshore drilling, offshore safety, and offshore policy in the United Kingdom, including incidents such as the Sea Gem and Piper Alpha.
Firstly, it is valuable to examine the United Kingdom’s drilling policy regime, where much of the regulation and subsequent industry implementation is a result of one devastating night in 1988.
The United Kingdom has a rich and turbulent history with offshore drilling. In 1965, the Sea Gem, a 5600 ton drilling barge, was the first rig to find oil in the North Sea. From the very beginning, the UK offshore industry was marked by disaster. In December 1965, only a few months after the rig began operations, the rig’s legs collapsed, destroying the rig and killing 13 crew members.
Soon after this, some of the first regulations were passed to specifically address offshore drilling safety issues. This is a trend that is evident from the very beginning; UK offshore drilling legislation has consistently been focused on safety and the creation of a safer environment for offshore drilling. Overall, these regulations were extremely prescriptive in nature, making very specific requirements of companies. These prescriptive regulations serve essentially as a checklist; each company is required to show inspectors that they have adhered to a list of safety requirements.
In fact, ironically, many of these prescriptive regulations were inspired by laws in the United States. As a 1964 letter from the British government states, “In some countries, notably in the United States of America, there are statutory provisions for regulating the management of Artificial Islands and Fixed Structures on the Outer Continental Shelf…a code of similar authority supported by credible sanctions ought to be made applicable to British structures…”. As a result of their prescriptive nature, many of these regulations were ultimately unsuccessful.
The new requirement for all rigs to have an Offshore Installation Manager, a master, or unequivocal captain of the rig, who can take charge in any emergency, proved to be ineffective. While, in theory, this OIM was supposed to have broad powers and the ability to take charge in any situation, in reality, he was often just a clerk with very little actual power. These regulations were ultimately formally codified in the Mineral Workings (Offshore Installations) Act of 1971.
Following this regulation, the North Sea was relatively peaceful until 1988, when a series of accidents devastated the United Kingdom, paving the path for a more serious regulatory regime. The Piper Alpha platform had been successfully been producing since 1976, but on July 6, 1988, an explosion and subsequent sinking of the rig killed 167 people, making it the most deadly offshore drilling disaster of all time. The explosion was caused when a large cloud of gas ignited, as it leaked from a pump that had recently had its safety valve removed. The incident shocked the nation, galvanizing regulators to identify the numerous holes in the drilling regulatory system.
The British Parliament commissioned Lord Cullen and the Cullen Inquiry to identify the causes of the disaster and to see how future British regulations could ensure that such an incident would never repeat itself. Lord Cullen’s inquiry made 106 recommendations for industry changes; ultimately, the vast majority of these recommendations were adopted by industry.
In addition, from a regulatory perspective, the agency recommended that the regulation of North Sea offshore resources be moved from the Department of Energy to the new office of the Health and Safety Executive. This switch was seen as an opportunity to avoid a conflict of interest; the same agency overseeing increases in offshore production should logically not also be responsible for offshore safety. The report also called for more significant training of employees, along with the appointment of safety representatives for each rig. These regulations were outlined in the The Offshore Installations (Safety Representatives and Safety Committees) Regulations of 1989 and the Offshore Installations (Emergency Pipe-line valve) Regulations of 1989.
While Lord Cullen’s report suggested many individual areas of change, its most significant mandate was for a fundamental transfer of regulatory authority in the United Kingdom. Prior to these reforms, the regulatory regime was top-down in nature with very specific, prescriptive rules made by regulators. Instead, Lord Cullen recommended a movement to more industry-run self-regulation.
In particular, Lord Cullen pioneered the “safety case” approach to regulation. Instead of top-down government regulations, it is up to industry to comprehensively research and present any safety risks, their relative chances of happening, and the safety mechanisms in place to ensure that they are fixed. In addition, the burden of proof is on industry to demonstrate that adequate safety mechanisms and plans are in place in the case of a major accident. Each company must operate on the ALARP (as low as reasonably practicable), meaning that all risks must be reduced to as low a level as possible without exorbitant expenses.
For every single rig, each company must create and submit a formal safety case, a comprehensive document that outlines significant hazards present in each installation, risk of occurrences, possible options for treating risks, and proper systems for emergency evacuation and rescue. In addition, the formal safety assessment requires the “identification and assessment of all hazards over the whole life cycle of a project, and across all stages from development to decommissioning”.
So, for every rig request that is processed, the onus is on the company to comprehensively demonstrate the safety of the installation. These groundbreaking offshore regulations were actually, in fact, based largely upon very similar regulations that applied to onshore installations. These regulations were encapsulated in the Offshore Installations (Safety Case) Regulations, which replaced the earlier Mineral Workings Act of 1971.
Perhaps the most substantial indication of the success of the UK’s regulatory system is that there have been no major incidents since 1988. Nevertheless, it is valuable to examine several safety statistics to better understand how successful these regulations have been.
The rate and occurrence of incidents has gradually decreased over time. This is a hallmark of the safety case, risk-based approach: over time, continued industry and government collaboration allows for the use of innovative and creative methods to achieve gradually stronger safety results. A recent discussion of the UK safety regime noted that each safety case is very expensive to create and process, around $1 million. This is the largest argument against the institution of similar safety cases in the United States; while they may be helpful, they can add seemingly unnecessary expense to companies.
This is Part 2 of a paper written following the BP Oil Spill in 2010 regarding US offshore safety. In this chapter, we take a look at the history of offshore drilling in the United States and the history of some past offshore drilling disasters.
First of all, it is valuable to take a look the United States’ own history with offshore disasters. US offshore drilling began in 1887, with the first offshore platform drilled off the cost of California. The first out-of-sight of land platform was drilled in 1947. As land petroleum resources began to decline, more and more companies began to look offshore for energy resources.
The first significant incident occurred in 1969 on Union Oil’s Platform A in Santa Barbara. A blowout on the platform caused the spill of more than 3 million gallons of crude oil into the Pacific Ocean, resulting in devastating environmental consequences. Thousands of sea birds and marine animals were killed, including dolphins, sea lions, and elephant seals. In addition, miles and miles of the beach were covered with oil. This incident, alongside the publication of Rachel Carson’s Silent Spring, catalyzed the birth of the United States Environmental movement. Since the incident, California has placed a ban on any new offshore drilling projects in state waters; this moratorium exists to the present day. In addition, this incident ushered in a nationwide moratorium on most East and West coast offshore drilling that persisted until early 2010.
In June 1979, the Mexican national oil company Pemex suffered a blowout at the Iztoc I exploratory well, about 1000 km from the Texas coast. Ultimately, over 3.3 million barrels of oil were leaked into the Gulf of Mexico. With many parallels to Deepwater Horizon, the spill hurt the fishing industry and depleted the region’s wildlife. However, the incident remained outside of the United States’ regulatory jurisdiction, and neither country took any significant action.
Another incident of note is the 1989 Exxon Valdez spill, during which a tanker spilled up to 11 million gallons of crude oil with similarly devastating environmental consequences. While this incident was not directly related to offshore drilling, it is important to realize its policy impact in shaping public opinion against drilling, particularly in the Arctic.
While there have been some previous incidents prior to Deepwater Horizon, they all failed to have much regulatory impact on US policy. Time and time again, instead of developing better regulations and fixing the problem, the temporary US solution has always been to simply prohibit offshore drilling. The recent Deepwater Horizon incident demonstrates conclusively that this solution is no longer acceptable.
In April 2010, the blowout, and subsequent explosion of the BP’s Deepwater Horizon rig in the Gulf of Mexico, killed 11 workers aboard the rig. Even more significantly, the subsequent sinking of the rig caused an oil spill that ranks among the greatest of environmental disasters of all time; ultimately, over 185 million gallons of crude oil were leaked into the Gulf of Mexico, devastating both wildlife and the occupations of thousands of Americans.
Following this spill, both Congress and the President have initiated numerous studies to discover just exactly how a disaster of this magnitude was allowed to happen. In late August, BP released internal findings, demonstrating that significant human and institutional errors were responsible for the spill. It has become apparent that a disaster of this magnitude demonstrates a significant gap in the current regulatory system that the nation uses to regulate offshore drilling activity.
As we look to identify solutions and improvements to our offshore drilling policy, it is imperative that we learn from the mistakes and experience of other nations across the globe. In particular, the United Kingdom, Norway, and Canada all have offshore drilling issues of a very similar nature to those of the United States. All three of these nations have also dealt with similar offshore drilling disasters, of equal or greater proportions. When drafting new and improved offshore drilling regulation, there is a lot that the United States can learn from the disasters and subsequent regulation enacted in other nations.
This is Part 1 of a paper written following the BP Oil Spill in 2010 regarding US offshore safety. This is the Introductory chapter that explains some of the drilling policy challenges with regards to offshore safety.
Throughout the future, our energy security, economy, and environment are all fundamentally threatened by the status quo of inadequate offshore drilling regulation. On April 20, 2010, a blowout in BP’s Deepwater Horizon oil rig in the Gulf was responsible for one of the most devastating disasters in American history. It has become apparent that a disaster of this magnitude demonstrates a significant gap in the current regulatory system that the nation uses to regulate offshore drilling activity.
Allowing poor offshore drilling to continue has profound implications for the future of the United States. First of all, the potential environmental impact of additional offshore accidents is truly immense; coral reefs, marine wildlife, and the entire ocean ecosystem were harmed by the Deepwater Horizon blowout. Secondly, the economic consequences of additional accidents are also vast. Following the Deepwater Horizon spill, the seafood and tourism industries were devastated. In addition, President Obama’s subsequent moratorium on deepwater drilling put the jobs of thousands of workers in jeopardy. Thirdly, perhaps the most significant consequence of poor drilling regulation is the danger of permanently ending all offshore drilling activity.
Invariably, as offshore incidents continue to occur, many politicians and environmental groups point out that perhaps offshore drilling has too many inherent dangers to be allowed. The consequences of this move are monumental; without domestic offshore drilling, we would be even more dependent on dictatorships and corrupt governments for most of our energy resources. However, one cannot ignore the concerns of these environmental groups; is offshore drilling really inherently safe, or is drilling safety a problem that can be solved through more effective regulation?
The experiences and successful regulatory systems of other nations across the globe conclusively demonstrate that, yes, offshore drilling can be successfully regulated. The United States would do very well to follow their example.