[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:
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\2\ We assessed the reliability of these data and found them to be
sufficiently reliable for our purposes.
---------------------------------------------------------------------------
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\
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\11\ GAO-10-313.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\14\ GAO-09-872.
---------------------------------------------------------------------------
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.
---------------------------------------------------------------------------
\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).
---------------------------------------------------------------------------
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
[GRAPHIC] [TIFF OMITTED] 56979.001
.eps[GRAPHIC] [TIFF OMITTED] 56979.002
.eps[GRAPHIC] [TIFF OMITTED] 56979.003
.eps[GRAPHIC] [TIFF OMITTED] 56979.004
.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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Public Affairs
Chuck Young, Managing Director, [email protected], (202) 512-4800
U.S. Government Accountability Office, 441 G Street NW, Room 7149
Washington, DC 20548
______
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.
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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.
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\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.
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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.
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\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.
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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.
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\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
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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)
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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
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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.
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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\
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\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.
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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)
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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.
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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.
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\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)
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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.
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\23\ The White House, ``Open Government Directive,'' December 8,
2009. http://www.whitehouse.gov/open/documents/open-government-
directive (Downloaded June 15, 2010)
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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