[House Hearing, 111 Congress]
[From the U.S. Government Publishing Office]



 
 THE DEEPWATER HORIZON INCIDENT: ARE THE MINERALS MANAGEMENT SERVICE 
                      REGULATIONS DOING THE JOB?

=======================================================================


                           OVERSIGHT HEARING

                               before the

                       SUBCOMMITTEE ON ENERGY AND
                           MINERAL RESOURCES

                                 of the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                        Thursday, June 17, 2010

                               __________

                           Serial No. 111-58

                               __________

       Printed for the use of the Committee on Natural Resources



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                     COMMITTEE ON NATURAL RESOURCES

              NICK J. RAHALL, II, West Virginia, Chairman
          DOC HASTINGS, Washington, Ranking Republican Member

Dale E. Kildee, Michigan             Don Young, Alaska
Eni F.H. Faleomavaega, American      Elton Gallegly, California
    Samoa                            John J. Duncan, Jr., Tennessee
Frank Pallone, Jr., New Jersey       Jeff Flake, Arizona
Grace F. Napolitano, California      Henry E. Brown, Jr., South 
Rush D. Holt, New Jersey                 Carolina
Raul M. Grijalva, Arizona            Cathy McMorris Rodgers, Washington
Madeleine Z. Bordallo, Guam          Louie Gohmert, Texas
Jim Costa, California                Rob Bishop, Utah
Dan Boren, Oklahoma                  Bill Shuster, Pennsylvania
Gregorio Sablan, Northern Marianas   Doug Lamborn, Colorado
Martin T. Heinrich, New Mexico       Adrian Smith, Nebraska
Ben Ray Lujan, New Mexico            Robert J. Wittman, Virginia
George Miller, California            Paul C. Broun, Georgia
Edward J. Markey, Massachusetts      John Fleming, Louisiana
Peter A. DeFazio, Oregon             Mike Coffman, Colorado
Maurice D. Hinchey, New York         Jason Chaffetz, Utah
Donna M. Christensen, Virgin         Cynthia M. Lummis, Wyoming
    Islands                          Tom McClintock, California
Diana DeGette, Colorado              Bill Cassidy, Louisiana
Ron Kind, Wisconsin
Lois Capps, California
Jay Inslee, Washington
Joe Baca, California
Stephanie Herseth Sandlin, South 
    Dakota
John P. Sarbanes, Maryland
Carol Shea-Porter, New Hampshire
Niki Tsongas, Massachusetts
Frank Kratovil, Jr., Maryland
Pedro R. Pierluisi, Puerto Rico

                     James H. Zoia, Chief of Staff
                       Rick Healy, Chief Counsel
                 Todd Young, Republican Chief of Staff
                 Lisa Pittman, Republican Chief Counsel
                                 ------                                


              SUBCOMMITTEE ON ENERGY AND MINERAL RESOURCES

                    JIM COSTA, California, Chairman
           DOUG LAMBORN, Colorado, Ranking Republican Member

Eni F.H. Faleomavaega, American      Don Young, Alaska
    Samoa                            Louie Gohmert, Texas
Rush D. Holt, New Jersey             John Fleming, Louisiana
Dan Boren, Oklahoma                  Jason Chaffetz, Utah
Gregorio Sablan, Northern Marianas   Cynthia M. Lummis, Wyoming
Martin T. Heinrich, New Mexico       Doc Hastings, Washington, ex 
Edward J. Markey, Massachusetts          officio
Maurice D. Hinchey, New York
John P. Sarbanes, Maryland
Niki Tsongas, Massachusetts
Nick J. Rahall, II, West Virginia, 
    ex officio
                                 ------                                
                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Thursday, June 17, 2010..........................     1

Statement of Members:
    Costa, Hon. Jim, a Representative in Congress from the State 
      of California..............................................     1
        Prepared statement of....................................     4
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     8
    Lamborn, Hon. Doug, a Representative in Congress from the 
      State of Colorado..........................................     5
        Prepared statement of....................................     6

Statement of Witnesses:
    Abbey, Hon. Robert V., Acting Director, Minerals Management 
      Service, U.S. Department of the Interior...................     9
        Prepared statement of....................................    11
    Abbott, Kenneth W., Former Contractor, BP Atlantis...........    54
        Prepared statement of....................................    55
    Brian, Danielle, Executive Director, Project On Government 
      Oversight (POGO)...........................................    98
        Prepared statement of....................................   100
    Kendall, Mary L., Acting Inspector General, U.S. Department 
      of the Interior............................................    13
        Prepared statement of....................................    15
    Maley, Steve, Operations Manager, Badger Oil Corporation.....   105
        Prepared statement of....................................   107
    Mann, Christopher G., Senior Officer, Pew Environment Group..    75
        Prepared statement of....................................    77
    Milito, Erik, Upstream Director, American Petroleum Institute    95
        Prepared statement of....................................    97
    Rusco, Frank, Director, Natural Resources and Environment, 
      U.S. Government Accountability Office......................    16
        Prepared statement of....................................    18
    Spackman, Alan, Vice President, Offshore Technical and 
      Regulatory Affairs, International Association of Drilling 
      Contractors................................................    84
        Prepared statement of....................................    86

Additional materials supplied:
    Lamborn, Hon. Doug, a Representative in Congress from the 
      State of Colorado, Letter submitted for the record from 
      Senator Vitter and Representative Scalise to Mary L. 
      Kendall, Acting Inspector General, U.S. Department of the 
      Interior, dated June 16, 2010..............................    32
    List of documents submitted for the record that have been 
      retained in the Committee's official files.................   122
                                     


OVERSIGHT HEARING ON ``THE DEEPWATER HORIZON INCIDENT: ARE THE MINERALS 
            MANAGEMENT SERVICE REGULATIONS DO-ING THE JOB?''

                              ----------                              


                        Thursday, June 17, 2010

                     U.S. House of Representatives

              Subcommittee on Energy and Mineral Resources

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Subcommittee met, pursuant to call, at 10:03 a.m. in 
Room 1324, Longworth House Office Building, The Honorable Jim 
Costa [Chairman of the Subcommittee] presiding.
    Present: Representatives Costa, Faleomavaega, Holt, 
Heinrich, Markey, Sarbanes, Tsongas, Lamborn, Fleming, Lummis 
and Hastings.
    Also present: Representatives Scalise, Cao, and Bilirakis.

STATEMENT OF THE HONORABLE JIM COSTA, A REPRESENTATIVE FROM THE 
                      STATE OF CALIFORNIA

    Mr. Costa. The oversight hearing of the Subcommittee on 
Energy and Mineral Resources on the Deepwater Horizon incident 
will now come to order. The subject of this morning's hearing 
is whether the regulations of the Minerals Management Service 
within the Department of the Interior are doing their job. We 
also have a GAO report and three panels of witnesses. We look 
forward to an instructive hearing this morning. Obviously, 
there are a lot of questions and concerns that have been raised 
as a result of this horrific accident.
    Before we begin, I would like to ask unanimous consent to 
allow Members who are not members of the Subcommittee to sit in 
and participate in this Subcommittee hearing. Without 
objection, so ordered. I suspect there are several different 
hearings going on concurrently, but we welcome those Members 
from the Full Committee to participate who are not part of the 
Subcommittee, and we will look forward to your contribution.
    Mr. Lamborn, you are recognized.
    Mr. Lamborn. Thank you, Mr. Chairman. I would also ask 
unanimous consent that as they are able to, that three other 
Members who are not on the Full Committee but do represent 
states on the Gulf Coast be able to sit in as well: Mr. Scalise 
of Louisiana, Mr. Cao of Louisiana and Mr. Bilirakis of 
Florida.
    Mr. Costa. All right. These are Members whose districts 
have been directly impacted as a result of this horrific 
accident that has had tragic results in the Gulf, and we 
certainly want to afford the opportunity to any Members whose 
districts lie in harm's way as a result of the terrible impacts 
that are being felt today.
    Mr. Lamborn. Thank you.
    Mr. Costa. You are welcome.
    Let me begin with my opening statement and then we will 
defer to the Ranking Member here, and then if the Ranking 
Member of the Full Committee would like to make a brief 
statement, and then we will get to the heart of the hearing 
here with the three panels that we have before us this morning.
    The Subcommittee on Energy and Mineral Resources is meeting 
today to hear testimony regarding the Minerals Management 
Service's regulations, the organizational structure that is now 
being changed as a result of the horrific accident that took 
place on the Deepwater Horizon on April 20th of this year.
    Before we begin, I think it is important that we take a 
moment to acknowledge the brave men who lost their lives aboard 
the Horizon that night. Although the focus of the Nation right 
now is on the environmental and economic catastrophe occurring 
in the Gulf, I think it is fitting and appropriate that we not 
lose sight of the fact that there was also a tremendous human 
tragedy as a result of the loss of those lives. So our thoughts 
and prayers are with those families and workers just as those 
thoughts and prayers are with everyone along the Gulf Coast who 
are suffering today as a result of this spill.
    This Subcommittee today will do the work that I think the 
American public expects Members of Congress to do as a part of 
our oversight, and in response to situations that clearly 
indicate that this tragedy could have been prevented. While it 
is expected that many may engage as a result of this horrific 
accident in the blame game and pointing the fingers, it is also 
expected that Congress do its appropriate work.
    In the aftermath of this explosion, obviously, a number of 
questions have been raised as to who is responsible, how this 
spill could be stopped, and what we can do to ensure that 
something like this hopefully never ever happens again. Three 
weeks ago, in the Full Committee hearing, we posed some of 
these questions to the heads of British Petroleum and 
Transocean, that was the contractor that was drilling the 
exploratory well.
    Today, it is the chore of the Subcommittee to turn the 
spotlight on the Minerals Management Service because, in the 
category of lessons to be learned, it is here that it seems to 
me that the appropriate work of the Subcommittee and the Full 
Committee, as well as other policy committees that have 
overlapping responsibility, that we do our due diligence in a 
way that will allow us to clearly understand what are the 
lessons to be learned.
    Although the term ``Minerals Management Service'' as we 
discuss this in the context of this Subcommittee and the Full 
Committee is always preceded with the adjective ``little 
known'' Minerals Management Service by the press, clearly it is 
a lot better known today. This agency, though, has had its 
troubles for years. It is well known to members of this 
Subcommittee, and I believe to Chairman Rahall and myself, 
because we have held in recent years a number of hearings 
trying to correct the problems that have existed in recent 
years within the Minerals Management Service, oversight 
hearings that go back to 2007.
    Recently, the Administration announced plans to split up 
the Minerals Management Service into three agencies and issue 
new rules regarding offshore drilling and safety, some of which 
already have been published. It is also pushing the pause 
button on deepwater drilling until the Presidential Commission 
can report back with recommendations on what happened, how it 
happened, why it happened, and how, most importantly, to keep 
it from happening again.
    When it comes to regulations, we must, I think, ask the 
hard questions on how we strike a proper balance between the 
role of government and the role of the private sector. Clearly, 
too little regulation can result in unsafe conditions that can 
ultimately result in the tragedy that we are facing today, but 
also too much regulation can be a problem as operators begin to 
expect the government to do everything and absolve themselves 
of their own safety responsibilities. There clearly is a 
responsibility on the part of all those who are participating, 
and it is the job of this Subcommittee and the Full Committee 
to really make those determinations as we look at legislation 
to correct these insufficiencies.
    I really see this effort as examining the role of risk 
assessment on one hand and risk management on the other. It is 
something that is always difficult, but it is something that 
must be done if we are going to take the necessary corrective 
action: assessing what are the risks that are out there, 
prioritizing those risks, and determining what is an 
appropriate role to establish a management priority list to 
adequately ensure that we are managing those risks based upon 
those that create the most potential for a catastrophe, such as 
the one that we are experiencing now.
    When it comes to an organization, therefore, we are trying 
to strike the proper balance between making sure an agency 
doesn't have too many conflicting purposes, and ensuring that 
excessive fragmentation doesn't keep those agencies from, in 
effect, working effectively, as we hope they will in the 
future. It would be particularly unfortunate if we went into a 
full circle and retreated with the same problems of 
coordination that the Linowes Commission found back in 1982.
    For the audience and for those listening here, and I know 
most members of the Subcommittees are aware, the Minerals 
Management Service was created in the early 1980s by Secretary 
Watt as a result of his secretarial authority. It is an organic 
organization. Therefore, this Secretary or any Secretary could 
reorganize the Minerals Management Service just as Secretary 
Watt created it back in the early 1980s for the purposes it was 
intended for.
    But Secretary Salazar, in his testimony to us several weeks 
ago, indicated that he didn't want to go in that direction; 
that in fact he wanted us to enact in statute a reorganization 
of the Minerals Management Service that would have the full 
force of the law in terms of its responsibility and its 
jurisdiction as we move forward and be a part, of course, of 
the appropriation and authorization under full oversight of the 
Congress.
    As I told the Secretary when he testified before us at that 
time, I hope this reorganizational structure is not simply 
reorganizing the boxes because I think the public expects us to 
do better, and certainly if we are going to ensure that future 
accidents don't happen, we are going to have to create a 
reorganization of the Minerals Management Service that simply 
is not rearranging the boxes.
    I think it is no surprise to those of you who are here and 
who I have worked with over the years that you know that I am 
one of those who is a strong supporter of offshore drilling. I 
believe it is one of the tools in the energy toolbox that we 
will continue to depend upon for decades as we look at all the 
energy tools in our energy toolbox. But we should not lose 
sight of the fact that under normal conditions, offshore 
exploration and utilization of oil and gas can be done 
extremely safely with little impact on the environment.
    But as we look today, tragic and horrific results can take 
place if we are not following all of the safety requirements 
that are necessary. Therefore, we have to, under the category 
again of lessons to be learned, ensure that if we go forward, 
we create the confidence in the American public that we can in 
fact do this safely, and therefore, again, one of the purposes 
of today's hearing.
    So, as I close, let me give you some final thoughts. It 
might cost a little more to do business during the safe periods 
as we look at what went wrong and how to fix it, but that cost 
is nothing compared to the tremendous expense and the tragedy 
that has resulted because of this accident.
    My assessment 59 days into this explosion that took place 
is that clearly as we look back on other incidences that are 
comparable, complacency and overconfidence as we look and 
examine all of the facts that took place were a direct result 
of this accident. Complacency and overconfidence.
    Complacency in so many wells that had been drilled 
offshore, both in the Gulf and around the world, that this was 
a routine way of doing business, and overconfidence in systems, 
redundant systems that were intended to apply in the event of 
an accident that did not work. Overconfidence in redundancy of 
systems that clearly failed. We saw that occur, sadly, in NASA 
with the tragic loss of the Challenger, and the Columbia; again 
complacency and overconfidence--both by the public sector and 
the private sector.
    We must remind ourselves at the end of the day that we are 
all human and, therefore, complacency and overconfidence is 
something that can and does happen. What we have to ensure as 
we look at the reexamination of how we prevent this from 
happening in the future is that complacency and overconfidence 
doesn't revisit us in the future.
    So, with that, I look forward to the witnesses' testimony. 
I will now recognize the distinguished Ranking Member Mr. Doug 
Lamborn from Colorado.
    [The prepared statement of Chairman Costa follows:]

            Statement of The Honorable Jim Costa, Chairman, 
              Subcommittee on Energy and Mineral Resources

    The Subcommittee on Energy and Mineral Resources is meeting today 
to hear testimony regarding the Minerals Management Service's 
regulations and organizational structure in light of the tragic 
accident aboard the Deepwater Horizon on April 20th.
    Before we begin, I would like to take a moment to acknowledge the 
brave men who lost their lives aboard the Horizon that night. Although 
the focus of the nation right now is on the environmental and economic 
catastrophe occurring in the Gulf, I believe we should not lose sight 
of the fact that this was also a tremendous human tragedy, and our 
thoughts and prayers are with the families of those workers, just as 
they are also with everyone along the Gulf Coast who is suffering as a 
result of this spill.
    In the aftermath of the explosion, a considerable number of 
questions have been raised as to who was responsible, how this spill 
can be stopped, and what we can do to ensure something like this never 
happens again. Three weeks ago we posed some of these questions to the 
heads of BP and Transocean. Today we turn our spotlight on the Minerals 
Management Service.
    Although the term ``Minerals Management Service'' is often preceded 
by ``little-known'' when it is mentioned in the press, this agency and 
its troubles are well known to this subcommittee, as Chairman Rahall or 
myself have chaired roughly 20 oversight hearings on the agency since 
2007.
    Recently, the administration announced plans to split the Minerals 
Management Service into three agencies and issue new rules regarding 
offshore drilling safety, some of which have already been published. It 
has also pushed the pause button on deepwater drilling until the 
Presidential commission can report back with recommendations on what 
happened, and how to keep it from happening again.
    When it comes to regulations, we must ask how to strike the proper 
balance between the roles of government and the private sector. Too 
little regulation can obviously lead to unsafe conditions. But too much 
regulation can also be a problem, as operators begin to expect the 
government to do everything and absolve themselves of their own safety 
responsibilities. This is an issue of risk analysis and risk 
management, and we must do a much better job at both of those.
    When it comes to organization, we have to strike the proper balance 
between making sure an agency does not have too many conflicting 
purposes, and ensuring that excessive fragmentation does not keep these 
agencies from working effectively. It would be particularly unfortunate 
if we went full circle and recreated the same coordination problems 
that the Linowes (LINN-oh's) Commission found back in 1982.
    I am a strong supporter of offshore drilling - I believe it is one 
of the tools in our energy toolbox that we will continue to depend on 
for decades to come. We should not lose sight of the fact that under 
normal conditions, it can be done extremely safely, with very little 
impact on the environment. But it is these ``Black Swan'' events - low-
probability, high-impact events - that we have to try to prevent, or to 
handle properly if they occur.
    It might cost a little more to do business during the safe periods, 
but that is nothing compared to the tremendous expense and tragedy that 
an accident like this can create.
                                 ______
                                 

STATEMENT OF THE HONORABLE DOUG LAMBORN, A REPRESENTATIVE FROM 
                     THE STATE OF COLORADO

    Mr. Lamborn. Thank you, Mr. Chairman.
    Today is day 59 of the Deepwater Horizon incident. We are 
here to examine possible shortcomings with regard to MMS's 
oversight of oil and gas development on the Outer Continental 
Shelf. As we conduct this hearing, we still do not know what 
actually caused the disaster on the Deepwater Horizon. We don't 
know how to stop the oil leaking from the seafloor, and still 
we don't know what happened that caused the explosion and what 
caused the failure of the blowout preventer. Yet the 
Administration has already made the decision to eliminate MMS 
as an agency, has imposed a six-month moratorium on deepwater 
drilling, and has stopped all future Outer Continental Shelf 
leasing.
    It is important to keep in mind what we do know though. We 
know that this incident has had devastating impacts on the Gulf 
Region; that the Federal Government and BP have still been 
unable to stop the leaking well; and that BP is liable for all 
the costs incurred by government agencies responding to the 
spill, restoration of the environment resulting from the spill, 
and billions in economic damages to the people of the Gulf and 
the affected states.
    We know that stopping the leak and cleaning up the oil must 
be BP and the government's first priority. We know that 
according to Ken Arnold, an engineering expert used by the 
Department to recommend safety improvements, in his opinion 
this disaster was, I quote, ``A groupthink kind of thing, and 
there were a bunch of things that were on the borderline. When 
you keep adding up the mistakes, you end up in a situation 
where a big problem sneaks up on you.''
    I wonder how our witnesses here today will explain how MMS 
is supposed to overcome rationalizing groupthink that results 
in a disaster. While MMS has tremendous responsibility, I 
wonder about their ability to overcome human error.
    We know that the Administration inspected all the offshore 
rigs with no significant safety violations and yet has 
instituted a six-month moratorium as part of a peer-reviewed 
report. That moratorium was subsequently refuted by seven of 
the engineering experts they asked to peer review the report. 
They said that in their professional opinion, I quote, 
``Changes made in the wording are counterproductive to long-
term safety.'' This is because enacting a six-month moratorium, 
possibly for political reasons, creates new and unintended 
safety problems when ongoing drilling is interrupted.
    We know that this moratorium is estimated to result in 
nearly 46,000 lost jobs almost overnight and as many as 300,000 
jobs if it continues for a long period of time. Furthermore, 
EIA estimates the moratorium will result in a reduction of 
domestic crude oil production.
    We know that the Secretary has decided to break up MMS. 
First, it was two departments, now it appears the plan is to 
make it three separate entities. On Tuesday, the President 
announced a new Director from MMS who will be responsible for 
breaking up and rebuilding the pieces of MMS. As much as the 
Administration wants to place the blame on their predecessors, 
the fact remains that while the comprehensive environmental 
analysis required for the OCS five-year leasing program and the 
lease/sale was conducted under the Bush Administration, the 
exploration plan, the application for permit to drill, amended 
APDs, and inspections of the Deepwater Horizon rig were done by 
the Obama Administration.
    We will hear from one of our witnesses today that safety, 
reportable and lost time incidents for offshore operations and 
blowout incident rates steadily improved throughout the Bush 
Administration. That is hardly the record of a group of people 
that regularly cut the regulated community slack.
    I hope that we can see the newly appointed Director of MMS 
here in the Committee at some point. Unfortunately, the 
Administration did not send him here today to testify before 
this Committee.
    Mr. Chairman, I look forward to hearing from all of the 
witnesses today, and I yield back.
    [The prepared statement of Mr. Lamborn follows:]

       Statement of The Honorable Doug Lamborn, Ranking Member, 
              Subcommittee on Energy and Mineral Resources

    Thank you, Mr. Chairman.
    Today is day 59 of the Deepwater Horizon incident. We are here to 
examine the shortcomings with regards to the Minerals Management 
Service's oversight of oil and gas development on the Outer Continental 
Shelf.
    Although we are holding this hearing, we still do not know what 
actually caused the disaster on the Deepwater Horizon. We don't know 
how to stop the oil leaking from the sea floor, and we still don't know 
what happened to cause the explosion and what caused the failure of the 
Blow out preventer.
    Yet the Administration has already made the decision to eliminate 
MMS as an agency and stopped all future OCS development.
    It is important to keep in mind what we do know?
    We know that this incident has had devastating impacts on the Gulf 
region. That the federal government and BP have still been unable to 
stop the leaking well and that BP is liable for the costs of the 
response to the spill including all costs incurred by government 
agencies responding to the spill, restoration of the environment 
resulting from the spill, and billions in economic damages to the 
people of the Gulf and the affected States. We know that stopping the 
leak and cleaning up the oil must be BP and the Government's first 
priority.
    We know that according to Ken Arnold, an engineering expert used by 
the Department to recommend safety improvements, that in his opinion, I 
quote,
        ``For six hours they were getting information that things were 
        not right on that rig and they were continuing to rationalize 
        that things were OK, It was a group-think kind of thing, and 
        there were a bunch of things that were on the borderline. ... 
        When you keep adding up the mistakes, you end up in a situation 
        where a big problem sneaks up on you.''
    I wonder how our witnesses here today will explain how MMS is 
supposed to overcome ``rationalizing group-think'' that results in a 
disaster. While MMS has tremendous responsibility, I doubt they have an 
ability to overcome human error. In our response to this disaster we 
need to know exactly what happened so we know exactly how to respond.
    We know that the administration inspected all the offshore rigs, 
with no significant safety violations, and yet has instituted a 6-month 
moratorium as part of a peer-reviewed report. That moratorium was 
subsequently refuted by 7 of the engineering experts they asked to 
peer-review the report and in their professional opinion, I quote, 
``changes made in the wording are counterproductive to long term 
safety.''
    We know that this moratorium is estimated to result in nearly 
46,200 lost jobs almost overnight and as many as 300,000 jobs if it 
continues for a long period of time. In addition, it will have a direct 
impact that will be felt through 2014.
    Furthermore, EIA estimates the moratorium will result in a, 
reductions - of domestic crude oil production that will average about 
26,000 barrels per day in the fourth quarter of 2010 and roughly 70,000 
barrels per day in 2011.
    We've asked the Administration for documents related to this 
disaster and those documents have not been forthcoming. It is very 
disappointing when the Administration has the documents that may 
provide answers that Congress needs to ensure that any legislation 
considered is designed to address a real problem. It is unfortunate the 
Administration shows no interest in demonstrating the transparency they 
demand of everyone else.
    We know the Secretary has decided to break up MMS. First, it was 
two departments, now it appears the plan is to make it three separate 
entities. Although Acting-Director Abbey is here to testify today, he 
was only appointed as the acting head of MMS after Director Birnbaum 
stepped down following our last hearing less than a month ago. Yet, on 
Tuesday the President announced a new Director for MMS who will be 
responsible for breaking up and rebuilding the pieces of MMS. 
Unfortunately, the Administration didn't send Mr. Bromwich here today 
to testify before the Committee.
    I hope that we can soon see Mr. Bromwich before us so we can ask 
him the important questions and get the important answers about the 
future of MMS.
CLOSING
    Restructuring MMS may be the only way to rebuild public trust for 
the federal government's role in leasing and development of the 
Nation's oil and gas resources on the outer continental shelf, however, 
before we make sweeping changes to the Nation's energy programs we 
should find out what happened on the Deepwater Horizon Rig April 20th. 
If it was due to human error all the regulations in the world will 
never address that problem.
    If the MMS was culpable in the accident because they didn't follow 
or enforce their own regulations . . . well new regulations won't fix 
that problem either.
    And finally we need to look at the Administration's emphasis on 
renewable energy. Did they stray from the core mission of the MMS 
leaving them leaderless and unfocused?
    As much as the Administration wants to place the blame on their 
predecessors the fact remains that the comprehensive environmental 
analysis required for the OCS 5-year leasing program and the lease sale 
was conducted under the Bush Administration, where as the Exploration 
Plan, APD, amended APDs and inspections of the Deepwater Horizon Rig 
were the responsibility of the Obama Administration.
    We will hear from one of our witnesses today that safety, 
reportable and lost time incidents', for offshore operations and 
blowout incident rates steadily improved throughout the Bush 
Administration. That is hardly a hallmark of a group of people that 
regularly cut the regulated community slack.
    I look forward to hearing from all of the witnesses today.
                                 ______
                                 
    Mr. Costa. Thank you, I appreciate that as the Ranking 
Member. Although with all due respect, I think since the 
gentleman was just appointed yesterday, it would be rather 
ambitious to think that he would be prepared to testify today. 
I will, at the Chair's discretion, and as a courtesy, allow the 
Ranking Member of the Full Committee to make a brief statement, 
and then it is the Chair's intention to begin with the first 
panel of the witnesses. So if the first panel will come forward 
and get seated, and I will recognize the gentleman from 
Washington, Doc Hastings, for a brief statement. We will then 
begin with the first panel.

STATEMENT OF THE HONORABLE DOC HASTINGS, A REPRESENTATIVE FROM 
                    THE STATE OF WASHINGTON

    Mr. Hastings. Thank you very much, Mr. Chairman, and thank 
you very much for the courtesy of allowing me to make a 
statement.
    As has been stated, we are nearly two months since the 
start of this crisis, but our priorities today remain the same 
as they were on day one, and that is to stop the leak, to clean 
up the spill, and to address the needs of the communities and 
the businesses in the Gulf of Mexico. But our next job, and the 
reason for this hearing, is to get answers and fix the failures 
in order to prevent a disaster like this from happening again.
    What is needed are educated reforms, not a rush to 
judgment. To ensure that all the necessary changes and reforms 
are made, we need to know what all of the facts are and what 
went wrong out on the Gulf--both what went wrong at the rig, as 
well as the Federal bureaucracy charged with overseeing the 
drilling. Today we are specifically looking at MMS and its 
regulations.
    As I have previously stated and what the Chairman observed 
in his opening remarks, the failures at MMS have been known for 
years, and there is bipartisan consensus that fundamental 
changes need to be made with the existing MMS structure. This 
must be done to ensure that American-made energy production is 
the safest in the world.
    Now, on Tuesday, yesterday, President Obama appointed a new 
head of MMS and it is unfortunate that he can't be here today, 
but I can certainly understand that, and hopefully this 
Subcommittee will be able to hear from him in the very near 
future.
    So if there are any changes that are to be made, whether it 
is to MMS or any other policy, it must be done right and 
thoughtfully in order to protect the environment, the 
taxpayers, and American jobs and, I might add, the security of 
our country.
    So, with that, Mr. Chairman, once again thank you for the 
courtesy and I yield back my time.
    Mr. Costa. Thank you very much. We will now begin with our 
panel. As I said at the outset, we have three panels this 
morning, and we will give the appropriate time for all members 
of the Subcommittee and those who have joined us from the Full 
Committee an opportunity to ask questions as we go through our 
process.
    So I want to thank the witnesses for appearing. I think all 
of you have testified before. You know the rules. We have the 
five-minute rule in which you will make your presentation. The 
lights there are in front of you. The green light remains on 
for four minutes, and at the fifth minute the yellow light goes 
on, and when the red light goes on we would ask you to wrap up 
your comments, if that is possible.
    So our witnesses this morning on the first panel are The 
Honorable Bob Abbey, the current and soon-to-be former Director 
of the Minerals Management Service. We appreciate your service, 
Mr. Abbey; Ms. Mary Kendall, the Acting Inspector General for 
the United States Department of the Interior; and Mr. Frank 
Rusco, the Director of National Resources and Environment at 
the U.S. Government Accountability Office, GAO.
    So let us begin first with Mr. Bob Abbey who is the 
Director of the Minerals Management Service for your opening 
statement.

STATEMENT OF THE HONORABLE BOB ABBEY, ACTING DIRECTOR, MINERALS 
      MANAGEMENT SERVICE, U.S. DEPARTMENT OF THE INTERIOR

    Mr. Abbey. Well, thank you, Chairman Costa, members of the 
Subcommittee. I know many of you from my role as the Director 
of the Bureau of Land Management. In late May, Secretary 
Salazar asked me to also assume the acting director 
responsibilities for the Minerals Management Service. It is a 
pleasure for me to be here today to represent the employees of 
the Minerals Management Service to discuss our ongoing safety 
and management reform efforts related to offshore energy 
activities.
    At his address to the Nation this past Tuesday, President 
Obama described three key areas that the Administration is 
committed to working on:
    First, the stopping of the leak from BP's wells and 
tackling the related cleanup; second, the recovery and 
restoration of the Gulf Coast by a long-term Gulf Coast 
restoration plan; and finally, the prevention of future 
disasters in the Outer Continental Shelf. The Department and 
employees of the Minerals Management Service share those 
commitments.
    Since January 2009. Secretary Salazar has taken the 
Department of the Interior in a bold new direction. We have 
worked to reform not only the Minerals Management Service's 
culture of doing business, but the entire Department of the 
Interior by issuing new ethic standards for all employees.
    Other reforms that we are implementing have resulted in a 
better balance between our energy needs and our stewardship of 
the environment. For example, Secretary Salazar has counseled 
lease sales in the Chukchi and Beaufort Seas because of 
concerns about the sensitivity of the Arctic and its 
vulnerability to oil spills. He has counseled the oil and gas 
lease sale in Bristol Bay in Alaska, and recently announced the 
establishment of the original renewable energy office located 
in Virginia which will coordinate and expedite, as appropriate, 
the development of wind, solar, and other renewable energy 
resources on the Atlantic Outer Continental Shelf.
    The tragedy and the massive spill in the Gulf have made the 
importance and urgency of this reform very clear. The Secretary 
has announced the reorganization of the Minerals Management 
Service and the establishment of the Bureau of Ocean Energy 
Management, the Bureau of Safety and Environmental Enforcement 
and the Office of Natural Resources Revenue. This effort will 
ensure the independence of the Outer Continental Shelf 
inspections and enforcement missions.
    On May 27th, the Secretary delivered to the President the 
results of a 30-day safety review that he ordered the 
Department to undertake. The report recommends a number of 
specific measures that can be taken on both a short and longer 
term basis to improve the safety of offshore oil and gas 
activities, including aggressive new operating standards and 
requirements for offshore energy companies.
    On May 30, 2010, in response to the safety report, the 
Department issued a directive to oil and gas lessees and 
operators imposing a six-month moratorium on deepwater 
drilling. The moratorium will provide time to implement new 
safety requirements and allow the Presidential Commission to 
conduct its investigation. This directive applies to drilling 
activities in water depths greater than 500 feet. Deepwater 
production will continue and be subject to closer oversight and 
safety requirements. Shallow water development and production 
activities, including exploration and development drilling, may 
proceed with adequate oversight and adherence to safety 
requirements.
    It should be noted that the Department is aware of, and 
sensitive to, the economical and social impacts of the 
moratorium and the other notices that we have been issuing that 
may have on the communities and businesses involved. We are 
working closely with members of the public and with local 
elected officials to hear their concerns and consider changes, 
where appropriate.
    Significant attention is also being given to the inspection 
program. It has long been recognized that inspection personnel 
face numerous challenges, such as the length of time to travel 
to deepwater facilities, and increasingly complicated drilling 
technology. Additional inspection program funding has been 
requested in Fiscal Year 2011. The number of inspectors needed 
and the qualifications required to be an inspector are being 
assessed and no doubt there will be changes.
    More recent actions include the President's selection of 
former Assistant U.S. Attorney and Justice Department Inspector 
General Michael Bromwich to lead reforms at the Minerals 
Management Service as the Department accelerates reforms and 
the regulation and oversight of offshore oil development. 
Bromwich will oversee reforms of the Minerals Management 
Service, helping to restore the integrity and rigor to the 
relationships between the Federal regulatory officials and oil 
companies.
    Mr. Chairman, this concludes my remarks and I will be happy 
to respond to questions from you or members of the 
Subcommittee.
    [The prepared statement of Mr. Abbey follows:]

            Statement of Robert V. Abbey, Acting Director, 
      Minerals Management Service, U.S. Department of the Interior

    Thank you, Chairman Costa, Ranking Member Hastings, and Members of 
the Committee for the opportunity to be here today. I appreciate the 
opportunity to discuss our ongoing safety and management reform efforts 
related to offshore energy activities. Since I was named acting 
director of the Minerals Management Service (MMS), we have continued 
our aggressive response to the BP oil spill in the Gulf of Mexico and 
efforts to improve the Department of the Interior's ability to respond 
to help prevent such events in the future.
    I will discuss these reforms in more detail later in my statement, 
but I want to be clear from the beginning that the changes that we have 
been making are substantive and systemic, not just cosmetic. These 
reforms are critical to help us prevent future occurrences of events 
like the Deepwater Horizon drilling rig explosion and the subsequent BP 
oil spill.
    Immediately after I was named acting director, I reviewed the major 
changes that we have made at MMS. Since January 2009, the Secretary has 
taken the bureau in a bold new direction, as exemplified by massive 
undertakings to tackle the ethics challenges at MMS, develop a new plan 
for oil and gas development on the Outer Continental Shelf (OCS), and 
create the renewable energy program.
    We have worked to reform the MMS's culture of doing business by 
issuing new ethics standards for all MMS employees during Secretary 
Salazar's first weeks here at the Department in January 2009. The 
Secretary terminated the Royalty-in-Kind program and implemented 
recommendations to improve MMS's royalty collection program that came 
from the Department's Inspector General and a committee chaired by 
former Senators Bob Kerrey and Jake Garn.
    The Secretary also extended the public comment period by 180 days 
on the Draft Proposed 5-year Program for the OCS produced by the 
previous Administration. He held regional meetings with thousands of 
stakeholders in Alaska, California, Louisiana, and New Jersey. The 
information and input gained from these additional meetings led to the 
Department's announcement, on March 31st, of a new and balanced 
strategy for exploring and developing our oil and gas resources on the 
OCS. This plan is intended to focus on development in the right ways 
and in the right places, provide order and certainty to industry and 
investors, and deliver a fair return to American taxpayers for the use 
of their resources.
    The changes and reforms we are implementing have resulted in a 
better balance between our energy needs and our stewardship of the 
environment. For example, the Secretary cancelled lease sales in the 
Chukchi and Beaufort Seas because of concerns about the sensitivity of 
the Arctic and its unique vulnerability to oil spills. He also 
cancelled the oil and gas lease sale scheduled for the magnificent 
fishing grounds of Bristol Bay in Alaska. The President formally 
withdrew Bristol Bay from any oil and gas leasing through June 30, 
2017.
    As we evaluate new areas for potential exploration and development 
on the OCS, we will conduct thorough environmental analysis and 
scientific study, gather public input and comment, and carefully 
examine the potential safety and spill risk considerations.
    Even before the Deepwater Horizon explosion occurred, the Secretary 
directed the National Marine Board, an arm of the highly respected 
National Academy of Sciences, to conduct an independent review of MMS's 
inspection program for offshore facilities. And the Department's fiscal 
year 2011 budget request provides funding to increase the number of 
inspectors available for the offshore oil and gas program by more than 
10 percent.
    The BP Deepwater Horizon oil spill tragedy has also served to 
underscore the need to develop clean, renewable sources of energy. 
Since the beginning of the Obama Administration, the Department has 
been focused on these issues and has set priorities for the 
environmentally responsible development of renewable energy on our 
public lands and the OCS. As we have moved forward to implement the 
President's clean energy goals, we have expanded the scope of the MMS's 
portfolio to include a stronger and more effective renewable energy 
program.
    On March 11, 2009, Secretary Salazar issued a Secretarial Order 
that made facilitating the production, development, and delivery of 
renewable energy on the OCS and on public lands top priorities at the 
Department. These goals are being accomplished in a manner that does 
not ignore, but instead protects our signature landscapes, natural 
resources, wildlife, and cultural resources, and working in close 
collaboration with all relevant federal, state, Tribal and other 
agencies with natural resource stewardship authority.
    In April 2009 Chairman Wellinghoff of the Federal Energy Regulatory 
Commission and the Secretary signed an agreement clarifying our 
respective agencies' jurisdictional responsibilities for leasing and 
licensing renewable energy projects on the OCS. This agreement allowed 
us to move forward with the regulatory framework for OCS renewable 
energy development that standardized the process and brought certainty 
to the application process for OCS wind, solar and hydrokinetic 
resources. This framework is important as it provides the ``rules of 
the road'' for states and companies to pursue development of projects 
on federal submerged lands.
    The Secretary also approved the Cape Wind project off 
Massachusetts' coast, and the Department has taken the first steps to 
stand up major wind projects off the coasts of New Jersey and Delaware. 
The Secretary is working with the Atlantic Coast Governors to give 
renewed impetus to developing the potential for offshore wind projects. 
In keeping with this goal, on June 8, the Secretary announced that ten 
governors of East Coast states and the Department signed a Memorandum 
of Understanding formally establishing an Atlantic Offshore Wind Energy 
Consortium to promote the efficient, orderly, and responsible 
development of wind resources on the OCS through increased federal-
state cooperation. Under the MOU, the consortium will develop an action 
plan setting forth priorities, goals, and specific recommendations and 
steps for achieving the objectives outlined in the agreement.
    The Secretary also announced the establishment of a regional 
renewable energy office, located in Virginia, which will coordinate and 
expedite, as appropriate, the development of wind, solar, and other 
renewable energy resources on the Atlantic OCS.
    The effort that we have put forward at the Department since January 
2009 has been a massive effort to chart a new direction for the 
Department of the Interior, including MMS.
Substantive and Systemic Improvements
    The tragedy and the massive spill in the Gulf have made the 
importance and urgency of this reform agenda clear. The Secretary 
issued Secretarial Order No. 3299 announcing the reorganization of the 
MMS and the establishment of the Bureau of Ocean Energy Management; the 
Bureau of Safety and Environmental Enforcement; and the Office of 
Natural Resources Revenue.
    Under the supervision of the Assistant Secretary for Land and 
Minerals Management, the Bureau of Ocean Energy Management will ensure 
the environmentally responsible and appropriate development of the OCS 
for both conventional and renewable energy in a predictable and 
effective manner. The Bureau of Safety and Environmental Enforcement 
will ensure that all production operations are safe and that potential 
negative impacts on marine ecosystems and coastal communities are 
appropriately considered in each phase of development and mitigated to 
the fullest possible extent through its independent regulation, 
oversight, and enforcement powers.
    Under the supervision of the Assistant Secretary for Policy, 
Management and Budget, the Office of Natural Resources Revenue will be 
responsible for the royalty and revenue management function ensuring 
the full and fair return to the American people for the utilization of 
these resources.
    Secretary Salazar has asked the Assistant Secretary for Policy, 
Management and Budget, Rhea Suh, the Assistant Secretary for Land and 
Minerals Management, Wilma Lewis, and one of his Senior Advisors, Chris 
Henderson, to oversee these reorganization and reform efforts. They all 
have strong organizational skills and outstanding experience and 
expertise in strategic planning, business administration, and 
performance management in the public and private sectors that will be 
invaluable assets as we move forward to implement this effort, which 
will ensure the independence of the agency's inspections and 
enforcement mission.
    The Secretary has testified before your Committee in support of 
organic legislation for the functions now performed by MMS. The OCS 
currently provides 31 percent of the Nation's domestic oil production 
and almost 11 percent of its domestic natural gas production. The MMS 
is one of the largest collectors of non-tax and non-trust revenue for 
the Treasury, and has collected an average of more than $13 billion 
annually for the past 5 years. The Administration believes that 
agencies with responsibilities of this magnitude should be governed by 
thoughtfully considered organic legislation.
    The President submitted to Congress, along with other 
Administration proposals to address the BP oil spill, legislation 
requesting additional funds for the Department to inspect offshore oil 
and gas platforms, draft enforcement and safety regulations, and carry 
out studies needed in light of this event. The legislation would also 
extend the time allowed by statute for MMS to review and approve oil 
and gas exploration plans from 30 to 90 days.
A Steadfast Focus on Safety
    Following the tragic and unprecedented explosion of the Deepwater 
Horizon drilling rig, Secretary Salazar ordered immediate inspections 
of all deepwater oil and gas drilling operations in the Gulf of Mexico, 
and we issued a safety notice to all rig operators reminding them of 
their responsibilities to follow our regulations and to conduct full 
and thorough tests of their equipment.
    The Secretary also established an OCS Safety Oversight Board 
comprising top Departmental officials charged with strengthening safety 
and improving overall management, regulation, and oversight of 
operations on the OCS.
    On May 27th, the Secretary delivered to the President the results 
of the 30-day safety review that he ordered the Department to 
undertake. The purpose of that Safety Report was to evaluate oil and 
gas safety measures that could be put in place on an interim basis 
before the on-going investigations to identify the root cause of the BP 
oil spill disaster have been completed. We consulted with a wide range 
of experts from government, academia and industry in drafting this 
report, and the draft recommendations contained in it were peer 
reviewed by seven experts identified by the National Academy of 
Engineering.
    The report recommends a number of specific measures that can be 
taken on both a short and longer term basis to improve the safety of 
offshore oil and gas activities, including aggressive new operating 
standards and requirements for offshore energy companies. Key 
recommendations include a recertification of all Blowout Preventers for 
new floating drilling operations; stronger well control practices, 
blowout prevention and intervention procedures; tougher inspections for 
deepwater drilling operations; and expanded safety and training 
programs for rig workers.
    After reviewing the report, the President ordered the Department to 
immediately implement a number of actions, including a continuation of 
the existing moratorium and a suspension of the issuance of new permits 
to drill new deepwater wells until the Presidential Commission 
investigating the BP oil spill has completed its six-month review. We 
are taking these immediate actions now, and we are laying the 
groundwork for additional measures in the future. On June 8th, for 
example, the Secretary announced the release of a ``Notice to Lessees'' 
that provides an initial set of new safety requirements that all 
offshore operators must meet.
Conclusion
    Mr. Chairman, the Secretary and his management team at the Minerals 
Management Service look forward to working with you over the coming 
weeks as we continue to implement real reform to improve the safety, 
transparency, and efficiency of oil and gas exploration and production 
operations on the OCS.
                                 ______
                                 
    Mr. Costa. Well, thank you very much for that testimony, 
Mr. Abbey, and we will now look forward to our next witness, 
Mary Kendall, the Inspector General. Please begin your 
testimony.

   STATEMENT OF MARY KENDALL, ACTING INSPECTOR GENERAL, U.S. 
                   DEPARTMENT OF THE INTERIOR

    Ms. Kendall. Thank you. Mr. Chairman and members of the 
Committee, thank you for the opportunity to testify today about 
the proposed reorganization of the Minerals Management Service 
and the regulatory structure that MMS has promulgated governing 
not only its own operations, but those of the offshore energy 
industry that MMS regulates.
    While the Office of Inspector General has not in the recent 
past conducted any rigorous review of MMS's governing 
regulations, during the course of other work that the OIG has 
done we have gained an understanding of some of the regulatory 
challenges that face MMS. We are also presently in the process 
of identifying gaps, weaknesses, and opportunities for 
improvement in MMS operations and regulations with a focus on 
the permitting process, the inspections and enforcement 
programs, environmental and safety requirements, and the 
regulations governing post-incident review or investigation.
    Let me begin with the latter. MMS has five brief paragraphs 
of regulation to cover post-incident investigation. As a 
result, in conducting the investigation into the Deepwater 
Horizon disaster, MMS is bound by the Coast Guard regulations 
which are comprehensive, but in my view, completely backwards, 
gathering evidence via public hearing rather than developing 
evidence to culminate in a public forum.
    Generally, MMS regulations are heavily reliant on industry 
to document and accurately report on operations and production. 
I am not prepared today to comment specifically on MMS's 
permitting, environmental, or safety regulations, although 
given the April 20th disaster on the Deepwater Horizon and the 
present circumstances in the Gulf of Mexico, I certainly 
believe that our review will find opportunities to strengthen 
the regulations in these areas.
    We learned recently that MMS has a dearth of regulations 
governing their inspection program. Anecdotally, we have also 
learned that MMS inspectors, at least in the Gulf of Mexico 
region, operate relatively independently with little direction 
as to what must be inspected or how. This is not the least of 
the inspector's challenges, however. We have been told that MMS 
has approximately 60 inspectors for the Gulf of Mexico region, 
to cover nearly 4,000 facilities. This is juxtaposed with the 
Pacific Coast, which has 10 inspectors for 23 facilities. MMS 
also has difficulty recruiting inspectors due to its grade and 
pay structure. Industry tends to offer considerably higher 
wages and bonuses. When they can be recruited, inspectors for 
MMS receive primarily on-the-job training. In any 
reorganization effort MMS should consider formalizing and 
updating its inspector training program and conduct periodic 
reviews of the program to ensure inspectors receive the proper 
and current training to keep pace with technological advances 
and procedural changes.
    We also have questions about MMS's enforcement programs. In 
the operations and safety arena, we question whether the civil 
penalty regulations are tied appropriately to the seriousness 
of the violation and the threat to human safety, property, and 
the environment. Again, the regulations are sparse.
    We have also had questions about the influence of industry 
on MMS in developing regulations. While industry clearly has 
influence, MMS appears to have followed the proper legal 
processes in finalizing its regulations. Because MMS relies 
heavily on an industry that it regulates, however, the 
possibility for, and the perception of, undue influence will 
likely remain.
    While there is ample opportunity to improve and strengthen 
the regulations that govern MMS and the industry, the greatest 
challenge in reorganizing and reforming MMS lies with the 
culture, both within MMS and within industry. As you know, the 
Office of Inspector General has issued a plethora of reports 
critical of various practices and misconduct. While each report 
included troubling accounts of inappropriate behavior on the 
part of certain MMS employees, that conduct was for the most 
part enabled by industry.
    How do we address the conduct of industry representatives? 
Perhaps it is time to impose some ethics requirements on 
companies doing business with the government.
    Mr. Chairman and members of the Committee, this concludes 
my prepared testimony today, and I would be happy to answer any 
questions.
    [The prepared statement of Ms. Kendall follows:]

        Statement of Mary L. Kendall, Acting Inspector General, 
                    U.S. Department of the Interior

    Mr. Chairman and members of the committee, thank you for the 
opportunity to testify today about the proposed reorganization of the 
Minerals Management Service (MMS) and the regulatory structure that MMS 
has promulgated, governing not only its own operations, but those of 
the offshore energy industry that MMS regulates.
    While the Office of Inspector General (OIG) has not, in the recent 
past, conducted any rigorous review of MMS' governing regulations, 
during the course of other work that the OIG has done we have gained an 
understanding of some of the regulatory challenges that face MMS. We 
are also presently in the process of identifying gaps, weaknesses, and 
opportunities for improvement in MMS operations and regulations, with a 
focus on the permitting process, the inspections and enforcement 
programs, environmental and safety requirements, and the regulations 
governing post-incident review or investigation.
    Let me begin with the latter. MMS has five brief paragraphs of 
regulation to cover post-incident investigation. As a result, in 
conducting the investigation into the Deepwater Horizon disaster, MMS 
is bound by the Coast Guard regulations, which are comprehensive, but 
in my view, completely backwards, gathering evidence via public 
hearing, rather than developing evidence to culminate in a public 
forum.
    Generally, MMS regulations are heavily reliant on industry to 
document and accurately report on operations, production and royalties. 
I am not prepared today to comment specifically on MMS' permitting, 
environmental or safety regulations, although given the April 20th 
disaster on the Deepwater Horizon and the circumstances in the Gulf of 
Mexico presently; I certainly believe that our review will find 
opportunities to strengthen the regulations in these areas.
    We learned recently that MMS has a dearth of regulations governing 
their inspection program - four brief, general subsections. 
Anecdotally, we have also learned that MMS inspectors, at least in the 
Gulf of Mexico region, operate relatively independently, with little 
direction as to what must be inspected, or how. MMS inspectors are 
guided, generally, by instructions in a handbook on Potential Incidents 
of Non-Compliance, or PINCs. This is not the least of the inspectors' 
challenges, however. We have been told that MMS has approximately 60 
inspectors for the Gulf of Mexico region to cover nearly 4,000 
facilities. This is juxtaposed with the Pacific Coast, which has 10 
inspectors for 23 facilities.
    MMS also has difficulty recruiting inspectors due to its grade and 
pay structure. Industry tends to offer considerably higher wages and 
bonuses.
    When they can be recruited, inspectors for MMS receive primarily 
on-the-job training. The MMS Offshore Inspector Training program 
guidance and instructions appear to be considerably out of date, 
developed between 1984 and 1991, and credit individuals with industry 
experience. During our investigative efforts, we have found indications 
that inspector training and training programs have not kept pace with 
the technological advancements occurring within the industry. In any 
reorganization effort, MMS should consider formalizing and updating its 
inspector training program and conduct periodic reviews of the program 
to ensure inspectors receive the proper and current training to keep 
pace with technological advancements and procedural changes.
    We also have questions about MMS' enforcement programs. In the 
royalties arena, we have been told repeatedly that, historically, the 
Office of Enforcement takes action to encourage compliance rather than 
take a stronger deterrent approach. During the past year however, we 
have been told that the Office of Enforcement may be taking a more 
aggressive approach. In the operations and safety arena, we question 
whether the civil penalty regulations are tied appropriately to the 
seriousness of the violation and the threat to human safety, property 
and the environment. Again, the regulations are sparse.
    We have also had questions about the influence of industry on MMS 
in developing regulations. While industry clearly has influence, MMS 
appears to have followed the proper legal processes in finalizing its 
regulations. Because MMS relies heavily on the industry that it 
regulates in so many areas, however, the possibility for, and 
perception of, undue influence will likely remain.
    While there is ample opportunity to improve and strengthen the 
regulations that govern MMS and the industry that extracts valuable 
resources from federal lands, the greatest challenge in reorganizing 
and reforming MMS lies with the culture - both within MMS and within 
industry. As you know, the OIG has issued a plethora of reports 
critical of various practices and misconduct. While each report 
included troubling accounts of inappropriate behavior on the part of 
certain MMS employees, that conduct was, for the most part, enabled by 
industry. Secretary Salazar and MMS have taken action to address the 
misconduct of MMS employees, have implemented and reinforced a new 
ethics policy, and have indicated some additional steps they intend to 
take to address some of the conflicts unique to MMS, given its 
closeness to and reliance upon industry. But how do we address the 
conduct of industry representatives? Perhaps it is time to impose some 
ethics requirements on companies doing business with the government.
    Mr. Chairman and members of the committee, this concludes my 
prepared testimony. I would be happy to answer any questions that you 
may have.
                                 ______
                                 
    Mr. Costa. Thank you very much.
    Our final witness for this panel and then we will begin the 
question period is Mr. Frank Rusco, the Director of Natural 
Resources and Environment with the U.S. Government 
Accountability Office. Mr. Rusco.

   STATEMENT OF FRANK RUSCO, DIRECTOR, NATURAL RESOURCES AND 
       ENVIRONMENT, U.S. GOVERNMENT ACCOUNTABILITY OFFICE

    Mr. Rusco. Thank you, Mr. Chairman and members of the 
Subcommittee. Thank you for the chance to speak here today on 
the Department of the Interior's management of oil and gas on 
Federal lands and offshore, and on plans to reorganize 
Interior's oil and gas program. This hearing takes place 
against a sobering backdrop of the ongoing oil spill in the 
Gulf of Mexico that began April 20th with an explosion and 
tragic loss of life. It now appears that the spill is, or will 
be, the largest in history and the effects on sea life, Gulf 
Coast wetlands, local economies and the livelihoods of many are 
large and growing.
    For the past five years, GAO, Interior's Inspector General, 
and others have reported on Interior's management of Federal 
oil and gas resources, both onshore and offshore. These reports 
have made over 120 recommendations, many of which Interior has 
been working hard to implement. To be fair, it must be said 
that in the course of our work we found the vast majority of 
Interior employees and management to be talented, hardworking 
and scrupulous. However, we also found pervasive systemwide 
problems in key areas that we believe must be addressed by 
Interior's top management as part of any successful 
reorganization.
    Interior has not kept pace with changes in the oil and gas 
industry or changing lease management practices employed by 
other resource owners. For example, in 2008, we found that 
Interior had not comprehensively studied how much or how to 
charge for Federal oil and gas for over 25 years despite 
significant changes in the industry over that time frame. 
Similarly, we found in 2008 that Interior had not kept abreast 
of lease terms used by some states and other resource owners to 
encourage faster development of promising leases while 
providing more time to develop more speculative leases. To its 
credit, Interior is currently engaged in reviewing these two 
areas.
    In 2010, we reported that Interior had not kept pace with 
the oil industry in terms of production verification 
technologies, including the types of meters used to measure oil 
and gas and how data from meters are collected and stored. 
These findings raise questions about whether or not the Federal 
Government is collecting the proper amount of oil and gas 
revenue.
    Second, Interior lacks agency-wide guidance or regulations 
that define how it will manage the Federal oil and gas program. 
For example, MMS evaluates offshore leases using available 
seismic and other information to estimate a fair market value 
for the rights to develop any oil and gas on a lease. The MMS 
will not sell a lease unless it receives at least this amount. 
In contrast, BLM does not estimate the value of the oil and gas 
on lands it leases.
    Further, in our recent work looking at production 
verification, we found that Interior's MMS for offshore and BLM 
for onshore had differing capabilities to evaluate changing 
production metering and verification technologies, and that 
they did not coordinate adequately to share information and 
avoid duplication of effort.
    Third, Interior lacks adequate management information 
systems to provide sufficient oversight of the program. For 
example, we have identified instances in which, one, database 
is used to collect and store royalty payment information were 
not fully compatible; two, data were not collected 
consistently; three, agency databases lacked key functionality, 
resulting in staff using off-line work-arounds; four, 
inaccurate data were recorded in agency databases; and five, 
some data that would be useful for evaluating management 
decisions were being collected in an ad hoc fashion.
    The oil and gas industry has changed dramatically over the 
past three decades and will continue to change as technology 
improves, allowing oil and gas resources to be developed that 
not long ago were out of reach. This is true onshore with the 
expanding development of unconventional oil and gas and 
offshore in deepwater.
    The ongoing oil spill in the Gulf illustrates starkly the 
need to be able to assess the risks associated with new 
technologies and to attenuate that risk were possible and 
mitigate the damages associated with even rare catastrophic 
failures.
    As the Secretary consults with Congress on plans to 
reorganize Interior's oil and gas program, there are 
opportunities to address this need both onshore and offshore. 
Changes in technology in the oil/gas industry and gas industry 
will require evolving guidance and regulations. Such change 
will provide opportunities for Interior to take the best from 
its onshore and offshore programs and apply these best 
practices more consistently within and across MMS and BLM.
    Last, any reorganization of Interior's oil and gas program 
will be most successful if Interior develops management 
information systems that are robust, compatible across the 
entire program, and up to date.
    This concludes my oral remarks. I will be happy to answer 
any questions you may have. Thank you.
    [The prepared statement of Mr. Rusco follows:]

     Statement of Frank Rusco, Director, Natural Resources and the 
           Environment, U.S. Government Accountability Office
[GRAPHIC] [TIFF OMITTED] 56979.006


    .epsMr. Chairman and Members of the Subcommittee:
    We appreciate the opportunity to participate in this hearing to 
discuss the Secretary of the Interior's proposal to reorganize the 
Minerals Management Service (MMS) in response to the Deepwater Horizon 
drilling rig disaster. The tragic loss of life, damage to natural 
resources, loss of livelihoods, and harm to local economies that 
resulted from the explosion, fire, and catastrophic oil spill in the 
Gulf of Mexico have again drawn national attention to federal oversight 
of exploration and production of oil and gas from federal land and 
waters. Under the current organizational structure, the Department of 
the Interior's bureaus are responsible for regulating the processes 
that oil and gas companies must follow when leasing, drilling, and 
producing oil and gas from federal leases as well as ensuring that 
companies comply with all applicable requirements. Specifically, the 
Bureau of Land Management (BLM) oversees onshore federal oil and gas 
activities, and MMS's Offshore Energy and Minerals Management (OEMM) 
oversees offshore oil and gas activities. Additionally, MMS's Minerals 
Revenue Management (MRM) is responsible for collecting royalties on oil 
and gas produced from both onshore and offshore federal leases. In 
fiscal year 2009, Interior reported collecting over $9 billion in 
royalties for oil and gas produced on federal lands and waters, 
purchase bids for new oil and gas leases, and annual rents on existing 
leases, making revenues from federal oil and gas one of the largest 
nontax sources of federal government funds.
    In recent years, we and others, including Interior's Office of 
Inspector General (OIG) have conducted numerous evaluations of federal 
oil and gas management and revenue collection processes and practices 
and have found many material weaknesses (see app. II for related GAO 
reports). Our work included reviews of Interior's oversight practices, 
operations, and rules, and our conclusions have been remarkably 
consistent: the agency has not done enough to meet the challenges it 
faces. Others, including the Interior OIG and a panel of experts 
convened by Interior have drawn similar conclusions. As a result, 
Interior staff are in the midst of attempting to implement over 100 
recommendations spanning the scope of the department's operations. We 
acknowledge Interior's efforts to reassess key oil and gas policies 
addressing revenue collection and rates of development on federal lands 
and waters as an important first step to address material weaknesses. 
In addition, the Secretary of the Interior announced several changes to 
BLM's leasing process in May 2010.
    Because of the recent announcement of the Secretary's proposed 
reorganization, we have not conducted a detailed analysis of these 
reorganization plans. However, our recent work on oil and gas 
management as well as work in the area of strengthening independent 
oversight of nuclear facilities and operations can be useful in 
evaluating key aspects of the Secretary's plans to reorganize MMS. In a 
2008 report, \1\ we identified the following key elements that any 
nuclear safety oversight organization should possess in order to 
provide effective independent oversight:
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    \1\ GAO, Nuclear Safety: Department of Energy Needs to Strengthen 
Its Independent Oversight of Nuclear Facilities and Operations, GAO-09-
61 (Washington, D.C.: Oct. 23, 2008). We developed these elements based 
on a long history of reviewing nuclear safety at DOE and supporting 
independent oversight and through our work with outside nuclear safety 
experts.
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          Technical expertise: The organization should have 
        sufficient staff with the expertise to perform sound safety 
        assessments.
          Ability to perform reviews and require that findings 
        be addressed: The organization should have the working 
        knowledge necessary to review compliance with requirements, 
        developed through periodic reviews, and should also have 
        sufficient authority to require the program offices to 
        effectively address its review findings and recommendations.
          Enforcement authority: The organization should have 
        sufficient authority to achieve compliance with requirements.
          Public access: The organization should provide public 
        access to its reports so that those most affected by operations 
        can get information.
          Independence: The organization conducting oversight 
        should be structurally distinct and separate from the entities 
        it oversees.
    When coupled with findings and recommendations about the management 
of federal oil and gas leases from our prior and ongoing work, these 
key elements may provide the Secretary and Congress with a useful 
framework for evaluating proposed reorganizations. While nuclear safety 
differs from safety associated with offshore oil and gas development, 
we believe there are similarities that make the key elements 
applicable. Specifically, as has been made clear by the recent oil 
spill disaster in the Gulf of Mexico, Interior is responsible for 
overseeing an industry with potentially significant impacts on workers, 
the environment, and vast areas of our oceans. Further, as with nuclear 
safety, even small probability adverse events can have significant and 
far-reaching effects.
    My testimony today uses the five key elements for effective 
independent oversight to broadly frame examples from our prior work on 
the management of federal oil and gas activities issued from June 2005 
through March 2010, as well as preliminary results from our ongoing 
review on public challenges to federal onshore oil and gas leasing 
decisions, to assist the committee as it considers changes to 
Interior's oversight. We developed these preliminary results from June 
2009 through June 2010 by reviewing federal laws, regulations, and 
guidance; analyzing data from Interior on the four Mountain West states 
(Colorado, New Mexico, Utah, and Wyoming) responsible for 69 percent of 
the oil and 94 percent of the natural gas produced on federal lands 
during fiscal years 2007 to 2009; \2\ and interviewing BLM officials 
and stakeholder groups--including representatives from the energy 
industry, state government, and nongovernmental organizations 
representing environmental, hunting, fishing, and recreational 
interests. We conducted the performance audit work that supports this 
statement in accordance with generally accepted government auditing 
standards. Those standards require that we plan and perform the audit 
to obtain sufficient, appropriate evidence to produce a reasonable 
basis for our findings and conclusions based on our audit objectives. 
We believe that the evidence obtained provides a reasonable basis for 
our statement today.
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    \2\ We assessed the reliability of these data and found them to be 
sufficiently reliable for our purposes.
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Technical Expertise
    Interior agencies should have sufficient staff with the technical 
expertise to oversee the activities under their authority. Oil and gas 
production methods on federal lands and waters have become increasingly 
sophisticated over the past decade. Additionally, oil and gas companies 
now rely on information technology to manage and oversee their 
operations. In a March 2010 review, we found that Interior had 
challenges in hiring, training, and retaining staff in critical oil and 
gas oversight roles, leading to questions about the technical capacity 
of Interior staff overseeing oil and gas activities. \3\
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    \3\ GAO, Oil and Gas Management: Interior's Oil and Gas Production 
Verification Efforts Do Not Provide Reasonable Assurance of Accurate 
Measurement of Production Volumes, GAO-10-313 (Washington, D.C.: Mar. 
15, 2010).
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          We found that Interior has faced difficulties in 
        hiring, retaining, and training staff in key oil and gas 
        oversight positions. Specifically, we found that staff within 
        Interior's program for verifying that oil and gas produced from 
        federal leases are correctly measured--including petroleum 
        engineers and inspectors--lacked critical skills because, 
        according to agency officials, Interior 1) has had difficulty 
        in hiring experienced staff, 2) has struggled to retain staff, 
        and 3) has not consistently provided the appropriate training 
        for staff. Interior's challenges in hiring and retaining staff 
        stem, in part, from competition with the oil and gas industry, 
        which generally pays significantly more than the federal 
        government. Moreover, key technical positions responsible for 
        oversight of oil and gas activities have experienced high 
        turnover rates, which, according to Interior officials, impede 
        these oversight employees' capacity to oversee oil and gas 
        activities. These positions included petroleum engineers, who 
        process drilling permits and review oil and gas metering 
        systems, and inspection staff--including BLM's petroleum 
        engineer technicians and production accountability technicians 
        onshore--who conduct drilling, safety and oil and gas 
        production verification inspections (see app. I). For example, 
        we found that turnover rates for OEMM inspectors at the four 
        district offices we reviewed between 2004 and 2008 ranged from 
        27 to 44 percent. Furthermore, Interior has not consistently 
        provided training to the staff it has been able to hire and 
        retain. For example, neither onshore nor offshore petroleum 
        engineers had a requirement for training on the measurement of 
        oil and gas, which is critical to accurate royalty collections 
        and can be challenging at times because of such factors as the 
        type of meter used, the specific qualities of the gas or oil 
        being measured, and the rate of production. Additionally, 
        although BLM offers a core curriculum for its petroleum 
        engineer technicians and requires that they obtain official BLM 
        certification and then be recertified once every 5 years to 
        demonstrate continued proficiency, the agency has not offered a 
        recertification course since 2002, negatively impacting its 
        ability to conduct inspections. It is important to note that 
        BLM's petroleum engineer technicians are the eyes and ears for 
        the agency--performing key functions and also perhaps the only 
        Interior staff with direct contact with the onshore lease 
        property itself.
          We also found that Interior's efforts to provide its 
        inspection staff with mobile computing capabilities for use in 
        the field are moving slowly and are years from full 
        implementation. Interior inspectors continue to rely on 
        documenting inspection results on paper, and later reentering 
        these results into Interior databases. Specifically, Interior's 
        BLM and OEMM are independently developing the capacity for 
        inspection staff to (1) electronically document inspection 
        results and (2) access reference documents, such as American 
        Petroleum Institute standards and measurement regulations, via 
        laptops while in the field. BLM initiated work on developing 
        this capacity in 2001, whereas OEMM is now in the preliminary 
        planning stages of a similar effort. According to Interior 
        officials, widespread implementation of a mobile computing tool 
        to assist with production verification and other types of 
        inspections, potentially including drilling and safety, are 
        still several years away. Interior officials said having such a 
        tool would allow inspection staff to not only easily reference 
        technical documents while conducting inspections to verify 
        compliance with regulations but also to document the results of 
        those inspections while in the field and subsequently upload 
        them to Interior databases.
Ability to Perform Reviews and Require that Findings Be Addressed
    An effective oversight program should include a component for 
systematic inspections and reviews, whose findings should be documented 
and subsequently addressed. In several recent reviews, we found that 
Interior had been unable to complete its necessary reviews, including 
both environmental and oil and gas production verification inspections 
and certain offshore environmental analyses.
          We found that Interior was unable to meet its goals 
        for conducting environmental and production verification 
        oversight inspections because of a management focus on 
        drilling. For example, in June 2005, \4\ we reported that 
        Interior devoted fewer resources to completing onshore 
        environmental inspections--inspections to ensure that oil and 
        gas companies are complying with various environmental laws and 
        lease stipulations. According to Interior staff, one of the 
        principal reasons was that management shifted available 
        resources to processing drilling permits. More recently, in 
        March 2010, \5\ we reported that Interior had only been able to 
        complete approximately one-third of the required onshore 
        production verification inspections, raising concerns about the 
        accuracy of the oil and gas volumes reported to MRM.
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    \4\ GAO, Oil and Gas Development: Increased Permitting Activity Has 
Lessened BLM's Ability to Meet Its Environmental Protection 
Responsibilities, GAO-05-418, (Washington, D.C.: June 17, 2005).
    \5\ GAO-10-313.
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          In another March 2010 report, \6\ we found that MMS 
        faces challenges in the Alaska Outer Continental Shelf (OCS) 
        Region in conducting reviews of oil and gas development under 
        the National Environmental Protection Act (NEPA), which 
        requires MMS to evaluate the likely environmental effects of 
        proposed actions, including oil and gas development. \7\ 
        Although Interior policy directed its agencies to prepare 
        handbooks providing guidance on how to implement NEPA, we found 
        that MMS lacked such a handbook. The lack of comprehensive 
        guidance in a handbook, combined with high staff turnover in 
        recent years, left the process for meeting NEPA requirements 
        ill defined for the analysts charged with developing NEPA 
        documents. It also left unclear MMS's policy on what 
        constitutes a significant environmental impact as well as its 
        procedures for conducting and documenting NEPA-required 
        analyses to address environmental and cultural sensitivities, 
        which have often been the topic of litigation over Alaskan 
        offshore oil and gas development. We also found that the Alaska 
        OCS Region shared information selectively, a practice that was 
        inconsistent with agency policy, which directed that 
        information, including proprietary data from industry, be 
        shared with all staff involved in environmental reviews. 
        According to regional MMS staff, this practice has hindered 
        their ability to complete sound environmental analyses under 
        NEPA.
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    \6\ GAO, Offshore Oil and Gas Development: Additional Guidance 
Would Help Strengthen the Minerals Management Service's Assessment of 
Environmental Impacts in the North Aleutian Basin, GAO-10-276, 
(Washington, D.C.: Mar. 8, 2010).
    \7\ Pub. L. No. 91-190, 83 Stat. 852 (1970).
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          In an August 2009 report examining Interior's 
        royalty-in-kind (RIK) program, \8\ we found that although MRM 
        staff had made progress in conducting reviews of gas 
        imbalances--instances where Interior may not be receiving the 
        total amount of royalties due from gas production--they were 
        unable to determine the exact amount the agency was owed for 
        imbalances because it lacked certain key information. For 
        example, MRM did not verify production data to ensure it 
        received its entitled percentage of RIK gas from leases taken 
        in kind. Without these and other data, MRM staff were unable to 
        quantify revenues from imbalances, leading to forgone revenues 
        and uncertainty about how much gas the government is owed.
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    \8\ GAO, Royalty-in-Kind Program: MMS Does Not Provide Reasonable 
Assurance It Receives Its Share of Gas, Resulting in Millions in 
Forgone Revenue, GAO-09-744, (Washington, D.C.: Aug. 14, 2009).
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          Until recently, Interior has left key functions it 
        oversees without review for long periods. In two reports issued 
        in 2008, we noted that Interior received less in royalties and 
        other payments for development of its oil and gas resources 
        than many other countries and that Interior did less than other 
        landowners to encourage development of resources it leased for 
        development. In a September 2008 report on royalties and other 
        payments, \9\ we found that Interior had not done a 
        comprehensive analysis of its royalty and other revenue 
        structure in over 25 years, and we recommended that it do so. 
        In an October 2008 report, \10\ we found that Interior had done 
        less than selected states and private landowners to encourage 
        development of oil and gas leases, and we recommended that it 
        develop a strategy to evaluate options to encourage faster 
        development on federal lands. Just this year, Secretary Salazar 
        directed that Interior conduct studies to examine these issues. 
        We are encouraged that Interior is undertaking these efforts 
        and hopeful that the findings of the studies will identify 
        opportunities to improve Interior's oversight of oil and gas 
        development.
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    \9\ GAO, Oil and Gas Royalties: The Federal System for Collecting 
Oil and Gas Revenues Needs Comprehensive Reassessment, GAO-08-691, 
(Washington, D.C.: Sept. 3, 2008).
    \10\ GAO, Oil and Gas Leasing: Interior Could Do More to Encourage 
Diligent Development, GAO-09-74, (Washington, D.C.: Oct. 3, 2008).
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Enforcement Authority
    Oversight entities must have the authority to ensure that all 
regulated entities fully comply with the law and applicable 
regulations. In our March 2010 report, \11\ we determined that in some 
instances Interior is uncertain about its legal authority for 
undertaking necessary enforcement actions and may be using its 
enforcement authority inconsistently.
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    \11\ GAO-10-313.
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          We found that Interior had not determined the extent 
        of its authority over key elements of oil and gas production 
        infrastructure necessary for ensuring accurate measurement. 
        This infrastructure includes meters in (or after) gas plants, 
        which may include the meter where oil and gas are measured for 
        royalties and meters owned by pipeline companies. These 
        companies frequently own, operate, and maintain the meter used 
        at the official measurement point on federal leases and own the 
        production data the meter generates. Because it did not know 
        the extent of its authority, Interior did not know what steps 
        it could take to enforce its standards and regulations for 
        meters. Thus it lacked assurances that royalty-bearing volumes 
        of oil and gas were correctly measured.
          We also found that Interior inspection staff were 
        not, in all cases, pursuing enforcement actions when they 
        identified oil and gas production activities not in compliance 
        with its regulations. Specifically, we found that some Interior 
        staff were not issuing incidents of non-compliance--a type of 
        enforcement action--when they identified certain measurement 
        devices during the course of their inspections, as they believe 
        the current measurement regulations were out of date. If staff 
        do not uniformly ensure compliance with regulations through 
        specified procedures and document their findings, Interior is 
        at risk of not capturing data to know the full extent of 
        particular violations.
Public Access
    Organizations should make relevant information widely available to 
ensure that those most affected by operations, including the public, 
can fully participate in decision-making processes that can, 
ultimately, have significant impacts. We recently found that Interior 
has been providing inconsistent and limited information with respect to 
its use of categorical exclusions in approving onshore oil and gas 
activities. Also, in preliminary results from our ongoing work on 
public challenges to BLM's federal onshore oil and gas lease sale 
decisions, we found that BLM state offices provide limited and varying 
amounts of information to the public on their leasing decisions.
          In September 2009, we found that BLM's use of 
        categorical exclusions was not fully transparent. \12\ In 
        addressing long-term energy challenges, Congress enacted the 
        Energy Policy Act of 2005, in part to expedite oil and gas 
        development within the United States. \13\ This law authorizes 
        BLM, for certain oil and gas activities, to approve projects 
        without preparing new environmental analyses that would 
        normally be required by NEPA. Section 390 of the Energy Policy 
        Act of 2005 does not specify procedures for involving or 
        informing either the public or other government agencies when 
        section 390 categorical exclusions are used. According to 
        Interior and BLM officials, there is no requirement to publicly 
        disclose that BLM used a section 390 categorical exclusion to 
        approve a project or to disclose approved section 390 
        categorical exclusion decision documents. Instead, the public 
        depends on the discretion of each field office for such 
        disclosure. We found that BLM field offices had different 
        degrees and methods of disclosing information related to 
        decisions on section 390 categorical exclusions. For example, 
        some field offices, such as White River and Glenwood Springs, 
        Colorado, publicly disclosed online which Applications for 
        Permit to Drill they approved with section 390 categorical 
        exclusions. In contrast, other field offices, such as Price/
        Moab, Utah, and Pinedale, Wyoming, did not publicly disclose 
        their decisions to use section 390 categorical exclusions and, 
        in fact, required the public to file Freedom of Information Act 
        requests to identify which projects BLM approved using section 
        390 categorical exclusions and to obtain copies of approved 
        section 390 categorical exclusion decision documents. In some 
        cases, it was difficult for other governmental agencies--
        including state environmental agencies--and the public to 
        determine whether BLM had used a section 390 categorical 
        exclusion until it was too late to comment on or challenge 
        BLM's action. When the public and other federal and state 
        agencies do not have a reliable or consistent way of 
        determining which projects have been approved with section 390 
        categorical exclusions, they lack a fundamental piece of 
        information needed to hold BLM accountable for their use.
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    \12\ GAO, Energy Policy Act of 2005: Greater Clarity Needed to 
Address Concerns with Categorical Exclusions for Oil and Gas 
Development under Section 390 of the Act, GAO-09-872, (Washington, 
D.C.: Sept. 26, 2009).
    \13\ Pub. L. No. 109-58, 119 Stat. 594 (2005).
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          In preliminary results from our ongoing work on 
        public challenges to BLM's federal oil and gas lease sale 
        decisions in the four Mountain West states responsible for most 
        onshore federal oil and gas development, we found the extent to 
        which BLM made publicly available information related to public 
        protests filed during the leasing process varied by state and 
        was generally limited in scope. We also found that 
        stakeholders--nongovernmental organizations representing 
        environmental, recreational, and hunting interests that filed 
        protests to BLM lease offerings--wanted additional time to 
        participate in the leasing process and more information from 
        BLM about its leasing decisions. In May 2010, the Secretary of 
        the Interior announced several agencywide leasing reforms that 
        are to take place at BLM, some of which may address concerns 
        raised by these stakeholder groups. For instance, BLM state 
        offices are to provide an additional public review and comment 
        opportunity during the leasing process. They are also required 
        to post on their Web sites their responses to letters filed in 
        protest of state office decisions to offer specific parcels of 
        land for oil and gas development.
Independence
    The agency should be free from the direct and indirect influence of 
the oil and gas industry. Our past work, as well as that of Interior's 
OIG, has identified several instances where Interior staff had 
inappropriate relationships with oil and gas industry personnel, 
raising questions about whether Interior's oversight efforts were 
sufficient.
          During the course of our audit work for our report on 
        Interior's use of categorical exclusions, \14\ allegations were 
        made about inappropriate relationships between Interior 
        management and the oil and gas industry. We referred these 
        allegations to Interior's OIG, which initiated an 
        investigation. The results of the investigation substantiated 
        these inappropriate contacts, the details of which are included 
        in an Interior OIG investigative report.
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    \14\ GAO-09-872.
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          Additional reports by Interior's OIG have also 
        identified instances that call into question the independence 
        of key staff working in Interior's oil and gas program. In 
        August 2008, Interior's OIG reported on inappropriate 
        relationships between staff working in Interior's RIK program 
        and the oil and gas industry. \15\ Specifically, the OIG found 
        that between 2002 and 2006 nearly one-third of the RIK program 
        staff socialized with and received a wide array of gifts and 
        gratuities from oil and gas companies with whom the program was 
        conducting official business. Most recently, in May 2010, the 
        OIG reported on inappropriate relationships between Interior's 
        offshore inspection staff and certain oil and gas companies 
        operating in the Gulf of Mexico. \16\ Interior's Acting 
        Inspector General stated that her greatest concern is the 
        environment in which these inspectors operate, particularly the 
        ease with which they move between industry and government.
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    \15\ Interior OIG, Investigative Report: Oil Marketing Group - 
Lakewood (Washington, D.C.: Aug. 19, 2008).
    \16\ Interior OIG, Investigative Report: Island Operating Company 
et al (Washington, D.C.: Mar. 31, 2010).
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    In conclusion, over the past several years, we and others have 
found Interior to be in need of fundamental reform. This past work has 
found weaknesses across a wide range of Interior's oversight of onshore 
and off shore oil and gas development. Secretary Salazar has taken 
notable steps to begin comprehensive evaluations of leasing rules and 
practices as well as the amount and ways in which the federal 
government collects revenues. Interior is also currently implementing a 
number of our recommendations aimed at making improvements within the 
existing organization of Interior's functions.
    As the Secretary and Congress consider what fundamental changes are 
needed in how Interior structures its oversight of oil and gas 
programs, we believe that our and others' past work provides a strong 
rationale for broad reform of the agency's oil and gas oversight 
functions--at MMS to be sure, but also across other parts of Interior, 
including those responsible for oversight of onshore areas. If steps 
are not taken to ensure effective independent oversight, we are 
concerned about the agency's ability to manage the nation's oil and gas 
resources, ensure the safe operation of onshore and offshore leases, 
provide adequate environmental protection, and provide reasonable 
assurance that the U.S. government is collecting the revenue to which 
it is entitled. Reorganization and fundamental change can be very 
difficult for an organization. Although we have not conducted a 
detailed evaluation of Secretary Salazar's proposals for reforming MMS, 
we believe that regardless of how MMS is ultimately reorganized, 
Interior's top leadership must also address the wide range of 
outstanding recommendations for any reorganization effort to be 
effective.
    Mr. Chairman, this completes my prepared statement. I would be 
happy to respond to any questions that you or other Members of the 
Subcommittee may have at this time.
GAO Contact and Staff Acknowledgement
    For further information on this statement, please contact Frank 
Rusco at (202) 512-3841 or [email protected]. Contact points for our 
Congressional Relations and Public Affairs offices may be found on the 
last page of this statement. Other staff that made key contributions to 
this testimony include, Ron Belak, Dan Feehan, Glenn C. Fischer, Jon 
Ludwigson, Ben Shouse, Kiki Theodoropoulos, and Barbara Timmerman.
Appendix I: Data on Turnover of Key Department of the Interior 
        Inspection Staff
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        .eps[GRAPHIC] [TIFF OMITTED] 56979.003
        
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        .eps[GRAPHIC] [TIFF OMITTED] 56979.005
        
.epsAppendix II: Related Prior GAO Reports
    Oil and Gas Management: Interior's Oil and Gas Production 
Verification Efforts Do Not Provide Reasonable Assurance of Accurate 
Measurement of Production Volumes, GAO-10-313, (Washington, D.C.: Mar. 
15, 2010).
    Offshore Oil and Gas Development: Additional Guidance Would Help 
Strengthen the Minerals Management Service's Assessment of 
Environmental Impacts in the North Aleutian Basin, GAO-10-276, 
(Washington, D.C.: Mar. 8, 2010).
    Energy Policy Act of 2005: Greater Clarity Needed to Address 
Concerns with Categorical Exclusions for Oil and Gas Development under 
Section 390 of the Act, GAO-09-872, (Washington, D.C.: Sept. 26, 2009).
    Federal Oil And Gas Management: Opportunities Exist to Improve 
Oversight, GAO-09-1014T, (Washington, D.C.: Sept. 16, 2009).
    Royalty-In-Kind Program: MMS Does Not Provide Reasonable Assurance 
It Receives Its Share of Gas, Resulting in Millions in Forgone Revenue, 
GAO-09-744, (Washington, D.C.: Aug. 14, 2009).
    Mineral Revenues: MMS Could Do More to Improve the Accuracy of Key 
Data Used to Collect and Verify Oil and Gas Royalties, GAO-09-549, 
(Washington, D.C.: July 15, 2009).
    Strategic Petroleum Reserve: Issues Regarding the Inclusion of 
Refined Petroleum Products as Part of the Strategic Petroleum Reserve, 
GAO-09-695T, (Washington, D.C.: May 12, 2009).
    Oil and Gas Management: Federal Oil and Gas Resource Management and 
Revenue Collection In Need of Stronger Oversight and Comprehensive 
Reassessment, GAO-09-556T, (Washington, D.C.: Apr. 2, 2009).
    Oil and Gas Leasing: Federal Oil and Gas Resource Management and 
Revenue Collection in Need of Comprehensive Reassessment, GAO-09-506T, 
(Washington, D.C.: Mar. 17, 2009).
    Department of the Interior, Minerals Management Service: Royalty 
Relief for Deepwater Outer Continental Shelf Oil and Gas Leases--
Conforming Regulations to Court Decision, GAO-09-102R, (Washington, 
D.C.: Oct. 21, 2008).
    Oil and Gas Leasing: Interior Could Do More to Encourage Diligent 
Development, GAO-09-74, (Washington, D.C.: Oct. 3, 2008).
    Oil and Gas Royalties: MMS's Oversight of Its Royalty-in-Kind 
Program Can Be Improved through Additional Use of Production 
Verification Data and Enhanced Reporting of Financial Benefits and 
Costs, GAO-08-942R, (Washington, D.C.: Sept. 26, 2008).
    Mineral Revenues: Data Management Problems and Reliance on Self-
Reported Data for Compliance Efforts Put MMS Royalty Collections at 
Risk, GAO-08-893R, (Washington, D.C.: Sept. 12, 2008).
    Oil and Gas Royalties: The Federal System for Collecting Oil and 
Gas Revenues Needs Comprehensive Reassessment, GAO-08-691, (Washington, 
D.C.: Sept. 3, 2008).
    Oil and Gas Royalties: Litigation over Royalty Relief Could Cost 
the Federal Government Billions of Dollars, GAO-08-792R, (Washington, 
D.C.: June 5, 2008).
    Strategic Petroleum Reserve: Improving the Cost-Effectiveness of 
Filling the Reserve, GAO-08-726T, (Washington, D.C.: Apr. 24, 2008).
    Mineral Revenues: Data Management Problems and Reliance on Self-
Reported Data for Compliance Efforts Put MMS Royalty Collections at 
Risk, GAO-08-560T, (Washington, D.C.: Mar. 11, 2008).
    Strategic Petroleum Reserve: Options to Improve the Cost-
Effectiveness of Filling the Reserve, GAO-08-521T, (Washington, D.C.: 
Feb. 26, 2008).
    Oil and Gas Royalties: A Comparison of the Share of Revenue 
Received from Oil and Gas Production by the Federal Government and 
Other Resource Owners, GAO-07-676R, (Washington, D.C.: May 1, 2007).
    Oil and Gas Royalties: Royalty Relief Will Cost the Government 
Billions of Dollars but Uncertainty Over Future Energy Prices and 
Production Levels Make Precise Estimates Impossible at this Time, GAO-
07-590R, (Washington, D.C.: Apr. 12, 2007).
    Royalties Collection: Ongoing Problems with Interior's Efforts to 
Ensure A Fair Return for Taxpayers Require Attention, GAO-07-682T, 
(Washington, D.C.: Mar. 28, 2007).
    Oil and Gas Royalties: Royalty Relief Will Likely Cost the 
Government Billions, but the Final Costs Have Yet to Be Determined, 
GAO-07-369T, (Washington, D.C.: Jan. 18, 2007).
    Strategic Petroleum Reserve: Available Oil Can Provide Significant 
Benefits, but Many Factors Should Influence Future Decisions about 
Fill, Use, and Expansion, GAO-06-872, (Washington, D.C.: Aug. 24, 
2006).
    Royalty Revenues: Total Revenues Have Not Increased at the Same 
Pace as Rising Oil and Natural Gas Prices due to Decreasing Production 
Sold, GAO-06-786R, (Washington, D.C.: June 21, 2006).
    Oil and Gas Development: Increased Permitting Activity Has Lessened 
BLM's Ability to Meet Its Environmental Protection Responsibilities, 
GAO-05-418, (Washington, D.C.: June 17, 2005).
    Mineral Revenues: Cost and Revenue Information Needed to Compare 
Different Approaches for Collecting Federal Oil and Gas Royalties, GAO-
04-448, (Washington, D.C.: Apr. 16, 2004).
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                                 ______
                                 
    Mr. Costa. Thank you very much for the entire panel's 
testimony, and now we will begin the opportunity to give 
members of the Subcommittee a chance to ask questions. Let me 
begin.
    Mr. Abbey, you are kind of wearing two hats these days, 
both with the Minerals Management Service and the Bureau of 
Land Management. The proposed changes that we are talking about 
in the Minerals Management Service appears doesn't apply as it 
relates to the leasing and permitting if we went forward with 
this implementation for onshore leasing and permitting. Why 
should they be separate?
    Mr. Abbey. Well, I think there are a couple of reasons, Mr. 
Chairman, and one is the urgency of moving forward as quickly 
as possible in reviewing the lessons learned from the terrible 
Deepwater Horizon accident and apply those lessons as quickly 
as we can into the regulatory reforms that are underway as well 
as other rules that we will be implementing.
    But one of the primary purposes for the reorganization is 
to provide greater clarity of the mission for both leasing and 
permitting as well as safety and enforcement, and to try to 
separate those two functions so that each new bureau that is 
proposed for creation will have a clear, distinct function and 
that both missions will be equally executed.
    Mr. Costa. But then what you are eventually saying is that 
ultimately down the road it could apply it to onshore as well?
    Mr. Abbey. Well, let me address that. Right now we have 
already created a special office under the Assistant Secretary 
for Land and Minerals. That special office is made up of 
employees from both the Minerals Management Service, as well as 
the Bureau of Land Management and the Office of Surface Mining 
and Reclamation. The primary purpose of that special office 
under the auspices of the Assistant Secretary of Lands and 
Minerals is to provide greater efficiencies and consistency in 
how we are managing oil and gas as well as all other minerals, 
both offshore as well as onshore. So there is work underway 
already to address the deficiencies and the inconsistencies 
between offshore and onshore.
    Mr. Costa. Well, to be revisited, but obviously the first 
priority is to plug the well and to clean up this mess, but it 
seems to me it is likely that we are going to act on 
legislation prior to the August break, I would guess, and yet 
the President has established this Commission that has a six-
month time frame. Clearly, they will come with recommendations 
that may complement but may differ from the recommendations 
that are currently being made with the Minerals Management 
Service and to the hearing process as we do our due diligence.
    How are we going to incorporate this Commission's 
recommendations?
    Mr. Abbey. Well, any recommendation that will be 
forthcoming from that Commission will be certainly considered 
in how we are going to conduct business in the future. The 
whole purpose of that Presidential Commission is to look back 
to determine what lessons have been learned and how we can best 
apply them so that we can have a safer program that we are 
managing.
    Mr. Costa. There are some that say that on the shallow 
wells, the 500 feet of ocean depth and less, that the new 
regulations for offshore are vague and confusing. Is MMS 
working on any new guidance for the operators on those shallow 
wells?
    Mr. Abbey. Mr. Chairman, we issued a notice to lessees last 
week regarding the need for operators operating in shallow 
waters to adhere to new safety requirements that was part of 
that notice to lessees. Due to the confusion among the 
operators as well as our own employees, we held a meeting with 
the shallow water coalition members as well as Members of 
Congress to go through that notice to lessees provision by 
provision to provide greater clarity.
    At the conclusion of that meeting that we had last week, 
people now have a greater understanding of what the intent of 
that notice to lessees are and how we intend to implement it.
    Mr. Costa. What would it take for the companies to be able 
to demonstrate in light of this disaster that they really have 
the responsibility or the capability I should say, capability 
to clean up a disaster of this magnitude?
    Clearly, all the reports that we have seen, the reports 
that were filed that were basically kind of cookie cutter 
copies of one another are, in light of what we have 
experienced, inadequate to do the job.
    Have you had a chance to begin to reassess what a 
comprehensive containment and clean-up plan would require in a 
worst case scenario as such as we are experiencing?
    Mr. Abbey. Well, what we are experiencing today certainly 
is way beyond anyone's imagination of what could have happened 
with offshore drilling.
    Mr. Costa. Well, now we can imagine it.
    Mr. Abbey. Now we can imagine it.
    Mr. Costa. OK?
    Mr. Abbey. You are absolutely right. There is no doubt that 
the spill response plans that have been previously submitted by 
the operators on the Outer Continental Shelf will need to be 
reviewed and amended based upon the lessons that we now have 
learned, so the lessees and the operators will be required to 
go back, revisit their spill response plans, and to come in 
with something that will give not only those of us who are now 
working in the Minerals Management Service, but the American 
public a little more confidence about their ability to control 
or to contain any future spills.
    Mr. Costa. Well, obviously today the confidence of the 
American public on that point, if not at zero, is near zero, so 
we have to do better.
    Quickly, Mr. Rusco and Ms. Kendall, because my time has 
expired, but in terms of the reorganization proposal that is 
before us and that will hopefully address in Chairman Rahall's 
CLEAR Act later this month or in July, do you see any potential 
problems in the reorganization plan?
    Mr. Rusco. We do have some concerns about just the ability 
of Interior staff to simultaneously respond to the catastrophic 
oil spill in the Gulf, to undergo a major structural 
reorganization, and also work to implement the over 120 
recommendations made by GAO, the DOI Inspector General, and 
Interior's Royalty Policy Committee.
    We do feel that any reorganization should be done only 
after thoughtful analysis with sufficient time to consider a 
variety of organizational structures and in consultation with 
Congress.
    Mr. Costa. Yes, on that point, I mean, I think members of 
the Subcommittee ought to note, I think we need to spend time 
in looking at the current staffing to do the inspection. I 
mean, the numbers I have are basically five for the West Coast, 
one for Alaska, and 56 members for the Gulf Coast. That is not 
going to get the job done if we are going to bring in the 
regulatory requirements that I think many of us believe is 
going to be necessary to begin to reinstill confidence, and so 
we are going to have to do a cost analysis of how many 
inspectors you really need based upon the rigs that are out 
there.
    Ms. Kendall, do you have any concerns about this 
reorganization plan that you would like to point out to us?
    Ms. Kendall. Well, I certainly share your concerns about 
the inspectors.
    Mr. Costa. The staffing?
    Ms. Kendall. The staffing, definitely, and I agree with Mr. 
Rusco that it needs to be well thought out and considered 
before hasty action is taken. Unexpected and unintended 
consequences attach to most actions, and I think proceeding 
thoughtfully and carefully is definitely the way we need to 
proceed, the Department needs to proceed in the reorganization.
    Mr. Costa. All right. My time has expired clearly. Mr. 
Lamborn.
    Mr. Lamborn. Thank you, Mr. Chairman.
    Ms. Kendall, the Department takes very seriously the 
importance and integrity of scientific and peer-reviewed 
documents. In fact, your office in the past has conducted a 
number of thorough investigations into the accusations that 
political appointees changed or modified scientific documents 
after they were peer reviewed.
    Now, according to recent press reports and releases from 
the Department, the recent offshore safety report after being 
peer reviewed was edited by political operatives at either the 
Department or at the White House to assert, against the 
recommendation of the report signers, that a six-month OCS, 
Outer Continental Shelf moratorium was appropriate. This was 
then falsely presented to the public as the sole work of the 
engineers and experts whose names were signed onto the report.
    These experts have since objected to this 
misrepresentation. They have also suggested that this political 
decision to impose a moratorium will not only cost jobs, energy 
security, and huge amounts of needed revenue, but may actually 
threaten the safety of workers and increase environmental 
threats to the Gulf Region already so hard hit by this spill.
    I want to know if your office is planning or has even 
already opened an investigation into who made these changes.
    Ms. Kendall. Congressman Lamborn, we have not. I understand 
right now that the 60-day moratorium is the issue of a lawsuit 
brought against the Department by industry. It has been the 
Office of Inspector General's practice for as long as I have 
been with the office that when a matter is in another forum, 
such as a Federal District Court, unless there is a compelling 
need for us to get involved and, in this case, we have not 
heard from either of the parties--either the Department or the 
industry--we would not investigate that. I think it would be 
inappropriate.
    I mean, I have heard all the things that you have itemized 
here. I was not involved in the process of developing that 
report, and I think it would be inappropriate for me to comment 
on it.
    Mr. Lamborn. And by the way, I didn't want to make any 
suggestion that you were involved. In fact, it is good that you 
are not so that you can be a disinterested, objective observer 
because there needs to be an investigation.
    Let me point out that the lawsuit that you are referring to 
is about the enactment of the six-month moratorium. It has 
nothing to do with the report that some said should result in a 
moratorium. These are two entirely different matters. So why 
can't you do an investigation of who made the changes in a 
peer-reviewed document to say that there should be a moratorium 
when that was not in the document originally?
    Ms. Kendall. Perhaps we can revisit that issue. I think the 
distinction is a fine one, but I would like to be able to think 
about it a little further.
    Mr. Lamborn. Well, I know that some Members of Congress, 
both in the Senate and in the House, have called for you to 
make this investigation. Do you see any reason why you can't do 
this type of investigation?
    Ms. Kendall. No, we could certainly do that type of 
investigation.
    Mr. Lamborn. OK. Thank you, Mr. Chairman, and I yield back.
    Mr. Costa. All right.
    Mr. Lamborn. And I would like to introduce for the record, 
without objection, a letter on this issue from Senator Vitter 
and Representative Scalise.
    Mr. Costa. All right, without objection so ordered.
    [The letter submitted for the record by Mr. Lamborn 
follows:]
[GRAPHIC] [TIFF OMITTED] 56979.011


    .epsMr. Costa. The gentleman from New Mexico, Mr. Heinrich, 
for five minutes.
    Mr. Heinrich. Thank you, Mr. Chair.
    I have a few questions for you, Director Abbey, and I want 
to say I appreciate your service for taking over what is 
clearly, even in the interim, an organization that has been 
highly challenged and has a lot of issues that we need to get 
to the bottom of, and work through over the next months to make 
sure that this kind of thing never happens again.
    We have all seen a copy of the oil response plan from BP. 
It was approved by MMS back in, I think, November of 2008. It 
determined that the worst case scenario for an uncontrolled 
blowout from the Gulf was 300,000 barrels of oil per day. It 
says, ``I hereby certify that BP Exploration and Production, 
Incorporated, has the capability to respond to the maximum 
extent practicable to a worst case discharge or a substantial 
threat of such a discharge resulting from the activities 
proposed in our exploration plan.''
    Now, I know the estimates have changed and we are now 
looking at something between 35,000 and 69,000 barrels per day 
from this event. That is nowhere near the worst case scenario 
that they said that they were planning for, and I think we can 
all agree that at least within the first couple of months the 
response to that 35 to 60 thousand barrels was completely 
anemic. I can only imagine what a 300,000 barrel per day event 
would look like.
    Do you think MMS fundamentally made a mistake in approving 
some of these plans for these large-scale events that on paper 
said everything is fine without digging into the background and 
making sure that they actually had the physical capability to 
manage a catastrophe like this?
    Mr. Abbey. Congressman, I think that is an excellent 
question, and there are a number of investigations and reviews 
underway right now to determine just what Minerals Management 
Service employees did as part of their review process.
    I will say this, and I will use the Chairman's own words, I 
think over time all of us, whether it is society, employees of 
the Minerals Management Service or the industry, became 
complacent and overconfident that such a spill like the one we 
are seeing today could never occur. We now know differently. As 
we look forward to apply the lessons that we are learning each 
day, you are going to see a more diligent effort on the part of 
any regulatory agency who has any jurisdiction at all relative 
to the offshore drilling and protection. We will do a better 
job.
    As far as addressing your specific question, I will tell 
you this; that during my period of time, four weeks now with 
the Minerals Management Service, I have seen nothing but 
professionalism on the part of its employees. I do think a 
reorganization is needed so that we can separate the various 
functions, distinct functions of that organization so that we 
can have some checks and balances. So I am certainly all for 
the reorganization proposals as we presented. I do think also 
that a better job needs to be done in the future.
    Mr. Heinrich. What can we do right now? What is the MMS or 
the Administration doing to make sure that all of our other 
offshore producers, whether we are talking about the old rigs 
in California or we are talking about Alaska, the Gulf, that we 
deal with this gap between what is on paper and what is 
physically capable in a response of them, what are they capable 
of providing in terms of personnel, in terms of skimmers, in 
terms of containment devices to deal with the blowout?
    What is MMS doing to make sure that, God forbid this thing 
should happen on another well someplace else offshore, that the 
producer has the capability and it is their responsibility 
under the OPA, the Act that was passed back in 1990, that they 
have the physical capability to respond to that?
    Mr. Abbey. Well, I certainly think that that is one of the 
purposes for this pause, the six-month moratorium, to allow all 
of us to go back and to determine the plans that are in place 
today, whether or not they are adequate to address what could 
potentially occur out there. The first and foremost effort that 
we are applying right now is to prevent future spills, anything 
like this from ever happening again.
    The Secretary ordered and we have implemented inspections 
on all deepwater rigs to make sure that the equipment that they 
have on those rigs are what they say they have on those rigs, 
that they are appropriate, that they are qualified people on 
those rigs to manage the equipment. We are increasing the 
number of inspections on not only deepwater rigs but also 
shallow water rigs, and at the same time we are reviewing the 
plans that had been previously submitted to determine if they 
are still adequate.
    Mr. Heinrich. That brings me to another thought, and we 
have heard some stories, both within this disaster and also 
allegations on other rigs, of a mismatch between, for example, 
the engineering drawings for equipment and what is actually 
there, or you know, we heard all about the batteries and the 
miswiring and all those things associated with the blowout 
preventer.
    Is part of that process also doing some sort of review to 
make sure that when the drawings or the documentation says X, 
that we don't have Y when you actually get out there onto the 
rig?
    Mr. Costa. This will have to be the gentleman's last 
question, and please respond succinctly.
    Mr. Abbey. And my response will be quick. That is part of 
the review.
    Mr. Costa. All right. The Chair will now recognize the 
gentlewoman from Wyoming, Ms. Lummis.
    Ms. Lummis. Thank you, Mr. Chairman.
    My first question is for Ms. Kendall. A former MMS Director 
testified before this Committee last week or two weeks ago that 
after requesting the IG to come in and do a review of 
mismanagement--excuse me--misbehavior within the MMS, that it 
took three years to get an IG's report. That happened twice.
    Can you explain to me why it should take three years when a 
director of an agency asks for an inspector general's report, 
and then is told, you know, stand at ease while we do our 
report so they can't even solve the problems that they 
themselves have identified and requested the IG to evaluate, 
how that advances good government?
    Ms. Kendall. Congresswoman, I am not aware of an incident 
where that occurred, where MMS has requested an investigation 
of us, and then something has taken that long.
    The other thing that puzzles me is that our policy is one 
where as we find things during the course of an investigation 
if there is something that the Department can do management-
wise to solve some underlying sort of organic problem, we will 
communicate with the Department at the time we find this 
information. We don't hold it until the end. Now in some cases 
they may not have everything they need to take administrative 
action say against an individual until they have a final 
report, but they can take corrective management action if there 
is an organic problem that led to some misconduct.
    Ms. Lummis. Well, Mr. Chairman, the testimony that we heard 
from a former MMS Director in this Committee was that an MMS 
Director had requested an IG's hearing in 2004, and got the 
final report in 2007, and then subsequently a follow-up report 
requested in 2007 was not issued until 2010. That seems to me 
to be inadequate in terms of a time frame for responding to a 
request by an administrator to solve the problems within their 
own agency. So I would refer, and let us visit about that 
further because that was brought to our attention a couple of 
weeks ago.
    Mr. Abbey, do you believe that BLM's leasing program should 
be removed from BLM oversight and given to a separate agency, 
BLM's leasing programs?
    Mr. Abbey. I do not.
    Ms. Lummis. OK, thank you. I also have a question about the 
unionized employees that are inspectors in the Gulf. A couple 
of weeks ago, again in testimony before this Committee, we 
learned that that father and son inspection team that last 
inspected the Deepwater Horizon well came to their subsequent 
questioning session with a union lawyer, and that they were 
unionized employees. It seems to me that in an inspector 
situation, that union representation and unionization of these 
types of employees may not be the best and appropriate place 
for unionization. Do you agree or disagree?
    Mr. Abbey. No, Congresswoman, I really do not agree with 
that. I don't think that this event had anything to do with the 
union or whether or not the inspectors were unionized. There is 
a lot that we are going to learn about our inspection program. 
There is a lot that we already had underway prior to the 
Deepwater Horizon. Secretary Salazar had asked the National 
Marine Board to conduct an independent review of the Minerals 
Management Service inspection program and to come in with their 
own recommendations so that we could improve the work that was 
currently being performed by our inspections.
    It is very complicated work, but going back to your 
question it has nothing to do with whether or not the 
inspectors are unionized or not.
    Ms. Lummis. And Mr. Rusco, you mentioned that with regard 
to lease terms that have come a long way, that we maybe at the 
Department of the Interior have not kept up to date with the 
lease terms that would give the people of the United States 
more return for their minerals in the Gulf, and I would just 
commend to your attention the changes that were made in the 
lease terms for the State of Wyoming's own oil and gas, and 
surface agreements, which were updated during the last four 
years under its director, Lynne Boomgaarden, who has since 
returned to the private practice of law, but she did a really 
good job updating the terms of the State of Wyoming's oil and 
gas leases, and surface use agreements to provide for more 
safety, for environmental protection, and for stronger lease 
terms and return to the people of the State of Wyoming in the 
instance of Wyoming's terms, and they might serve as a good 
example for onshore Department of the Interior lease terms. Not 
the offshore, we don't have that much----
    Mr. Costa. Not in Wyoming.
    Ms. Lummis. Thanks, Mr. Costa.
    Mr. Costa. That will have to be the gentlewoman's last 
word. The Chair will now recognize the gentleman from Maryland, 
Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman. Thank you to the 
witnesses.
    I am convinced when all of this look back and inquiry is 
done that we will determine that for years, years ago really 
MMS handed over to the oil industry the keys to the kingdom, 
and they have taken full advantage of that, and what we are 
about is we have to get the keys to the kingdom back because 
the industry really doesn't seem to be able to act responsibly 
on its own.
    Now when you look at the resources available to MMS, the 
lack of resources, and the lack of vigilance, I think that will 
also be part of this story. If I am the industry, MMS is like a 
fly buzzing around my head. It is a joke, and we have to figure 
out how to make the agency more relevant so the industry 
actually cares when they show up for an inspection.
    I mean, people who are--and you made the point, people who 
don't get paid enough so that you can recruit good people--and 
they are standing next to an industry person on the rig who is 
telling them this, that and the other thing, and you know, 
weaving and bobbing and so forth, it is not a fair fight. We 
have to get back to where the industry actually cares when an 
MMS inspector is coming because maybe they have to like get 
with the program.
    So what I am curious about is just the permit process 
because I am very interested in going forward how we make sure 
that certain parts of that process are elevated in the statute, 
particularly the ability to demonstrate as a company that if 
you are going to go drill on the moon, or you know, 5,000 feet 
under the surface of the ocean, that the techniques that you 
have for stopping a spill actually will work there, and you 
have to certify to that, and there has to be some independent 
verification of it, and so forth and so on.
    So what happens? The application comes in, all the boxes 
are checked, and then the MMS folks go to work. So can you just 
take me through the process that happens when that permit comes 
in, in terms of getting to the approval stage?
    Mr. Abbey. Well, an application for a permit to drill is 
submitted. It would be based upon the exploration plan that had 
already been submitted and previously approved by the Minerals 
Management Service. There would have been an analysis of the 
exploration plan to determine what the likely consequences of 
future drilling would be based upon the terms and conditions of 
the exploration plan.
    The Minerals Management Service employees would then look 
at the application for permit to drill. They would assess the 
adequacy of the information that was contained in that permit 
application. They would move forward and either reject the 
application for a permit to drill or to accept it.
    At that point in time once a permit is issued to the 
industry member they can go forward and begin their operations.
    Mr. Sarbanes. Wait a second. So what you just described 
could be an entirely paper exercise, right? Permit comes in, 
information is sought. The personnel of MMS review that, 
determine whether it is incomplete or whether it is 
insufficient, and ask for more information. More information 
comes in and an intelligent person can figure out how many 
extra pages to add to their application to get that box 
checked.
    Are there points along the way in that initial process you 
just described where somebody is actually going out and kicking 
the tires on the operation? I mean, really sort of pulling the 
layers back and trying to corroborate whether what is presented 
on paper is actually matched by the reality? Does that happen 
or would you say the resources aren't there for that to happen?
    Mr. Abbey. Well, up until the time that you have approved 
an application for permit to drill, there are really no tires 
to kick. There are no operations to go out and review or 
inspect. It is only after they have the authorization to move 
forward to lay their platform and then to commence with 
drilling is there any action that an inspector can go out and 
monitor, and to determine whether or not they are conducting 
business----
    Mr. Sarbanes. Well, you could go--if somebody is saying 
that the Deepwater Horizon rig, if there is a problem that 
happens the way we are going to respond to it is with X, Y, and 
Z technique, or equipment, or relying on the blowout preventer 
or something, you could say to them, well, can you demonstrate 
other places where this is in place, and we can go check it 
out? We can do an independent review of whether a blowout 
preventer actually can never fail like the sun coming up every 
day, or whether it is just another piece of equipment that can 
fail. I mean, presumably there are places you can go look to 
verify what is being submitted even though it is not for that 
particular location or rig, right?
    Mr. Abbey. That is true.
    Mr. Sarbanes. OK.
    Mr. Abbey. The experience that the people have that are 
doing the reviews certainly have been involved in a number of 
inspections and a number of plan reviews and approvals, you 
know, in the conduct of doing business. There are an awful lot 
of similarities in the operations that are occurring in the 
Gulf of Mexico, so you are absolutely right relative to do we 
have the knowledge of what is being proposed and has it worked 
elsewhere.
    And the answer to that question is what is usually proposed 
by an operator as part of their exploration plan or as part of 
their application for permit to drill is state-of-the-art, best 
management practices. It has been tried and proven to work in 
other parts of the Gulf of Mexico and, therefore, there are 
some similarities, there are some familiarity with what is 
being proposed by the operator, and the Minerals Management 
Service would make their determination based upon the papers 
that have been submitted, the plan, the applications, and also 
their own experience with similar operations operating in that 
same area.
    Mr. Costa. The gentleman's time has expired.
    All right, the Chair will now recognize the gentleman from 
Louisiana, Mr. Fleming.
    Mr. Fleming. Thank you, Mr. Chairman.
    I have a question for Ms. Kendall. To preface it, I think 
it has been clearly brought out that failure of oversight and 
perhaps even corruption in MMS, which has been in prior 
administrations and extends to date in this administration, has 
been a serious problem, and one difficult to overcome.
    But a statement that you made, Ms. Kendall, made the cilia 
in my ears stand up; that is, perhaps it is time to impose some 
ethics requirements on companies doing business with the 
government.
    Would that extend to environmental groups?
    Ms. Kendall. Help me if you would, Congressman, with what 
you are suggesting.
    Mr. Fleming. Well, would an environmental group providing 
office space and meals to NLCS employees be a violation of 
ethics rules?
    Ms. Kendall. I can't really speculate on that. It may, it 
may not. I would certainly need more information.
    Mr. Fleming. The NLCS is the National Landscape 
Conservation Service, part of BLM.
    Ms. Kendall. Yes, sir.
    Mr. Fleming. So I realize that you may not be familiar with 
specific situations, but just an agreement, just in general can 
we agree that an environmental group providing free office 
space and meals to governmental employees who have some 
responsibility of oversight, that would be a violation of 
ethics rules in general, would it not?
    Ms. Kendall. It would depend. Quite frankly, the ethics 
regs are very specific. If this environmental group were a 
prohibited source, then yes, but without more I could not opine 
on whether it would or not be in and of itself.
    Mr. Fleming. OK. So this is a very targeted ethics issue 
then. It would apply to some but not others in terms of those 
who may influence government is what you are saying?
    Ms. Kendall. The gift acceptance rule, which would be 
meals, and the space is a little--I am not as familiar with 
what that might imply, but gifts are covered under the ethics 
regs and government officials are prohibited from receiving 
gifts from prohibited sources with some exceptions in terms of 
dollar amount.
    Mr. Fleming. I hear what you are saying, those are kind of 
the rules, but the question more is in line with what your 
personal belief or perhaps the belief of the OIG, but I will 
follow up with another question.
    In your testimony today, you say that we need to consider 
penalties against the companies which provide gifts to MMS 
employees. Should we, in consideration of those rules, expand 
that consideration to gifts of all Interior employees?
    Ms. Kendall. Oh, yes.
    Mr. Fleming. OK. So I guess kind of to follow up and maybe 
a last question on this before we move on, so if I understand 
you correctly, are you suggesting that the impotency of the OIG 
to have oversight over MMS, the inability of the Administration 
to, I guess, root out the corruption in MMS, and to control the 
cozy relationships with companies, that we now have to go to 
the companies themselves to impose ethics rules? We can't 
really accomplish that by reining in our own departments?
    Ms. Kendall. No, that is not what I was implying, 
Congressman. My testimony was suggesting that essentially it 
takes two, and the MMS employees that we are talking about, I 
would echo Mr. Abbey's statement that we are talking about a 
very limited number of people. The OIG reports that have come 
out that have been, well, scathing, if you will, about the 
conduct of some MMS employees, it is very, very limited in 
terms of numbers.
    But that having been said, the conduct always related to 
something vis-a-vis industry, and my suggestion is that 
perhaps, like we do with government contractors now, have 
affirmative responsibility for industry to disclose. Maybe it 
is something that would be useful in this arena as well, but to 
have industry understand what the rules are that apply to the 
people that they deal with on the government side. It seems to 
me to be a very simple thing that we could do, and require from 
companies who want to do business with the government.
    Mr. Fleming. Well, I in no way would defend any ethics 
lapses by companies and certainly environmental groups, and I 
certainly agree with you on the transparency, but I am a bit 
concerned that that does suggest that either we are impotent 
and unable to control ethics problems in our own governmental 
department in the Administration, or perhaps that we give up or 
maybe we give them a pass so now we put the responsibility on 
outside groups and companies.
    Ms. Kendall. No, I am not suggesting that at all. I think 
it is a two-part solution.
    Mr. Costa. The gentleman's time has expired, and the Chair 
will now recognize the gentlewoman from Massachusetts, Ms. 
Tsongas.
    Ms. Tsongas. Thank you, Mr. Chairman. Sorry to lean over 
here----
    Mr. Costa. You need to give the gentlewoman a little room 
there so she can have an opportunity to ask her questions and 
make her comments.
    Ms. Tsongas. Thank you so much for your testimony, and I 
know we are all so concerned about the ongoing extraordinary 
spill that we all have witnessed to on a daily ongoing basis.
    But Mr. Abbey, you happen to mention that a spill of this 
magnitude was beyond anyone's imagination, and Mr. Cassidy, my 
colleague from Louisiana, who is not here today, in an earlier 
hearing said that this was an absolute failure of imagination. 
In my view it is an abject failure because if nothing else the 
sheer depth at which this well was placed tells us that if an 
event occurred in which technology did not immediately solve 
the problem, and we had a continuous event, that we had the 
potential for an environmental disaster, and we have seen that.
    In spite of BP's best efforts, they did not have in place a 
plan to respond to a continuous event. They were never asked to 
have a plan in place to respond to a continuous event of this 
magnitude in the event that technology did not help them.
    So my question is, Mr. Sarbanes has asked about the 
permitting process, and you said there are instances in which 
applicants are rejected. Do you in the course of that have a 
presumption that there are instances in which ``No'' is an 
appropriate basis for the application, and that that ``No'' is 
based on a common-sense understanding that if an event occurs 
at depth that we now see, and technology does not keep it from 
being abruptly shut off, that the challenges are so 
extraordinary that the environmental impacts and economic 
impacts can only be what we are seeing today and, therefore, 
the risk does not warrant whatever we might gain from such a 
well?
    Mr. Abbey. Well, I think that is an excellent question. I 
will say this; that any regulatory agency should always be 
ready to say no if they do not have sufficient information or 
adequate information to do an analysis of what is being 
proposed and understand what are the likely consequences of the 
proposed action.
    The question I think that you raise, Congresswoman, is best 
addressed maybe by the Presidential Commission. It is really a 
very complex issue that we are dealing with. Oil and gas is 
going to continue to be for years to come a major component of 
our nation's energy portfolio. A large percentage of our 
domestic oil and gas in this country is produced from offshore. 
We have to take that into account as we move forward, but we 
have to be smarter about it. We have to make sure that any 
future drilling is done right, it is done safely, and it is 
done in compliance with the law.
    As to the broad spectrum of the question that you raise, I 
really believe it is best addressed by the Presidential 
Commission.
    Ms. Tsongas. Would the others address this as well? And I 
am just curious, as we go forward not only should the 
Commission address it, but in the reorganization of MMS there 
should be an appropriate place for this kind of risk 
assessment, and understanding whether or not it is possible, 
possible to put in place a quick response to an event such as 
occurring down in the Gulf, and given that, if that is not 
possible, you know, all the modeling out there, all the 
appropriate response planned for, if it is not possible, then 
when is ``No'' warranted?
    But I would like the others to respond to how they see the 
capacity of the MMS to deal with this, and whether 
reorganization has a potential to address it as well.
    Mr. Rusco. Well, we have found systemwide and pervasive 
problems at Interior in terms of attracting and retaining 
enough of the kind of expertise to do the jobs that we looked 
at in terms of safety and production inspections, production 
verification inspections, meter calibration inspections. I 
think that the knowledge required to understand the technology 
in the deep Gulf has to evolve as the technology evolves, and 
what we have seen is that Interior has been challenged in 
keeping abreast of technology and having enough of the right 
kinds of expert staff on hand to address these issues. That is 
something they must address in any reorganization or even if 
they don't reorganize. They must address that in order to be 
effective.
    Ms. Tsongas. Do you think it is possible to put in place a 
response plan to an event like this that could have quickly 
dealt with this issue or do you think there is a level of human 
impossibility here; that it just would require too much--just 
too much, more than anybody could have in place to immediately 
deal with an event of this nature?
    Mr. Rusco. I am sorry. I am certainly not qualified to 
answer that question. We have not evaluated that specific 
question.
    Ms. Tsongas. Mr. Abbey, do you have any sense of that?
    Mr. Abbey. Well, first, the response plans is not only the 
responsibility of the Minerals Management Service but also the 
United States Coast Guard. There are some jurisdictions there, 
and responsibilities as well, as far as trying to contain any 
spill that might occur in the Outer Continental Shelf.
    Congresswoman, I am not a technical expert either relative 
to the engineering capabilities of trying to contain a spill of 
this magnitude. I do believe that there is sufficient equipment 
and certainly sufficient technology that would allow us to 
contain such a spill but we have to be prepared to react. Well, 
first and foremost, to try to prevent future spills of this 
magnitude, then second, if there is such a spill in the future, 
that we have to do a better job of reacting.
    Mr. Costa. The gentlewoman's time has expired. We thank her 
and thank the witnesses.
    We will now recognize the last member of the Subcommittee 
who is here, and then the Chair will begin to recognize other 
members of the Full Committee who have joined us, Mr. 
Faleomavaega from American Samoa.
    Mr. Faleomavaega. Thank you----
    Mr. Costa. Excuse me. I have just noticed that we have 
votes and following the gentleman's questions, the Committee 
will recess for the purposes of us going to vote for the series 
of votes, and then we will come back and continue the hearing 
with this first panel. So the gentleman is recognized.
    Mr. Faleomavaega. Thank you, Mr. Chairman, and I do 
appreciate your leadership and our Ranking Member's initiative 
in holding this hearing, and I do want to thank the members of 
the panel for their most eloquent statements in this very 
serious issue that we are now discussing before this 
Subcommittee.
    I find it somewhat ironic. Why are we seemingly surprised 
that something like this has happened in terms of oversight 
responsibilities that the Federal agencies have toward this 
matter, for example, of the oil spillage?
    My point is that we cannot even account for the billions of 
dollars the American Indian tribes had supposedly given the 
responsibility to the Department of the Interior to account 
for, and why are we surprised with a Department that has a $13 
billion budget to oversee hundreds of billions of dollars of 
our nation's resources. And when I hear that--if I heard it 
correctly from our Inspector General--that 16 inspectors to 
review 4,000 facilities. I mean, I am somewhat a little 
puzzled, Mr. Chairman, and I wanted to ask our panel.
    It is quite obvious that the Interior Department doesn't 
have the resources, and I wanted to ask, as has been cited, 
that the MMS agency, subagency of the Interior Department, you 
know, you have about 70,000 employees that work for the 
Department of the Interior. That is quite a number to be 
responsible for.
    What I am curious about, Mr. Abbey, is that the President 
made an announcement that the Administration is seriously 
looking at allowing more offshore drilling, and I suspect--I am 
sure, was the MMS agency taken into account for all the--to 
make sure that we are going to do this properly, or was this 
just something that the White House just dreamed of, that said 
we should do it because we need energy?
    Of course, we need energy, and I wanted to ask Mr. Abbey, 
was there any given serious accounting before the President to 
make the decision that we should go to offshore drilling before 
this disaster occurred?
    Mr. Abbey. The track record as far as operations in the 
Outer Continental Shelf has been a fairly good one. Again, it 
goes back to maybe a little overconfidence relative to the 
abilities of not only the regulatory agency like the Minerals 
Management Service to respond to any kind of spill, but also 
the fact that the industry knew what they were doing as they 
went forward and developed these resources.
    There are 1,700 employees working for the Minerals 
Management Service. There are 62 or thereabout inspectors. 
Those 62 inspectors perform on an average 24,000 inspections 
per year. Now, these inspections can be anywhere from two hours 
to up to a three-member team conducting inspections over a 
three-day period, depending upon the----
    Mr. Faleomavaega. So in the 22,000 inspections, somehow or 
some way one of these major corporations happened to have 
gotten a record of not complying with a lot of these standards 
and they get away with it. Am I correct that BP was one of the 
corporations that really was given a lot of citations and 
warnings about some of the noncompliance of some of these 
standards, and yet somehow it went past?
    Mr. Abbey. Most of the notices of noncompliance or 
incidents of noncompliance are fairly minor and they can be 
corrected within a matter of days. If they are serious, then 
the Minerals Management Service will actually shut in a 
production facility or a drilling facility until the deficiency 
is taken care of.
    Mr. Faleomavaega. Now according to the media reports there 
were warnings given to BP, or this certain rig that was being 
questioned, and yet nothing was done. Is that correct?
    Mr. Abbey. I don't know. You know, I would rely upon the 
investigations and the reviews that are underway right now 
because we are going to learn a lot about exactly what took 
place rather than reacting to allegations.
    Mr. Faleomavaega. OK. One other question I have, Mr. Abbey 
and I am glad we have the GAO, we have the Inspector General. 
We have to get this thing worked out pretty well. It is my 
understanding that the offshore rig, Deepwater Horizon, is 
registered under the flag of the Republic of the Marshall 
Islands.
    Now, of all places, this whole registration process, I 
think they were only paid $20,000, and this practice has been 
going on for how many years where you go and register in a 
foreign flag which certifies that it is OK, but pay $20,000, 
and supposedly the Republic of the Marshall Islands now are 
supposed to be responsible for safety standards and equipment, 
and the operations of this rig, is that correct?
    Mr. Abbey. Well, I have heard that. I think that is a 
question better asked of the United States Coast Guard.
    Mr. Faleomavaega. Well, let me ask you this. Should we 
continue this practice of registration the way we are doing it 
now so that companies could escape paying taxes? Hiring cheap 
labor. No, I want to ask your honest opinion of this. Should we 
change the whole process of the registration?
    Mr. Abbey. Well, as a citizen of the United States and not 
a representative of the Minerals Management Service or this 
administration, I would say that is a good question for this 
Congress to look into.
    Mr. Faleomavaega. Thank you, Your Honor. My time has 
expired.
    Mr. Costa. OK, I think that is an objective response of 
some sort.
    The Subcommittee will now recess for the purpose of votes. 
For those of you in the audience, those witnesses, you might 
want to stretch your legs. I guess you have time to get a cup 
of coffee. I suspect we will not be back here until about 
noontime or so, so you have a little break, and when we return 
we will resume the questioning. Mr. Grijalva and Bilirakis and 
others have an opportunity to ask their questions. There are a 
couple of questions I would like to have another chance to ask 
these witnesses, and then we will begin with the second panel.
    So I suspect we are going to be here, depending upon the 
length of the members' interest of questions, at least for 
another couple of hours. So at this point the Subcommittee will 
now recess.
    [Recess.]
    Mr. Costa. The Subcommittee will now come to order. We have 
returned from our voting recess. That is the good news. The bad 
news is I am told that we will be going back to vote in about 
another 20 minutes or half an hour. The Chair will try to give 
as many members an opportunity to be recognized between now and 
the next time that we are asked to return to vote, and then, of 
course, I also am informed maybe that those could be our last 
votes of the day, and hopefully that will be the case, and if 
it is, then we will come back and by that time hopefully get to 
our second panel and our third panel. But I will keep you 
informed. As much as information as I have you will have as 
soon as I have it.
    So with that understood, we have another member of the Full 
Committee who chairs a subcommittee within Natural Resources, a 
gentleman from Arizona, my friend Mr. Grijalva.
    Mr. Grijalva. Thank you very much, Mr. Chairman, and thank 
you for your courtesy in inviting Natural Resources Committee 
members to be part of this hearing. I appreciate it very much, 
and also to the Ranking Member as well. Thank you.
    Mr. Abbey, first the good news is that I am glad you are 
going to be full time back at BLM.
    Mr. Abbey. Me, too.
    Mr. Grijalva. That is good news for our Committee as well. 
Let me begin with a couple of issues. I understand that MMS is 
doing an investigation of BP Atlantis, something that we wrote 
in a letter twice requesting that there be some kind of follow 
up based on comments made by Mr. Abbott and other people 
regarding issues there in terms of not following the 
requirements, and you know, there is a certification statement 
that MMS has from BP Atlantis.
    I was going to request formally that--you know, we have 
been told that BP keep as-built documents, which is the crux of 
the issue, in electronic form and uses the databases to record 
their status. I am assuming MMS is the agency that obtains 
copies of all these from BP, and in the course of this post-
incident investigations that are going on. If you could please 
provide immediately, if not sooner, to the Committee Chair for 
dissemination to the rest of us an electronic copy of that 
information, a copy of the as-builts along with the drawing 
log, which I think is important, and the database that is used 
to record the status of the documents. I think that would help 
this Committee, in terms of its due diligence, to look at the 
post-incident record that has been going on about these 
investigations, and that is in the form of a request, and I 
will transmit that as well to the Chair.
    Mr. Costa. I would like to reinforce that and the Chair 
would like that information ASAP for all the members of the 
Full Committee.
    Mr. Grijalva. Thank you. Mr. Abbey, the next panel, Mr. 
Abbott will testify about the BP Atlantis steps relative to the 
request. We have sent a letter, then another. I had the 
opportunity to meet with Mr. Abbott yesterday. He told me that 
he has still not been interviewed or contacted by MMS regarding 
the investigation. Do you feel that that is part of the post-
incident process that is going on, and the issue that not only 
I, but other Members of Congress has raised regarding Mr. 
Abbott's information that he provided about BP Atlantis; that 
Mr. Abbott and other individuals, and other personnel shouldn't 
they be part of a discussion, and talking to them about the 
information they have so that it will be forthcoming and part 
of this whole post-incident analysis that is going on and 
investigation?
    Mr. Abbey. Well, Congressman Grijalva, in preparation for 
this hearing I did look into the information that we have 
compiled regarding the allegations that had been made by Mr. 
Abbott. I don't have any specific knowledge relative to what 
all those facts are, but in preparation for this testimony I 
did read documents that Mr. Abbott was interviewed by Minerals 
Management Service employees as well as a member of our Office 
of the Solicitor.
    I have also looked into exactly what our investigation has 
found. I will say this, that the investigations and the 
allegations are taken serious, and that investigation 
continues. But, to date, the Minerals Management Service has 
confirmed that BP submitted a complete hazard analysis as 
required by regulations, and that it was approved by the 
Minerals Management Service.
    Before production at the Atlantis facility, the Minerals 
Management Service conducted four inspections of the process 
safety system, and that these inspections included a review of 
the surface safety system function logic and we found no 
violations.
    Since BP began producing at the Atlantis platform, the 
Minerals Management Service has inspected the Atlantis three 
times, and during these inspections we verified that the 
component of the safety devices and their associated shutdown 
functions were found to be with no abnormalities, and that we 
issued no incident of noncompliance.
    During our third inspection, however, Congressman, we did 
find an issue, an incident of noncompliance for a leaking 
safety valve, and that valve was fixed that same day.
    Mr. Grijalva. I appreciate the information and I am 
assuming that will be forthcoming in some written documentation 
that the Committee and my office, which has been requesting 
this, can review. Mr. Abbott will be a panelist later on and I 
am sure he will have a point of view on the information and 
also the comments that he has been interviewed. It is my 
recollection that he has not, but be that as it may.
    Let me quote one thing if I may, Mr. Chairman, and it is 
from a BP submitted application. In response to a Senate 
inquiry BP said, ``BP is not aware of any MMS practice 
requiring an applicant to attach its initial application, proof 
of strength of the blind-sheer rams on blowout preventers,` 
which is the subject and it quotes the regulation, and the 
regulation, this is BP saying that we are not aware that we 
have to provide information on blowout preventers.
    Then they go on to say--then the contents, this is from MMS 
regulations, `Information that shows blind-sheer rams installed 
in the stack, both surface and subsea stacks are capable of 
sheering the drill pipe in the hole under maximum anticipated 
surface pressures.`
    How concerned should we be that if BP has not been 
verifying the quality of its blowout preventers because they 
are saying that it is not required by MMS, shouldn't that be, 
and was MMS aware that BP was in noncompliance with this one 
particular requirement?
    Mr. Costa. This will have to be the gentleman's last 
question.
    Mr. Grijalva. Thank you very much, sir.
    Mr. Abbey. I am not aware again of what was required in the 
past. I will say this; that under the safety report that was 
issued by the Secretary of the Interior to the President, there 
were some recommendations regarding what we anticipate to be 
required of operators in the future. We followed up and when I 
say we, the Minerals Management Service followed up with that 
safety report with our own notice to lessees identifying new 
requirements that we are going to be enforcing as a result of 
not only this incident but also the fact that we do want to 
improve the safety within the industry.
    We are looking at blowout preventers and we are requesting 
independent third party verification that the equipment on 
these platforms are sufficient to do the jobs that they are 
intended to perform. Not only are we asking that third party 
verifications, but we are also asking and directing that the 
CEOs of each of these operators verify that they are in full 
compliance with our new requirements, and then we are 
conducting our own independent inspections as a follow up to 
the independent verifications that we are receiving.
    Mr. Grijalva. Thank you, sir.
    Mr. Costa. Very good. If you could encapsulate the answer 
that you have just given in the form of a formal response, as a 
letter to the Chair of this Subcommittee, Ranking Member, and I 
will be happy to share it with the Full Committee members.
    Mr. Abbey. We will do that.
    Mr. Costa. But I think it is important to have that on the 
record.
    OK, our next member, actually he is not a member of the 
Committee, but he is a guest of the Committee and we are 
pleased to have him here, the gentleman from Florida, Mr. 
Bilirakis.
    Mr. Bilirakis. Thank you, Mr. Chairman, and thank you, 
Ranking Member Lamborn. I really appreciate you allowing me sit 
in on the panel today.
    Mr. Costa. The Ranking Member cashed in some big favors to 
get you in here so you should appreciate it. Not really. I am 
teasing.
    Mr. Bilirakis. As a member from the Tampa Bay area, of 
course, I am especially interested in the oil spill taking 
place, actually unfolding throughout the Gulf, I think what we 
have learned the most complex and dangerous part of deepwater 
drilling is what takes place subsurface. As we get into deeper 
and deeper water, 5,000 feet, 6,000 feet, and even 7,000 feet 
below the surface operations get more and more complex. I think 
you would agree with that.
    What is surprising to me is that while there are a whole 
slew of regulations for rigs at surface level, rules and 
regulations for subsurface operations are sparse. Why is that 
the case? And the question is for the entire panel.
    Mr. Abbey. I will take my first shot at that. I wish I 
could answer it more specifically and directly to your 
question. I really don't know. I do know that the technologies 
are very similar in shallow water and deepwater even though the 
drilling is more complex in deepwater. I do know that they both 
require due diligence, both require that there is equipment 
that is capable of performing the jobs and tasks they are 
intended to perform, and that there are adequate safeguards, 
including redundant safeguards, to prevent what we are 
experiencing today from ever occurring.
    Again, the investigations and the reviews that are underway 
today will certainly help us have a better understanding of 
exactly what took place and what needs to be done differently 
in the future.
    Mr. Bilirakis. And you do admit that they are sparse, is 
that correct? Is that correct?
    Mr. Abbey. I am sorry. What was the question?
    Mr. Bilirakis. That the rules and regulations are sparse.
    Mr. Abbey. I really don't know, Congressman.
    Mr. Bilirakis. Anyone else on the panel, please?
    Ms. Kendall. I am afraid I am with Mr. Abbey on this. I am 
not familiar, personally familiar with the regulations in any 
level of detail. I have come to learn basically everything I 
know about deepwater drilling in the last month or so.
    The regs, they do have requirements. What I understand is 
that they have gone from basically prescriptive requirements to 
performance-based requirements, and so that is something that 
my office is looking at as well in terms of where there are 
gaps, if indeed there are gaps in terms of safety measures, not 
only deepwater but shallow water as well.
    Mr. Bilirakis. Sir, would you like to respond?
    Mr. Rusco. GAO has not studied this specific issue and I 
can't respond directly to your question, but we do have 
concerns about systemwide and pervasive problem in keeping up 
with technologies in other areas that we have looked at. To the 
extent that that is occurring in this case, then it is 
something that needs to be addressed, and we do expect to be 
looking at this.
    Mr. Bilirakis. In your position, shouldn't you be familiar 
with these regulations? And I would like to get a response in 
writing as soon as possible. Thank you.
    During the course of the six-month moratorium that the 
Administration has imposed on deepwater drilling there have 
been suggestions that MMS review spill response plans for 
existing deepwater rigs. I am wondering if spill response plans 
were ever reviewed or approved in the first place. Is there a 
database that exists that shows that MMS reviews and approves 
these plans?
    Mr. Abbey. Spill response plans are reviewed and approved 
prior to permits being issued. You know, based upon those 
reviews it would be determined whether or not the spill plan is 
adequate to cover what might occur based upon the analysis and 
the determination at the time of what might be a worst case 
scenario.
    As we mentioned before in earlier comments to members of 
this Committee, what we are experiencing today is beyond what 
we imagined could occur in such a spill scenario. So those 
response plans will be reevaluated based upon the lessons that 
we are learning to determine whether or not they need to be 
improved.
    Mr. Bilirakis. Is there a database that currently exists?
    Mr. Abbey. I would imagine, Congressman, that there is an 
approval mechanism that we can share with you relative to the 
documentation or the review that took place. I don't know 
whether or not it is electronic database, but we can certainly 
look into your question and respond accordingly.
    Mr. Bilirakis. Please do.
    Mr. Abbey. OK.
    Mr. Bilirakis. Anyone else like to respond to this?
    I am wondering if you might briefly explain the complexity 
of operations that take place subsurface. Can you paint a 
picture of how flow lines, wellheads, pipelines and safety 
shutdown systems work, and what type of engineering required to 
not only build those systems, but also operate them? Do you 
believe MMS employees have a full understanding as to these 
nuances and also do you believe MMS or any other government 
agency is better equipped to review and approve plans than 
industry experts?
    Mr. Costa. The witnesses might answer the latter part of 
that question rather than the first part of that question, but 
that has to be your last question because we will let our other 
colleagues----
    Mr. Bilirakis. Yes, sir.
    Mr. Costa. You have gone beyond time.
    Mr. Bilirakis. Yes, sir, Mr. Chairman.
    Mr. Abbey. Well, I think you are absolutely right, Mr. 
Chairman. I am better prepared to answer the last part of your 
question than the first.
    The Minerals Management Service do have capable engineers 
employed to conduct the necessary reviews and analyses and make 
appropriate determinations relative to the adequacy of the 
plans that are being submitted. We are very fortunate to have 
good engineers working within this organization.
    As has been brought out, technology continues to change. We 
are continuing to do our best to stay abreast of what that 
technology is, and how best to make sure that our own employees 
are well aware of what is being proposed today and what might 
be proposed in the future. There is still work that we can do 
that would improve that overall performance, but I do believe 
we have the capable expertise.
    Now, do we have enough of that expertise is a whole 
different issue, and I would say that we could certainly help 
the organization by bringing in some additional people.
    Mr. Bilirakis. Thank you very much. Thank you, Mr. 
Chairman.
    Mr. Costa. That is going to have to be it. Thank you, Mr. 
Bilirakis.
    They have just called roll again. Mr. Gohmert, we will 
recognize you for five minutes, and I will take a quick look at 
it and I will see if I can get Mr. Cassidy before we recess 
again before we go to the second panel.
    Mr. Gohmert. Thank you, Mr. Chairman.
    Mr. Costa. And if you don't use all your time you can defer 
to Mr. Cassidy.
    Mr. Gohmert. Mr. Abbey, we have been told that MMS is being 
divided into three new entities. Do you have a job already 
designated in those three new entities?
    Mr. Abbey. I have a job already that I am going back to as 
soon as the new Director of the Minerals Management Service 
arrives on Monday. I am the Director of the Bureau of Land 
Management, and that is the job I will return to on Monday.
    Mr. Gohmert. So you won't be part of those three?
    Mr. Abbey. I will not, no.
    Mr. Gohmert. Well, I know you regret that.
    [Laughter.]
    Mr. Gohmert. Well, let me ask. The staff had done some work 
for a prior hearing, and we had found out that the one 
unionized entity within MMS was the offshore inspectors, and 
Director Birnbaum didn't know a whole lot about the unionized 
aspect. She didn't know about unionized contract, so I am 
curious and I want to ask you.
    Since these offshore inspectors are unionized, and their 
union contract, were there limits on their travel or amount of 
time they could work in a day, anything like that that could 
affect how much inspection they could do?
    Mr. Abbey. Sir, I am not aware of the specifics of their 
individual contracts. I do know that unions do negotiate the 
work environment, terms and conditions of a work environment. I 
would be surprised if that might not be part of the contract, 
but I do not know that specifically.
    Mr. Gohmert. Well, we also found out that according to her 
the major check and balance, the control that made sure that an 
offshore inspector was doing his job was actually to have them 
sent out in pairs so that one could report the other if there 
was some problem, and they were not doing their jobs. So I was 
asking her if it was a good idea to have the last inspection 
team that went out to the Deepwater Horizon before the blow be 
a father and son team, and she said that was under 
investigation.
    So my question to you is different. Has there been any 
limitation so we won't have any more father and son or related 
teams that are supposed to be double-checking each other as 
offshore inspectors?
    Mr. Abbey. There are changes in the works, Congressman, and 
I don't know whether or not the father/son team had anything to 
do--well, I know. I mean, I am not sure it is an issue.
    Mr. Gohmert. Oh, you don't think it would be a problem to 
have the only check and balance be a father and son team? They 
are going to watch each other carefully and report the other 
one if they are not doing their job just right. You don't see a 
problem with that?
    Mr. Abbey. Congressman, I do not because I believe that if 
we ask someone to do the job, they are going to do the job. 
That is not to say we should not have checks and balances to 
ensure that people are actually doing the job that we are 
asking them.
    Mr. Gohmert. We were told that was the check and balance, 
to make sure they were doing their job. Well, I would suggest 
to you it is not a good idea, and that something should be done 
about that.
    Well, now we have heard the President say he wanted to find 
out, and I will paraphrase, who is rear end to kick, he wanted 
to find out about kicking rears, but----
    Mr. Costa. It is a term we use in California and Texas.
    Mr. Gohmert. We know that the President has declared this 
six-month moratorium, and that there are other companies who 
are not nearly as irresponsible as BP was, and that it is 
costing them a fortune to shutdown their rigs and some of them 
are probably moved off if this is really going to be a six-
month moratorium. So I am curious. Is it deemed to be by MMS a 
measure of kind of kicking some rears of some oil companies to 
force them into costing millions and millions of dollars just 
to sit idle because BP screwed up? Is that the purpose of the 
moratorium?
    Mr. Abbey. No, it is not at all the purpose. The purpose of 
the moratorium is to----
    Mr. Gohmert. Well, then have there been inspectors that are 
being sent out to those 33 so you could get back to the 
President and say, these guys are innocent, they are doing 
everything right, they did not have a problem with blowout 
preventers like BP, they weren't cutting corners, they are 
doing everything right, so don't penalize them? Have there been 
inspectors going out so you could let the President know he 
doesn't have to keep kicking their rears? They are doing their 
jobs correctly.
    Mr. Abbey. Well, Secretary Salazar immediately asked and 
directed the Minerals Management Service to conduct an 
inspection of all deepwater rigs shortly after this incident. 
Those evaluations have taken place.
    Mr. Gohmert. Well, my time is running out so a quick 
question for Ms. Kendall. We had heard from the Inspector 
General previously on investigating the 1998-1999 leases in 
which the price adjustment language was pulled out for those 
two years, and according to him, there were two people within 
the Interior Department that knew why that language was pulled 
out, and it obviously cost our country, I thought, hundreds of 
millions, now I am told it is billions of dollars that went to 
the big oil instead of----
    Mr. Costa. Mr. Gohmert, you know, I always give a little 
leeway but you are going to your colleague's time and I want 
to----
    Mr. Gohmert. Well, if I can just finish the question 
because it is critical to this country.
    Mr. Costa. OK. Well, you are impeding upon your colleague's 
time here.
    Mr. Gohmert. So my question is, now that we found out that 
one of the two people that pulled the language out has returned 
to Interior, because Devaney said, she left, she went to BP. We 
can't question her. Now that she is back in government service 
with Interior, have you questioned as to why she cost the 
country billions of dollars by pulling the price adjustment 
language out?
    Ms. Kendall. No, we have not, Congressman. My recollection 
was not that Ms. Baca was one of the two people that was 
involved. That is just not my recollection. I would have to go 
back and look at that.
    Mr. Costa. We will have to check that out in all fairness.
    Mr. Cassidy from Louisiana, you have five minutes. We have 
378 people who have not voted and seven minutes and 17 seconds 
before the vote is called. It is the Chair's intention when we 
wind up with this question we will recess once again, and I 
will adjourn this panel. We will not be back for an hour, 
probably two o'clock. Go have some lunch and we will do Panel 
No. 2 and No. 3. OK, quickly, Mr. Cassidy.
    Mr. Cassidy. Mr. Abbey, I am told by some they feel there 
is a de facto moratorium on shallow water operations; that the 
two permits that were done were rescinded the next day; and 
that, yes, there are conversations but never is there clarity. 
It is always it has just moved, it is just out of reach. The 
conversations are along going along with the rig operators, not 
with the lessees, and the lessees feel, rightfully so, they 
should be looped in because they are going to be captain of the 
ship, as we say, when we were getting sued in health care.
    So any comments on that?
    Mr. Abbey. Well, there is no moratorium on shallow water 
drilling and operations. We have submitted or actually approved 
and shared with the lessees that they are going to be adhered 
to new safety requirements before any drilling occurs.
    Mr. Cassidy. No, I was told that they heard those. They 
accepted them. They thought they were reasonable. Actually they 
said they were already industry standard, and yet they are 
still not getting permitted.
    Mr. Abbey. Well, I am not sure about that, Congressman 
Cassidy. I will say this. Once we receive that third party 
verification that their equipment is functional, that it is 
doing the job that it is intended to do, there should be no 
problem moving forward with----
    Mr. Cassidy. Is the third party already engaged? Are they 
already doing the inspection?
    Mr. Abbey. That would be up to the operator or the lessee 
to engage that third party.
    Mr. Cassidy. So just to be clear, you are saying that if 
you contract with a third party who is going to come in and 
inspect and then, boom, we are ready to go?
    Mr. Abbey. On previously approved applications for permits 
to drill.
    Mr. Cassidy. That is great. Thank you.
    Also in the testimony, I am sorry I came in late and if 
this was addressed, I apologize, but somebody's testimony on 
the Pacific Coast indicated that there are 10 inspectors for 
like 28 rigs and in the Louisiana Gulf Coast there are like, I 
don't know,, 30 inspectors for thousands of rigs.
    Mr. Costa. There are five on the West Coast and one in 
Alaska.
    Mr. Cassidy. So why is the, if you will, per-rig count so 
much higher on the West Coast than there is on the Gulf Coast?
    Mr. Abbey. I will say this. It is my understanding that 
there are six inspectors in the Pacific and something in the 
neighborhood of 56 or so----
    Mr. Costa. Right, five and one.
    Mr. Abbey.--in the Gulf. And so I do not have an answer to 
why there is such a discrepancy in the numbers based upon the 
rigs and where those rigs are located. I will say this; that 
the Minerals Management Service needs more inspectors in the 
Gulf of Mexico.
    Mr. Cassidy. OK, that leads me to my next question. I was 
struck that this kind of automatic system where your inspectors 
can type in data and it is immediately uploaded which I just 
thought was yesterday's news is not going to be done for six 
years through this system. Now, why has it taken so long to put 
something that would seem so basic in place which is direct 
uploading of data?
    Mr. Abbey. I don't know but I can certainly get back to you 
on that.
    Mr. Cassidy. And from GAO, any comments on that because I 
think I read that in your testimony, or somebody's?
    Mr. Rusco. We have found in general that there has been 
issues with keeping up with technology, and one of the things I 
think you may be referring to is the production verification 
technology the industry uses which is second-by-second data 
collection and storage on production.
    Mr. Cassidy. So why don't we--I mean, not to interrupt, but 
I only have a minute 50 left. As I was reading that, I was 
struck. I know that contractors working for the Army Corps have 
to have a data set that the Corps can kind of plug into like 
Spock used to do in somebody's brain, and immediately 
understand what is going inside that brain. Now, it doesn't 
mean they have to expose their whole company, they just have to 
expose the data set that interfaces with the Army Corps 
database.
    Why can't we--this makes perfect sense to me--require that 
the lessees let us know what their data is as it relates to 
flow rates?
    Mr. Rusco. It could be done and there is a pilot program to 
do that, but it is not moving very quickly.
    Mr. Cassidy. And why in the heck not?
    Mr. Rusco. I don't know the answer to that fully, but I 
know that BLM has developed its own software for this and there 
is off-the-shelf software available that would----
    Mr. Costa. Should be able to do it.
    Mr. Rusco.--have full functionality.
    Mr. Cassidy. Last question, and he is about to gavel me so 
I am trying to get it in before that the light turns red. There 
really seems to be a conflicting set of values here. On the one 
hand your testimony, Ms. Kendall, is that these people go have 
barbecues together. On the other hand we all know they go to 
college together, so if we are going to have somebody that 
knows anything, there are not that many petroleum engineering 
schools. I also hear that industry is way ahead of government 
in terms of their knowledge base of what cutting-edge 
technology is. And then I read in testimony that, by golly, we 
are not doing continuing education for our inspectors.
    And so it almost seems like the guys that are actually 
doing the work on the rigs are about a mile ahead of the 
inspectors in terms of knowledge. The only way we are going to 
give the inspectors that knowledge is to allow them to have a 
barbecue over a continuing education conference; on the other 
hand that is held up as a perception of impropriety, so it is 
always like we have to from birth make people petroleum 
engineers like we do the Dalai Lama, and say, listen, you 
cannot go into industry, you must stay in business, but you 
have to know a heck of a lot.
    Now somehow I don't understand how to reconcile that. 
Thoughts from any of you?
    Mr. Abbey. I do if I could. I think that there are a couple 
of reasons where there is an appearance that industry is way 
advanced in the technological expertise versus the government. 
First and foremost, we are asking our inspectors in many cases 
to do an almost impossible task. On one hand we are asking them 
to go out and inspect production verification, production 
platforms, and at the same time turn around and inspect 
drilling operations.
    I think in the industry they specialize, and so they may 
have some skills and abilities to do certain things on the 
platform, and yet we are asking our inspectors to do much more 
than just specialize; we are asking them to look at production 
as well as drilling operations.
    Mr. Costa. And they get paid more for it.
    Mr. Cassidy. Believe me. Clearly, when I am reading that we 
have turnover because industry pays so much more, I am, 
frankly, nihilistic that we are ever going to be able to 
compete, so whenever we get somebody who has such brilliance in 
one area, why wouldn't industry hire him away?
    So that said, you have been generous, Mr. Chairman. I yield 
back.
    Mr. Costa. All right, thank you very much.
    One quick question, Mr. Abbey, I don't know if you can 
answer it quickly or not. If there was a combined onshore and 
offshore inspection fee force, do you think it would be an 
improvement over the current situation?
    Mr. Rusco. I would like to answer that. I think that our 
studies have repeatedly found that there are problems with 
coordination across the Interior's oil and gas programs. It 
goes across BLM field offices, it goes across MMS offices, and 
it goes between MMS and BLM for offshore and onshore.
    There are a lack of coordinating mechanisms, there is a 
lack of sharing of information, and there is a danger of 
duplicative efforts.
    Mr. Costa. So you are saying combining it would not work?
    Mr. Rusco. No, I am saying it might be a valuable--well, 
what we have recommended is a greater coordination. We 
recommend that there is this coordinative----
    Mr. Costa. If staffed properly and coordinated properly, 
yes, it could work.
    Mr. Rusco. I believe so. We have not recommended 
specifically a single force, but what we have recommended is 
consistent with that; that there be greater coordination and 
that there be greater communication and sharing of information 
and expertise.
    Mr. Costa. Well, thank you, Mr. Rusco. I thank the members 
of the Subcommittee, the Full Committee, everybody has been 
here. Thank the panel. You have been patient and you have been 
very good in answering our questions. Those of you in the 
audience and those in Panel 2 and 3, I am going to ask you to 
continue to be patient. We are going to recess the Subcommittee 
once again. We will come back at two o'clock to hear Panel 2 
and Panel 3. I am sorry, but we have six votes, and I have to 
try to get there to cast this first vote. The Committee is now 
recessed.
    [Recess.]
    Mr. Costa. The Subcommittee on Energy and Minerals will now 
reconvene. We took a break during those last series of votes. 
There were six of them. I felt we would be finished before two 
o'clock. I want to apologize to the witness on the second 
panel, and the witnesses on the third panel because obviously I 
was off by about 20 minutes, and the audience.
    It is the intention of the Chair now to go through this 
second panel and the third panel, and conclude the hearing when 
that takes place. Members that are here will be recognized 
under the same terms as we hold with the previous witnesses--
previous panel, excuse me.
    And so now with Panel 2 the Chair will recognize the 
gentleman, Mr. Ken Abbott who is a former contractor for the 
British Petroleum platform called Atlantis. So Mr. Abbott, you 
have been very patient today. I appreciate that. You waited all 
morning and heard the testimony, and there were some references 
in this morning's testimony as it was toward some of the 
comments that you have made, and so I suspect after your five 
minutes there will be questions as it relates to those and 
everything else that has been discussed here this morning. So 
please begin. You have five minutes.

  STATEMENT OF KENNETH ABBOTT, FORMER CONTRACTOR, BP ATLANTIS

    Mr. Abbott. Thank you, Mr. Chairman.
    My background and training is in the field of engineering 
project management. For over 30 years I have worked in the 
management of a wide variety of large onshore and offshore 
engineering projects. My employers have been among the largest 
engineering construction managers in the world, including M.W. 
Kellog, Brown and Root, Stone & Webster, Shell Oil, Jacobs 
Engineering, and others.
    Engineering project management is a field dedicated to 
management of large engineering projects. I am not an engineer 
and I do not do engineering. I provide management support for 
engineers by establishing project schedules and budgets and by 
auditing the performance of the project against them. In 
addition, I manage the engineering document control systems and 
database records necessary for the engineers to do their work. 
BP Atlantis is the world's deepest moored oil and gas platform 
production facility. It is located in very 7,000 feet of water 
in the Gulf of Mexico, deeper than the deepwater Horizon well 
now fouling the Gulf. It is rated to produced 200,000 barrels 
of oil per day and large quantities of natural gas far more 
than the Horizon well.
    In August 2008, I started work under contract with the BP 
Project Management Office for the BP Atlantis project on the 
subsea team. I was hired as a project controls lead and had 
responsibility which included management of the engineering 
documents. Almost immediately upon reporting to work I was 
confronted with the problem that BP Atlantis operations, the 
department that actually operates the rig, was demanding as-
built P&IDs, which are very important engineering documents 
that operations must have to operate safely.
    Mr. Costa. Do you want to explain P&ID?
    Mr. Abbott. Process and instrument diagrams.
    Mr. Costa. All right. We are not engineers either.
    Mr. Abbott. Right, it just kind of shows the overall flow, 
layout of piping and instruments for the whole project.
    Mr. Costa. We have a problem here in government. We have 
all the acronyms as well.
    Mr. Abbott. We have tons of them in the industry.
    Anyway, we did not have these P&IDs to provide to 
operations. These are documents that should have been supplied 
before the rig started production, but at that time Atlantis 
had already been in operation for about a year.
    Another BP manager had written in an e-mail that the P&IDs 
for subsea are not complete and have not been approved for or 
handed over to operations. This could lead to catastrophic 
operator errors. Currently there are hundreds, if not 
thousands, of subsea documents that have never been finalized, 
yet the facilities have been turned over.
    And by the way, this was included in the distribution we 
made to the Committee as one of the attachments.
    From this time until I was fired on February 5, 2009, I 
worked to obtain BP engineer approval as-built drawings needed 
to safely operate the rig. We made little, if any, progress. 
Technip, the vendor company which was the lead engineering 
contractor, did not have and could not provide up-to-date 
P&IDs. The BP lead engineers responsible for various sectors 
within the project did not have and could not provide up-to-
date P&IDs.
    At one point BP management vetoed a plan to solve the 
problem because if its estimated cost of 2 million. The more I 
insisted that we had to develop or obtain these documents the 
more unpopular I became. Industry practice and MMS regulations 
require engineering approved design and construction. BP is the 
owner/operator that overall had responsibility for overall 
integration of various component designs, and that has not been 
done properly.
    The integration engineering is a critical part of 
engineering the system. Before I was terminated from BP, we 
developed a database of all the complete and incomplete 
documents to analyze the overall completion status. The results 
were astounding. Out of the total of over 7,000 drawings and 
documents, almost 90 percent had never received any engineering 
approval of any kind, not even for design, and you can see the 
last column of this attached chart, and this shows that BP 
itself did not fulfill its role of integration engineering.
    This lack of critical engineering documentation is being 
seen on the Deepwater Horizon rig, was involved in the Texas 
City disaster in 2005, and the Alaska pipeline spills in 2006. 
It is a common thread for those disasters in BP Atlantis, and 
the days after I was terminated, I tried to file complaints 
with the BP ombudsman, the Department of the Interior, 
Inspector General, and the Department of Justice and MMS.
    I did receive a written response from the BP ombudsman over 
a year later. Judge Stanley Sporkin, the ombudsman, found that 
my complaints about the lack of proper engineering documents 
was valid.
    In conclusion, from my experience in working in the 
industry for over 30 years I have never seen these kinds of 
problems with other companies. I have never seen another 
company with this kind of widespread disregard for proper 
engineering and safety procedures that I saw at BP and that we 
hear from the news reports about Horizon, Texas City and the BP 
Alaska pipeline spills. BP's own investigation of itself by 
former Secretary of State Mr. Baker reported that BP has a 
culture which simply does not follow safety regulations. From 
what I saw, that culture has not changed. It is very saddening 
to me that the Department of the Interior and MMS seem 
unwilling to enforce the law against the culture of repeat 
violations. Thank you.
    [The prepared statement of Mr. Abbott follows:]

                     Statement of Kenneth W. Abbott

    Mr. Chairman and Members of the Committee:
    Thank you for inviting me to testify today.
Background and Career
    My background and training is in the field of engineering project 
management. For over 30 years, I have worked in the management of a 
wide variety of large engineering projects. My employers have been 
among the largest engineering construction managers in the world 
including M.W. Kellogg, GTE Mobilnet, Stone & Webster, Brown & Root, 
Shell Oil, Jacobs Engineering and others. While I have worked on a wide 
variety of projects, the large majority have involved petrochemical and 
energy projects, including refineries and offshore facilities. (Resume 
attached as Ex. A)
    Engineering project management is a field dedicated to management 
of large engineering projects. I am not an engineer and I do not do 
engineering. I provide management support for engineers by establishing 
project schedules and budgets and auditing performance against them. In 
addition, I manage engineering document control systems, database 
records, financial records and other types of management records 
necessary for the engineers to do their work.
Importance of Engineering Documents
    Before a skyscraper, or a petrochemical plant, or an offshore 
production facility, or a wireless data network or any other major 
project can be physically constructed, it is first constructed on 
paper, or now in computers.
    The first phase of building a project is to design the project, 
from overall concept down through systems and subsystems to individual 
parts. A complex project usually involves thousands of engineering 
drawings and documents; each one of which goes through many drafts and 
revisions before the final design is approved. Part of my job is to 
organize and manage those drawings and documents so that engineers can 
find the correct document when they need it. The design phase 
ultimately arrives at an approved design which is certified by the 
engineering staff for the owner of the project.
    After a design is certified, it is typically necessary for new 
drawings to be prepared to be used in the fabrication and construction 
of the project. These fabrication or construction drawings add details 
needed for the manufacture or construction of the physical equipment. 
These drawings are also approved and certified, again by the 
engineering staff for the owner. They are then turned over to vendors 
who use them for the actual fabrication or construction.
    During the fabrication and construction phase, it often becomes 
necessary to make changes to account for unforeseen issues, such as how 
equipment physically fits together or takes up space. All such changes 
must be approved by the engineering staff for the owner and the 
drawings are modified and certified by engineering as matching the 
physical construction.
    At the end of the project, the owner then has, not only the 
physical facility, but a large body of engineering drawings and 
documents which correctly record the actual physical construction, 
along with the history of changes made during the project which led to 
the final result. These final documents are referred to as ``As-Built'' 
drawings and documents; the term ``as-built'' means that these 
documents are up to date and correspond to the physical equipment in 
the facility. Therefore, someone can learn the physical facility by 
looking at the ``as-builts.''
    Many of the as-builts will be used by the Operations Department 
(the department which actually operates the facility) to create safe 
operating procedures, testing and maintenance procedures, training 
procedures, etc.
    One of the important categories of drawings is P&IDs--the 
abbreviation for Piping and Instrument Diagrams. Their importance lies 
in the fact that a petrochemical operation is similar to a giant spider 
web of pipes that connect vessels which contain the product with 
valves, pumps, heaters, and instruments which measure temperatures, 
flow rates and pressures. The Operations Department of the facility 
must constantly start, stop, redirect or maintain product flow or flow 
rates, or raise, lower or maintain temperatures and pressure. 
Electronic signals are used to control the valves, heaters, pumps and 
other equipment based on information gathered by instruments and 
computerized operation procedures. The P&IDs document all of this 
equipment and how it is interconnected from the wellhead to where the 
product leaves the facility, and are the basis for developing the 
operating procedures.
    In my experience, it is universally true that, for petrochemical 
facilities, as-built P&IDs must be turned over to the operations 
department that will operate the facility before startup of the 
facility. It is my training that a facility cannot be safely operated 
without up to date P&IDs. Textbooks say that P&IDs serve as a guide for 
those who will be responsible for the final design and construction. 
Based on this diagram:
        1.  Mechanical engineers and civil engineers will design and 
        install pieces of equipment.
        2.  Instrument engineers will specify, install, and check 
        control systems.
        3.  Piping engineers will develop plant layout and elevation 
        drawings.
        4.  Project engineers will develop plant and construction 
        schedules.
    Before final acceptance, the P&IDs serve as a checklist against 
which each item in the plant is checked.
    (Richard Turton, Richard C. Bailie, Wallace B. Whiting, Joseph A. 
Shaewitz, Analysis, Synthesis, and Design of Chemical Processes, 2nd 
Edition, 2003)
Experience at BP Atlantis
    BP Atlantis is the world's deepest moored oil and gas production 
facility; it is located in over 7,000 feet of water in the Gulf of 
Mexico about 150 miles south of New Orleans. It is rated to produce 
200,000 bbls. of oil per day and large quantities of natural gas, far 
more than the Deepwater Horizon well now fouling the Gulf and its 
beaches.
    In August, 2008, I started work under contract for the BP project 
management office for the BP Atlantis Project, on the Subsea Team. I 
was hired as a ``project controls lead'' and had responsibility which 
included management of the engineering documents.
    The BP Product Execution Plan (PEP) for Subsea Atlantis fit into 
this system. BP Lead engineers were assigned to each sector of the 
project. Outside vendor Technip Offshore, Inc. was primary engineering 
contractor. At each phase, the BP Lead Engineers were to review and 
approve designs and technical documents for their respective sectors. 
It was specifically provided that:
        As-Built Documentation
        The Lead Engineer for each discipline area will ensure that all 
        technical documentation is updated to reflect the as-built 
        condition of the equipment prior to deployment to the field.
    A project such as Atlantis is incredibly complex in two ways: 
First, there are many components produced by many vendors which must 
all work together. Second, there are many challenges created by the 
extreme water depth which must be overcome by cutting edge engineering 
techniques. One of the functions of the owner/operator, BP in this 
case, is to assure that engineering knowledge and expertise look at the 
system overall to be sure that all of the parts function together; this 
is called ``integration.'' The signature of the BP engineer signing off 
on a given drawing signifies approval taking into account this 
integration function.
    Almost immediately upon reporting to work, I was confronted with 
the problem that BP Atlantis Operations was demanding as-built P&IDs 
and we did not have them to provide to Operations. At this time, 
Atlantis had already been in operation for about a year and the 
equipment had long-since been deployed to the field.
    I received a copy of an email (attached as Ex. B) written by my 
immediate predecessor in my job, Barry Duff, who had been promoted to 
another position. In it, he wrote why he was refusing to provide P&IDs 
to Operations. He wrote that:
          ``The P&IDs for Subsea are not complete 
        have have [sic] not been approved or handed over to 
        Operations.''
          ``This could lead to catastrophic Operator 
        errors due to their assuming the drawing is correct. Turning 
        over incomplete drawings to the Operator for their use is a 
        fundamental violation of basic Document Control, the IM 
        Standard and Process Safety Regulations.''
          ``Currently there are hundreds if not 
        thousands of Subsea documents that have never been finalized, 
        yet the facilities have been turned over.''
    From this time until I was fired on February 5, 2009, I worked to 
obtain BP engineer approved, as-built P&IDs and all other as-built 
project drawings with little, if any, progress. Technip, the vendor 
company which was the lead engineering contractor did not have and 
could not provide up to date P&IDs. The lead engineers responsible for 
various sectors within the project did not have and could not provide 
up to date P&IDs. The more I insisted that we had to develop or obtain 
them, the more unpopular I became. At one point, BP management vetoed 
one plan because of its estimated cost of $2 million.
BP Atlantis Deficiencies
    While I was at BP Atlantis, we developed a database in which we had 
all of the engineering documents and coded the database with the 
completion status (or latest approval status) of each document. We also 
obtained and put in the database the completion status as shown by 
Technip's document control system. This allowed us to analyze overall 
what documents we had and their completion status.
    The results were astounding to me. The Table (attached as Ex. C) 
shows the completion status for all documents in the various sectors of 
the project. The overwhelming majority of documents and drawings had 
never received any engineering approval at any phase of development. 
The last column shows the percentage never having any approval at all. 
Out of the total of over 7,000 drawings and documents, almost 90% never 
received any approval of any kind, not even for design.
    With reference to specific systems:
          The oil and gas products under high 
        pressure are managed, contained and transported to the floating 
        surface vessel by the wellhead, the tree, the manifolds, 
        pipelines and flowlines, controls and risers. For all of these 
        system, less than 10% were certified as approved by 
        engineering.
          The wellhead is the equipment which 
        controls pressures inside the well at the upper end of the 
        casing, below the tree--none of those documents ever had any 
        engineering approval.
          The tree is a series of valves immediately 
        above the well which have the same function as the BOP stack 
        during drilling; they control pressures and can be used to shut 
        down the well if needed; they are a critical part of the Safety 
        Shutoff System. On Atlantis, they also include valves to 
        control flows related to the manifolds. Of these critical 
        components, 98% never received any engineering approval.
          The software logic for the safety shutoff 
        system does not have engineering approval.
          Welding procedures for such critical items 
        as manifolds do not have engineering approval.
    I have now learned that MMS regulations as well as BP internal 
procedures and project execution plan require that designs for these 
facilities be approved by BP engineers specializing in the design of 
offshore structures. BP records reflect that the design was not, in 
fact, approved by engineers.
    The Subsea portion of Project Atlantis was being constructed in 
``Drill Centers (DC's),'' each one of which collects the product from 
several wells and passes it to the surface facility. When I went to 
work for Atlantis, DC-1 was in production and DC-3 was under 
construction. It came to my attention that we did not have ``approved 
for construction'' documents for DC-3. In my experience, entering into 
construction without ``approved for construction'' documents can be a 
major problem. I immediately attempted to obtain approved for 
construction documents, but was never able to obtain them.
    During development of such a project, it is normal that much of the 
equipment must be tested before being placed into service. I learned 
that the nature of the records kept by BP for such testing did not 
allow the results of a given test to be correlated to the item which 
was tested. As a result, there was no way for anyone to learn from the 
database whether a particular item had been tested with a particular 
test, or the results of the testing actually done on a particular 
component. In November 2008, I was advised that BP personnel and 
Malcolm Voss, engineer for Technip, had reached an agreement on how to 
resolve this problem. However, a number of such agreements were reached 
which were never carried out; I have no knowledge of whether this 
agreement was actually completed.
    While I was at BP, I spent many hours in meetings with my 
management and others on the Subsea Team attempting to solve the 
problems of the non-existent as-builts. It was never solved.
    The lack of As-Builts is a common thread running through BP 
disasters from Texas City (15 dead) to Alaska (200,000 gallons spilled 
into Arctic tundra) to Deepwater Horizon (blowout preventer modified 
and would not close) to BP Atlantis.
Dept. of Interior and MMS Refuse to Act
    Within a few days after being fired, I made a complaint about the 
situation to the BP Office of the Ombudsman which I understand was 
created after BP failed to respond to employee concerns regarding 
unsafe conditions at its Texas City Plant. It is my understanding that 
the Office of the Ombudsman is supposed to be sure that complaints of 
unsafe conditions are dealt with properly. I provided full information 
to the Ombudsman and had a number of meetings, telephone calls and 
written communications with them over the next several months. I did 
not receive any substantive reply from them for over a year. I will 
discuss that response later in my statement.
    On March 9, 2009, I emailed Earl Devaney, Inspector General of the 
Dept. of the Interior at doioig.gov. I sent him full information on the 
unsafe conditions. I never received any response. Several months later, 
someone from that office contacted my attorney and confirmed that my 
email had been received. An employee from the OIG did contact me by 
phone once in mid 2009, but said he could not help since I was not a 
government employee. No one else from the DOI OIG ever contacted me 
about the unsafe conditions of the Atlantis project or took any other 
action to my knowledge.
    After receiving no further response from the Department of the 
Interior, I contacted an attorney from the firm of Perry & Haas in 
Corpus Christi, Texas. They asked me to furnish them with all of my 
documentary information and they wrote a letter providing all of that 
information to the Attorney General and the local United States 
Attorney (attached as Ex. D). They felt that the evidence showed that 
BP was committing fraud on the Federal Government by operating in 
violation of the statutes and regulations which govern oil and gas 
operations in the Gulf. On April 21, 2009, my attorneys filed a qui tam 
suit to force BP to repay to the Government the amount it had taken 
fraudulently. They also provided the Government with a report from an 
engineer detailing the importance of the BP Atlantis deficiencies and 
explaining that those deficiencies could lead to a catastrophic failure 
with resulting catastrophic harm to the environment of the Gulf of 
Mexico.
    My attorneys have informed me that on May 19, 2009, they had a 
personal meeting in Houston, Texas with an Assistant United States 
Attorney. Also present by telephone were an attorney from the 
Department of Justice; another attorney from the Department of the 
Interior; and four representatives of MMS, Mr. Saucier, Mr. Domangue, 
Ms. Moser, and Mr. Herbst. My attorneys have reported to me that the 
MMS personnel strongly took the position that BP Atlantis was safe and 
they did not need to take any action.
    On May 27, 2009, my attorneys wrote a lengthy letter to the 
attorney from the Department of the Interior warning that the kind of 
problems I have told them of created an imminent risk of catastrophe to 
the Gulf of Mexico (attached as Ex. E.). In this letter, my attorneys 
pointed out in writing the great threat to the environment created by 
deep water drilling if proper procedures are not following.
    At a later date, I participated in a personal meeting with the 
Asst. United States Attorney, the attorneys from DOJ and DOI and the 
MMS representatives. Again, the MMS representatives strongly expressed 
their opinion that BP Atlantis was safe.
    Since that time, I have relied on my attorneys and Food and Water 
Watch to seek action from the Government. In general, I am aware that 
they have been in contact with MMS continually for about a year, and 
have urged upon the MMS the importance of taking action to prevent a 
catastrophe in the Gulf. FWW has also contacted Members of Congress who 
have demanded action from MMS.
    In April, I finally received a written response from the ombudsman. 
We have now learned that a BP internal investigation through Judge 
Sporkin, the ombudsman, verified my complaints about the absence of 
documentation for Atlantis (letter attached as Ex. F). Judge Sporkin 
was interviewed by AP and confirmed that BP did not have the necessary 
documents for Atlantis (attached as Ex. G). Regardless, MMS still 
refuses to take action.
Atlantis Deficiencies Similar to Deepwater Horizon
    I am personally sick at heart over the Horizon tragedy. Like 
millions of others, my family and I have vacationed and fished in the 
Gulf, and used it for recreational purposes. My work and career are 
tied to the oil and gas industry, much of which is in the Gulf. I feel 
that the pollution of the Gulf, the destruction of the beaches, the 
destruction of its recreational and economic value is a national 
tragedy. I feel strongly that it would not have happened with proper 
procedures.
    Several different causes for the blowout have been reported on the 
news. Many of them would be caused by the same problems I have seen on 
Atlantis.
        1)  blowout preventers did not close--on Atlantis, safety 
        shutdown system logic has not been engineer-approved; this 
        could cause failure of shutdown systems;
        2)  rig crew did not understand makeup of blowout preventers--
        this would be due to failure to have up to date as-built 
        documents; same problem as Atlantis;
        3)  a mechanic apparently did not have access to manual 
        shutdown procedures for diesel engines--again, failure to have 
        proper documentation;
        4)  there was apparently no gas sniffer and automatic shutdown 
        for the diesel engines--failure to have safety equipment which 
        should have been present happens when proper engineering 
        procedures are not followed.
    From my experience working in the industry for over 30 years, I 
have never seen these kinds of problems with other companies. Of 
course, everyone and every company will make mistakes occasionally. I 
have never seen another company with the kind of widespread disregard 
for proper engineering and safety procedures that I saw at BP and that 
we hear from the news reports about BP Horizon, or BP Texas City, or 
the BP's Alaska pipeline spills. BP's own investigation of itself, by 
former Secretary of State James Baker, reported that BP has a culture 
which simply does not follow safety regulations. From what I saw, that 
culture has not changed.

          Dept. of Interior/MMS Refusal to Enforce Regulations

    At first, I could not believe it when MMS refused to take any 
action and loudly insisted nothing was wrong before they had done any 
investigation. As far as I know, MMS did nothing to investigate my 
complaints for over a year. They have never contacted me except for the 
one conference I had with them and the U.S. Attorney. MMS never 
contacted me as part of an MMS investigation. They have now filed 
papers in my lawsuit saying that they started an investigation in April 
2010, over a year after my first complaints, and only after a demand 
from many Members of Congress.
    Of course, this makes sense only after we learn of MMS history of 
failure to enforce regulations, granting waivers and taking favors from 
the industry.
    I read that Congress is considering new regulations. Perhaps the 
regulations should be improved; perhaps we do need some new 
regulations.
    It seems to me that we need to start by enforcing the regulations 
we already have. My attorneys believe BP is now in violation of many 
regulations, but that MMS is refusing to enforce the regulations now on 
the books. No matter what the regulations, BP has a history of ignoring 
and violating the regulations, so it doesn't matter what the 
regulations say unless they are enforced.
    Among various responses to FWW, MMS has stated directly that it is 
not enforcing large segments of the regulations. MMS has written that 
they do not enforce Part I [eye] of the regulations as to subsurface 
equipment (attached as Ex. H). Lawyers tell me that Part I of the OCS 
regulations contains requirements that:
          companies create and maintain and provide 
        MMS with access to:
                  as-built drawings
                  design assumptions
                  fabrication records
                  inspection and test results;
          keeping testing records
          construct and use only certified engineer-
        approved designs
          comply with multiple industry regulations 
        which have been codified into the Federal regulations
          comply with a Certified Verification 
        Program
    MMS has repeatedly written to FWW that they DO NOT ENFORCE THESE 
REGULATIONS for subsea equipment--even though the written regulations 
specifically include subsea equipment. The greatest danger of 
environmental damage is from loss of control of oil and gas in the 
underwater sector. It makes no sense to simply refuse to enforce 
regulations for that sector. Because MMS refuses to follow and enforce 
its regulations, FWW and I have together filed another suit against the 
Secretary of the Interior seeking a court order to enforce the law and 
the regulations.
    Unbelievably, even when MMS claims to enforce certain requirements, 
it renders them meaningless. For example, the requirement that 
companies maintain as-built drawings: MMS has written that its 
regulations do not require the drawings kept to be accurate or complete 
(attached as Ex. I).
    Now, after a year of refusing to act, MMS now says they want to do 
an investigation that will take months. This is totally unreasonable. 
BP has a database of the engineering documents and the completion 
status of each document. I have provided copies of that database to 
MMS. It would take a qualified person no more than a few minutes to 
analyze the database for the information needed, and only a few hours 
to compare the results to the actual electronic images of the 
documents.
    Deepwater Horizon demonstrates the urgency of assuring proper safe 
procedures. Catastrophe can strike unsafe conditions at any moment. The 
worst case scenario for BP Atlantis is a torrent of 200,000 bbls. per 
day into the Gulf, many times worse than Deepwater Horizon. The danger 
is known to be present, the situation is urgent and delay makes no 
sense.
    Finally, in his court filings, Secretary Salazar says that the 
court cannot enforce the law, that he has the right to decide to do 
nothing. The statute passed by Congress says different; the statute 
says:
        ``The Secretary ... shall enforce safety and environmental 
        regulations promulgated pursuant to this subchapter.'' 43 USC 
        Sec. 1348
    The Secretary is not above the law passed by Congress; he is 
required to enforce the law. If the Secretary had followed the law, 
Deepwater Horizon may not have occurred. Let's not have another tragedy 
because the Secretary will not follow the law.

                 New Statutory and Congressional Action

    With the assistance of my attorneys and advice from Food and Water 
Watch, we would respectfully recommend that the Congress consider the 
following action:
        1.  Establish a Safety and Environmental Regulatory Agency 
        independent of the Dept. of the Interior.
        2.  No one presently at MMS should be allowed a regulatory 
        position in the new agency. The culture of corruption and 
        coziness appears too deep to be fixable.
        3.  Regulatory personnel should not come from the rank of the 
        industries being regulated; statutes should close the 
        ``revolving door.'' The present Deputy Secretary of the 
        Interior for Land and Minerals Management having direct 
        supervision over MMS comes to the Department directly from BP. 
        At BP, she was VP for BP America's Health, Safety and 
        Environment department which was responsible for the Alaska oil 
        spills disaster, the Texas City disaster, and, now, of course 
        the Deepwater Horizon disaster, to name only a few. It does not 
        make sense for a person with that record to be placed in charge 
        of enforcement, yet Secretary Salazar's new ``reorganization'' 
        of MMS leaves this same person in charge of the new enforcement 
        office.
        4.  Process Safety Management (PSM) regulations which are 
        enacted under the OSHA and Clean Air Acts in identical language 
        should be applied to OCS. (See 40 CFR Part 68 Chemical Accident 
        Prevention Programs and 29 CFR 1910.119 Safety Process 
        Management of Highly Hazardous Chemicals).
        5.  The penalties for a disaster such as Deepwater Horizon, or 
        the Alaska oil spills should include forfeiture of the leases 
        which the company holds. A company which cannot properly 
        operate the leases should forfeit them and they should be 
        turned over to a company which can and will operate them 
        properly.
    NOTE: Attachments have been retained in the Committee's official 
files.
                                 ______
                                 
    Mr. Costa. Thank you, Mr. Abbott. We will now begin the 
period of questions, and I still start.
    Was there any indication that--I mean, I understand about 
the issue you stated in your testimony that the documents, 
whether the documents were complete, but do you have any 
evidence that demonstrates that components of these documents 
that you have referenced were either substandard or damaged, or 
in any way constituted an imminent hazard within the platform 
Atlantis?
    Mr. Abbott. Yes, sir, I do. As part of my responsibility of 
managing the project documents, we kept electronic database 
with all the drawings in it in a drawing log that showed the 
status of the drawings. You know, if it had been reviewed and 
approved. Ninety percent were preliminary.
    Mr. Costa. So if we wanted to gain those documents, who has 
them today? British Petroleum?
    Mr. Abbott. Yes, sir.
    Mr. Costa. MMS, or is there an independent third party?
    Mr. Abbott. BP, British Petroleum has those documents, and 
the drawing log.
    Mr. Costa. And they are not required to be filed with the 
Minerals Management Service?
    Mr. Abbott. As I understand the regulations, they are 
required to be available and kept in some location for review 
by the Minerals Management Service, and you know, I don't 
believe--I know that 90 percent of them have not been approved 
by engineers, have not been as-built, and that is the last I 
saw on the document log.
    Mr. Costa. You make a comparison, and it is obviously a 
very serious one, and I am certain that you do that as a matter 
of conscience, that the situation with Atlantis that you think, 
as you noted, drilling at even deeper ocean depths is 
comparable to the Deepwater Horizon, but there are distinctions 
in the sense that the British platform--the British Petroleum 
platform Atlantis is a production platform while the Horizon 
was a drilling rig. There are relative differences--I have been 
out there--between production and drilling.
    Are you indicating as a result of that that the safety 
factor is such that this nonproduction platform should be at 
this point shutdown or closed?
    Mr. Abbott. You mean the production platform, right?
    Mr. Costa. Right.
    Mr. Abbott. Yes, I do think it should be--I do believe it 
should be shutdown based on the fact of the really poor 
engineering design and non-adherence to normal engineering 
practice. They do not have final as-built drawings. Because of 
that the operators out there do not have a good road map or a 
good driver's manual, if you will, of how that rig should work, 
and it is a tremendously complex rig, and they run big risks if 
they don't have those plans.
    I saw similarities between the Atlantis and Deepwater based 
on, you know, information from articles I have read. For 
example, when BP tried to shutdown the BOP, blowout preventer 
on the Deepwater, they wasted a day because they had the wrong 
drawings. Transocean didn't have the current drawings either. 
The drawings had been changed--the design of the BOP had been 
changed after it was installed. Nobody bothered--even though BP 
approved that, nobody bothered to produce new engineering 
drawings for those operators. So, you know, even the owner/
operator BP was sitting there trying to figure out how to shut 
that thing off, pushing the wrong buttons, and you know, there 
was wiring changes. That is a perfect example of the same kind 
of problem that BP Atlantis has.
    Mr. Costa. Yes, let me as a couple of questions as it 
relates to that point. One, were you ever on the Deepwater 
Horizon?
    Mr. Abbott. No, sir. I worked in the Houston office.
    Mr. Costa. Did you ever review the drawings or the plans 
for the Deepwater Horizon?
    Mr. Abbott. No, sir.
    Mr. Costa. All right. Your comparative analysis is based 
upon what you have read over the last month?
    Mr. Abbott. That is correct, sir.
    Mr. Costa. All right. You say it is unreasonable for the 
Minerals Management Service to take months to investigate the 
Atlantis. Since you have provided copies of the British 
Petroleum database to the Minerals Management Service, I am 
trying to remember the time in which your relationship with 
British Petroleum was terminated, but wouldn't that database, I 
mean because the Minerals Management Service is now doing that 
as a result of the order by the President, doing that due 
diligence with the Secretary of the Interior as they are 
reviewing all of these deepwater platforms, but isn't that data 
a year and a half old?
    Mr. Abbott. The data I had at the time, it goes back to 
February 2009, when I was laid off, it shows that 90 percent of 
the drawings had not been reviewed by engineers or issued as-
built. The data that they can get now, there should be a 
current drawing log, and drawings electronically available. 
That should be a pretty simple matter to check in a few days by 
the MMS personnel.
    Mr. Costa. Well, that is my point, though, and obviously if 
they have this new updated information they will be able to do 
an analysis to see whether or not it has changed from the 
information that you had, which was over a year ago.
    Mr. Abbott. Exactly.
    Mr. Costa. Whether or not they have corrected any of those 
drawings or plans or whether they are the same.
    Mr. Abbott. Exactly, so I don't know why they just don't do 
that. You know, they told Congress, this Committee I believe in 
February, they would do it by May. They had three months to do 
it. They could have just pulled that log and a few drawings to 
spot check them, and that would have taken maybe a few days. 
That was never done, and now they want three more months.
    Mr. Costa. My time has expired so I want to allow my 
colleagues an opportunity, but let me ask you just one quick 
question as it relates to that point you made.
    Do you believe the expertise is there that resides within 
the Minerals Management Service to do that spot check, to do 
the efforts that are necessary to either hold British Petroleum 
in violation or to either clear them?
    Mr. Abbott. I can't answer that, Congressman. I don't have 
any good concept of their capabilities, and I am not an 
engineer anyway. I know the----
    Mr. Costa. You stipulated that for the record so----
    Mr. Abbott. There are people that can do that.
    Mr. Costa. Yes, but I mean, and again I am going over my 
time, but I would assume from all the work that you have done 
you have had experience in your previous work with the Minerals 
Management Service, right? I mean, don't you have any 
interaction or relation in your past?
    Mr. Abbott. No, not really.
    Mr. Costa. Really?
    Mr. Abbott. I produced the drawings and we put them out to 
the site, and the MMS does----
    Mr. Costa. I want to pursue that if I get a second round of 
questions.
    Mr. Abbott. Sure.
    Mr. Costa. Because I find that interesting. I think the 
gentleman from New Jersey, Mr. Holt, is next.
    Mr. Holt. Thank you, Mr. Chairman, and as Chairman, you get 
as many rounds of questioning as you want.
    Thank you, thanks for your testimony, Mr. Abbott.
    Mr. Abbott. Sure.
    Mr. Holt. Help me understand what you think are the risks 
of BP Atlantis not having the proper documentation. Following 
on the Chairman's question, I mean, this is a production 
facility rather than exploratory or drilling facility. I am not 
an expert in this area but I think the safety record is better 
once these things are in production. So what do you see as the 
risk here?
    Mr. Abbott. Well, I would agree there are----
    Mr. Holt. Maybe you can try to compare it to----
    Mr. Abbott. Sure.
    Mr. Holt.--the risk of something like the Deepwater 
Horizon.
    Mr. Abbott. Well, Congressman, first of all, the Deepwater 
Horizon was strictly a drilling rig and they were drilling one 
rig. The BP Atlantis is a multiple well site. There are many 
production wells. I think probably four to six in production 
now. They are hooked up directly to the piping and all. But 
there are also two drilling rigs there drilling new rigs right 
nearby the Atlantis. So rightfully so it is a combination, 
drilling and production rig.
    And yes, production rigs are theoretically more safe 
because, you know, you are not going through the whole drilling 
process. Here is the thing, you know. All of this equipment, be 
it production or drilling rigs, is subsurface with tremendous 
pressures and tremendous heat. They say that the pressure down 
at the bottom of that ocean can take a 55-gallon jug and reduce 
it to the size of a thimble.
    Now this means that the manifolds and all the piping 
underneath has to be extreme new cutting-edge metallurgy, 
welding procedures, et cetera. If those welling procedures and 
that metallurgy was not reviewed by BP engineers who know the 
overall design, then there is a tremendous danger that there 
could be errors, OK?
    There is also a tremendous possibility that the operators 
if they don't have the latest drawings in front of them could 
make mistakes in an emergency situation when they are shutting 
this rig down, and you know, that could be deadly.
    Mr. Holt. OK, thank you. So help me understand. Why would 
BP not provide this or not want to provide this documentation? 
Do they save time or do they save money, or is it just sloppy 
procedure, and it would have been in their financial interest 
to provide these but they just didn't get around to it? I mean, 
what do you think is behind this?
    Mr. Abbott. OK. From what I saw there, you know, working 
the budgets, working the document control and scheduling, what 
I believe what I saw was that BP management set the tone and 
they were more concerned with production and cost, making the 
money, safety was the last issue. That I found to be very much 
true.
    Mr. Holt. In other words, producing the documents, the 
drawings and so forth, would cut into production time----
    Mr. Abbott. Exactly.
    Mr. Holt.--and, therefore, cost money.
    Mr. Abbott. Because, Congressman, if you just go with your 
theme, if you just take--you know, engineering normally goes 
through several iterative processes. You have a preliminary 
design, it is approved by the owner company, and they go back 
and forth with the vendors and get it right to fit their 
design, and finally they produce as-built drawings. That takes 
many thousands of man-hours to do.
    If you just shortcut and say, we are going to take the 
preliminary drawings and build it based on that, it cost you a 
lot less money, and that is what they did.
    Mr. Holt. The BP Atlantis, in all parts of the operation 
there this documentation was missing?
    Mr. Abbott. Yes, sir. Ninety percent of the drawings. Even 
engineer approved by BP drawings were missing.
    Mr. Holt. OK.
    Mr. Abbott. Subsea only. I am sorry. Everything below the 
surface that is what I worked.
    Mr. Costa. You might want to reiterate--excuse me--for the 
record that distinction because I think it is important for 
folks to know the percentage of a platform that is above the 
water, and that is below, and the potential hazard risks that 
you are concerned of.
    Mr. Abbott. Right. The subsea, you know, includes things 
like the risers, the piping, the umbilicals, the wellhead, the 
BOPs and in case of the production unit, the trees, and you 
know, they are at least half of the total cost versus 
everything above the surface, and what happens is that above 
the surface there are some low-pressure and high-pressure 
elements; you know, piping. But below the surface it is pretty 
much all high pressure and high temperature, so it is special 
metals, and in my opinion, the most dangerous of all the piping 
and equipment that is built for that platform lies beneath the 
sea.
    Mr. Holt. You testified that the MMS did not quickly 
respond to your claims, your reports. Have they now?
    Mr. Abbott. No, sir, they have not.
    Mr. Holt. So since you have been announced as a witness at 
this hearing you have not heard from the MMS, for example?
    Mr. Abbott. No, sir. The only time I heard from them was 
last June. My attorney and I had a meeting with the Justice 
Department, and MMS was on the phone. I think they asked me one 
or two questions. They said they would follow up with an 
interview with me. Never happened. They said in February of 
this year when your Committee sent your letter to investigate 
it, and in May when you sent it you specifically mentioned they 
should talk with me. They have never talked with me in any 
sense at all; done any kind of interview.
    Mr. Holt. And just a very quick question since my time is 
up. Have any other people joined you in these reports of 
missing documentation and so forth?
    Mr. Abbott. Well, Barry Duff, whose letter you have, was my 
predecessor at BP and a long-time BP employee, who was promoted 
when I came in. He wrote a very direct letter saying that there 
are hundreds, if not thousands, of drawings that are not 
complete and could cause catastrophic operator errors.
    You know, I pursued that. I asked him for a list of 
problems when I went in, and I pursued that problem, and all it 
got me was a very unpopular reputation and pretty much ran off.
    Mr. Holt. Thank you, Mr. Chairman.
    Mr. Costa. Thank you, Mr. Holt, and thank you, Mr. Abbott. 
The next member of the Subcommittee, the gentlewoman from 
Wyoming, Ms. Lummis.
    Ms. Lummis. Well, Mr. Chairman, I am late enough to the 
game here, but I appreciate the opportunity to ask questions 
and I will decline, but thank you very much. Thank you, Mr. 
Abbott.
    Mr. Abbott. You are very welcome, Congresswoman.
    Mr. Costa. OK. The next member of the Subcommittee is the 
gentleman from Maryland, Mr. Sarbanes.
    Mr. Sarbanes. Thank you, Mr. Chairman.
    Thank you for your testimony. In describing these drawings 
I mean I get the picture that if you do not have the drawings 
you are basically flying blind a lot of the time, is that----
    Mr. Abbott. Exactly, Congressman. Exactly.
    Mr. Sarbanes. At what point in the process of MMS's 
interaction with BP should MMS have become aware of a problem 
with the absence of drawings?
    Mr. Abbott. That is a very good question, Congressman. 
There is an MMS regulation that says the owner/operator will 
have as-built drawings, and he will keep them in a place where 
we can review them. But you know what the real problem is? From 
what I have seen in the last year and a half, they don't review 
them at all. And so it scares the heck out of me.
    I do not believe that MMS--this is my opinion--looks in any 
way at drawings to see of they had been completed and reviewed 
by engineers and if they are as-built, and that is the real 
danger. And if this Committee can change anything, it would be 
to get them to do their job to inspect the drawings and not 
just to go out there and check pressure readings, and look and 
see if they did a safety test. That is not enough.
    On land-based systems, refineries, if you ever thought of 
sending something as a final product from an engineering 
company to a refinery that was not as-built and approved by 
your engineers, you would be fired. It is as simple as that.
    Mr. Sarbanes. So is there a point at which a permit is 
issued to the company for production let us say where you would 
say without MMS having seen or reviewed these drawings, that 
that permit should not be issued?
    Mr. Abbott. Absolutely. They have two certifications, or 
two plans. One is an exploration plan, and one is a production 
plan for every well that they design and build. What happened 
on the production side when they were ready to start production 
is that BP had to certify to MMS that they had completed as-
built drawings, and they were engineer-approved. I haven't yet 
seen that certification. We have asked for it, and I understand 
they are going to try to get it for the Committee.
    But if that certification said, yes, it was done, then it 
was falsified.
    Mr. Sarbanes. I guess you would say that as a threshold 
matter the certification should have been received by MMS 
before a permit was issued, but beyond that even with a 
certification MMS should have done enough independent review to 
be able to assure itself that that certification was well 
founded?
    Mr. Abbott. Absolutely, Congressman. You know, when they 
started production in November of '07 on Atlantis--remember I 
came to work there in August of '08, almost a year later. When 
I came in there they had the problem of 90 percent of the 
drawings not being approved, not being issued to the operator.
    The operations manager, Ron Berger, met with me in January 
of 2009, and said, Ken, I don't have any drawings for my 
operators out on the rig site; no as-built drawings. I said I 
will try to get them, and I kept trying until I was run off.
    Mr. Sarbanes. And as we have this hearing today and 
Atlantis is in production, what percentage of those drawings do 
you think are available in the way that they should be? Do you 
have any way----
    Mr. Abbott. When I left, 90 percent of the drawings were 
not as-built and not reviewed by any BP engineers, and I know 
that Judge Sporkin, the ombudsman for BP who reviewed my 
complaint about that, said in an AP article three weeks ago 
that to the best of his knowledge they weren't complete in 
September of 2009. BP is telling him now recently that they 
have been done but he has no documented proof of that.
    Mr. Sarbanes. So it is possible that at production facility 
people are still flying blind, it is possible.
    Mr. Abbott. Absolutely.
    Mr. Sarbanes. Now, you know the President put this 
moratorium in place for offshore drilling beyond 500 feet, 
right?
    Mr. Abbott. Correct.
    Mr. Sarbanes. So that is not with respect to facilities 
that are already at the production stage.
    Mr. Abbott. Correct. Production can keep going.
    Mr. Sarbanes. Right. Is it possible that even if you have a 
moratorium on drilling that the drilling operation could have 
reached a stage that if you don't have in place the right kind 
of oversight, that even though you go into a moratorium mode, 
that there is still some risk there, or do you believe that 
when you impose a moratorium on a drilling operation, that from 
that point forward you have eliminated the potential risks that 
exists?
    Mr. Abbott. Well, as long as you set the well in properly, 
which is what they would be doing as a result of this 
moratorium, it should be safe until you resume the drilling. 
But, once again, the drilling is the more dangerous side. If 
you don't have good engineer-approved designs and if the owner/
operator, BP, is getting lazy and wants to save money and just 
take those preliminary drawings from their vendors and use 
them, then you have tremendous risk there; and the minute they 
start up, they are in the same risk pool as they were before.
    Mr. Sarbanes. Thank you.
    Mr. Costa. The gentleman's time has expired. Our next 
member of the Committee who is sitting in on the Subcommittee 
is Mr. Markey for five minutes.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Mr. Abbott, in 2009, an independent firm that BP hired to 
serve as its ombudsman headed by former Federal Judge Stanley 
Sporkin substantiated that BP was violating its own policies by 
not having completed engineering documents on board the BP 
Atlantis rig when it began operating in 2007. However, BP's 
managing attorney stated to the Associated Press on May 15th 
that ``BP has reviewed the allegations and found them to be 
unsubstantiated.''
    Mr. Abbott, why would BP not have these critical documents 
before starting operations of the BP Atlantis rig?
    Mr. Abbott. Congressman, the only reason I--and this is my 
opinion--is because they felt it would be a lot cheaper just to 
build it, cutting corners, and not getting the drawings 
approved from their vendors by their own people, and you know, 
that is exactly what they did. They shortcut those man-hours 
and used poor engineering practices.
    Mr. Markey. Mr. Abbott, what was the response of your 
superiors at BP when you alerted them that the BP Atlantis was 
missing crucial final engineering documents that could lead, as 
one BP official stated, to catastrophic operator error?
    Mr. Abbott. Well, Congressman, first I talked to the lead 
engineers when I discovered the problem, and I got big kickback 
from them because they weren't used to doing that. They asked 
me why should we have to approve these drawings, and I said 
because every other engineering company I have ever seen an 
owner company does, OK, it is standard engineering practice.
    And when I went to my supervisors, and his boss and talked 
about it, they told me don't put pressure on the engineers. You 
know, you are causing problems. And they really discouraged me 
trying to pursue that, which was part of my job, and you know, 
I just don't want to see people die because I know what can 
happen if the operators at any kind of plant don't have good 
as-built final issued drawings.
    Mr. Markey. Mr. Abbott, do you have any reason to believe 
that there are other BP rigs currently operating in the Gulf of 
Mexico that have similar safety deficiencies as the BP 
Atlantis?
    Mr. Abbott. Well, as Congressman Costa remarked and I had 
told him this and he remarked on it, basically I see 
similarities between Atlantis and the Deepwater facility from 
what I see in the press, and there are at least three different 
incidences that describe the same situation. One was the 
problem with the blowout preventer where neither BP nor 
Transocean had the most current drawing. That is inexcusable 
for an owner/operator BP to not have those drawings on that 
site.
    And you know, an interview with one of the mechanics, 
another incident on Deepwater, and the man said, you know, I 
smelled the gas coming up from the well. The engine started 
surging. The automatic shut off didn't work. And if I had just 
had a procedure for manually shutting down that engine, I might 
have saved us all. He did not have a procedure, a simple one-
page procedure for shutting down an engine. That is what I call 
a big lack of engineering documentation.
    Mr. Markey. All right. Mr. Abbott, right now BP's chief 
executive officer, Tony Hayward, is testifying before the 
Energy and Commerce Committee right across the street. We all 
know that BP cut corners and ignored warning signs with the 
Deepwater Horizon, but you have raised questions about the 
safety of other BP rigs that are currently operating in the 
Gulf of Mexico.
    Mr. Abbott, what is your message to Mr. Hayward as he 
testifies before Congress today?
    Mr. Abbott. Well, for one thing I would say, Mr. Hayward, 
please get a complete honest answer for these congressmen. You 
know, three weeks ago he said that there was nothing wrong with 
the BP Atlantis drawings when the unit started up, and there is 
nothing wrong today. He said that in a letter to his people. At 
the same time, Judge Sporkin, his chief investigator into 
employee complaints about safety, had said, ``Yeah, there is 
something wrong. Mr. Abbott is right. These drawings are not 
complete.''
    And so I would say to Tony, please get this right, and I 
would say in general, these rigs--all the BP rigs--need to be 
checked out to see if they have complete design drawings for 
those operators, and I have real doubts about that.
    Mr. Markey. So you believe there could be other rigs out in 
the Gulf of Mexico without complete designs, without completed 
procedures to take in the event that something goes wrong?
    Mr. Abbott. I know for sure the Atlantis did. I know from 
what I have read that Deepwater had similar problems that could 
have helped cause the disaster, and I can only assume that at 
the very least we ought to be checking out all the BP rigs, 
checking the drawings. Not going out there and checking 
pressures and safety checks that MMS is currently doing, and 
that is what they are doing.
    Mr. Markey. Do you believe, Mr. Abbott, that there could be 
another BP ticking time bomb out in the Gulf of Mexico as we 
sit here today and Mr. Hayward sits testifying across the 
street?
    Mr. Abbott. I absolutely do, Congressman. I know for a fact 
that Atlantis has four to five times the flow capacity with 
about eight wells, that this one well, Deepwater Horizon had, 
and it has got just as much risk and just as much high 
technology engineering that could be wrong.
    Mr. Markey. Should any of the BP rigs be shutdown right now 
in order to ensure that a complete safety inspection is 
completed?
    Mr. Abbott. Well, since after a year and a half of trying 
to get both BP and MMS to inspect this thing and check the 
drawings, I would say that the best solution at this point 
would be to shut that rig down and then to put the onus on BP 
to prove that it is safe; to fix the--anything can be fixed if 
you spend enough time, but it is dangerous as it is and it 
needs to be shut down.
    Mr. Costa. The gentleman's time has expired.
    Mr. Markey. I think that the only----
    Mr. Costa. I know, but I had some questions I would like to 
ask.
    Mr. Markey. Can I finish just one sentence, Mr. Chairman?
    Mr. Costa. Yes, you can finish one sentence.
    Mr. Markey. I appreciate it. I think that the only thing 
worse than one oil spill in the Gulf of Mexico would be two BP 
oil spills in the Gulf of Mexico. I think that BP and Congress 
should heed the warning that you are providing today, Mr. 
Abbott. Thank you, Mr. Chairman.
    Mr. Abbott. Thank you, Congressman.
    Mr. Costa. Thank you. Mr. Abbott, you described yourself, I 
think, correct me if I am wrong, as a project manager?
    Mr. Abbott. Project controls manager.
    Mr. Costa. Project controls manager. And how often or how 
long have you been doing this?
    Mr. Abbott. It has pretty much been my whole career for 30 
to 33 years.
    Mr. Costa. And has most of it been on offshore platforms?
    Mr. Abbott. Probably about seven years of it has been 
offshore, and the rest has been onshore. Everything from $70 
million projects to $3 billion projects onshore.
    Mr. Costa. So as a project manager I think with the seven 
years and the additional years onshore experience you have what 
is considered good experience on offshore platforms.
    Mr. Abbott. Right.
    Mr. Costa. And you indicated that you have worked for Shell 
and what other companies?
    Mr. Abbott. Some of the major owner companies are Shell and 
General Electric, and BP, of course. Engineering procurement 
construction companies that do the work in the field, and those 
include Stone & Webster.
    Mr. Costa. Let us stipulate for the record this is not your 
first rodeo.
    Mr. Abbott. No.
    Mr. Costa. OK? The reason I am asking that is because I am 
trying to get some comparative analysis based upon the 
testimony you have given this afternoon with regard to your 
experience with British Petroleum on the platform Atlantis--and 
some other platforms that you may have worked on. I suspect you 
are a pretty thorough guy. You sound like you are.
    This kind of documentation for plans and drawings that you 
describe in your testimony is the same kind of information you 
would request for Shell or any of the other companies you 
worked with?
    Mr. Abbott. Absolutely. It is standard engineering 
practice.
    Mr. Costa. And it was forthcoming on those instances?
    Mr. Abbott. In every case, and you better not do it 
improperly or you wouldn't be there.
    Mr. Costa. So are you saying based upon your experience of 
seven years on offshore platform and the time that you have 
spent onshore that there seems to be a culture of carelessness, 
at least, or as I said this morning in the testimony, an 
atmosphere of overconfidence and complacency that came together 
that created this horrific disaster?
    Mr. Abbott. Congressman, I do agree that there is a culture 
of complacency and nonconcern for safety issues at BP, the like 
of which I haven't seen anywhere I have worked. You know, 
nobody is perfect. No company is perfect. But it is thoroughly 
embedded and management sets the tone there, and you know, 
people do what management tell them to do.
    Mr. Costa. So in dealing with this, how long did you work 
for British Petroleum?
    Mr. Abbott. I was at British Petroleum for approximately 
six months.
    Mr. Costa. OK, so it was six months compared to 20 plus 
years of working with other companies?
    Mr. Abbott. Correct. Well, probably 29.
    Mr. Costa. So a project manager is generally hired by a 
company to take on a certain project. You work it through to 
the end, and then if the company likes your work you get hired 
for another project, or you move on to another company. What 
are you doing now?
    Mr. Abbott. I am a contractor and I finished my last 
project, completed in December of last year. It was an Exxon-
SABIC Elastomer project onshore, and I have been looking since 
then.
    Mr. Costa. So you were hired by another major oil company 
or energy company after BP.
    Mr. Abbott. Right.
    Mr. Abbott. Actually, I worked for Swift, a contractor, and 
I was secunded to an Exxon-SABIC as a project representative, 
client representative with Fleur & Jacobs.
    Mr. Costa. Well, you mentioned earlier that you had little 
contact, and I am surprised about this because with the 
Minerals Management Service--I just would have thought that in 
seven years of working on offshore platforms, one of the 
purposes of this Subcommittee's hearing, and one that we are 
looking at is how to reorganize the Minerals Management 
Service. The Administration has put a proposal out there, and 
we are vetting it now at this time to see what we think is 
good, and what needs to be changed, and clearly for me the 
staffing ratios have got to be looked at.
    I mean, you can break it down into different organizational 
structures, but clearly the staffing ratios are inadequate to 
do the job with the amount of platforms, whether they be 
production platforms or drilling platforms, to ensure that the 
regulations and safeties are being done, but I cannot 
understand for the life of me why after seven years of doing 
that you would have had no interaction with the Minerals 
Management Service inspection personnel.
    Mr. Abbott. It is really a quite easy explanation. Most of 
my assignments I have worked in the home office and sometimes 
in the field on the engineering projects, like you said, where 
they design, and buy, and you know, have built all the 
components for the offshore and onshore units. But in that role 
we just don't really have any contact with MMS people.
    The MMS people primarily deal with the operations people on 
the rig and the operations managers, and I guess they probably 
deal a lot with the regulatory people within the oil companies, 
you know, as far as leasing arrangements and all, but my 
experience they don't deal very much at all with the engineer 
and design and construction folks.
    Mr. Costa. Interesting. My final question, and I have gone 
over my time again. Congressman Markey commented and asked you 
the question about the potential of a ``ticking time bomb.'' 
You have been involved in this field for 29 years, as you 
indicated. Do you believe it is--in terms of the risk analysis 
versus the risk management--safe for us to continue to utilize 
the oil and gas finds that are available to our country to be 
used as part of an overall energy portfolio? And should we be 
able to continue to do this safely, or do you think that the 
utilization of offshore leases for oil and gas fields, at some 
point, should be ended?
    I mean, you know, a fair bit about the energy needs of this 
country and the world. I mean, my basic question to you is can 
this be done safely, and if it can, what should we be doing to 
ensure that it is safe as we do our due diligence?
    I mean, as I made the statement, I think you heard me this 
morning, unfortunately, the confidence factor by the American 
public if not zero is near zero as to our ability to do this 
and to utilize this important source of energy for our country. 
So could you give me your thoughts on this?
    Mr. Abbott. Certainly, Congressman.
    Mr. Costa. Because it goes to the heart of ultimately how 
we move forward in a comprehensive energy package that is 
absolutely critical to our country in the twenty-first century.
    Mr. Abbott. Absolutely. You are asking for my opinion and I 
will be glad to give it to you. From what I have observed I am 
a realist as well as somebody that wants to protect our Gulf--I 
live there--and the lives of the people working on it. But at 
the same time I know that very scarce oil and gas resources are 
being depleted onshore and in shallow depths. That is a fact. 
And we are left with a deep sea, and we have to find out how to 
use it and we have to be able to control it and make it safe 
for our environment.
    I believe that a very basic type of regulation is being 
overlooked by the MMS, and that is they need to be checking to 
see, they ask for the drawings. They say you have to have as-
built drawings. The should be doing some kind of cursory check, 
looking at the document log to see if the drawings have been 
issued as-built, spot checking some of the drawings to make 
sure there is no fooling around, and that should take a few 
days on each rig, Congressman, and if we accomplish nothing 
else but got that regulation in force, I think that you all 
would have done a tremendous benefit value for this country.
    I think there are things that could be made better in the 
regulations, but I am not an expert in that, I am not going to 
go into it. I just think the regulators need to regulate. The 
oil companies need to know that in the end there are regulators 
that are serious about it.
    Mr. Costa. So do you believe it could be done safely?
    Mr. Abbott. I think absolutely it can be done safely. I 
don't think it is beyond our technology. A country that has 
built some of the biggest dams in the world and space shuttles, 
I certainly think that we could figure out how to drill a hole 
in the ocean and not have it blow out.
    Mr. Costa. Thank you. Mr. Sarbanes has a question or 
comment.
    Mr. Sarbanes. Yes, a quick question. Getting back to the 
moratorium that has been imposed, you said that with respect to 
drilling operations that are underway that the moratorium will 
cause--what is it that they will do, basically put those in a 
pause mode? What is that they do?
    Mr. Abbott. Well, they will probably shut the--you know, 
depending on where they are at in the drilling operation, they 
will probably shut that well in, cap it off in some way, and 
then move the rig somewhere else, you know, where they can 
drill.
    My attorney is correct on that. I don't know if they are 
just going to stop the current drilling or, you know, put a cap 
on it and move it totally. I am not totally clear on that, so I 
am really kind of, well, opinionating on that.
    Mr. Sarbanes. How long does it take to take either of those 
measures, to sort of shut down a drilling operation, would you 
say?
    Mr. Abbott. And honestly, I just can't comment on that. I 
am not close enough to that to give you a reliable time.
    Mr. Sarbanes. OK. Well, as I listen to testimony, I guess 
what I am worried about is we now have in everyone's mind the 
notion that the moratorium is in place, but I am curious as to 
how long it actually takes before you can say that that is 
true. I mean, you issue a moratorium on a Monday. Does that 
mean by Monday night all of these drilling operations have been 
put into a pause mode? Probably not. So if it is Friday or two 
weeks or three weeks out, are we going to discover later if 
something goes wrong that while they were in the process of 
getting this thing shut down, but then in the meantime 
something happened, and if that is the case, then I think BP's 
drilling operations in particular somebody ought to be going 
and looking at those, looking right over their shoulder as they 
are implementing the moratorium because they have already 
demonstrated a culture that doesn't seem to put a high priority 
on this, and if those rigs are at higher risk, which I have to 
believe they are given that culture, then somebody needs to be 
paying a lot of attention to how the moratorium is actually 
being implemented because I could see us waking up and reading 
a newspaper headline about how some other drilling operation 
that was supposed to be getting closed down has blown up.
    Mr. Abbott. Congressman, I would agree with you completely 
on that. You know, to say we have a six-month moratorium by 
itself does nothing for us because, you know what, six months 
from now if everything goes the way it is MMS will still be 
doing the same kind of inspections and not checking the 
drawings. My recommendation would be to see that these 
inspections are done properly; that they include reviews of the 
design-basis drawings to see if they are up to snuff, and to 
see if they are complete. Then all the other things that they 
should do as well--the safety checks, the pressure checks--and 
there should be a plan. They could stagger these inspections, 
and I could see it would take six months to get these things in 
place. But if nothing changes in six months, they are right 
where they were, and you are right--it is just as dangerous as 
ever when they start them up.
    Mr. Costa. Is the gentleman finished?
    OK, you may be right, Mr. Abbott, but in six months we are 
supposed to have the new improved Minerals Management Service, 
so if in fact that is the case, hopefully the sort of oversight 
and review that you are suggesting here today will be taking 
place, we hope.
    I don't know if it is worth repeating for members of the 
Subcommittee, but I hope there is no confusion as to what the 
elements are of the moratorium that the President has 
implemented with regard to both deepwater and water under 500 
feet or less because I know we talk a lot about it today and we 
talked about it in all the other hearings, but the moratorium 
for six months is any wells that were being drilled for 
production purposes but have not yet reached production stage, 
or any anticipated new efforts that we are going to take 
advantage of their API, and had moved far along and up the 
process to begin actually drilling the exploratory well, that 
is the subject of the moratorium as I understand it.
    Those production wells under Atlantis, as you testified 
today, are currently operating. You said there are what, eight 
wells there--oil and gas wells?
    Mr. Abbott. Well, there is intended to be 16 eventually. 
You know, I have been gone a year now so I don't know how many 
they have actually got in. When I left they had, I think, four 
of them operating. They could have five or six now, but 
understand, there was two new wells being drilled when all this 
happened.
    Mr. Costa. How many wells were in production when you were 
out there?
    Mr. Abbott. When I was there, there were four.
    Mr. Costa. Four.
    Mr. Abbott. Right.
    Mr. Costa. Did you get a chance to review the drawings on 
the blowout valves and some of the other issues that we are 
dealing with now on the Deepwater Horizon?
    Mr. Abbott. No, not the drawings on the Deepwater Horizon. 
No, I was strictly----
    Mr. Costa. No, no, on the----
    Mr. Abbott. On the Atlantis.
    Mr. Costa. On the four wells on the Atlantis.
    Mr. Abbott. Well, remember, on the Atlantic on the 
production side we had trees, yeah, and we had tree drawings so 
would show--a tree replaces----
    Mr. Costa. Right.
    Mr. Abbott.--a blowout preventer when it goes into 
production.
    Mr. Costa. And it sits on the ocean floor.
    Mr. Abbott. Exactly.
    Mr. Costa. And so were you confident that those safety 
aspects on the Atlantis were in place?
    Mr. Abbott. I know that they had preliminary well drawings, 
but none of them had been approved by BP engineers, so you 
know, not very safe if you haven't even reviewed the design of 
them, and issued them as-built to the operators.
    Mr. Costa. All right.
    Mr. Abbott. None of them were approved.
    Mr. Costa. On the permanent trees that were of the four 
wells----
    Mr. Abbott. Correct.
    Mr. Costa.--when you were there were in production?
    Mr. Abbott. Right.
    Mr. Costa. All right. I could go on but I won't. We have 
another panel. The gentlewoman from Wyoming I believe has a 
question.
    Ms. Lummis. Thank you, Mr. Chairman. Now I am in the flow 
of the conversation so I appreciate your letting me follow up 
on your line of questioning, Mr. Costa.
    Where Mr. Costa seemed to be going, and I think he was 
really getting to the heart of the matter finally, which is, it 
seems that, and tell me if you agree with this statement, 
safety and the priority that safety is from company to company 
varies, depending on the culture of the company. The size of 
the company--be it small, medium or large--is not an indicator 
of who may be the safest, or the most reliable, or the most 
responsible. In fact, you really have to look at each company 
individually to understand whether their corporate culture is 
one that values safety of people and the environment, and so 
you shouldn't just judge big companies as being more safe and 
capable than little companies, or vice-versa, based on their 
size. You really have to zero in on the company itself.
    Mr. Abbott. And look at their track record. That is the 
other giveaway. Exactly.
    Ms. Lummis. Thank you, Mr. Chairman.
    Mr. Costa. Thank you, and I want to thank you, Mr. Abbott, 
for your patience and for your testimony, and let us move on to 
our third panel who have been waiting a good time here since 
ten o'clock.
    Mr. Abbott. Thank you, all.
    Mr. Costa. Thank you. If you will come forward.
    All right, our third panel is now here. You get the prize 
for who waits the longest, but there are less of us here to ask 
questions so maybe that's a benefit, of sorts. We would like to 
recognize this group that involves a combination of various 
perspectives.
    Mr. Christopher Mann, Senior Officer of Pew Environmental 
Group; Mr. Alan Spackman, Vice President of the Offshore 
Technical & Regulatory Affairs for the International 
Association of Drilling Contractors, otherwise known as IADC.
    Mr. Spackman. We just call it I-A-D-C.
    Mr. Costa. OK. Got it, I-A-D-C. Mr Erik Milito, Group 
Director of Upstream and Industry Operations for the American 
Petroleum Institute; Ms. Danielle Brian, the Executive Director 
of the Project on Government Oversight, I like this anagram, 
POGO; and Mr. Steve Maley, the Operations Manager for the 
Badger Oil Corporation, is that correct?
    Mr. Costa. All right, and I understand you are more 
representative of the smaller--I don't know if that is the 
appropriate term since we have to be careful, some of the 
adjectives we use here. Well, the less than larger energy 
companies.
    Mr. Maley. I only represent Badger Oil Corporation.
    Mr. Costa. OK. You can tell us all about Badger when you 
get to testify.
    So let us begin with Mr. Christopher Mann, the Senior 
Officer at the Pew Environment Group. I think you folks have 
sat around here long enough today to get the rules. You have to 
activate your microphone. You have that clock in front of you, 
and it is green for four minutes, yellow for a minute, and then 
it turns red. As you can see, the Chair tries to give a little 
bit of discretion, and as long as you don't get him upset. 
Everybody has been on good behavior here today, so why don't 
you begin, Mr. Mann.

STATEMENT OF CHRISTOPHER MANN, SENIOR OFFICER, PEW ENVIRONMENT 
                             GROUP

    Mr. Mann. That is my first rule, Mr. Chairman, not to upset 
you, so at this point in the program, I will try to be brief 
and get right to it.
    I very much appreciate the opportunity to share the views 
of the Pew Environment Group on the Minerals Management Service 
regulation of offshore energy development. I want to note that 
the recommendations in my written statement were developed in 
coordination with the Ocean Conservancy.
    The Deepwater Horizon oil spill has become the worst 
environmental disaster in U.S. history. It brings into sharp 
relief the cost of both human and environmental of our 
society's dependence on fossil fuels. Clearly, something went 
disastrously wrong with that drilling operation, but 
revelations since the spill about environmental shortcuts and 
lack of oversight by the Minerals Management Service show that 
this disaster is as much a failure of governance as it is a 
failure of technology.
    My written statement provides detailed recommendations for 
reform of both the Oil Pollution Act and the Outer Continental 
Shelf Lands Act.
    Although oil spill recovery response is vital, we are now, 
sadly, reminded that once the oil is in the water, much of the 
damage is inevitable. Prevention is the name of the game and my 
remarks today will focus on reforming the development process 
in the hope of preventing a repeat of the Deepwater Horizon.
    Our government system to decide where, when, and how to 
drill in the offshore environment is in need of substantial 
reform. Congress last seriously amended the Outer Continental 
Shelf Lands Act in 1978, when Jimmy Carter was in the White 
House and disco music ruled the airwaves, a sartorial period 
when most of us would probably prefer to forget. During the 
intervening 32 years, the technology to extract oil and gas has 
advanced dramatically, but technologies always fail eventually 
and the technology to prevent and respond to oil spills has not 
kept pace.
    We believe the management of offshore oil and gas 
development is deeply flawed from the five-year planning 
process through production, and needs to be brought into the 
modern era.
    The structural reforms proposed by the Administration are 
an important first step, but Congress should amend the Outer 
Continental Shelf Lands Act to ensure that the risks of 
offshore energy development are fully and accurately assessed 
and managed.
    What are the key problems Congress should focus on? The OCS 
Lands Act provides a narrow single sector approach that 
prioritizes oil and gas extraction over other ocean uses and 
human and environmental safety. Both the Pew Oceans Commission 
and the U.S. Commission on Ocean Policy cited single sector 
management of marine resources as a factor that contributes 
significantly to the degradation of our marine ecosystems.
    The OCS Lands Act focuses on expeditious development which 
pressures and processes--I am sorry--which pressures the 
process and creates strong forward momentum for production, 
especially after the period when leases are sold. The OCS Lands 
Act does not include standards for environmental protection to 
which decisionmakers can be held accountable, and it places 
decisionmaking squarely in the hands of the Minerals Management 
Service which lacks expertise or institutional interest in 
broad ocean issues and has clearly failed to assess objectively 
and accurately the potential risks of OCS drilling.
    Last, current law allows inadequate environmental analysis 
and inadequate preparation for, and capacity to respond to, oil 
spills. What do we recommend Congress do about this?
    Congress should amend the policy statement in the OCS Lands 
Act and create substantive standards to prioritize protection 
of coastal and marine ecosystem health. Standards should 
include the identification and protection of important 
ecological areas, collection and analysis of baseline 
scientific information, and a requirement for demonstrated 
capacity for oil spill response by potential lessees. Congress 
should ensure that Federal agencies beyond the Minerals 
Management Service have a much greater role in OCS energy 
development decisions. Congress should amend the Lands Act to 
require joint preparation of, or at a minimum concurrence by 
the Secretary of Commerce in five-year oil and gas leasing 
programs and the NEPA documents that accompany that planning.
    Congress should ensure environmental review is thorough at 
each step of the leasing process. The ocean agencies should be 
required to examine worst case scenarios and cumulative 
impacts. Categorical exclusions are not intended to cover 
actions with potentially serious environmental consequences and 
should, therefore, not be applied at any stage of the OCS 
development process.
    Finally, we recognize that moving toward more comprehensive 
ocean management comes with additional costs. To address these 
needs Congress should set aside a portion of OCS revenues in a 
permanently appropriated dedicated fund for ocean and coastal 
and Great Lakes conservation and management.
    There are clearly profound environmental consequences from 
development of oil and gas resources offshore, but there is a 
compelling logic in taking a small portion of the revenue we 
derive from developing those resources and reinvesting it in 
the conservation and management of renewable ocean and coastal 
resources. The CLEAR Act, introduced by Congressman Rahall last 
year, provides a good model for the structure of such a fund.
    Mr. Chairman, we look forward to working with both Congress 
and the Administration to protect the health of our oceans as 
we meet our nation's energy needs. That should not be an 
either/or proposition. Thank you.
    [The prepared statement of Mr. Mann follows:]

           Statement of Christopher G. Mann, Senior Officer, 
                         Pew Environment Group

    Chairman Costa, Ranking Member Lamborn and Members of the 
Subcommittee:
    My name is Christopher Mann and I serve as a Senior Officer with 
the Pew Environment Group in Washington, D.C. I greatly appreciate your 
invitation to appear before the Committee to share our views on 
regulation of offshore oil and gas leasing and development. The Pew 
Environment Group is the conservation arm of the Pew Charitable Trusts. 
We are dedicated to advancing strong environmental policies that are 
informed and guided by sound science on climate change, wilderness 
protection and marine conservation. I manage a number of Pew's marine 
conservation initiatives, including our efforts to promote 
comprehensive, ecosystem-based management of our oceans, coasts and 
Great Lakes.
    The explosion and sinking in late April of the Deepwater Horizon 
oil rig some 50 miles off the coast of Louisiana brought once more into 
sharp relief the costs, both human and environmental, of our society's 
dependence on fossil fuels. Emerging evidence of malfunctioning 
equipment and repeated failures to contain the spill show the risks 
inherent in offshore development. Revelations about environmental 
shortcuts and lax oversight by the Minerals Management Service (MMS)--
the federal agency charged with ensuring that offshore development is 
conducted safely--are equally troubling. As this unprecedented 
environmental disaster unfolds, it has become clear that our government 
system to decide where, when and how to drill in the offshore 
environment is in need of substantial review and reform. We believe 
that the management of offshore oil and gas development is deeply 
flawed from the five-year planning process through production. If any 
good can come of the ongoing environmental tragedy in the Gulf of 
Mexico, it is that Congress may assert its oversight responsibilities 
and enact significant reforms of the Outer Continental Shelf (OCS) 
development process.
    The structural reforms proposed by the administration are an 
important first step in changing both the process and the culture of 
OCS development at the Department of the Interior (DOI). A more durable 
solution is for Congress to amend the Outer Continental Shelf Lands Act 
(OCSLA) to establish a new approach that fully and accurately assesses 
and manages the risks of offshore energy development. These amendments 
should espouse the goal of safely developing offshore energy resources 
while protecting the health of marine ecosystems and the coastal 
economies that depend on them.
    Congress has not enacted significant amendments to OCSLA since 
1978. In the 32 intervening years, amazing advancements in technology 
have allowed extraction of oil and gas from ever-deeper waters. Sadly, 
the technology for extraction appears to have far outstripped the 
quality of oil spill prevention and response capabilities. Since 1978, 
we have also learned a great deal about the long-lasting impacts of oil 
spills on marine and coastal ecosystems. Oil in the marine environment 
is more persistent and more toxic to marine life than was believed when 
Congress last seriously considered OCSLA reform. It is time for an 
overhaul of OCSLA and the Oil Pollution Act (OPA), the statutes that 
respectively govern mineral extraction from our oceans, and oil spill 
liability, response and recovery.
    To address the shortcomings in the current system, the Pew 
Environment Group recommends the following commonsense reforms:
          No new offshore oil leasing, exploration or 
        production should take place until the recommendations of the 
        independent commission established by the President are 
        released and new safety and environmental standards are put in 
        place.
          Environmental and safety analysis and management 
        should be separated from the collection of revenue from OCS 
        minerals development.
          OCSLA, which governs offshore mineral leasing and 
        development, and its implementing regulations should be amended 
        to ensure the environmental effects of oil and gas development, 
        including cumulative impacts, are thoroughly reviewed and 
        appropriately addressed.
          OPA, which governs oil spill contingency planning and 
        response, should be amended to increase the timeliness and 
        effectiveness of oil spill response and recovery.
          Statutory limits on liability for damages resulting 
        from oil spills should be eliminated to ensure that the full 
        cost of economic and environmental damages is recovered.
    These recommendations are addressed in detail below.
    MMS has proved incapable of effective planning, regulation and 
oversight, and federal law governing oil and gas activities on the OCS 
does too little to ensure that coastal and ocean ecosystems are 
protected. There are several key problems with the current statutory 
regime:
    Single-sector approach--Decisions about oil and gas activities on 
the OCS have not been integrated with other ocean management decisions. 
Both the Pew Oceans Commission and the U.S. Commission on Ocean Policy 
cited single-sector management as a factor that contributes 
significantly to the degradation of marine ecosystems, and recommended 
moving towards multi-objective regional planning for the conservation 
and management of marine resources.
    Focus on expeditious development--In planning and administering OCS 
oil and gas activities, existing law requires MMS to balance oil and 
gas development with the protection of human, marine and coastal 
environments. In practice, however, MMS prioritizes resource 
extraction, often at the expense of these other concerns as 
demonstrated by the current spill.
    Lack of substantive standards--Under OCSLA, MMS need only consider 
environmental impacts and then can balance potential harms and benefits 
with oil and gas development in whatever way it wants. OCSLA does not 
include substantive, enforceable standards mandating environmental 
protection to which decision-makers can be held accountable.
    Decision-making in the hands of the MMS alone--MMS lacks expertise 
or institutional interest in broad ocean issues and has clearly failed 
to assess objectively and accurately the potential risks of OCS 
drilling. Other agencies with expertise and management responsibility 
over marine and coastal resources have only a limited role in decisions 
regarding oil and gas planning, leasing, exploration and development. 
The devastating effects that oil and gas development can have on marine 
life require a more balanced assessment of costs and benefits that can 
only be achieved by bringing in additional natural resource 
perspectives and expertise.
    Inadequate environmental analyses: Current law allows MMS to avoid 
preparing full and comprehensive analyses at both the programmatic and 
site-specific project stage, as contemplated by the National 
Environmental Policy Act (NEPA).
    Inadequate response capability: Current law does not mandate that 
oil spill response plans be effective, or that response capacity and 
technical standards for safety and efficacy of response be sufficient.

                            RECOMMENDATIONS

    The current system for planning, analyzing and overseeing oil and 
gas activities on the OCS must be reformed. Ideally, OCS oil and gas 
decision-making should be integrated into a comprehensive ocean 
governance structure, as has been recommended by the Pew Oceans 
Commission, the U.S. Commission on Ocean Policy and President Obama's 
Ocean Policy Task Force. Until such an approach can be developed and 
implemented, targeted amendments to OCSLA and OPA 90 \1\ are necessary 
to improve the OCS oil and gas planning and development process and 
reduce the likelihood of future offshore oil spills and other 
environmental impacts.
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    \1\ In many instances, statutory changes would require 
corresponding changes to agency regulations. For example, changes to 
OCSLA would likely require DOI to revise the regulations that implement 
OCSLA. In the absence of legislative action, DOI can also make 
substantial revisions to the OCSLA regulations on its own.
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I.  ESTABLISH A MISSION AND SUBSTANTIVE STANDARDS THAT PROTECT MARINE 
        AND COASTAL RESOURCES AND THE ENVIRONMENT
    MMS's \2\ focus on resource extraction, and its failure to ensure 
protection of coastal and ocean ecosystems, can be traced directly to 
the policy set forth in OCSLA. Section 3 states in part that the OCS 
should be made available for ``expeditious and orderly development, 
subject to environmental safeguards.'' 43 U.S.C. Sec. 1332(3). This 
policy has allowed MMS to treat protection of the environment as a 
secondary consideration. Moreover, although certain of OCSLA's 
provisions address environmental concerns, they lack meaningful and 
substantive standards. As a result, the statute gives enormous 
discretion to the agency, which routinely tips the balance in favor of 
oil extraction over environmental protection. To address these issues, 
Congress should (1) change the nation's OCS policy and/or make 
Congressional findings to prioritize protection of coastal and marine 
ecosystem health; and (2) set forth meaningful, substantive standards 
designed to reduce environmental impacts to better guide agency 
decision making.
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    \2\ On May 19, 2010, Secretary of the Interior Ken Salazar signed a 
Secretarial Order that calls for MMS to be reorganized into three 
separate administrative entities. In this document, ``MMS'' refers to 
Minerals Management Service or its successor agencies.
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  A.  Amend OCSLA's OCS policy and/or add Congressional findings
    Under OCSLA, the nation's OCS policy does not place sufficient 
emphasis on protection of coastal and ocean ecosystem health. Congress 
should clarify that OCS oil and gas activities can occur only when 
science demonstrates that development poses minimal environmental risk. 
To that end, Congress should amend the nation's existing OCS policy to 
state that protection, maintenance and (where appropriate) restoration 
of coastal and ocean ecosystems is the paramount OCS policy objective; 
development of mineral resources is permissible only if it will not 
compromise that objective. The amended policy should provide that oil 
and gas activities on the OCS are appropriate only:
          In those areas of the OCS where science shows that 
        oil and gas activities can proceed with minimal risk to the 
        health of ocean ecosystems;
          When regulators have a thorough understanding of the 
        ecosystem and environmental baseline, the risks of exploration 
        or development, and the potential consequences of accidents;
          Rigorous safety measures are in place and enforced, 
        and there is a demonstrated ability to mount an effective 
        response to accidents in real-world conditions;
          When oil and gas activities would not impede the 
        development and production of renewable energy; and
          When such activities use the best available 
        technology in order to ensure the highest levels of protection 
        for human life and marine resources.
    This policy can be amplified in Congressional findings that 
recognize the value of non-mineral marine and coastal resources such 
as:
          Healthy coastal and ocean ecosystems are of vital 
        importance to the nation;
          These ecosystems provide jobs, food, recreational 
        opportunities, and subsistence resources, and they support and 
        provide habitat for fish, marine mammals, birds and other 
        wildlife;
          They provide myriad other ecosystem services; and
          The OCS surface and seabed may be important for the 
        development of renewable energy sources.
  B.  Improve agency decision making by enacting meaningful, 
        substantive standards
    Although some provisions of OCSLA address environmental concerns, 
those provisions do not contain meaningful, substantive standards. For 
example, when developing a five-year leasing program, OCSLA requires 
the Secretary of the Interior to ``consider'' environmental values and 
``balance'' impacts on the environment with oil and gas development. 43 
U.S.C. Sec. 1344(a). The lack of specific standards gives the Secretary 
broad discretion, which provides little accountability for or 
yardsticks with which to measure decisions. OCSLA should be amended so 
that environmental concerns and marine resources are not just 
``considered'' or ``balanced,'' but are protected pursuant to a 
discernable, enforceable standard. Specifically, amendments should 
include the following substantive standards:
          In developing five-year oil and gas leasing programs, 
        Congress should require the lead agencies to identify important 
        ecological areas within the areas proposed for inclusion in the 
        program. \3\ Such areas should be excluded from the five-year 
        leasing program, and any areas included in or likely to be 
        affected by a five-year program should be subject to specific, 
        stringent precautions that must be satisfied before the sale of 
        any leases wholly or partially within them.
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    \3\ Congress could define important ecological areas as 
geographically delineated areas which by themselves or in a network 
have distinguishing ecological characteristics, are important for 
maintaining habitat heterogeneity or the viability of a species, or 
contribute disproportionately to an ecosystem's health, including its 
biodiversity, function, structure, or resilience. For example, 
important ecological areas could include areas of high productivity or 
diversity; areas that are important for feeding, migration, or the 
lifecycle of species; or areas of biogenic habitat, structure forming 
habitat, or habitat for endangered or threatened species.

---------------------------------------------------------------------------
          Congress should require the collection of specific 
        types of baseline scientific information on OCS areas before 
        they can be included in a five-year program. For example, 
        before an area of the OCS is included in a five-year program, 
        Congress should require three (or more) years of baseline 
        weather, water, wind, ocean chemistry and other environmental 
        data. It should require similar baseline studies for wildlife--
        including fish, birds, invertebrates and marine mammals--and of 
        the benthic environment. Unless and until such data are 
        compiled for a given area of the OCS, that area should not be 
        eligible for inclusion in a five-year program. In addition, 
        Congress should require a more rigorous and meaningful 
        evaluation of environmental sensitivity and marine productivity 
        based on the baseline science information. In the event of a 
        spill, these data can play a critical role in contributing to 
        natural resource damage assessments.
          Under OCSLA, MMS ``sells'' leases, which give oil 
        companies the conditional right to explore for and develop oil 
        on certain tracts of the ocean floor. History shows that the 
        mere existence of these rights--whatever their scope--may skew 
        government decision-making toward allowing oil and gas 
        exploration and development to go forward, even if there are 
        legitimate reasons not to proceed. To guard against this 
        imbalance, Congress should require potential lessees to meet 
        specific standards before OCS lease tracts are sold. For 
        example, Congress should prohibit the sale of oil and gas 
        leases unless and until operators have demonstrated their 
        ability to respond effectively to an oil spill in real-world 
        conditions in a given area. Congress should ensure safety and 
        improve agency decision making by imposing quantitative 
        standards that are rigorous, but realistic. Congress could, for 
        example, prohibit lease sales unless and until potential 
        operators demonstrate that they can remove a specific 
        percentage of oil from a worst-case scenario spill in the area 
        of the OCS proposed for leasing.
          Congress should also require all OCS leases to 
        include more rigorous safety and technology provisions. The 
        government should develop and enforce its own technology 
        standards for environmental and safety performance. For 
        example, Congress could require OCS leases to provide that no 
        exploration or development is allowed unless OCS operators 
        demonstrate that they are using the most effective safety 
        technology, regardless of cost. Congress should also require 
        MMS to incorporate into OCS leases environmentally protective 
        timing and location stipulations to reduce the potential for 
        environmental damage and harm to coastal communities.
          Congress should also eliminate the provision of OCSLA 
        that requires approval of an exploration plan within thirty 
        days of the date the exploration plan is submitted. Currently, 
        this requirement does not preclude MMS from conducting a 
        thorough environmental analysis; MMS could complete a NEPA 
        analysis before it deems an exploration plan submitted, for 
        example. However, the thirty-day requirement has caused 
        confusion and given MMS an excuse to rush its environmental 
        analyses--or avoid them altogether--through the use of 
        categorical exclusions. Congress should eliminate the 30-day 
        deadline under which MMS must approve a ``submitted'' 
        exploration plan to facilitate more rigorous NEPA analysis.
          At the exploration, development and production plan 
        stages, the National Oceanic and Atmospheric Administration 
        (NOAA and and the U.S. Fish & Wildlife Service (FWS) must issue 
        permits or consult under the Marine Mammal Protection Act 
        (MMPA), Magnuson-Stevens Fisheries Conservation and Management 
        Act (MSA) and the Endangered Species Act (ESA). Similarly, the 
        Environmental Protection Agency (EPA) may have responsibilities 
        under the Clean Air Act and the Clean Water Act. Greater 
        participation by these agencies in the five-year planning 
        process and the preparation of associated NEPA documents will 
        improve analysis and decision making as they carry their 
        responsibilities under these statutes.
II.  AMEND THE PROCESS FOR OCS ENVIRONMENTAL REVIEW, PLANNING AND 
        DEVELOPMENT
    The current process for administering oil and gas activities on the 
OCS can be improved by a series of targeted changes. First, expert 
agencies beyond MMS should have a much greater role in decisions about 
and preparation of environmental analyses for OCS oil and gas 
activities. Second, both five-year programs and individual lease sales 
should identify with greater precision areas of the OCS that will be 
subject to leasing; area-wide lease sales should be eliminated. Third, 
the statute should include explicit requirements governing the type of 
NEPA analysis that must be prepared at each stage of the OCSLA process.
  A.  The Secretary of Commerce should jointly develop and prepare 
        five-year oil and gas leasing programs.
    Congress should change Section 18 of OCSLA so that the Secretary of 
Commerce, who has resource protection responsibilities under the Marine 
Mammal Protection Act, the Endangered Species Act and the Magnuson-
Stevens Fishery Conservation Act, is an equal partner in making initial 
decisions about if, when, where and how to allow oil and gas leasing, 
exploration and development on the OCS.
  B.  MMS and NOAA should jointly prepare NEPA documents for all OCS 
        oil and gas activities, with input from other resource agencies 
        and local experts.
    To ensure that environmental analyses for OCS oil and gas actions 
are sufficiently comprehensive, Congress should amend OCSLA to require 
that NOAA and MMS jointly prepare NEPA documents. See 40 C.F.R. 
Sec. 1501.5(b) (``Federal, State, or local agencies, including at least 
one Federal agency, may act as joint lead agencies to prepare an 
environmental impact statement . . .''). NOAA's broad ocean expertise 
and its role as a natural resource trustee will help ensure that 
environmental analyses contain a proper range of reasonable 
alternatives and assess accurately the risks of oil and gas activities. 
Congress should specify that other administrative agencies with 
relevant expertise, including USFWS, USGS, EPA, and others, contribute 
to the NEPA process as cooperating agencies. See 40 C.F.R. Sec. 1506 
(describing role of coordinating agencies). All agencies participating 
in the process should identify areas that must be off limits to oil and 
gas activities due to unavoidable and unacceptable impacts on other 
marine resources as well as and areas of special concern. The lead 
agencies should adopt the resource agencies' recommendations as to 
areas to be off limits to leasing, and disputes between or among 
agencies should be referred to the Council on Environmental Quality 
(CEQ) for resolution. The statute should also require that the 
Secretary solicit and take into account local and traditional knowledge 
from affected communities. \4\ This would ensure that expert concerns 
are heard from the outset, and could help avoid complications later in 
the process. Affected states and local governments must also be 
partners in preparation of the NEPA analyses.
---------------------------------------------------------------------------
    \4\ This requirement is particularly necessary in the Arctic, 
because of the cultural importance of ocean resources, the value of 
local and traditional knowledge, and the difficulty in engaging with 
Arctic communities.

---------------------------------------------------------------------------
  C.  Alternatively, concurrence should be required by the Secretary of 
        Commerce on five-year programs and NEPA documents for all 
        offshore oil and gas activities.
    An alternative to joint preparation of five-year programs and NEPA 
analyses is for Congress to require the Secretary of the Interior to 
obtain the concurrence of the Secretary of Commerce and other natural 
resource agencies as appropriate for both five-year OCS programs and 
for NEPA documents related to offshore oil and gas activities. A model 
for this approach is the requirement under section 404 of the Clean 
Water Act for concurrence by the Administrator of the Environmental 
Protection Agency for dredge spoil disposal permits by the Army Corps 
of Engineers.
  D.  The agencies should narrowly tailor planning and leasing 
        decisions.
    As a matter of policy, in developing five-year leasing programs 
during the past several decades, the Secretary of the Interior has 
defined ``planning areas'' that encompass tens or even hundreds of 
millions of acres. These planning areas are much larger than specific 
areas with high oil and gas development potential, and it is impossible 
to conduct meaningful environmental analyses on planning areas of that 
scale. Congress should amend section 18 of OCSLA to require five-year 
programs to identify with greater precision the portions of planning 
areas that will be open to oil and gas leasing by, for example, placing 
an upper limit on the percentage of a planning area that may be 
included in any one five-year leasing program. Alternatively, Congress 
could require MMS to focus individual lease sales on specific lease 
tracts, rather than offering enormous portions of planning areas. \5\ 
It is also possible to require government oversight of seismic data 
collection so that the data can be used to more precisely define areas 
to be offered for lease.
---------------------------------------------------------------------------
    \5\ Including the recommendations of NOAA and other expert entities 
as to areas where oil and gas activities should not occur due to 
unacceptable impacts to living marine and coastal resources will also 
serve to narrow the scale of the 5-year plan offerings.

---------------------------------------------------------------------------
  E.  Congress should mandate that environmental review adequately 
        consider every stage of the oil and gas leasing and development 
        process.
    Under current law, agency practice and judicial interpretation, the 
segmented nature of the OCSLA process has resulted in poor quality NEPA 
analysis. At the five-year plan and lease sale phases, MMS's broad, 
generalized NEPA documents gloss over important issues and potential 
environmental impacts. Instead of filling in those gaps with detailed, 
site-specific information, later NEPA analyses--if any--largely 
recapitulate the information contained in previous documents. This 
analytical shell game results in a failure to analyze important effects 
on the human environment and missed opportunities to develop 
alternatives to the proposed actions. Congress should prevent this by 
mandating specific requirements for environmental analysis at each 
stage in the OCSLA process and requiring full, site-specific analysis 
of exploration and production as early as possible.
    OCSLA should state explicitly that preparation of a national five-
year program is a major federal action significantly affecting the 
quality of the human environment that requires the preparation of a 
programmatic Environmental Impact Statement (EIS). The NEPA analyses 
must assess fully the effects of oil and gas development and 
specifically must include an assessment of the effect of a 5-year 
schedule on any potential future alternative energy source or use of 
the OCS.
    Congress should also explicitly require that a site-specific EIS be 
prepared at the lease-sale stage. As noted above, Congress should 
foster more meaningful environmental analysis by limiting lease sales 
so that they are targeted toward specific lease tracts rather than 
large sections of planning areas. Smaller lease sales will allow for 
site-specific analysis in lease-sale EISs. These site-specific lease 
sale EISs must include a full assessment of the effects of exploration 
and development. Current interpretation of OCSLA falsely treats the 
stages of oil and gas production as unrelated. As a result, MMS's NEPA 
analyses fail to address fully the effects of all aspects of oil and 
gas operations. For NEPA purposes, agencies should assume that 
exploration and development will follow the lease sale stage, and 
should assess all impacts from such exploration and development before 
leases are sold.
    In addition to analyzing site-specific impacts of exploration and 
development, lease-sale EISs must include rigorous cumulative impact 
analyses to avoid the potential for geographic segmentation. They must 
also include an analysis of the potential impacts of a catastrophic oil 
spill--even if such an event is perceived to be unlikely--from the 
activities that could flow from the lease sale. NEPA analyses must also 
include a meaningful consideration of local and traditional knowledge. 
Categorical exclusions under NEPA must not be allowed for any OCS 
activity.
    At the exploration or development stage, changes that have occurred 
since the lease sale EIS, or new information about projected impacts, 
will require preparation of a new or supplemental EIS to ensure that 
the effects of all aspects of oil and gas operations are assessed in an 
EIS. This is especially likely in frontier areas, or when operators 
intend to use new technologies. If the effects of exploration and 
development have been assessed fully at the leasing stage and there are 
no changes or new information, an Environmental Assessment (EA) should 
be prepared to assess impacts and determine whether an EIS is 
necessary, or whether a finding of no significant impact is adequate.
III.  REQUIRE EFFECTIVE OIL SPILL PREVENTION AND RESPONSE
    In the Oil Pollution Act of 1990 (OPA 90), Congress directed the 
President to ``issue regulations which require an owner or operator of 
a tank vessel or facility . . . to prepare and submit to the President 
a plan for responding, to the maximum extent practicable, to a worst 
case discharge, and to a substantial threat of such a discharge, of oil 
or a hazardous substance.'' 33 U.S.C. Sec. 1321(j)(5)(A)(i). According 
to that statute, such spill plans must ``identify, and ensure by 
contract or other means approved by the President the availability of, 
private personnel and equipment necessary to remove to the maximum 
extent practicable a worst case discharge (including a discharge 
resulting from fire or explosion), and to mitigate or prevent a 
substantial threat of such a discharge.'' 33 U.S.C. 
Sec. 1321(j)(5)(D)(iii) (emphasis added).
    As the Deepwater Horizon tragedy has shown irrefutably, these 
requirements and the regulations promulgated pursuant to them are 
inadequate. The basic problems are as follows:
          There is a complete lack of accountability. Neither 
        the law nor the regulations require operators to demonstrate 
        that the spill response plan could be effective. There is no 
        requirement that the Department of the Interior verify that the 
        technologies proposed for use have been shown to work, that the 
        vessels and other capacity on scene would be sufficient, or 
        that coordinated efforts could be successful. Nor is there a 
        standard against which the government can evaluate the 
        company's description of the worst-case discharge. In short, 
        there are no standards against which the government can measure 
        the adequacy or likely effectiveness of a spill response plan.
          There is no requirement for federal or state response 
        capabilities. In other words, if a spill were to exceed the 
        response capacity (as it has in the Gulf of Mexico), there is 
        no requirement that other vessels or capacity be able to 
        respond. This problem is particularly acute in the Arctic, 
        where response capacity is nearly 1000 miles away.
          Technical standards are insufficient, and could be 
        improved by requiring redundancy, requirements for relief well 
        drilling, better modeling and studies of dispersants proposed 
        for use.
          There should be no limit on liability for damages 
        resulting from oil spills to ensure that the full cost of 
        economic and environmental damages is recovered.
    In developing spill response needs for specific geographic areas 
the following steps should be conducted:
          Conduct an Oil Spill Risk Assessment to provide a 
        comprehensive evaluation of the oil spill risks from oil and 
        gas activity, and to identify priority risk reduction measures 
        that can be implemented to reduce oil spill risks.
          Assess oil spill response capacity. Evaluate the 
        capacity of spill response systems (including dedicated 
        equipment, vessels, and personnel available to respond to an 
        oil spill). Use scenario analyses to examine the capabilities 
        and limits of available technologies to respond to potential 
        oil spills identified through a Spill Risk Assessment. 
        Establish an ongoing testing and evaluation program to further 
        refine available technologies and develop new technologies for 
        offshore oil spill response.
          Conduct an oil spill response gap analysis. A 
        ``response gap'' exists whenever environmental conditions 
        exceed the operating limits of oil spill cleanup equipment. An 
        oil spill response gap analysis will quantify the operating 
        limits of the oil spill response systems available and will 
        calculate how frequently those operating limits are reached in 
        the area of oil and gas operations.
          Ensure the process is transparent and scientifically 
        rigorous. All meetings, reports, and work products should be 
        available for public and stakeholder review and input. All 
        research projects and products should be peer reviewed.
          Establish regional citizen advisory councils for oil 
        spill preparedness. One of the most effective provisions of OPA 
        90 was the creation of a regional panel made up of tribal and 
        community representatives from the Prince William Sound. This 
        body has proven to be effective at ensuring the best spill 
        response and prevention capabilities have stayed in place since 
        the Exxon Valdez oil spill. Congress should consider expanding 
        this model nationwide.
IV.  INVEST REVENUES DERIVED FROM OFFSHORE DEVELOPMENT IN OCEAN AND 
        COASTAL CONSERVATION AND RESTORATION
    The Deepwater Horizon spill provides a harsh reminder of the 
impacts of human activities on the health of marine ecosystems. To 
address these threats, Congress should establish permanently 
appropriated, dedicated funding for ocean, coastal, and Great Lakes 
conservation and management. There is a compelling logic in taking 
public revenues derived primarily from the extraction of non-renewable 
ocean resources and investing them in the conservation and management 
of renewable resources. Such a financing scheme will pay rich dividends 
long after the oil and gas coming from our oceans has been used. A good 
model for this is section 605 of the CLEAR Act, introduced last year by 
Chairman Rahall. The bill would cover ten percent of OCS revenue into 
the fund each year. This would provide approximately one billion 
dollars annually for ocean and coastal management. The proposed trust 
fund would be used to support three classes of activities for 
protection, maintenance and restoration of marine ecosystem health: 
grants to states based on a formula similar to that used to allocate 
funds under the Coastal Zone Management Act; competitive grants for 
ocean conservation and management available to public and private 
entities; and grants to support regional ocean partnerships.
    In addition, as the events of the last two months have revealed, 
the technology and capacity to prevent, respond to and restore damage 
from oil spills is woefully inadequate. We need to find balance between 
extraction capability and response and recovery capability. Congress 
should revitalize the Oil Spill Liability Trust Fund by increasing 
revenue going into it, and by making substantial funding available for 
research and development of oil spill prevention, response and recovery 
technologies and techniques.

                               CONCLUSION

    The tragedy in the Gulf of Mexico makes it all too clear that we 
simply must make better decisions about the management of our offshore 
energy resources, for the safety of offshore workers, for the health of 
our oceans and coasts, and for the coastal communities that depend on 
them. The OCSLA, and its implementation over many years, has allowed 
offshore development that is too focused on extraction and 
insufficiently focused on ensuring safety and protecting the 
environment. The flaws in our offshore development process have long 
been known, but until now the political will to change the system has 
largely been lacking. Our system of government often responds best in a 
crisis. If any good can come from the Deepwater Horizon spill, perhaps 
it is that Congress will find the impetus to reform the laws governing 
offshore development and response to oil spills.
    Mr. Chairman and members of the Committee, we look forward to 
working with both Congress and the Administration to ensure that the 
health of our oceans and coasts is protected as we meet our nation's 
energy needs. This should not be an either or proposition.
                                 ______
                                 
    Mr. Costa. Thank you, Mr. Mann. I appreciate your 
testimony. And our next witness is Mr. Alan Spackman, Vice 
President of the Offshore Technical & Regulatory Affairs for 
the International Association of Drilling Contractors. Mr. 
Spackman.

STATEMENT OF ALAN SPACKMAN, VICE PRESIDENT, OFFSHORE TECHNICAL 
  & REGULATORY AFFAIRS, INTERNATIONAL ASSOCIATION OF DRILLING 
                          CONTRACTORS

    Mr. Spackman. Thank you, Chairman Costa, members of the 
Committee. I want to thank you for the opportunity to speak to 
you here today on the restructuring of the MMS and how the 
implementation of a Health, Safety and Environmental Case might 
affect the restructuring effort.
    While IADC opposes the moratoria imposed on offshore 
drilling, IADC does support many of the recommendations made by 
Secretary Salazar in his 27 May report to the President. One 
such recommendation is the adoption of a safety case 
requirement based on the 2009 IADC HSE case guidelines to be 
imposed on deepwater drilling.
    By using a risk-based approach to the analysis of hazards a 
safety case provides a tool for the assessment of new 
technology and the development of controls to manage the 
associated risks without the protracted delays inherent in the 
development of prescriptive regulations. I will address why 
many have chosen to implement a safety case, what are the 
prerequisites to successfully implementing a safety case, how 
key parts of a safety case are developed, and the challenges to 
implementing a safety case in the United States.
    Historically, the safety case has served three principal 
functions. Its primary use allows companies to identify hazards 
in the workplace and establish the risk management controls 
needed to meet their internal health, safety and environmental 
objectives.
    As the capability of a safety case to assist in meeting 
internal objectives was recognized, its use was broadened and 
companies began to ask their contractors to implement a safety 
case. Regulatory bodies were not far behind in establishing 
their own, sometimes differing, objectives.
    What are the prerequisites? A company implementing a safety 
case must have a robust and effective management system to 
assure the output of a safety case is reflected in the 
workplace. The commitment to implementing a safety case must be 
ongoing. There must be a constant learning in the workplace and 
feedback into the risk management process. If a safety case is 
to be effectively used to address external goals, there must be 
a dialogue leading to clear understanding and incorporation of 
either the client's or the regulator's expectations into the 
safety case.
    The three main elements in the development of a safety case 
are: the identification of major hazards and events, and the 
assessment of risk control measure to prevent and mitigate the 
hazards and integration of these measure into operations.
    While each safety case will be unique, for offshore 
drilling there are a number of commonly recognized hazards. 
Fourteen such hazards are shown on this slide. Regulatory 
jurisdiction over each of these hazards is spread across 
multiple agencies. Jurisdictional issues between agencies can 
adversely influence effective development and implementation of 
a safety case.
    A team identifies the risk control measures necessary to 
prevent the unwanted event from occurring as well as measure to 
mitigate the effect should the event occur despite the 
precautions. A team then reviews equipment design, operating 
instructions, training plans, emergency response plans, et 
cetera, in order to provide a means to implement the control 
measures.
    What are our immediate challenges? The Secretary's report 
says the safety case will be imposed by emergency rulemaking. 
IADC is concerned that this process will not allow for the 
dialogue necessary for industry and DOI to reach a mutual 
understanding of DOI's specific goals for the safety case.
    The report recommends that a well construction interface 
document accompany the safety case. There are presently no 
government or industry guidelines that describe the content of 
such a document. A dialogue is urgently needed so as to 
understand DOI's expectations regarding the content of this 
document.
    The Coast Guard shares jurisdiction over offshore drilling 
operations with the Department. MMS had worked with the Coast 
Guard to clearly identify boundaries on areas of individual and 
mutual regulatory concern. We are concerned that with the 
safety case these boundaries may shift.
    Review of the safety case will require a cadre of personnel 
with the knowledge and experience to address the full scope of 
the identified hazards and risk control measures addressed in 
the document. Their experience must match that of the team that 
develops it. There will also be a need for auditors to assess 
the implementation of the safety case both onshore and 
offshore.
    For its part, IADC is committed to assisting in drilling 
contractors to implement the safety case, sustaining a dialogue 
with the oil companies to facilitate safety case 
implementation, and engaging the Department to facilitate a 
mutual understanding for safety case expectations.
    Thank you.
    [The prepared statement of Mr. Spackman follows:]

  Statement of Alan Spackman, Vice President, Offshore Technical and 
 Regulatory Affairs, International Association of Drilling Contractors

The International Association of Drilling Contractors
    The International Association of Drilling Contractors (IADC) is a 
trade association representing the interests of oil-and-gas and 
geothermal drilling contractors worldwide. IADC's contract-drilling 
members own virtually all of the world's land and offshore drilling 
units and drill the vast majority of the wells that produce the 
planet's oil and gas. This includes all mobile offshore drilling units 
(MODUs) operating in areas under the jurisdiction of the United States 
and nearly all MODUs operated under competitively-bid contracts 
worldwide. IADC's membership also includes oil-and-gas producers, and 
manufacturers and suppliers of oilfield equipment and services.
    Founded in 1940, IADC's mission is to improve industry health, 
safety and environmental practices; advance drilling and completion 
technology; and champion responsible standards, practices, legislation 
and regulations that provide for safe, efficient and environmentally 
sound drilling operations worldwide. IADC holds Accredited Observer 
status before two specialized agencies of the United Nations, the 
International Maritime Organization and the International Seabed 
Authority. The Association is a leader in developing standards for 
industry training, notably its Well Control Accreditation Program 
(WellCAP) and rig-floor orientation program, RIG PASS. IADC is 
headquartered in Houston and has offices in Washington D.C., the 
Netherlands, Thailand, and the United Arab Emirates, as well as 
chapters in the UK, Venezuela, Brazil, Australasia, South Central Asia, 
Southeast Asia, the Middle East and across the United States.
Increased Safety Measures for Energy Development on the Outer 
        Continental Shelf
    While IADC strongly opposes the blanket moratorium imposed on 
deepwater drilling operations, IADC recognizes value in many of the 
recommendations contained in the Department of Interior's ``Increased 
Safety Measures for Energy Development on the Outer Continental Shelf'' 
(DOI Report). IADC specifically supports the recommendations for: the 
development of more rigorous requirements for well design and training. 
IADC also supports enhanced organizational and safety management 
through the adoption of safety case requirements based on the 2009 IADC 
Health, Safety and Environmental Case Guidelines for Mobile Offshore 
Drilling Units; mandating Well Construction Interfacing Documents for 
deepwater drilling operations; and the development of regulations for 
Safety and Environmental Management Systems. It is on these last three, 
integrally-related items, that IADC will focus.
What is a Health, Safety and Environmental (HSE) Case?
    The DOI Report recommends adoption of safety case requirements 
based on the 2009 IADC Health, Safety and Environmental Case Guidelines 
for Mobile Offshore Drilling Units (IADC Guidelines) through emergency 
rulemaking.
    The IADC Guidelines recognize that a HSE Case serves three primary 
purposes:
        1.  To demonstrate in a structured way that a Drilling 
        Contractor's risk-reducing controls can achieve the 
        organization's established goals for health, safety, 
        environmental and security performance;
        2.  To demonstrate to clients that its management system's risk 
        reducing controls meet the client's defined expectations 
        relating to health, safety, environment or security; and
        3.  To demonstrate to regulators that its management system's 
        risk reducing controls meet the regulator's defined 
        expectations relating to health, safety, environment or 
        security.
    Developing and maintaining a HSE Case provides continuous assurance 
that existing HSE risks are effectively managed and provides assurance 
that risks associated with changes to equipment, activities or 
locations, as well as systemic weaknesses identified by incident 
analyses and audits, will be effectively managed.
The evolution of the Safety Case as a regulatory tool
    It is only possible to achieve absolute safety if as a society we 
do not undertake hazardous activities. However we know that the 
application of technology brings great benefits to us as a society. The 
skill comes in exploiting potentially hazardous technology while 
minimizing the risks - accepting that it is not possible to totally 
eliminate all risks.
    The concept of regulatory bodies using the mechanism of a Safety 
Case as a tool to help manage safety risks is not new. The tool first 
gained widespread use in the nuclear power industry. As the use of 
Safety Cases became more prevalent, it became evident that the same 
techniques could be used to address health and environmental risks, and 
this expanded tool became known as a HSE Case. More recently, the tool 
is also being applied to security.
    Use of the tool by regulatory bodies continues to expand, 
particularly in the offshore oil and gas industries. This is evidence 
of the value of the concept of moving from prescriptive regulations, 
which due to the time and effort to produce, apply static and often 
outdated controls to reduce risk, to a more adaptive performance-based 
approach to regulation.
    The offshore oil and gas industries focused on the Safety Case 
concept after the 1988 explosion and fire on the Piper Alpha production 
platform in the UK sector of the North Sea, which resulted in 167 
fatalities.
    The Piper Alpha investigation led to the recognition that the 
existing system of prescriptive regulation was unsustainable. Not only 
could prescriptive regulations never keep pace with changes in 
technology, they served to foster a mentality under which compliance 
with the prescriptive minimum regulatory requirements was presumed to 
adequately address the risks in the workplace. This led the UK 
Parliament to eliminate most (but not all) prescriptive safety 
regulations for the offshore oil and gas industry. In their place, the 
U.K. mandated that a Safety Case be developed by the owners and 
operators of offshore facilities and submitted for acceptance by the UK 
Health and Safety Executive. The legislation and regulations describe 
objectives for the control of major hazards (i.e., those with the 
potential to result in fatalities). Duty holders then must justify that 
the equipment and methods used will achieve these objectives so as to 
fulfill the regulatory obligations. Complementing the Safety Case 
legislation and regulations are Approved Codes of Practice (approved or 
issued by government), government-issued guidance documents and 
industry standards. At this time, the U.K.'s Safety Case does not 
directly address environmental risks; however, the risk-reduction 
controls necessary to reduce safety risk are often the same as those 
necessary to control environmental risk.
    Norway's move from a prescriptive to a performance-based approach 
to regulating the offshore oil and gas industries has been more 
evolutionary in nature. As its approach has evolved, it has moved 
toward an integrated scheme for controlling health, safety and 
environmental risks that recognizes the use of a Safety Case as a tool 
for managing these risks. While doing so, it has moved away from 
`inspection' and has adopted an approach of `supervision.' Approval of 
plans and activities has been replaced by acceptance or consent. The 
`supervision' takes the form of audits, verification and 
investigations, to which a great deal of transparency is provided by 
timely posting of results on the Internet. Among regulatory agencies 
having similar responsibilities, the Petroleum Safety Authority (PSA) 
is unique in its expenditure of effort and resources to interact with 
the industry and the workforce in order to keep abreast of changes in 
technology, to understand the challenges facing offshore operations and 
move toward mutually acceptable solutions to those challenges.
    Norway does not require the submission for acceptance of a Safety 
Case. It was considered, but it was concluded that the proper 
processing of a Safety Case by the regulator is a very resource 
demanding exercise which does not add to safety. Further, it is 
Norway's view that acceptance of a Safety Case inevitably transfers 
parts of the operator's responsibility to ensure compliance with 
statutory requirements on to the regulator. ``Perhaps not really in a 
legal sense - but morally'', according to PSA's Director General, Magne 
Ognedal. This said, PSA does require that operators do the same risk 
assessments and describe how they intend to control identified risks 
similarly to the way they would in a Safety Case regime. Their 
documented assessments and calculations (or parts of them) must be kept 
and handed over to PSA should PSA so require. To complement its 
performance based approach, PSA commissions numerous studies addressing 
identified areas of concern and actively participates in the 
development of non-mandatory guidance which it uses to influence 
industry in the establishment of performance goals. It also actively 
participates in the process of developing industry standards, both at a 
national and international level.
    Australia is the country to most recently require a Safety Case. 
This change was made coincident with a (partial) federalization of 
health and safety responsibilities previously held by State and 
Territorial authorities. While Australia's National Offshore Petroleum 
Safety Authority (NOPSA) adopted a Safety Case approach, its underlying 
legislative authority did not extend to well operations. This 
shortcoming was highlighted by the 2009 Montara platform blowout and 
subsequent fire that consumed the (then unmanned) MODU, West Atlas. The 
Montara Commission of Inquiry is scheduled to release its report this 
month. It is expected that his report will recommend changes to the 
regulatory regime to expand the authority of NOPSA, but retain the 
Safety Case approach.
    Other countries that already mandate use of a Safety Case or HSE 
Case for offshore oil and gas activities include: Cuba, Denmark, Faeroe 
Islands, Germany, Ireland, Italy, the Netherlands, and New Zealand. 
Countries that are reportedly considering implementation of a Safety 
Case or HSE Case approach include: Angola, Brazil, Canada 
(independently in provincial and Federal jurisdictions), India, 
Malaysia, Oman, Qatar, Senegal, South Africa and Trinidad and Tobago.
    Each of the jurisdictions that have adopted a Safety Case or HSE 
Case approach has done so within the context of its own culture, and 
often within the constraints of legislative boundaries or competing 
legislation. This has resulted in considerable contrasts:
          Some jurisdictions require a Safety Case, but do not 
        explicitly mandate that there be an auditable safety management 
        system in place to implement the controls necessary to reduce 
        the risk associated with those hazards.
          Some jurisdictions look for the Safety Case to 
        integrate concerns of occupational health, safety, and 
        environment at all potential risk levels, while others only 
        explicitly require analysis of hazards capable of producing 
        multiple fatalities.
          Some jurisdictions attempt to quantitatively set 
        acceptable risk thresholds in terms of exposure rate, while 
        others seek to assure that risk is `as low as reasonably 
        practicable.'
          In some jurisdictions the regulators actively and 
        cooperatively work across the jurisdictional boundaries of 
        their individual regulatory agencies to holistically address 
        health, safety and environmental risk associated with all 
        activities, while in other jurisdictions the regulator's view 
        is narrowly constrained to its underlying regulatory authority, 
        even though its regulations may demand a Safety Case addressing 
        all hazards.
    Some oil companies require contractors to provide a Safety Case as 
part of the bidding process and/or prior to commencing operations.
Development of the IADC Guidelines
    In response to the UK's implementation of Safety Case regulations 
following the Piper Alpha, IADC commissioned the development of a 
workbook to assist drilling contractors in the preparation of a Safety 
Case in accordance with the UK requirements. While this workbook served 
to improve understanding of the requirements of the new regulations, 
its attempt to rely on quantitative risk assessment for extremely low 
probability but high consequence events was not seen as leading to 
control measures that would lead to residual risk (risk after the 
application of control measures) that met the regulatory objective of 
being ``as low as reasonably practicable.'' Further, while the workbook 
output addressed the regulatory mandate, it was cumbersome and the 
results were not easily communicated to the workforce. IADC members saw 
the need for improvement.
    As additional countries in the North Sea region began implementing 
their own (differing) Safety Case requirements (or in the case of those 
also addressing environmental concerns, HSE Case requirements) IADC 
members sought an approach to the development of a HSE Case that would 
overcome the shortcomings of the workbook and could be used to satisfy 
regulatory mandates in multiple regulatory jurisdictions as their MODUs 
moved among countries in response to market conditions. Because MODUs 
are also subject to maritime requirements imposed by both flag-State 
authorities and the maritime authorities of the coastal State in which 
they operate, IADC members saw value in assuring that the management 
system embodied in a Safety Case would meet the requirements of the 
International Maritime Organization's (IMO's) International Management 
Code for the Safe Operation of Ships and for Pollution Prevention (ISM 
Code). Further, as several of the large integrated oil companies that 
employ IADC-member MODUs impose contractual requirements for a HSE 
Case, IADC has attempted to assure that the IADC guidance would produce 
a HSE Case meeting their expectations.
    In fulfillment of these demands, in February 2003, IADC issued the 
first edition of the IADC Health, Safety and Environmental Case 
Guidelines for Mobile Offshore Drilling Units. These Guidelines have 
been structured to provide reasonable assurance that, by following the 
Guidelines, a rig owner, can produce a HSE Case that will satisfy the 
Safety Case or HSE Case requirements of those co-operating countries 
for which a cross-reference between their regulatory requirements and 
the Guidelines has been developed, i.e., Australia, Denmark, Germany, 
Italy, Netherlands, Norway and the United Kingdom. These Guidelines 
remain under continuous review.
    IADC makes these Guidelines freely available for downloading from 
the internet at: http://www.iadc.org/hsecase/index.html
    IADC would welcome the opportunity to work with the Department of 
Interior's newly-established Bureau of Safety and Environmental 
Enforcement \1\ towards including the United States in the list of 
countries for which a HSE Case produced following the Guidelines will 
satisfy their regulatory requirements. We believe this would be of 
benefit both to our members, their clients and to the United States. 
IADC sees some challenges in this regard; however, we do not believe 
they are insurmountable.
---------------------------------------------------------------------------
    \1\ Throughout this testimony, references to the Minerals 
Management Service (MMS) should be understood to be references to the 
Bureau of Safety and Environmental Enforcement.
---------------------------------------------------------------------------
Principles of the IADC Guidelines
    The IADC Guidelines consist of six parts and a series of supporting 
appendices.
    Part 1_Introductions consists of an introduction and a description 
of typical internal (i.e., self-imposed by the drilling contractor) and 
external (e.g., client and regulatory body) expectations. Importantly, 
appendix 4 of the Guidelines contains a series of cross-references 
between the relevant regulations of the cooperating regulatory bodies, 
and the ISM Code, in order to provide assurance to these stakeholders 
that their expectations will be met by a HSE Case produced following 
the Guidelines.
    The remaining five parts are interrelated, and centered on risk 
management, as shown in the following diagram.
[GRAPHIC] [TIFF OMITTED] 56979.007


    .epsPart 2--Drilling Contractor's Management System describes the 
Drilling Contractor's management system and presents objectives that 
must be met to demonstrate assurance that HSE risks are reduced to a 
tolerable level. For purposes of regulatory compliance, the elements of 
the management system in the Guideline have been carefully selected for 
consistency with the ISM Code. This does not demand that a specific 
format be utilized; rather, the company should be able to demonstrate, 
through cross-reference, that any mandatory elements are being met. 
Regulatory bodies attempting to audit management systems must have 
specialized skills and training to do so effectively. There are 
applicable industry standards for such auditors (e.g., ISO 10011).
    Recognizing that many of the risks associated with the operation of 
MODUs are associated with the specific activities to be performed under 
the drilling contract the Guidelines include provisions addressing 
alignment of the Drilling Contractor's management system with that of 
the client through the creation of bridging documents.
    Because of the breadth of references consulted in the development 
of the management system guidance within the Guidelines, it is IADC's 
view that this portion of the HSE Case will satisfy the requirements 
that will be proposed for Safety and Environmental Management Systems 
in fulfillment of the DOI Report.
    The methods of achieving the objectives of the management system 
are considered in the risk management undertaken in accordance with the 
process for risk management described in Part 4 of the Guidelines. 
However, it is important to recognize that only through an effective 
management system can the implementation and functionality of the risk 
controls be assured.
    Part 3 - MODU/Rig Description and Supporting Information describes 
the equipment and systems necessary to meet the objectives described in 
the management system and to fulfill the requirements of the 
Contractor's Scope of Operations. In developing this section, and the 
Scope of Operations, it is necessary to compile detailed information 
about the MODU and its equipment.
    Critical operating limits for a broad range of equipment and 
primary structure, as established by the design criteria (or risk 
tolerance, if lower) must be documented. Limits for items ranging from 
the primary hull structure of the MODU to switches used to assure shut-
down of machinery must be considered. Thus, it is far easier to 
complete this part during the design and construction of a new MODU 
than it is to assemble the required information for an existing unit.
    In understanding and setting the operating boundaries there is 
heavy reliance on applicable standards such as those developed and 
maintained by classification societies (e.g., the American Bureau of 
Shipping or Det Norske Veritas) and standards developing organizations 
such as the International Organization for Standardization (ISO) and 
the American Petroleum Institute (API). Prescriptive regulations, where 
applicable, may also dictate the operational boundaries that are 
established. This reliance on standards demands that the persons 
developing this portion of the HSE Case understand the standards that 
are cited, their applicability and their limitations. To function 
effectively, regulatory bodies assessing the HSE Case must have a cadre 
of personnel that are similarly competent.
    Again, the residual risks associated with the MODUs equipment and 
systems, after the application of any applicable design standards, must 
be assessed in the risk management under Part 4.
    Part 4 - Risk Management describes the Risk Management Process for 
assuring that the risks associated with a Contractor's Scope of 
Operations are reduced to a level that is tolerable to the Drilling 
Contractor and other stakeholders.
    As illustrated in the above graphic, the Risk Management Process is 
at the heart of the HSE Case. The process must consider the management 
objectives (Part 2) and the systems and equipment (Part 3). Any gaps 
related to the objectives in Parts 2 and 3 that are identified in Part 
4 must be addressed through the Contractor's management system. The 
Risk Management Process described in the Guidelines has been developed 
to comply with requirements of:
          The cooperating regulatory bodies in Australia, 
        Denmark, Germany, Italy, Netherlands and the United Kingdom; 
        and
          The ISM Code.
    As earlier noted, regulatory bodies requiring the production of 
either a Safety Case or a HSE Case have differing requirements for the 
hazards that they require to be assessed, and their risk tolerability 
limits. The Guidelines attempt to identify these differences so as to 
facilitate regulatory compliance and generally suggest that an ``all 
hazards'' approach be undertaken.
    In no operating area or condition is a HSE Case developed de novo. 
There is always some empirical evidence of the major hazards, and there 
have often been prescriptive regulatory requirements, or industry 
guidance and standards developed to address these hazards. The 
Guidelines contain a list of major hazards that are commonly 
encountered. There are often multiple regulatory bodies that exercise 
jurisdiction over the hazard and/or associated risk control measures.
    The following table lists these hazards and, for typical MODU 
operations in the U.S., identifies the regulatory agencies having 
jurisdiction over associated risk control measures. (This list is 
intended as illustrative, not exhaustive.)
[GRAPHIC] [TIFF OMITTED] 56979.008

    .epsAs illustrated above, in the U.S., there are a number of 
regulatory agencies whose activities affect MODU operations and whose 
exercise of jurisdiction, often with prescriptive regulatory 
requirements, must be considered in developing a HSE Case.
    A similar situation exists internationally. This can be a 
particular frustration to MODU owners when, for example, a regulatory 
body demanding that risk reduction measures be introduced to control a 
particular hazard does not acknowledge that the application of that 
measure may be constrained by another agency.
    To further complicate matters, there may be complex 
interrelationships between these hazards. This is illustrated in the 
following graphic.
[GRAPHIC] [TIFF OMITTED] 56979.009

    .epsA key element of risk management is a structured hazard 
identification and control process. The Guidelines recommend that this 
process be based upon international standards (ISO 17776). The 
following diagram provides an example representation of a hazard 
scenario evaluation, with the identification of the associated risk 
management barriers.
[GRAPHIC] [TIFF OMITTED] 56979.010

    .epsHaving been so identified, the barriers can then be assessed 
for their criticality and effectiveness, responsibility assigned for 
their maintenance, and arrangements made for their verification, as 
appropriate. It can be appreciated that in a complex facility, such as 
an operating MODU, there will be thousands of barriers identified.
    Regulatory bodies often impose prescriptive requirements with 
regard to certain barriers, for example, certified training of key 
personnel, testing of alarm systems, periodic inspections, etc.
    Part 5 - Emergency Response describes the objectives for emergency 
response of incidents--to mitigate the consequences (severity) 
identified as part of the risk management process in Part 4 and the 
measures to recover.
    Topics addressed in the Guideline include emergency response 
management for all contingencies, command and communication, training 
and evacuation and escape.
    Many of the risk controls associated with emergency response, 
particularly with respect to incidents that cannot be controlled 
entirely on the MODU, rely on external resources. These are often 
provided by the client under the terms of the contract, and must be 
specific to the jurisdiction in which the operations are to take place. 
These are addressed in the bridging arrangements.
    Once again, the residual risks associated with emergency response 
must be assessed in the risk management process under Part 4.
    Part 6 - Performance Monitoring describes arrangements for 
monitoring to ensure that the risk management measures identified (Part 
4) are implemented, maintained and effective at the workplace.
    Topics addressed in the Guideline include: performance monitoring, 
incident reporting and analysis, behavior-based observation systems, 
health and environmental monitoring and measurement, audit and 
compliance, verification of critical activities and equipment, and the 
role of certification. The Guidelines generally encourage feedback into 
the management process in order to foster continuous improvement.
    The Guidelines recognize that regulatory bodies have differing 
expectations with regard to performance monitoring and may impose 
specific requirements by prescriptive regulations, e.g., requirements 
for equipment certification, third-party verifications, or workplace 
drug testing.
Lessons from Past Experiences
    In developing the Guidelines, and observing their implementation in 
several jurisdictions, IADC has learned several lessons:
    Starting out:
          Start the discussion (and it must be a discussion, 
        not a debate) with the risks, not the rules;
          Ensure that the regulatory body is truly empowered to 
        implement the approach;
          Beware of other regulatory policies which may 
        contradict or hinder the adoption of a risk-based approach; and
          Effectively communicate the goal of creating an 
        effective risk-based dialog between industry and regulators, 
        leading to improved safety and environmental performance.
    During implementation:
          It will take time;
          There will be significant challenges; and
          Focus beyond the risk-assessment to the goal - It is 
        achievable.
    In the longer term:
          Be prepared to make adjustments;
          There will be a continual need for effective 
        communication between industry and the regulator, both on a 
        one-on-one basis addressing individual HSE Cases, and through 
        workshops, conferences, etc.
Well Construction Interface Document
    While the DOI Report indicates that there will be a requirement to 
produce a Well Construction Interfacing Document there is currently no 
guidance - either from industry or government regarding the appropriate 
content for such a document.
    In IADC's view, the development of such a document would begin 
within the operating oil company's organization during the project 
development phase and would need to anticipate the project needs for 
overall management of project health, safety and environmental 
management. As project needs are finalized, and services and equipment 
are contracted, the finalized document would establish a basis for 
mutual understanding among project participants of individual and 
mutual roles and responsibilities to manage project-associated risks to 
personnel health, safety and environment, particularly with regard to 
equipment suitability and interface, standards for personnel competence 
and training, reporting responsibilities, the provision of logistical 
support and emergency response.
    IADC is committed to working with other stakeholders to develop a 
mutual understanding of expectations with regard to the development of 
the Well Construction Interface Document and seeing that this 
understanding is reflected in industry guidance.
Challenges associated with implementation of a HSE Case in the United 
        States
Jurisdictional Issues for MMS
    Examining the provisions of the OCS Lands Act, IADC is concerned 
that inappropriate interpretation of the Act might hinder the effective 
development and implementation of the HSE Case.
    (1) 43 USC 1347(c) provides:
        The Secretary of the Department in which the Coast Guard is 
        operating shall promulgate regulations or standards applying to 
        unregulated hazardous working conditions related to activities 
        on the outer Continental Shelf when he determines such 
        regulations or standards are necessary. The Secretary of the 
        Department in which the Coast Guard is operating may from time 
        to time modify any regulations, interim or final, dealing with 
        hazardous working conditions on the outer Continental Shelf.
    It could be argued that responsibility for HSE Case regulations, as 
they address hazardous working conditions, should rest with the Coast 
Guard rather than the MMS.
    While IADC does not subscribe to this view, IADC believes that it 
is imperative that the MMS work with the Coast Guard to develop an 
understanding of the numerous provisions of a HSE Case that are 
affected by Coast Guard regulations and the related maritime regulatory 
bodies of the various MODU flag-States. This is particularly critical 
with respect to risk management barriers which are prescribed by such 
regulations and subject to verification under those regulations - these 
are likely to be those with which the MMS has no prior experience, 
e.g., alarms required by maritime regulations for maritime risks.
    (2) 43 USC 1348(c) provides:
        The Secretary and the Secretary of the Department in which the 
        Coast Guard is operating shall individually, or jointly if they 
        so agree, promulgate regulations to provide for--(1) scheduled 
        onsite inspection, at least once a year, of each facility on 
        the outer Continental Shelf which is subject to any 
        environmental or safety regulation promulgated pursuant to this 
        subchapter, which inspection shall include all safety equipment 
        designed to prevent or ameliorate blowouts, fires, spillages, 
        or other major accidents;
    In the past, the Coast Guard and the MMS have taken divergent views 
of this provision, with the Coast Guard conducting a general inspection 
of a facility and the MMS undertaking a `component inspection' looking 
at each control. If the MMS adopts an approach to verification of HSE 
Case risk control barriers that requires examination or inspection of 
each such control, it will be overwhelmed. Its inspectors would also 
require extensive education and training in order to effectively assess 
the numerous controls that are already subject to examination and 
verification by maritime regulatory bodies, e.g., controls on fire 
extinguishing systems on MODUs.
    IADC would urge MMS to clearly articulate the scope of its interest 
in the HSE Case, particularly with regard to:
          Does it extend to areas under Coast Guard 
        jurisdiction?
          Will it adopt a ``major hazards'' approach or an 
        ``all hazards'' approach? If the former, what are the 
        thresholds?
          Will it prescribe verification of risk control 
        barriers? If so, by what criteria?
Resource Issues for Industry
    While many of the MODUs operating in the deepwater regions of the 
U.S. OCS have HSE Cases to satisfy their managements' internal needs, 
these will need to be reassessed against any risk thresholds that MMS 
may impose through the emergency rule and modified as necessary. This, 
combined with the very high resource needs of developing the HSE Cases 
for those existing MODUs and floating facilities with drilling activity 
that do not already have HSE Cases will create a high demand for 
resources with the appropriate professional expertise.
Resource Issues for MMS
    It is IADC's experience from other jurisdictions that it takes 
considerable time and effort for the regulator and the HSE Case 
developer to reach a mutual understanding of risk terminology and risk 
tolerance thresholds. MMS and those exercising oversight over MMS must 
understand that this will be a resource-intensive and time-consuming 
process.
    MMS presently has few staff with the requisite competence to 
facilitate the necessary discussions. With the imposition of the HSE 
Case requirement by emergency rule, MMS will be directly competing for 
staff and/or consultants with the requisite specialized knowledge of 
MODUs, their safety equipment, and their operational procedures. There 
is also the potential for other jurisdictions that have not yet imposed 
Safety Case requirements to do so, creating further competition for 
these resources. MMS will need to be adequately staffed by persons with 
the requisite competence to both communicate its expectations to 
industry and review (if they are to be subject to review) the HSE 
Cases.
    Similar concerns exist with the development of mandatory Safety and 
Environmental Management Systems (SEMS); however, this could be 
somewhat ameliorated if the MMS rulemaking process allows comments on 
its HSE Case regulations to be fully considered and prior to the SEMS 
final rule.
    There will be a critical need for MMS to announce its expectations 
with regard to the content of the Well Construction Interfacing 
Document and to hold regulatory workshops or stakeholder meetings in 
order to move quickly toward mutual understanding with industry 
regarding the ultimate content of this essential document. This must be 
done in the very near term.
    There are numerous other provisions of the DOI Report that require 
clarification before industry can fully mobilize to address the 
concerns. Industry is currently developing a list of these concerns for 
submission to DOI/MMS. A near term response will be urgently needed to 
sustain this industry's presence and viability in the United States.
    NOTE: Attachments have been retained in the Committee's official 
files.
                                 ______
                                 
    Mr. Costa. Thank you very much, Mr. Spackman. During the 
question and answer period, I will want to get back to you on 
some of those slides, so whoever is doing those we may want to 
come back to them and explore a little more about what you 
consider best management practices.
    Our next witness is Mr. Eric Milito?
    Mr. Milito. That is correct.
    Mr. Costa. Like the filter.
    Mr. Milito. Burrito, Milito, I have been called many 
things.
    Mr. Costa. Mr. Milito is from the American Petroleum 
Institute. Please begin your testimony.

STATEMENT OF ERIK MILITO, GROUP DIRECTOR, UPSTREAM AND INDUSTRY 
            OPERATIONS, AMERICAN PETROLEUM INSTITUTE

    Mr. Milito. Thank you, Chairman Costa, and members of the 
Subcommittee for the opportunity to address the regulation of 
the offshore oil and natural gas industry.
    My name is Erik Milito, and I am the Upstream Director for 
the American Petroleum Institute. API has about 400 member 
companies, which represent all sectors of America's oil and 
natural gas industry. Our industry supports 9.2 million 
American jobs, including over 170,000 jobs in the Gulf of 
Mexico related to the offshore development business, and our 
industry provides most of the energy we need to power our 
economy and our way of life.
    The first thing I would like to say is our thoughts and 
prayers go out to those families who have lost their loved ones 
and to the workers who have been injured in this, and to our 
neighbors along the Gulf Coast who have been affected by this 
tragic, unprecedented accident. People of the oil and natural 
gas industry understand our responsibility to find out what 
happened and why, and we understand that we need to cooperate 
and work with the government and move forward so that we can 
improve equipment and the procedures and the offshore 
operations so we can prevent accidents like this happening 
again. Our industry's top priority has always been to provide 
energy in a safe, technologically sound, and environmentally 
responsible manner. This incident is a sobering reminder to 
remain focused on efforts to continuously improve operations so 
that we can safely and reliably provide American with the 
energy they need.
    We support the government's review of the systems that we 
have in place, and we will take the necessary steps to prevent 
accidents like this from occurring again. We believe a 
constructive cooperative relationship between government and 
industry is critical to promoting safe offshore operations 
while maintaining a strong offshore oil and gas program. Both 
are vitally important to producing the oil and natural gas the 
American consumers need and providing the energy and jobs 
crucial to the economy in the Gulf Region and the nation. Our 
goal is to understand the causes of this incident and to 
correct them.
    We understand the concerns many people have about offshore 
drilling in the wake of this incident. That is why we are 
committed to meeting the public's expectations for safe and 
reliable production of our nation's critical energy needs. 
Access to affordable energy impacts every sector of our 
economy, every state in our nation, and every American family. 
We appreciate the opportunity to address the existing 
regulatory process affecting oil and natural gas development. 
To be clear, oil and natural gas operators on the Outer 
Continental Shelf are subject to significant regulatory 
requirements.
    As Secretary Salazar testified last month, the offshore oil 
and natural gas industry is a very highly regulated industry. 
There are 27 statutory authorities that apply, 88 Code of 
Federal Regulation sections, and 24 significant approvals and 
permits. Furthermore, API and the industry through the standard 
setting process developed the technologies, best practices and 
programs needed to help ensure that workplace safety and 
environmental stewardship are at the forefront of the offshore 
oil and gas development process.
    Since 1924, API has developed industry standards and 
practices that promote reliability and safety through the use 
of proven engineering practices. API standards are developed 
through a collaborative effort among industry experts, 
technical experts from the government, and other interested 
stakeholders. The industry has helped create more than 500 
standards, including some 240 exploration and production 
standards that address offshore operations. Seventy-eight of 
these standards have been adopted by the Minerals Management 
Service in their regulations.
    As a result of the regulatory framework, industry standards 
and individual company's safety program offshore oil and 
natural gas development has been safely conducted for nearly 60 
years in the Gulf of Mexico. Within that time more than 42,000 
wells have been drilled, including more than 2,000 deepwater 
wells. But despite those safe operations we know we must now 
focus on making sure this kind of accident will never happen 
again.
    The industry is committed to a goal of zero fatalities, 
zero injuries and zero incidents, and the industry has already 
taken steps to improve safety and environmental performance in 
the aftermath of the Gulf incident. We have already assembled 
the world's leading experts to conduct the top to bottom review 
of the offshore drilling procedures from operations to 
emergency response.
    Two industry task forces that are addressing issues related 
to equipment and operating practices delivered recommendations 
to the Interior Department last month. API's commitment to 
learn from this experience and to make offshore oil and natural 
gas exploration and production safer will not stop. We intend 
to use any findings from the incident's investigations to 
continue to improve technologies and practices to achieve safe 
and environmentally sound operations. As part of this process, 
we will continue to develop new API standards and revise and 
adapt existing standards to raise the bar of performance to a 
higher level.
    As Congress considers these important issues, thoughtful 
consideration must be given to harmonize the need to protect 
the environment and the taxpayers while allowing us to safely 
and reliably provide the energy our nation relies on for 
economic and energy security. Department of Energy projects 
that we will need much oil and natural gas to fuel our economy 
for decades to come. We have the opportunity to develop those 
resources here at home. We have the ability to do it in a safe 
and responsible manner.
    The responsible path forward is to recognize the important 
role energy plays in fostering job growth and energy security. 
Those goals--job growth and energy security--can and should be 
met through responsible domestic oil and gas development. We 
look forward to providing constructive input as this Committee, 
the Congress and the Administration move forward with policy 
proposals.
    This concludes my statement, Mr. Chairman, and I welcome 
questions from you and your colleagues. Thank you.
    [The prepared statement of Mr. Milito follows:]

    Statement of Erik Milito, Upstream Director, American Petroleum 
                               Institute

    Good morning Chairman Costa, Ranking Member Lamborn, and members of 
the subcommittee. Thank you for the opportunity to address the 
regulation of the offshore oil and natural gas industry.
    My name is Erik Milito. I am the upstream director for the American 
Petroleum Institute. API has about 400 member companies, which 
represent all sectors of America's oil and natural gas industry. Our 
industry supports 9.2 million American jobs - including 170,000 in the 
Gulf of Mexico related to the offshore development business - and 
provides most of the energy we need to power our economy and our way of 
life.
    First, our thoughts and prayers go out to the families who lost 
loved ones, to the workers who were injured, and to all of our 
neighbors in the Gulf who are affected by this unprecedented and tragic 
accident. The people of the oil and gas industry understand our 
responsibility to find out what happened and why, and to work in 
cooperation with the government to come up with practice and equipment 
for improving the operational and regulatory process across the board.
    Our industry's top priority has always been to provide energy in a 
safe, technologically sound and environmentally responsible manner. 
This incident is a sobering reminder to remain focused on efforts to 
continuously improve operations so that we can safely and reliably 
provide Americans with the energy they need. We support the 
government's review of the systems that we have in place and will take 
the necessary steps to prevent accidents like this from occurring 
again.
    We understand the Administration's desire to restructure the agency 
overseeing the offshore activity and we are ready to work with MMS or 
other agencies under whatever system is put in place. We believe that 
the ultimate goal should be three-fold:
          To ensure that operations are conducted in a safe and 
        environmentally responsible manner;
          To ensure that the oil and natural gas required to 
        meet the nation's energy needs continue to be available for 
        safe and reliable production; and
          To ensure that Americans receive fair value for these 
        critical resources.
    API supports thorough environmental analysis and welcomes 
government scrutiny and oversight of our operations. We support a 
robust inspection and enforcement program for offshore operations. 
However, we must ensure the regulatory bodies have the staffing, 
resources and processes in place to effectively and efficiently perform 
these functions.
    We believe a constructive, cooperative relationship between 
government and industry is critical to promoting safe offshore 
operations, while maintaining a strong offshore oil and gas program. 
Both are vitally important to producing the oil and natural gas 
American consumers need - and providing the energy and jobs crucial to 
the economy of the Gulf region and the nation. Our goal is to 
understand the causes of this incident - and correct them.
    We understand the concerns many people have about offshore drilling 
in the wake of this incident. That is why we are committed to meeting 
the public's expectations for safe and reliable production of our 
nation's critical energy needs. Access to affordable energy impacts 
every sector of our economy, every state in our nation and every 
American family.
    We appreciate the opportunity to address the existing regulatory 
process affecting oil and natural gas development. To be clear, oil and 
natural gas operators on the Outer Continental Shelf are subject to 
significant federal regulatory requirements. As Secretary Salazar 
testified last month, the offshore oil and natural gas industry ``is a 
very highly regulated industry.'' For example, there are 27 statutory 
authorities that apply to OCS oil and natural gas operations, 88 Code 
of Federal Regulations parts that implement these statutory 
authorities, and 24 significant approvals and permits that apply.
    Furthermore, API and the industry, through the standards setting 
process, develop the technologies, best practices, and programs needed 
to help ensure that workplace safety and environmental stewardship are 
at the forefront of the offshore oil and gas development process.
    Since 1924, API has developed industry standards and practices that 
promote reliability and safety through the use of proven engineering 
practices. The API standards program is accredited by the American 
National Standards Institute (ANSI), the authority on U.S. standard 
setting. It undergoes regular program audits to ensure it meets ANSI's 
essential requirements of openness, balance, consensus and due process.
    API standards are developed through a collaborative effort among 
industry experts, technical experts from government, and other 
interested stakeholders. The industry has helped create more than 500 
standards, including some 240 exploration and production standards that 
address offshore operations. Seventy-eight of these standards are 
referenced in Minerals Management Service regulations.
    As a result of the regulatory framework, industry standards, and 
individual company safety programs, offshore oil and natural gas 
development has been safely conducted for nearly 60 years in the Gulf 
of Mexico. Within that time, more than 42,000 wells have been drilled, 
including more than 2,000 deepwater wells. But despite those safe 
operations, we know we must now focus on making sure this kind of 
accident will never happen again.
    The industry is committed to a goal of zero fatalities, zero 
injuries and zero incidents, and the industry has already taken steps 
to improve safety and environmental performance in the aftermath of the 
Gulf incident.
    In fact, we have already assembled the world's leading experts to 
conduct a top-to-bottom review of offshore drilling procedures, from 
operations to emergency response. And our industry is providing data 
and expertise to the federal government to stop the flow of oil, clean 
up the environment, understand the causes and correct them. Two 
industry task forces that are addressing both short- and long-term 
issues related to offshore equipment and offshore operating practices 
delivered recommendations to the Interior Department last month.
    While the task forces are not involved in the review of the 
incident, they did bring together industry experts to identify best 
practices in offshore drilling equipment and operations. Without the 
benefit of the final root-cause analysis of the incident, the task 
forces looked at current industry practices in an effort to immediately 
move industry standards to a higher level of safety and operational 
performance. The final report from the Interior Department, dated May 
27, 2010 and submitted to the President, incorporated much of the input 
provided by the task forces.
    And, just last week, the industry announced the creation of two 
additional task forces. API, along with other energy trade 
associations, has assembled experts to review oil spill and blowout 
response capabilities. One task force will focus on stopping and 
containing an oil leak at the wellhead, and one task force will focus 
on oil spill response at the surface and shoreline.
    API's commitment to learn from this experience and to make offshore 
oil and natural gas exploration and production safer continues. In the 
long-term, we intend to use any findings from the incident 
investigations to continue to improve the technologies and practices to 
achieve safe and environmentally sound operations. As part of this 
process, we will continue to develop new API standards and revise and 
adapt existing API standards to raise the bar of performance to a 
higher level.
    As Congress considers these important issues, thoughtful 
consideration must be given to harmonize the need to protect our 
environment and the taxpayers, while allowing us to safely and reliably 
provide the energy our nation relies on for our economic and energy 
security. The Department of Energy projects that we will need much oil 
and natural gas to fuel our economy for decades to come. We have the 
opportunity to develop those resources here at home, and we have the 
ability to do it in a safe and responsible manner. The responsible path 
forward is to ensure that any discussion of legislative or regulatory 
action recognizes the important role energy plays in fostering job 
growth and energy security. Those goals - job growth and energy 
security--can and should be met through responsible domestic oil and 
gas development. We look forward to providing constructive input as 
this committee, the Congress and the Administration move forward with 
policy proposals.
    This concludes my statement, Mr. Chairman. I welcome questions from 
you and your colleagues. Thank you.
                                 ______
                                 
    Mr. Costa. Thank you, Mr. Milito, and we will move on to 
our next witness, Ms. Danielle Brian, the Executive Director of 
the Project on Government Oversight. Please begin.

  STATEMENT OF DANIELLE BRIAN, EXECUTIVE DIRECTOR, PROJECT ON 
                      GOVERNMENT OVERSIGHT

    Ms. Brian. Thank you very much, Mr. Chairman. Thank you 
very much for inviting me to testify today, and I want to 
compliment the Committee for having structured the hearing with 
the panel for whistleblowers. I think that is a really 
important element of oversight, and other committees should be 
following your example.
    Since 1995, POGO has issued five reports about MMS's 
failure to do its job, and the Deepwater Horizon disaster is a 
direct result of that failure. Splitting up MMS is an important 
step, but reducing these structural conflicts will not fix two 
primary dysfunctions: the revolving door between industry and 
MMS, and an overdependence on industry for expertise.
    The revolving door between industry and MMS has been 
swinging wildly. An egregious example of this problem is that 
the last director of MMS under the previous administration, 
Randall Luthi, recently came before your Subcommittee as the 
president of an offshore driller's trade association, the 
National Oceans Industry Association. As a disturbing side 
note, his predecessor at that association, Tom Frye, was also a 
former MMS Director. These two cases are emblematic of what is 
wrong with MMS.
    When the director of MMS joins a trade association whose 
explicit mission is to secure a favorable regulatory 
environment for offshore drillers, taxpayers have to question 
whose interests were actually being served when he was at MMS. 
In the case of Mr. Luthi, who joined the trade association only 
14 months after leaving MMS, in other words, just after his 
cooling off period, it is unclear whether he was always 
ideologically opposed to MMS's mission.
    As we have been discussing all day, MMS has suffered from a 
conflict in its mission. Oversight and promotion of production 
should never be combined in one agency. The CLEAR Act tackles 
this conflict by separating out the auditing and regulatory 
functions and giving it to the IG. Secretary Salazar's proposed 
reorganization of MMS would also help to improve the agency by 
separating into three separate organizations, but this plan's 
success would depend on adequate fundings, staffing, and 
expertise, and we are concerned that there is a problem, 
perhaps, in letting the regulatory functions sink deeper into 
the bureaucracy. POGO really believes that particularly the 
auditing function that is responsible for collection of 
royalties should be moved out of Interior entirely and made 
part of an independent Federal contract audit agency.
    We also believe it is essential to rebuild the government's 
technical capacity to challenge industry within the Department 
of the Interior. We heard Members of Congress, I believe it was 
Ranking Member Lamborn, who was talking about the groupthink, 
and also Congressman Sarbanes who was talking about the keys to 
the kingdom being turned over to industry, and those are both 
going to be resolved we believe. We can rebuild technical 
capacity within the Department of the Interior so they can 
challenge industry and have the intellectual security to fight 
back when there are questions.
    The way to do this also is to ensure that there are enough 
inspectors and auditors, consider increasing pay on the GS 
scale for inspectors who are critical to rig safety, and also 
determine whether some of the functions of BLM should be 
incorporated into this reorganization, as the CLEAR Act also 
prescribes. Bringing all the inspectors of both onshore and 
offshore into the same division might help to focus that 
inspection mission. POGO Is also very pleased about President 
Obama's recently announced nomination of Michael Bromwich to be 
the new head of MMS because of his reputation as a tough 
investigator as a former inspector general, and the fact that 
he is not from the insular culture of the Department of the 
Interior, and also his lack of ties to the oil and gas industry 
could be a tremendous asset in changing the culture of coziness 
with industry.
    Another factor that we think is important in terms of 
changing the culture is that MMS should be making better use of 
partners like state and tribe auditors. There is an incident 
that happened before the Committee a couple of years ago that I 
think is worth noting when a North Dakota state auditor told 
the Subcommittee that a high-ranking MMS official had advised 
him and other members of the state and tribal royalty committee 
not to testify before Congress because it was best to keep any 
problems with MMS in-house, and those are exactly the kinds of 
people that MMS should be seeing as partners rather than as 
silenced outsiders.
    Additionally, there must be rigorous enforcement of 
existing rules and regulations. And when it comes to ethics 
enforcement, there is one piece of good news that came from the 
most recent IG investigation. The culture of accepting gifts 
from the oil and gas industry appears to be on the decline 
after one MMS regional supervisor was investigated and 
terminated after accepting gifts from an offshore drilling 
contractor. This example shows that a culture can change when 
people are held accountable for misconduct.
    The CLEAR Act's language to increase fines and penalties 
could provide effective tools for improving royalty management. 
It is also important to note that as this has been going on for 
years with people from within MMS, particularly on the royalty 
side and auditors coming forward as whistleblowers, they have 
all suffered retaliation, reassignment, and job loss. The 
current whistleblower protection laws do not provide adequate 
protection for these people, and the bipartisan Whistleblower 
Protection Act would remedy this gaping hole in government 
accountability tools.
    Last, no matter what reforms are put in place they must be 
accompanied by increased transparency about MMS's operations. 
Interior should be providing to the public and Congress easy 
access to information regarding leases, volume of production, 
production costs, audits, environmental impact statements, and 
safety assessments. It is notable that after the President's 
open government directive required all agencies to put three 
high-valued data sets on line that Interior gave no information 
about oil and gas leasing, but instead put up a database of 
national treasurers, which had already been online anyway.
    Thank you again to the Committee for your oversight of MMS 
which has been going on for many years, and for asking me to 
testify. I look forward to answering any questions you may have 
and continuing to work with the Committee.
    [The prepared statement of Ms. Brian follows:]

           Statement of Danielle Brian, Executive Director, 
                 Project On Government Oversight (POGO)

    Thank you for inviting me to testify today. I am the Executive 
Director of the Project On Government Oversight, also known as POGO. 
Since 1995, POGO has issued five reports about the federal government's 
inadequate oversight of the major oil and gas companies, primarily with 
a focus on the Minerals Management Service (MMS) and the loss of 
royalty revenue. \1\ Most recently, we issued a report tracing the 
troubled history of the Department of the Interior's Royalty-In-Kind 
(RIK) program and recommending the abolition of the program. 
Investigations conducted by POGO, the Inspector General (IG), the 
press, and this and other congressional committees have long found that 
MMS is broken. The Deepwater Horizon disaster is a direct result of 
MMS's failure to do its job. It is important that Interior and Congress 
do what they can to learn from this catastrophe and make sure it never 
happens again.
---------------------------------------------------------------------------
    \1\ Project On Government Oversight, Drilling the Taxpayer: 
Department of Interior's Royalty-In-Kind Program, September 18, 2008, 
http://www.pogo.org/pogo-files/reports/natural-resources/drilling-the-
taxpayer/nr-rik-20080918.html; Drilling For The Truth: More Information 
Surfaces On Unpaid Oil Royalties, January 1, 1997, http://www.pogo.org/
pogo-files/reports/natural-resources/drilling-for-the-truth-more-
information-surfaces-on-unpaid-oil-royalties/nr-oil-1997.html; Wait! 
There Is More Money to Collect...Unpaid Oil Royalties Across the 
Nation, January 1, 1996, http://www.pogo.org/pogo-files/reports/
natural-resources/wait-there-is-more-money-to-collect/nr-oil-1996.html; 
With A Wink And A Nod: How the Oil Industry and the Department of 
Interior Are Cheating the American Public and California School 
Children, March 1, 1996, http://www.pogo.org/pogo-files/reports/
natural-resources/with-a-wink-and-a-nod/nr-oil-19960301.html; 
Department of Interior Looks the Other Way: The Government's Slick Deal 
for the Oil Industry, January 1, 1995, http://pogoarchives.org/m/ep/
doi-looks-the-other-way-19950401.pdf
---------------------------------------------------------------------------
    The reforms proposed by the Consolidated Land, Energy, and Aquatic 
Resources (CLEAR) Act of 2009 (H.R. 3534) to split some of the 
conflicted missions of MMS \2\ anticipated many of the operational 
problems the Deepwater Horizon disaster has revealed. Interior 
Secretary Ken Salazar's ethics reforms \3\ and new proposal to split 
MMS \4\ could also help make Interior more effective. But reducing 
these structural conflicts will not fix the most significant conflict 
of interest at MMS: the agency's disturbingly close relationship with 
the industry they are entrusted to oversee. In a recent report, the 
Interior IG found that MMS's inappropriate relationship with industry--
which included ``gifts and gratuities''--compromised its objectivity. 
\5\ Secretary Salazar's ethics reforms should prevent this specific 
problem from recurring, and POGO applauds Chairman Rahall for pursuing 
information ``regarding rotation practices designed to ensure that 
inspectors maintain arms-length relationships with offshore facility 
personnel.'' \6\ But these actions do not fix the two primary causes of 
the inappropriate closeness: the revolving door and an over dependence 
on industry for expertise.
---------------------------------------------------------------------------
    \2\ Consolidated Land, Energy, and Aquatic Resources (CLEAR) Act of 
2009, H.R. 3534, http://frwebgate.access.gpo.gov/cgi-bin/
getdoc.cgi?dbname=111_cong_bills&docid=f:h3534ih.txt.pdf (Downloaded 
June 15, 2010) (Hereinafter H.R. 3534)
    \3\ Department of the Interior, ``Secretary Salazar Outlines High 
Ethical Standards for Interior Department in Memo to All Employees,'' 
January 26, 2009. http://www.doi.gov/archive/news/09_News_Releases/
012609a.html (Downloaded June 15, 2010)
    \4\ Department of the Interior, ``Salazar Divides MMS's Three 
Conflicting Missions,'' May 19, 2010. http://www.doi.gov/news/
pressreleases/Salazar-Divides-MMSs-Three-Conflicting-Missions.
cfm (Downloaded June 15, 2010)
    \5\ Department of the Interior, Investigative Report: Island 
Operating Company et al, March 31, 2010. http://www.doioig.gov/images/
stories/reports/pdf/IslandOperatingCo.pdf; See also: Department of the 
Interior, Investigative Report: MMS Oil Marketing Group-Lakewood,'' 
August 19, 2008. http://www.doioig.gov/images/stories/reports/pdf//
RIKinvestigation.pdf (All downloaded June 15, 2010)
    \6\ Letter from Nick J. Rahall, II, Chairman of the House Committee 
on Natural Resources, to Interior Secretary Ken Salazar, June 8, 2010. 
http://www.pogoarchives.org/m/nr/doi/rahall-salazar-20100608.pdf 
(Downloaded June 15, 2010)
---------------------------------------------------------------------------
Revolving Door
    One of the most problematic causes of the inappropriate closeness 
between MMS and industry is the number of the individuals who have gone 
through the revolving door. Several have been sentenced to prison for 
violations of conflict-of-interest laws or obstruction of justice. \7\ 
As long as the door continues to revolve between industry and Interior 
or MMS, the public cannot be sure their interests are being served.
---------------------------------------------------------------------------
    \7\ Project On Government Oversight, Drilling the Taxpayer: The 
Department of Interior's Royalty-In-Kind Program, September 18, 2008, 
pp. 12-14. http://pogoarchives.org/m/nr/rik/report-20080918.pdf
---------------------------------------------------------------------------
    The most egregious example of this problem is the last Director of 
MMS under the previous administration, Randall Luthi--who recently came 
before your committee as the president of an offshore drillers trade 
association, the National Oceans Industries Association. \8\ As a 
disturbing sidenote, his predecessor at the Association, Tom Fry, was 
also a former MMS Director. \9\ These two cases are emblematic of what 
is wrong with MMS. When the Director of MMS joins a trade association 
whose explicit mission was to secure a ``favorable regulatory and 
economic environment for the companies that develop the nation's 
valuable offshore energy resources,'' \10\ taxpayers have to question 
whose interests were actually being served when he was at MMS. In the 
case of Mr. Luthi--who joined the trade association approximately 14 
months after leaving MMS--it's unclear whether he was always 
ideologically opposed to the agency's mission.
---------------------------------------------------------------------------
    \8\ National Ocean Industries Association, ``Biography: Randall 
Luthi, President, National Ocean Industries Association.'' http://
www.noia.org/website/download.asp?id=38559 (Downloaded June 15, 2010)
    \9\ National Ocean Industries Association, ``Tom Fry Announces 
Retirement from the National Ocean Industries Association,'' October 9, 
2009. http://www.noia.org/website/article.asp?id=35791 (Downloaded June 
15, 2010)
    \10\ Project On Government Oversight, ``Oil Drilling Trade Group 
Slips the F-Word into Its Mission Statement,'' June 11, 2010. http://
pogoblog.typepad.com/pogo/2010/06/oil-drilling-trade-group-slips-the-
fword-into-its-mission-statement.html
---------------------------------------------------------------------------
    There have already been several improvements to ethics policies at 
Interior since our 2008 report. POGO applauds President Barack Obama's 
Executive Order for Ethics Commitments by Executive Branch Personnel, 
\11\ and Secretary Salazar's Memorandum to Employees on their ethical 
responsibilities. \12\ POGO particularly wants to praise Secretary 
Salazar for enhancing the ethical culture of the agency by urging 
employees to seek the assistance of bureau or office ethics officials 
for guidance to avoid even the appearance of impropriety. The CLEAR Act 
also offers meaningful solutions to combat this problem by requiring 
the Secretary of the Interior to annually certify that all employees 
involved in leasing activities are in full compliance with all federal 
employee ethics laws and regulations, \13\ and we hope that in the wake 
of this disaster this certification would extend to all employees 
involved in overseeing resource development.
---------------------------------------------------------------------------
    \11\ The White House, ``Ethics Commitment By Executive Branch 
Personnel,'' January 21, 2009. http://www.whitehouse.gov/
the_press_office/Ethics-Commitments-By-Executive-Branch-Personnel 
(Downloaded June 15, 2010)
    \12\ Department of the Interior, ``Secretary Salazar Outlines High 
Ethical Standards for Interior Department in Memo to All Employees,'' 
January 26, 2009. http://www.doi.gov/archive/news/09_News_Releases/
012609a.html (Downloaded June 15, 2010)
    \13\ H.R. 3534, Section 103.
---------------------------------------------------------------------------
    We also recommend that Interior and Congress consider the following 
recommendations:
          Prohibit government employees from overseeing or 
        regulating their former private sector employer.
          Require government officials to enter into a binding 
        revolving door exit plan that sets forth the programs and 
        projects from which the former employee is banned from working. 
        Like financial disclosure statements, these reports should be 
        filed with the Office of Government Ethics and available to the 
        public. This requirement would benefit government employees who 
        are unaware of or confused by post-government restrictions or 
        who have multiple post-employment bans covering different time 
        periods. It would also enhance public trust in the government.
          Require recently retired government officials and 
        their new employers to file revolving door reports attesting 
        that the former government employee has complied with his or 
        her revolving door exit plan.
MMS's Dependence on Industry
    The second reason for MMS's closeness to industry is that, as Tyler 
Priest, clinical professor of business history and director of global 
studies at the University of Houston's C.T. Bauer College of Business, 
has pointed out, MMS has always been a ``junior partner'' to industry, 
dependent on industry for the technical knowledge MMS employees need to 
be able to do their jobs. \14\ President Obama has acknowledged that 
this dependence on industry has been a festering sore for MMS: ``What's 
also been made clear from this disaster is that for years the oil and 
gas industry has leveraged such power that they have effectively been 
allowed to regulate themselves.'' \15\ POGO worries that MMS allowed 
industry to perform inherently governmental functions by allowing 
industry's technical analysis to determine how to adapt or develop 
regulations. \16\
---------------------------------------------------------------------------
    \14\ Tyler Priest, ``The Ties that Bind MMS and Big Oil,'' 
Politico, June 9, 2010. http://www.politico.com/news/stories/0610/
38270.html (Downloaded June 15, 2010)
    \15\ The White House, Office of the Press Secretary, ``Remarks by 
the President on the Gulf Oil Spill,'' May 27, 2010. http://
www.whitehouse.gov/the-press-office/remarks-president-gulf-oil-spill 
(Downloaded June 15, 2010)
    \16\ FAR 7.503(c)(5) (inherently governmental functions include 
``the determination of agency policy, such as determining the content 
and application of regulations, among other things''). https://
www.acquisition.gov/far/current/html/Subpart%207_5.html#wp1078196 
(Downloaded June 15, 2010)
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    In our own investigations, we found that industry's promotion of 
the Royalty-In-Kind program facilitated the program's expansion against 
the significant concerns of independent government auditors. The 
revolving door between MMS and industry has been tolerated, if not 
encouraged, based on the belief that industry knows best. As a result, 
MMS has not been an effective enforcer of regulations, but instead has 
allowed industry to operate largely on an honor system. Billions of 
dollars in royalty underpayments by industry, and the oil disaster in 
the Gulf, have demonstrated that this honor system doesn't work.
Separating Missions and Increasing Independence
    In addition to its inappropriate coziness to industry, there are a 
few other factors that have contributed to MMS's failure. POGO has long 
believed MMS suffers from a conflict of mission. For example, the sole 
mission of a federal royalty management and collection program should 
be determining and enforcing revenue obligations of private companies 
operating on public and Indian lands. Prior to the proposed split, 
auditors and other compliance and enforcement personnel reported to 
officials within MMS whose responsibilities also include leasing and 
development, and who may be more inclined to make the royalty 
management program look successful rather than be successful. As POGO 
discovered, in some instances MMS told their professional auditors to 
stop auditing, even when the auditors had discovered evidence that 
companies were underpaying royalties. The Deepwater Horizon disaster 
has demonstrated that similar pressures may have undermined the 
effectiveness of MMS inspectors.
    The CLEAR Act tackles this conflict by separating out the auditing 
function and giving it to the IG \17\; we would still like to see this 
function moved out of Interior entirely and made part of an independent 
federal contract audit agency. Secretary Salazar's proposed 
reorganization of MMS could also help to improve the agency by 
separating out these missions and increasing its independence, but this 
plan's success will depend upon implementation. For one, these bureaus 
cannot be allowed to suffer from the lack of resources that crippled 
MMS--they must have the funding, staff, and expertise they need to be 
effective. Proposals to augment the inspectors for both MMS and the 
Bureau of Land Management (BLM) have been quashed in the past. Congress 
and Interior should:
---------------------------------------------------------------------------
    \17\ H.R. 3534, Section 101(h).
---------------------------------------------------------------------------
          Ensure that there will be enough inspectors
          Consider increasing the pay and GS scale for 
        inspectors to be comparable to MMS auditors and IG evaluators 
        and criminal investigators. The disaster in the Gulf has 
        demonstrated that rig inspectors perform equally important 
        functions for Interior, and they should be adequately 
        compensated for it.
          Determine whether some functions of the BLM should be 
        incorporated into this reorganization, as the CLEAR Act 
        prescribed. \18\ For example, putting all of the inspectors for 
        both onshore and offshore in the same division might focus 
        Interior's inspection mission.
---------------------------------------------------------------------------
    \18\ H.R. 3534, Section 101.
---------------------------------------------------------------------------
    POGO has seen this kind of split improve effectiveness before: in 
1974, the Atomic Energy Commission was abolished and divided into two 
agencies because its dual missions of promotion and regulation of 
nuclear power was recognized as an inherent conflict of interest. \19\ 
As a result, the Department of Energy (DOE) was given the role of 
promoting nuclear power, while the Nuclear Regulatory Commission (NRC) 
was created to regulate, inspect, and enforce regulations of the 
nuclear power industry. While NRC still faces some challenges to being 
successful, it has been a more effective regulator than the Atomic 
Energy Commission.
---------------------------------------------------------------------------
    \19\ Nuclear Regulatory Commission, ``A Short History of Nuclear 
Regulation, 1946-1999.'' http://www.nrc.gov/about-nrc/short-
history.html#end (Downloaded June 15, 2010)
---------------------------------------------------------------------------
    A large hurdle facing MMS is cultural: this is an agency that has 
been subservient and dependent on industry for too long. Changing this 
requires more than reorganization; it requires new leadership. POGO 
worries that Secretary Salazar's well-intentioned split, creating 
smaller offices, could also diminish the effectiveness of auditing and 
inspections, and make it difficult to attract high quality people 
needed to really create change. But Interior can get the qualified 
officials it needs if they look beyond industry, the solicitor's 
office, and MMS. For example, Secretary Salazar could appoint one of 
the state or tribe auditors who have been frustrated with MMS's lax 
royalty auditing to head up the new auditing bureau. Someone from the 
Government Accountability Office or the IG office could be an effective 
head of the bureau charged with inspections. These critics care about 
MMS's mission and want it to succeed, and are exactly the kind of 
people MMS employees and industry need to see in the lead.
    Additionally, there must be rigorous enforcement of existing rules 
and regulations. When it comes to ethics enforcement, the one piece of 
good news in the most recent IG investigation is that the culture of 
accepting gifts from the oil and gas industry appeared to decline after 
one MMS regional supervisor was investigated and terminated for 
accepting gifts from an offshore drilling contractor. This example 
demonstrates that a culture can change when people are held accountable 
for misconduct. Additionally, Congress should consider whether:
          The CLEAR Act's language to increase fines and 
        penalties \20\ could provide effective tools for improving 
        royalty management.
---------------------------------------------------------------------------
    \20\ H.R. 3534, Section 205.
---------------------------------------------------------------------------
          Bonuses for MMS employees could improve inspections 
        or royalty collections.
    Even without these changes, perhaps we would have had more warning 
about the looming disaster and the problems at MMS if federal workers 
and contractors knew they would be protected and have recourse if they 
faced retaliation for coming forward. A few did come forward about 
royalty underpayments by oil companies, and when they did, the MMS 
employees who came forward alleged retaliation including reassignment 
and job loss. \21\ The current whistleblower protection law does not 
provide adequate protections for pursuing their claims. The bipartisan 
Whistleblower Protection Enhancement Act, H.R. 1507, would strengthen 
existing whistleblower protections for all federal employees and extend 
protections to federal government contractor employees who disclose 
wrongdoing. \22\ This bill is critical to ensuring more warning of 
wrongdoing and more accountability at Interior and throughout the 
government.
---------------------------------------------------------------------------
    \21\ Department of the Interior Office of Inspector General, 
Investigative Report: Minerals Management Service, False Claims 
Allegations, September 7, 2007, pp. 86-131. http://www.doioig.gov/
images/stories/reports/pdf//Qui%20tam.pdf (Downloaded June 15, 2010)
    \22\ Whistleblower Protection Enhancement Act of 2009, H.R. 1507. 
http://frwebgate.access.gpo.gov/cgi-bin/
getdoc.cgi?dbname=111_cong_bills&docid=f:h1507ih.txt.pdf (Downloaded 
June 15, 2010)
---------------------------------------------------------------------------
    No matter what reforms are put in place, they can only be effective 
with increased transparency about MMS's operations. Interior should 
provide:
          Congress and the public easy access to non-
        proprietary information regarding leases, volumes of 
        production, production costs, audits, Environmental Impact 
        Statements, and safety assessments.
          Quarterly public reviews of inspection activities by 
        MMS that would be sent to the Secretary, the IG, and Congress. 
        It is important to note that Interior has not released 
        information about oil and gas leases, despite being given 
        several opportunities to do so by measures outlined in the Open 
        Government Directive. \23\ Interior's willingness to increase 
        its openness in the wake of the Gulf disaster should be 
        considered a real acid test as to how committed the 
        Administration is to the kind of transparency measures that 
        will help citizens hold the federal government and industry 
        accountable.
---------------------------------------------------------------------------
    \23\ The White House, ``Open Government Directive,'' December 8, 
2009. http://www.whitehouse.gov/open/documents/open-government-
directive (Downloaded June 15, 2010)
---------------------------------------------------------------------------
    We are happy that Congress and the Administration are taking a 
serious look at MMS's problems, but it shouldn't haven taken a disaster 
of this magnitude to fix the obvious and well-known problems at this 
agency. I think that this, above all, is the most important lesson to 
take away from the Gulf Coast disaster.
    Thank you again for your oversight of MMS and for asking me to 
testify. I look forward to answering any questions you may have, and to 
working with your Committee on this issue.
                                 ______
                                 
    Mr. Costa. Thank you. We will get to that in a moment. Our 
last witness for this panel, the last panel but certainly not 
the least, wow, we have a spill here but not an oil spill. I 
think this one we can handle.
    Mr. Steve Maley, the Operations Manager for Badger Oil 
Corporation. Mr. Maley, thank you for your patience.

   STATEMENT OF STEVE MALEY, OPERATIONS MANAGER, BADGER OIL 
                          CORPORATION

    Mr. Maley. Thank you, Mr. Chairman, and members of the 
Subcommittee. I am Steve Maley Operations Manager for Badger 
Oil in Lafayette. We have a small production office in Houma, 
Louisiana, as well.
    I come here today representing not just Badger but also the 
citizens of my adopted home state.
    Mr. Costa. How many people do you employ?
    Mr. Maley. About 24.
    Mr. Costa. OK.
    Mr. Maley. Badger is an independent, meaning we don't own 
pipelines, refineries or gas stations. Rather, Badger operates 
a handful of shallow-water gas platforms on the Shelf in the 
Gulf of Mexico like this one 100 miles offshore. One of the 
points I have noticed sitting here today is the confusion 
between rigs and platforms. A platform is a fixed structure, 
especially on the Shelf, it is in place with a production 
facility, and our plan is to----
    Mr. Costa. I am glad you pointed that out.
    Mr. Maley. And it is why the confusion about 4,000 rigs and 
platforms. Some of those structures you are talking about are 
single-well structures in very shallow water, so the number is 
high. It skews the ratio and makes it not comparable with 
California.
    This particular platform is one we installed in 2007, and 
we had applied for and had been granted permits to work over 
three of the four weeks with a drilling rig which will come up 
next to the platform, jack up, and service the wells.
    We have no interest in playing in deep water. Our operation 
bears little resemblance to BP's, but the deepwater moratorium 
has shut us down. As documented in last Sunday's Washington 
Post, the deepwater moratorium has now spilled over, causing 
regulatory confusion and slowed activity in the shallow waters 
of the Shelf. I mentioned the permits we had in hand to work on 
three wells that have been verbally rescinded. That is probably 
300 jobs between the direct people that would work on the rig 
for the contractor and suppliers, plus the support jobs that 
that would entail.
    In the case of our platform, the wellheads and hence the 
BOPs will be high and dry. You can't really see them in the 
picture, but they are right above that first deck. The water 
depth is 200 feet so divers can access anything that went wrong 
in the water. The wells are shallow and low pressure. The wells 
are gas condensate wells, not oil wells, so that the 
environmental threat is much less.
    We are not in the same league as deepwater, high pressure 
oil, but the shallow water shelf has a 40-year history, still 
intact of increasingly safe and clean operations comparable to 
or better than other industries that don't operate in the 
marine environment.
    I am lazy. I used MMS's own slides. This is from a PDF that 
they have online that shows their drilling recordable incident 
rate, OSHA recordables, and lost time accidents for a 13-year 
period ending in 2008. That is a pretty impressive trend. Next 
slide, please.
    Same thing for combined operations. Drilling, production, 
construction. Next slide.
    Blowout incident rate, and I think everyone can see in 2006 
and 2007 for the entire Gulf of Mexico zero blowouts. With 
hundreds of platforms down in the storm since 2005, subsurface 
safety valves prevented production well blowouts and any 
substantial environmental impact from spills. Those came about 
after a production platform spill in 1970, way before the MMS 
was instituted. Industry learned from that experience and MMS 
enforced it, evidence that together we can and do learn from 
our mistakes.
    In answering the question what went wrong it is important 
to recognize that someone is doing something right. As I state 
in my testimony, the cozy relationship, as described, is not 
consistent with my experience with MMS. In fact, if you had 
asked me a year ago would I be here today defending MMS, I 
would say you have got to be kidding.
    To answer what went wrong, I have suggested in my testimony 
that the regulatory structure for drilling rigs and production 
platforms be distinct because the separate processes are so 
different between them. I have also suggested that the focus 
needs to be redirected--of the agency needs to be redirected 
back to oil and gas, not wind energy. All industrial processes 
involve risk. Mine safety folks can't guarantee safe coal 
mines. The FAA cannot put me on a perfectly safe plane to go 
home. OSHA cannot guarantee perfectly safe factories.
    Offshore oil has its risks but the alternatives have great 
risks as well. If we don't produce oil and gas here, we have to 
bring it in in boats. It is a terrible way to move oil around. 
If you look at a list of the worst oil spills in history, it is 
dominated by large tanker spills. Those tend to happen in our 
rivers and bays, not 50 miles offshore.
    Natural gas, that would be a good bridge to the future but 
we are planning to shoot it in the head along with the oil 
industry because both things tend to run together. Ethanol 
creates a dead zone in the Gulf of Mexico every summer from the 
fertilizer runoff from the Midwest. I am waiting to see which 
northeastern state they will compare the size of it to--
Delaware, New Jersey, Connecticut--it is usually one of those.
    Wind energy doesn't replace petroleum as a transportation 
fuel, and if you look at it closely, it has its safety and 
environmental risks, too.
    Last, I would like to say that Louisiana is the birthplace 
of offshore technology. Louisiana did not share in a big way in 
the royalties. We never got much out of the deal except jobs. 
Louisianans developed much of the technology and provided the 
people who made the global offshore industry possible. On a rig 
in the North Sea, Angola, or the Middle East, you might be 
served as good a gumbo as you find downtown Mamou.
    Louisiana is family. As much as we are affected by the oil 
in the marsh, everyone in the state is only one or two degrees 
of separation removed from someone whose job depends on oil and 
gas, and everyone knows that when, not if, the deepwater rigs 
leave, they have left for good. In that context a $100 million 
fund for laid-off workers is nothing. I have seen estimates as 
high as $330 million a month. We are talking permanent 
crippling structural damage to the economy, especially in 
Louisiana, but to the rest of the Gulf states as well. These 
men and women that work on the deepwater rigs and support that 
activity live in Louisiana but also in Mississippi, Alabama, 
Texas, Oklahoma and Arkansas, and probably every other state. 
They work 14 and 14 and can come from far away.
    Mr. Costa. Mr. Maley, we need you to----
    Mr. Maley. Two sentences?
    Mr. Costa. Two sentences.
    Mr. Maley. This regulatory impasse must be solved. 
Louisiana doesn't want to be on the government dole or BP's 
dole. We don't need another panel or commission. The regs 
currently on the books vigorously enforce to reflect the 
relative risk of deepwater oil can do the job but we must end 
the moratorium. Thank you.
    [The prepared statement of Mr. Maley follows:]

  Statement of Steve Maley, Operations Manager, Badger Oil Corporation

BACKGROUND
    My name is Steve Maley. I am a petroleum engineer with 32 years of 
industry experience. I serve Badger Oil Corporation as its Operations 
Manager. Badger is headquartered in Lafayette, Louisiana, with a 
satellite office in Houma, Louisiana.
    Badger doesn't own pipelines, refineries or gas stations; rather, 
we are an ``independent'' explorer and producer. Badger operates a 
total of 10 active wells on 6 platforms, in waters no deeper than about 
200 feet, all in the Western Gulf of Mexico. Most of our production is 
gas. In addition, we have interests in 6 producing leases on the Outer 
Continental Shelf that are operated by industry partners. We don't have 
deepwater leases, and have no interest in becoming a deepwater company. 
Badger drilled its first well in the Gulf in 2003, but our key 
engineering and operations staff of seven--the folks responsible for 
keeping our operations safe, clean and efficient--averages some 35 
years of industry experience, much of that in the Gulf of Mexico.
INTERACTION WITH MMS
     Badger has interacted on multiple occasions with MMS staff from 
several of the District offices, as well as the Gulf of Mexico Region 
office in New Orleans. We usually have weekly contact by telephone or 
email with MMS, or more frequently when we're busy.
    In 2008, Badger was honored to be a finalist for the MMS SAFE 
Award, in the moderate size operator category.
    Generally, the relationship between the operators/lessees and the 
MMS is one of mutual respect for the stewardship roles that each of us 
has to carry out.
    The alleged ``cozy relationship'' with lessees is at odds with my 
day-to-day experience. Our company's dealings with MMS office staff 
have been professional and conducted at arm's-length. MMS has a cadre 
of middle management professionals that impress me as dedicated and 
capable public servants who do their best to deliver regulatory 
technical oversight in an arena that has become increasingly political.
    At no time have we found that our status as a remitter of royalty 
made any difference in our dealings with MMS staff who deal with safety 
or permitting.
OFFSHORE REGULATION: WHAT'S WORKING?
    Fifty thousand wells have been drilled on the Outer Continental 
Shelf. From 1970 until March, 2010, the total volume of oil spilled due 
to blowouts was 1,500 barrels.
    Figures 1 and 2 in the attachment show the reported incident rates 
(OSHA recordable incidents and Lost Time Accidents) for Drilling 
Operations, and for Combined Drilling-Construction-Production 
Operations for the 13-year period from 1996-2008. Industry has worked 
hard to make continuous improvement. Figure 3 shows the drilling well 
blowout rate for the same period.
    These graphs are evidence that somebody's doing something right. 
Incident rates like these compare very favorably with any heavy 
industry you care to name.
    The industry's performance is all the more impressive when you 
consider that oil and gas operations are conducted in a hostile marine 
environment and often in extreme weather conditions.
    As a taxpayer and a citizen of Louisiana, I'm glad that the MMS has 
undertaken positive initiatives for safety and the environment, 
including:
          Subsurface safety valves, which prevented blowouts on 
        hundred of hurricane-toppled platforms
          The ``Idle Iron'' initiative
          Promotion of ``Stop Work'' policies
          Safe Lifting Workshops for the use of offshore cranes
    There have been a number of occasions when Badger has complied with 
a request from MMS staff or inspectors to make specific modifications 
to our facilities in the interest of safety, sometimes at considerable 
cost. These were not modifications that are specified by any 
regulations. We made a judgment that to comply was in the interest of 
building a better relationship with our regulator.
WHAT'S NOT WORKING?
    In attempting to answer the question ``The Deepwater Horizon 
Incident: Are the MMS Regulations Doing the Job?'', as an engineer, my 
first question is, ``What went wrong?'' I've heard all kinds of 
theories: Was it improper well design? Equipment failure? Human error? 
Any or all three may have played a role in this unprecedented disaster.
    Without knowing what went wrong, there is no way to make a reasoned 
judgment on whether existing regulations were adequate and not 
followed, or if some gap in current regulations set the stage for the 
failure.
    In its approach to safety management, MMS attempts to meld two 
processes that are fundamentally distinct from the operator's 
perspective: Drilling and Production. My basis for making this 
statement is the 2009 Notice of Proposed Rulemaking regarding Safety 
and Environmental Management Systems (SEMS). I commented then, and I 
still believe, that Drilling and Production are so different that it is 
a mistake to attempt to manage their safety processes in the same way.
    Production processes take place at fixed installations that are 
always under the control of the operator. Drilling processes take place 
on MODUs - mobile offshore drilling units - that are contracted by the 
operator (the lessee) only temporarily. Not only does the drilling rig 
owner, the contractor, have superior knowledge of his equipment and 
crew, the rig's OIM (Offshore Installation Manager) is effectively the 
captain of the ship.
    Ultimately, though, MMS holds the operator responsible for safety 
compliance. That's because the MMS only has a contractual relationship 
(via the oil and gas lease) with its lessee, the operator.
    As detailed in Sunday's Washington Post (``Aboard a shallow-water 
gas rig, regulatory confusion keeps crew waiting'', 6/13), the 
deepwater drilling moratorium has spilled over to affect the shallow 
water operators. Badger is one of those firms in ``permit limbo''; 
three workover permits we once had have been verbally rescinded, with 
no clear read on what will resolve the situation. There is no way that 
this situation accrues to anyone's benefit. It can even be argued that 
it is detrimental to safety by deferring work that could have been done 
in ideal weather (May/June) into the heart of hurricane season.
    Another area of concern is the organizational focus of the MMS. 
Less than a year ago, while in the Region office in New Orleans for a 
meeting, I happened to overhear two staffers commenting about their 
changing career opportunities as the focus shifted away from oil and 
gas and toward renewable energy programs, specifically wind. The change 
was apparent on the MMS website, and was even highlighted by Secretary 
Salazar on his nationwide series of public forums on the Five Year 
Plan.
GOALS
    Within days of the Deepwater Horizon explosion, I saw an Associated 
Press report which stated that ``The U.S. Minerals and Management 
Service [sic] . . . [is] developing regulations aimed at preventing 
human error . . . .'' I was struck with the irony of that statement.
    Neither the MMS, nor the U.S. Congress will ever come up with 
regulations that can ``prevent human error'', any more than we can 
prevent gravity. The goal must be to minimize human error to the extent 
possible.
    To support that goal, regulations need to be well-crafted, easy to 
follow and easy to communicate. Complex regulations, and too many of 
them, get in the way of good communication and can lead to the human 
error that they try to prevent.
ETHICAL ISSUES
    MMS's critics point to recent investigations as evidence of the 
``cozy relationship'' between the Service and its regulated community.
    Personnel from the Royalty-in-Kind Office in Denver did behave 
inappropriately with oil industry personnel, but their relationship was 
not of a regulatory nature. The episode resulted from a management 
failing, but certainly does not reflect on the relationship of MMS with 
operators in the Gulf.
    Two DOI Inspector General Reports issued 5/25/2010 detail ethical 
lapses of the former Gulf of Mexico Regional Supervisor, and an audit 
of the Lake Charles District Office. A few facts are worth noting for 
the record:
          The investigation and subsequent conviction of the 
        Regional Supervisor resulted from an internal tip.
          The IG notes that subsequent to the Regional 
        Supervisor's termination in 2007, MMS clarified its ethical 
        expectations, and the relatively minor abuses in the Lake 
        Charles office ceased.
          Neither of the two reports documented any unethical 
        behavior involving an operator/lessee.
IN CONCLUSION
    Offshore energy plays a vital role in the energy security of the 
United States, and in the economy of the entire Gulf South. The 
moratorium on deepwater drilling is particularly disastrous for 
Louisiana.
    In the Gulf of Mexico, a forty-year record of improving safety and 
environmental performance proves that the industry and government can 
work together toward a safe, clean and secure supply of energy.
    The near-term alternative to domestic oil production is to haul the 
stuff in from overseas in boats, historically the largest source of 
damaging spills. Tanker spills tend to happen in our rivers, bays, and 
estuaries, not fifty miles offshore.
    No process in any industry can be made entirely risk-free. We can, 
however, learn from our mistakes. The regulatory process is already 
changing to accommodate the recommendations of the panel from the 
National Academy of Engineering.
    It's time to get back to work.
    [NOTE: Mr. Maley's PowerPoint presentation has been retained in the 
Committee's official files.]
                                 ______
                                 
    Mr. Costa. Thank you. You were able to get your five-minute 
testimony in seven minutes and 40 seconds, so the Chair 
obviously is in a good mood this afternoon.
    Mr. Maley. Thank you.
    Mr. Costa. Mr. Mann, you mentioned the ability to 
demonstrate or mount an effective response to accidents. 
Clearly, we have learned, if nothing else, that the 
responsibility in this disaster was totally and completely 
inadequate, and we have also learned when we compare the 
response to other plans that have been submitted that they tend 
to be, I would suggest, deficient as well, if they were ever 
tested and we pray to God they will not be tested.
    Can we, should we, well, I think we should, but is it 
possible in terms of the technology and the science and the 
ability to produce this oil and gas, it has been quoted many 
times over the last two months that our ability to respond to 
such catastrophe has not kept up with the technology to do the 
production? Can we develop it? Is it there?
    Mr. Mann. Yes, it is an excellent question, Mr. Chairman. I 
mean, I would like to believe that we certainly can improve the 
technology. You know, I think the investment in spill response 
removal and recovery technology is just, of course, a fraction 
of what has been invested in the technology to get the oil out 
of the ground. So certainly some additional resources there 
through the Oil Spill Liability Trust Fund or another mechanism 
would be appropriate.
    At the same time, I think we have to be honest, that I am 
not sure that any amount of preparation would have prepared us 
to contain a spill like this, which is why I say prevention is 
really the name of the game. So I would include in that not 
just response technology, but safety and blowout prevention.
    Mr. Costa. So on the risk management and the risk 
assessment, do you think that the focus on the assessment of 
the risk has to be on trying to prevent the blowout from ever 
taking place because once that happens, a spill of this 
proportion is very, very difficult to handle?
    Mr. Mann. Yes. I think there are two components of the risk 
assessment. One is what is the risk of the blowout occurring, 
and the second is once the blowout occurs what is the likely 
damage from that spill, and to make sure that we have, based on 
not just a process-based, we have all heard reports of 
statements put into assessments of proven technology that 
clearly was not proven.
    Mr. Costa. No, I think you have made your point.
    Mr. Mann. Yes.
    Mr. Costa. I just have a lot of questions.
    Mr. Mann. Sure.
    Mr. Costa. Oh, and I have other witnesses. You talk about 
categorical exclusions must not be allowed for any offshore 
activity. Some would view that as extreme. What if an 
exploration plan gets a full EIS, environmental impact 
statement, and immediately after the approval of the plan, a 
company applies for a permit to drill, an API. Do you suggest 
that then at that point a new NEPA process begin?
    Mr. Mann. I would distinguish between categorical 
exclusions and other steps that are available under NEPA, but 
are less than a full EIS. I mean, we feel that what has not 
been lacking is the quantity of environmental review. It is the 
quality, and that the problem is that when the environmental 
review is broad and fairly cursory at a macroscopic level, at a 
five-year plan level.
    Mr. Costa. Yes, I think everybody feels at this point that 
the oversight in MMS is insufficient, clearly on that point.
    Mr. Spackman, do you think the industry underestimated or 
even downplayed the risk of an offshore blowout given the 
response we have seen? You know, there has been a preponderance 
of testimony to indicate that possibly, although as I stated 
this morning, a culture of complacency and overconfidence in 
systems, and a series of steps that led to this accident, just 
as you could document with the Challenger accident or with a 
plane crash. But, clearly, the finger seems to be pointing at 
one company in particular, that has had a history more than 
other companies. Do you care to comment?
    Mr. Spackman. Thank you, Mr. Chairman.
    I would say that, from a drilling contractor's perspective, 
there has not been an underestimation of the likelihood of a 
blowout. It is something that a contractor lives with every 
day, and is certainly trying his best to control. It is his 
assets and it is his people that are the first ones to feel the 
brunt of the unintended event.
    Mr. Costa. What is your policy under best management 
practices?
    I have been out there. Some companies indicate that one 
person on a rig says, hey, shut her down, that that is 
considered best practices, and that happens, you know. Clearly, 
when you look at the testimony that was given in those 24 hours 
prior to the blowout of the Deepwater Horizon, there were 
certainly indicators that something wasn't right. Could you 
please tell me what you think ``best management practices'' 
are?
    Mr. Spackman. Well, certainly most of our members, at least 
those that are participating in our HSE conferences, in the 
conferences that SPE conducts, indicate that in their behavior-
based safety programs, they are giving ``stop work'' authority 
to anybody on the rig that identifies an unsafe act.
    Mr. Costa. Do you know if that stop work authority existed 
within the--oh, the name of the company that--Transocean?
    Mr. Spackman. I do not know the specifics of the Transocean 
rig or the management level stop work authority on that rig.
    Mr. Costa. Mr. Milito, do you want to comment on those two 
questions?
    Mr. Milito. Yes, I think it is important that we kind of 
hold off on any ultimate conclusions until we have the final 
root cause analysis of this incident.
    Mr. Costa. No, we are doing our due diligence, but I am 
using that in a reference to get an understanding of what 
normal practices are.
    Mr. Milito. No, but in terms of the industry's position and 
perspective on whether or not safety is being taken for 
granted, I don't believe that is the case, and what I would----
    Mr. Costa. You don't think there has been a--I mean, 
certainly 60 days later that is not the case but just as we 
launched a lot of shuttles, a culture of complacency, 
overconfidence--overconfidence and redundancy in systems that 
are designed to create redundancy to be fail safe.
    Mr. Milito. If you look at the record in the Gulf, over 16 
billion barrels have been produced, and you have less than one/
one-thousandth of a percent of the oil spill from that. You 
have also over 42,000 wells drilled, over 2,000 in deepwater. 
This is an unprecedented tragic accident that we would hope 
would never have occurred at all, but there are regulations in 
place and there are redundancies in place, and it starts with a 
company and their own safety and environmental management 
program.
    The government currently does not have a requirement that a 
operator have a safety and environmental management program, 
but API back in 1993----
    Mr. Costa. You say that should be part of a----
    Mr. Milito. Yes, it should be. Yes, it should be. But 
companies do that already. Through API, the industry put out in 
1993 its own safety and environmental management guidance 
document. So for the past 20 years API and the industry have 
been following a document on how to put together safety and 
environmental management program.
    In addition to that, you have to go through the risk 
management up front, all the way through to the drilling of the 
well when you have the well design, the well construction, the 
well operations, the blowout preventer. If you look at each 
phase of the operations you are going to see many redundancies 
built in. We don't even want to get to the blowout preventer. 
We want to have the design in place, we want to have the 
construction in place, we want to have the operations in place 
so that you don't even get to the BOP, and ultimately, if you 
look at the regs and if you look at where industry has gone, 
they have created the procedures and the design and the 
practices to make sure that we don't get to that point.
    But I guess my ultimate point is we have to go back and 
really see what happened here. The industry, yes, put together 
task forces that have already put together recommendations to 
improve performance. We are continuously looking for ways to 
improve poor performance, and the Department of the Interior 
actually accepted a lot of the recommendations and included 
them in their latest notice to lessees.
    So we are already seeing measures taken to raise the bar of 
performance, but a lot of that stuff has already been done and 
is being done by the industry.
    Mr. Costa. Does the American Petroleum Association 
subscribe to a stop work concept that should be the order of 
the day on any platform?
    Mr. Milito. I don't believe that is something within our 
recommended practices at this point. It is something we can go 
back and look at, but I do understand a lot of our members and 
a lot of the operators have that as part of their internal 
programs. We at API create recommended practices. We bring the 
experts together and----
    Mr. Costa. Well, but part of your association is to 
establish best management practices, right?
    Mr. Milito. That is correct, and that is something we can 
look at and go back and take a review of our safety and 
environmental performance documents to see if that is something 
we need to improve.
    Mr. Costa. I have more questions, but I have way exceeded 
my time. I will recognize the gentlewoman from Wyoming, Ms. 
Lummis.
    Ms. Lummis. Thank you, Mr. Chairman. Mr. Maley, did I 
pronounce that right?
    Mr. Maley. Yes.
    Ms. Lummis. Have you, in your experience, had direct 
contact with MMS regulators?
    Mr. Maley. Yes.
    Ms. Lummis. Could you tell me your general reaction to 
their qualifications, their training, their professionalism, in 
your experience?
    Mr. Maley. Most of my dealing has been with engineers at 
the district and region level. I haven't dealt much with the 
inspectors. I would say in general they are competent, 
qualified, dedicated public servants. There is a tier there of 
middle managers I am very impressed with.
    Ms. Lummis. Have you ever been concerned about the culture 
at the MMS as being somehow corrupt in a way that gave industry 
some sort of free rein?
    Mr. Maley. No.
    Ms. Lummis. OK, thank you.
    Question for Ms. Brian. Are you equally concerned about 
where people come from when they enter in an administrative 
capacity as where they go to after they leave?
    Ms. Brian. Absolutely. We call that the reverse revolving 
door, and we think that is a very important part of any reforms 
would be to ensure that we are looking at making sure that 
people coming into the government aren't regulating their 
former employer, for example.
    Ms. Lummis. OK. So does it disturb you that Mr. Luthi 
before he was MMS Director was the Deputy Director of the U.S. 
Fish and Wildlife Service? Do you think that somehow that 
created a bias going into the MMS that should be somehow 
regulated or curtailed?
    Ms. Brian. Not at all because that would have been a public 
service. He was working for the government. Our concern is when 
there is a financial interest, and I don't see that he would 
have had one at the Fish and Wildlife Service.
    Ms. Lummis. OK. How far back should a person coming into an 
administration be separated from the industry they are 
regulating, and how long after they leave should they be unable 
to go back to work?
    Ms. Brian. That depends in part on the particular position 
of the person. This is a subject of a lot of conversation and I 
do think that in general most people think two years really is 
helping to at least ensure that there is some distance from 
relationships and, sort of, too coziness with the people they 
are actually just coming from in terms of their colleagues, but 
it depends on how high up in the structure of the bureaucracy, 
and their relationship with particular contracts or leases.
    So, for example, if someone is an inspector there would be 
a different standard, I think, for a revolving door than for 
someone who is the head of MMS. I would argue that there should 
be a permanent ban from someone who is the director of MMS from 
going to turn and work for industry.
    Ms. Lummis. Have you written a proposal that looks at all 
these different levels and how you recommend that they be 
regulated, and does it concern you that you could end up with 
someone who is the director of MMS who is not terribly 
qualified because they don't have previous knowledge?
    They come in as a blank slate in terms of having a bias but 
that blank slate also may mean they don't have any knowledge of 
an industry they are trying to regulate.
    Ms. Brian. We have spent a lot of time looking a revolving 
door, primarily with the Department of Defense and our history 
in that work, so we certainly have written a lot on the subject 
of the revolving door and have worked mostly in the Senate who 
has done a lot of work in that arena.
    In terms of management of agencies what we found is that 
the head of an agency is not the person who needs to have the 
technical expertise. They need to have that expertise from 
within their departments and have advisors who can give them 
the advice, but we are not as concerned that the head of an 
agency have that technical background.
    One of the things that I have thought was one of my best 
examples of how you don't have to be going through the 
revolving doors, actually the Deputy Secretary of Energy in the 
Bush Administration, Kyle McSlarrow. As the Deputy Secretary of 
Energy one would have thought there are many industries he 
could have gone to the revolving door from industries they were 
regulating, but instead he went to the K1 Broadcasters 
Association, which had nothing to do substantively with the 
work he had done because his work as a manager in running an 
organization, and that was his strength, and I think that is an 
example of someone who can go on into the private sector and do 
very well for himself but not trade into those relationship 
that he had been overseeing when he was in the government.
    Ms. Lummis. What about an environmental organization? Let 
us say someone goes from the Fish and Wildlife Service, had 
this same gentleman, Mr. Luthi, gone instead from the U.S. Fish 
and Wildlife Service into an environmental organization as, for 
example, Secretary Babbitt did. Is that problematic?
    Ms. Brian. I really don't see it as comparable because for 
us the concern is the financial interests of the entities that 
are being regulated.
    Ms. Lummis. And what if they have a financial interest, 
then does that change your----
    Ms. Brian. It would if there is a financial interest. I am 
not sure that I am aware of any in Secretary Babbitt's case, 
but that to us is really what matters.
    Ms. Lummis. Thank you, Mr. Chairman.
    Mr. Costa. Thank you. The gentleman from Louisiana, Mr. 
Cassidy. I think he has gotten his spill corrected, so glad to 
have you back on board.
    Mr. Cassidy. Thank you.
    Mr. Mann, are you against all offshore drilling, even the 
near-shore non-deepwater drilling that Mr. Maley speaks of?
    Mr. Mann. No, sir. We are not opposed to offshore drilling 
but we believe----
    Mr. Cassidy. Do you think there should be a moratorium for 
the near-shore as well as the OCS?
    Mr. Mann. Yes, until this spill is----
    Mr. Cassidy. Let me ask you because I thought Mr. Maley 
spoke eloquently of how they are really different animals. The 
engineers that the Secretary for National Academy of 
Engineering asked to review his plan, eight of them, I think, 
and made a statement, and they said that the more--and after 
the Secretary, of course, implied that they endorsed the 
moratorium, the eight of them who were from academia sent out a 
rather scathing rebuttal of that, and among the quotes are, ``A 
blanket moratorium is not the answer. It will not measurably 
reduce risk further, and it will have a lasting impact on the 
nation's economy which may be greater than that of the oil 
spill.''
    So, let me--``It will not measurably reduce risk further, 
and have a lasting impact on the nation's economy.'' I don't 
mean to be cheeky, but I am just asking. What would you know 
that they don't know that would imply that they are wrong that 
the blanket moratorium is not going to be helpful?
    Mr. Mann. Well, I would have to review their comments and I 
have not done that. What I would say is that they may have more 
standing to comment on the engineering aspects than the 
economic aspects, and I mean, we are certainly sensitive to the 
economic hardship.--
    Mr. Cassidy. Let me tell you. From Louisiana, you don't 
need a study to know that this is going to be a stake in the 
heart of Louisiana's coastal economy.
    Mr. Mann. As is the oil spill, sir.
    Mr. Cassidy. It turns out again in Louisiana we know, oh, 
my heart bleeds. I think Mr. Maley was getting emotional--as he 
was, so was I--for the fisherman, for the tourist industry it 
is awful, but it is interesting, we have the director of the 
Oyster Association, who likewise got emotional because he said 
that he was adamantly opposed to the moratorium because he said 
in times past when fishing was bad people worked on the rigs, 
and when rigs were down they worked in fishing, and this takes 
care of both.
    So, again, what do you know that these guys don't know as 
regards--again, the moratorium will not measurable reduce risks 
further and will have a lasting impact, et cetera?
    Mr. Mann. Well, I just don't agree with that statement that 
it----
    Mr. Cassidy. But is there a fact here? Let me just ask. I 
am a teacher so when I speak to my medical students, I say, is 
that a belief system or do you have a fact upon which you base 
this?
    Mr. Mann. The fact that we are basing this on is that this 
is the worst environmental catastrophe that this country has 
ever endured.
    Mr. Cassidy. Let me just pause----
    Mr. Mann. We think it is appropriate----
    Mr. Cassidy.--for a second because I have limited time, and 
actually I am going to address the Chairman very respectfully. 
The Chairman's questions implied, Mr. Milito, that BP's 
actions--I don't think we can ever guarantee that when somebody 
cuts corners and makes decisions which everyone else would 
condemn, that we can avoid an accident. As a physician, I can 
tell you if somebody practices unsafe medicine, we end up with 
a bad outcome. That is not an indictment of safe practices. It 
is an indictment of that person's particular practice.
    So that said we do have an oil spill but we also have 
clearly identified already factors which if any one of which 
would have been done correctly it probably would not have 
happened. So are we going to indict all those folks who are 
doing it safely, according to protocols, best practices, 
because of the actions of someone who, or an entity which did 
not do so?
    Mr. Mann. Well, this is not an action that the Pew 
Environment Group is taking. This is an action taken by the 
Administration, but I do think it is appropriate after such a 
calamity to take----
    Mr. Cassidy. I guess I am not----
    Mr. Mann.--action and examine the causes.
    Mr. Cassidy. I guess I am not getting the answer to my 
question why these----
    Mr. Mann. They would not have put the space shuttle back up 
in the air within three or six months of that first disaster.
    Mr. Cassidy. Fair statement, but we certainly still fly 
airplanes after there is a bad accident.
    Ms. Brian, I have just got to ask this. Did you 
deliberately name POGO after the cartoon character?
    Ms. Brian. It was in our minds when we came up with the 
acronym, yes.
    Mr. Cassidy. I actually thought that was fairly good.
    Ms. Brian. I am glad you enjoy that.
    Mr. Cassidy. And by the way, I applaud your statements 
regarding transparency. I think that would be wonderful.
    Mr. Maley, we have a dispute as to the economic impact of 
the terrible effect upon jobs in Louisiana. You are in 
Lafayette, Louisiana and Houma, kind of a small player if I may 
say.
    Mr. Maley. Yes.
    Mr. Cassidy. Any comment though that Mr. Mann is kind of 
maybe jobs would be lost, maybe not?
    Mr. Maley. Well, I think the difference is between a 
transient impact and a permanent impact. From day one of the 
spill I have seen journalists trying to compare it, trying to 
force it into an Exxon Valdez template. This is not a Valdez 
spill. It is a much lighter grade crude. It is 50 miles 
offshore. It took it a month to make it to shore, and once it 
is in the marsh it is a terrible thing, and I am not trying to 
minimize it, but Mother Nature has ways to take care of it, and 
my expectation would be that in a few months you would be able 
to find some impact; in a year, possibly; after a few years--I 
am not an environmental specialist, but my thinking would be 
that Mother Nature is going to take care of it.
    When these rigs move, those jobs will go with them. The 
people will go off to other things. The industry barely 
survived what we went through in 1986 just because of low oil 
prices, but when these rigs go overseas to other markets it 
costs so much to move them back that they may just be gone for 
good.
    Mr. Cassidy. OK. I yield back. Thank you.
    Mr. Costa. The Chair intends to adjourn the Committee here 
shortly, but I have a few more questions I would like to ask.
    Mr. Maley, I believe you were here this morning when I 
asked a question to the Interim Director or whatever his title 
is as to the confusion that existed with regards to the 
moratorium on wells of 500 feet or less. He acknowledged that 
there had been some confusion related to the moratorium, and he 
indicated that there was a meeting last week and he thought 
that they had created a better understanding of what was 
intended with regards to the kinds of well activity that you 
are engaged in.
    Do you concur with his statement this morning?
    Mr. Maley. I was a little confused about what he was 
talking about. I may be speaking out of school, but I think 
there was a meeting up here with a group of the rig 
contractors, the shallow water rig contractors, and they may 
have achieved some clarity, and MMS has put out an NTL.
    Mr. Costa. NTL, come on.
    Mr. Maley. Notice to Lessees.
    Mr. Costa. I am just a farm boy from California.
    Mr. Maley. We live with the government's----
    Mr. Costa. No, I understand. NTL is what?
    Mr. Maley. NTL is Notice to Lessees.
    Mr. Costa. OK.
    Mr. Maley. That is how MMS communicates.
    Mr. Costa. No, I understand. I just wanted to make sure we 
are clear to everybody. We have a public out there that is 
listening.
    Mr. Maley. Good. And there was a lot of things that dealt 
strictly with subsea BOPs in 500 plus feet of water, and 
requirements on those and other requirements on all----
    Mr. Costa. So what you are saying is that as far as 
production wells, which you are engaged in if I am correct, it 
is not clear?
    Mr. Maley. We are continuing to produce. That is not a 
problem.
    Mr. Costa. Right.
    Mr. Maley. The problem is the planning and the logistics of 
picking up a rig to go work on our wells, and at one point we 
had a permit, it was verbally rescinded, and we are kind of in 
limbo right now. We think we have satisfied what Mr. Abbey said 
the requirements were to have a permit approved but we don't 
have it in hand as far as I know.
    Mr. Costa. All right. I want to get to another one, but Ms. 
Brian, the Secretary, obviously, has made a significant effort 
here, we are vetting it, and we will make our own changes, and 
you more or less kind of indicated some additional thoughts, 
but do you think that he has gone far enough, or is this a 
first good step?
    I referenced a couple of times today that the Linowes 
Commission work in the early 1980, parts of these 
recommendations that are being implemented actually come from 
the Commission's report, but there are other elements in the 
report that have not been stated. Do you want to quickly add, 
because I want to make my--I have a couple more questions.
    Ms. Brian. It is clear that the Committee had studied the 
Linowes Commission work in the drafting of the CLEAR bill 
because much of what was recommended is incorporated into that 
bill. I would say if there is one thing that is really still 
out there and not dealt with is the revolving-door question.
    While President Obama issued an Executive Order at the 
beginning of his administration that, at the moment, is 
addressing the concerns we have, it is only an Executive Order. 
It is not law. And when President Clinton came into power, he 
also issued a similar revolving-door restriction, which at the 
end of the his administration he lifted. So, our concern is 
that this is only an Executive Order and is only good as long 
as the President likes it. We really would encourage the 
Committee to consider incorporating revolving-door 
legislation----
    Mr. Costa. Yes, on that revolving door thing, clearly one 
of the outcomes of that, if you want to stop that, is to pay 
people an appropriate sum of money so that they can do that. I 
mean, obviously a person that worked on a rig would have a lot 
of experience in terms of what is done there. Now if they are a 
rig inspector, if they were paid--I mean, you have to obviously 
have the restrictions and the firewall and all that stuff. You 
cannot be going to sporting events together, and that kind of 
stuff. But what should be an appropriate salary?
    Ms. Brian. I don't know that I can give a specific amount 
but I do think looking at the GS levels, for example, making 
the inspectors' levels more commensurate with the auditors' 
levels of GS would be a good start.
    Mr. Costa. All right. Mr. Spackman, do the inspection 
forces differ in other countries versus the United States? What 
are the skills needed for inspections in countries with HSE 
cases, and how does that differ from skills necessary to be an 
inspector in our country? And is there anything we can learn 
from other countries in trying to improve or reform our 
efforts? I am thinking off the Scandinavian coast, Norway, the 
North Sea. Do you have any sort of comparative analysis that 
you could speak to?
    Mr. Spackman. I would begin by saying that the underlying 
cultures in these countries are different than they are in the 
United States for a large part. In Norway, for example, there 
is a much different view of the role of government, industry 
and the worker. There is a more shared view of responsibility, 
and this leads to a more cooperative effort to address concerns 
when they arise.
    I know from experience in Norway that there is a fairly 
consistent movement of people between mid-management levels 
within the industry to mid-management levels in government to 
instill expertise in both directions.
    Mr. Costa. When it comes to the issue of prescriptive 
regulations versus performance-based regulations, where are 
other countries relative to the United States?
    Mr. Spackman. Again, there are cultural differences and 
there is a difference in how----
    Mr. Costa. We will stipulate that for the record.
    Mr. Spackman. A term ``regulation'' is used, but there has 
to be a balance between prescription and performance. Things 
like couplings on fire hoses have to be standardized, but the 
approach to risk management in the countries that have an 
effective safety case seems to be working. The North Sea 
countries are seeing a reduction in their major incidents and 
safety incidents levels.
    Mr. Costa. Certainly the North Sea is a very difficult 
places throughout the world to do this kind of activity. They 
have a long track record.
    Let me ask you, I mean, I mentioned in my opening statement 
that it is understandable given our culture that we are kind of 
in a mode as we try to address this horrific accident, but it 
is human nature to point fingers and engage in the blame game. 
The press certainly is involved in that since this incident has 
taken place. It sometimes, I think, creates a perception that 
the governments allow the industry to take the reins and 
effectively regulate itself.
    Based on the questions I have asked you, how would you 
compare the United States regulatory scheme? Is it one of the 
more prescriptive regulatory schemes in the developed world? In 
other words, are we as tough? Are we tougher? Are we more lax 
than areas of the developed world where this has been done for 
a long time?
    I am not talking about Nigeria or some of these other 
places in the Third World where I understand the standards are 
much weaker.
    Mr. Spackman. Again, it depends upon how you are going to 
define what you are regulating. MMS's regulations are 
voluminous. If you look at them in comparison to the 
regulations in either the U.K. or Norway, they are probably 15 
to 20 times thicker, and that is all due to prescription.
    Does the prescription actually lead to an improved safety 
result? I am not convinced that it does given the experience in 
those countries.
    Mr. Costa. Do you think there is a role for OSHA on 
offshore rig safety practices?
    Mr. Spackman. Here I would say emphatically no. If you have 
a problem now in expertise level within the Minerals Management 
Service, take an agency that has no experience in either 
maritime issues or in oil and gas production offshore, and ask 
it to insert itself into the offshore workplace, I just don't 
think it would be effective.
    Mr. Costa. No, my sense is it would not work either. I 
don't even have any helicopters. I guess they could charter 
one.
    So could you--well, with the American Petroleum Institute, 
I expect most of your experience is confined to the U.S. and so 
maybe you are not well placed to ask this question.
    Mr. Spackman, let me get back to the question I was trying 
to ask. Compared to other developed nations when it compares to 
comparing safety performances, I know there are cultural 
differences, but I mean at the end of the day you compare 
safety performances based upon whether there are accidents like 
this happen, and on that basis how would you rate the U.S. 
safety record?
    Mr. Spackman. Well, you have just said ``accidents like 
this''. This is a unique incident. It happened only in the 
United States.
    Mr. Costa. Well, but there has been other major spills. 
There was one off the coast of Mexico a number of years ago 
that up until recently indicated that it was larger than this 
one. I don't know, but I guess we have now surpassed it.
    Mr. Spackman. Yes, but there is no comparison between the 
current safety culture in Mexico and the culture that existed 
then. There is no comparison between the safety culture in 
Mexico and the United States.
    Mr. Costa. Well, under best management practices are we 
doing as good as we should?
    Mr. Spackman. In my opinion, sir, no.
    Mr. Costa. OK.
    Mr. Spackman. We need to provide a tool to the regulator 
that allows him to assess from the get-go the risk associated 
with a particular activity, and that starts with the geologist 
who interprets the data to design the well.
    Mr. Costa. Would you concur with that, Mr. Milito?
    Mr. Milito. I would. I think that this industry is 
dedicated to continually improving operations. We understand 
based upon this incident that we have a long way to go and we 
are doing that right now. We have already taken steps to 
improve----
    Mr. Costa. Yes, you made the comment in your testimony 
about zero risk. I don't know that that is ever possible. I 
have just great difficulty--everything we do in life has a 
risk.
    Mr. Milito. The goal was zero.
    Mr. Costa. Yes, I know but from the time we get up in the 
morning and we get in our car, and we back out the driveway, I 
mean, there is no zero risk that you are going to get to work 
safely.
    Mr. Milito. But we don't want to back off the goal of zero 
injury, zero environmental----
    Mr. Costa. No, I understand. I mean, that ought to be the 
standard, but we also ought to realize the--you know, the 
reality of life.
    How could the industry better, Mr. Milito, prepare to have 
this low risk, high impact events like the Deepwater Horizon? I 
mean, so far, and this will be a question that I will come back 
to you with in the months ahead, what are the lessons to be 
learned here?
    Mr. Milito. There are a lot of lessons that are being 
learned and it has already started with discussions among the 
industry experts on what is being done across the board.
    Mr. Costa. So internally what is the API doing to sit down 
and developing your own in-house operation to say, look, this 
is a big, big problem for us, and the American public has 
little confidence in our ability to deal with this today, and 
how are we going to address it?
    I mean, I have to assume you have had that meeting.
    Mr. Milito. Yes, and it is not just API. We are reaching 
all across industry, working with IADC, NOIA, PAA, but there is 
a task force that is working on equipment, looking specifically 
at BOPs and ROVs, how to improve those capabilities. There are 
already recommendations to incorporate into our API 
specifications for BOPs and ROVs, so that----
    Mr. Costa. Hold on. The API, I think everybody gets, 
American Petroleum Institute.
    Mr. Milito. Yes.
    Mr. Costa. You were going a little fast there.
    Mr. Milito. API is the standards developing organization, 
and we have specifications which deal with how to manufacture a 
piece of equipment, and the equipment task force has already 
come out and said we need to go take a look at the BOP 
specifications for blowout preventers, and the ROV for remotely 
operated vehicles to make sure that they have the capabilities 
to operate at these depths and can shut down a BOP, and so that 
the BOP can effectively shut off under these conditions.
    There is also a task force on operating procedures, and 
they have decided and recommended to the Interior Department 
that two barriers are needed below the wellhead in place so 
that you have the obstacles that will prevent or the barriers 
that will prevent hydrocarbons from breaching the well and 
getting into the surface, and they have made a number of other 
recommendations. They have already been hard at work. There has 
already been a task force put together on how to deal with 
stopping and containing a wild well, essentially what you have 
here, a blowout at the wellhead which is an area that we really 
need to see improvement and we need to see processes in place 
as to what measures should be used, what order, when you do 
them, is it a top kill, is it a coffer dam, so you can look at 
all those and have the processes in place and have the 
resources in the Gulf so that you can stage those and have them 
in place.
    Another area where we put a task force together is on 
surface and shoreline response. There has been a lot of talk 
about this spill not having--the reaction to this spill not 
being adequate. We are going to look at plans. We are going to 
look at the resources and the research that is necessary to 
improve that.
    And another area there has been a lot of discussion is with 
the Oil Spill Liability Trust Fund. We support the Oil Spill 
Liability Trust Fund. We think it is an important component to 
make sure the taxpayer does not foot any of the bill for this, 
and we are looking to figure out a way to make sure the Trust 
Fund is in place as an insurance element to the taxpayer so 
that the taxpayer does not foot the bill to improve upon the 
current system.
    So all these task forces are moving forward. They are 
working. They are short term and they are long term, and we 
have recently come out with a recommended practice, 65-2, on it 
is isolating flow zones during well construction, and so this 
is avoiding getting to the point where you have pressure 
building up. What practices do you have in place with the 
cementing and the casing so that you don't have the pressure 
building up so you don't get to a point where you have a 
blowout? And we are pushing to have this adopted by the 
government.
    Mr. Costa. Well, let me make a recommendation to you and 
then ask one final question and we will close the meeting. My 
recommendation is that as you deal with this internal 
reassessment of what should be the best management practices, 
realizing that the old days are gone, and if we want to--for 
one of the Members of Congress that does support using all the 
energy tools in the energy toolbox that includes offshore 
utilization of oil and gas, that we are going to have to do a 
heck of a lot better than we are doing today.
    And so I think these recommendations need to be put forth 
in all of your testimony, and with milestones that are probably 
sooner than you would like because I suspect the CLEAR Act of 
Chairman Rahall's is going to be marked up probably in July, 
and obviously this effort will continue through the August 
break, and I suspect in September or October we will be looking 
at some sort of a comprehensive bill to change the way we deal 
with this issue, so that hopefully it will never ever happen 
again. I mean, I think that is what we owe the American public 
if we are ever going to restore faith and confidence in your 
industry's ability to do this, which I think most people agree 
is necessary for our economy and for a long-term comprehensive 
energy package.
    But you better be moving and getting this information to 
Members of Congress.
    Mr. Milito. Yes, sir.
    Mr. Costa. Realizing that it is going to cost more and 
realizing that we are not going to all agree at the end of the 
day.
    So my final question to you is this. I would just think, 
but I have not talked to any of the various other energy 
companies since this horrific accident has taken place, but I 
would think that, and I would like to know if you can answer 
the question, that the major energy companies that are engaged 
in deepwater as a result of this in the last month or so have 
taken upon themselves to do their own internal safety audit 
thinking, you know, we think we are pretty good but you know, 
who knows. And so is that taking place? Do you know?
    Mr. Milito. Yes, I can assure you that is happening and 
part of that process is----
    Mr. Costa. I mean, if I was an executive of one of these 
companies that is what I would be doing.
    Mr. Milito. No, the companies are doing that. Not only are 
they doing that but they are coming together to talk together 
as an industry, not just API members and not just operators. It 
is equipment manufacturers, it is the drillers, it is the 
service and supply companies, so that the lessons can be shared 
across the board as to what individual companies are doing so 
that everybody can share and improve across and have consistent 
improvement across the board for the industry. That is 
happening, and we are moving quickly, and we can provide to you 
the recommendations that have been provided to Interior, and we 
can get that information to you.
    Mr. Costa. I appreciate that. I appreciate all the 
testimony provided by the witnesses on this panel and the 
previous two panels. I want to thank you all for your patience 
and your time. Obviously, this is a work in progress but we 
must work together on behalf of all of those in the Gulf who 
have suffered this tragedy, the families who have lost their 
loved ones, the communities that have been devastated 
economically, and a way of life that, Mr. Maley, you conveyed, 
I think, quite well to all of us in terms of the importance 
that we all view that part of America.
    So, clearly we have our work cut out for us, and I hope 
that we can continue to work together in a bipartisan fashion 
so that we can cap this well, clean up the mess, and learn the 
lessons that are critical to ensure that in the future this 
never happens again.
    The hearing is now adjourned.
    [Whereupon, at 4:36 p.m., the Subcommittee was adjourned.]
    [NOTE: The documents listed below have been retained in the 
Committee's official files.]

      Abbott, Kenneth, Former Contractor, BP Atlantis, 
submitted for the record
          Exhibit B - E-mail entitled ``FW: P&IDs for Operations'' 
        between Kenneth Abbott, Barry C. Duff, Bill Naseman, and 
        William Broman, September 2, 2008
          Exhibit C - Chart entitled, ``Subsea Systems (DC-1 
        Only)''
          Exhibit D - Letter from David L. Perry (Kenneth Abbott's 
        Attorney) to Attorney General Eric H. Holder and Acting U.S. 
        Attorney Tim Johnson entitled, ``Re: Kenneth W. Abbott - BP 
        Atlantis Project,'' April 9, 2009
          Exhibit E--from David L. Perry (Kenneth Abbott's 
        Attorney) to Silvia Murphy, Attorney-Advisor to tje Dept. of 
        the Interior's Division of Mineral Resources, entitled, 
        ``Kenneth Abbott/BP Atlantis Threat to GOM Environment,'' March 
        27, 2009
          Exhibit F - Letter from BP Deputy Ombudsman Billie 
        Pirner Garde, April 13, 2010
          Exhibit G - AP News article--``BP's Own Probe Finds 
        Safety Issue on Atlantis Rig,'' by Ramit Plushnick-Masti and 
        Naoki Schwartz, May 15, 2010
          Exhibit H - E-mail entitled, ``Follow up questions from 
        January 22 meeting'' between William Hauser and Zach Corrigan, 
        February 17, 2010
          Exhibit I - Letter from Robert G. Zainey, Chief, 
        Information Resources, Freedom of Information Act Officer, 
        Department of the Interior and Zach Corrigan, October 30, 2009
      Maley, Steve, Operations Manager of Badger Oil 
Corporation submitted for the record
          PowerPoint Presentation, prepared for the hearing
      Spackman, Alan, Vice President, Offshore & Regulatory 
Affairs, International Association of Drilling Contractors, submitted 
for the record
          PowerPoint Presentation entitled, ``Restructuring the 
        MMS Implementation of the HSE Case,'' prepared for the hearing

                                 
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