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



                           DEEPWATER DRILLING
                 TECHNOLOGY, RESEARCH, AND DEVELOPMENT

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

                                HEARING

                               BEFORE THE

                       SUBCOMMITTEE ON ENERGY AND
                              ENVIRONMENT

                  COMMITTEE ON SCIENCE AND TECHNOLOGY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED ELEVENTH CONGRESS

                             SECOND SESSION

                               __________

                             JUNE 23, 2010

                               __________

                           Serial No. 111-101

                               __________

     Printed for the use of the Committee on Science and Technology


     Available via the World Wide Web: http://www.science.house.gov

                                 ______

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                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                   HON. BART GORDON, Tennessee, Chair
JERRY F. COSTELLO, Illinois          RALPH M. HALL, Texas
EDDIE BERNICE JOHNSON, Texas         F. JAMES SENSENBRENNER JR., 
LYNN C. WOOLSEY, California              Wisconsin
DAVID WU, Oregon                     LAMAR S. SMITH, Texas
BRIAN BAIRD, Washington              DANA ROHRABACHER, California
BRAD MILLER, North Carolina          ROSCOE G. BARTLETT, Maryland
DANIEL LIPINSKI, Illinois            VERNON J. EHLERS, Michigan
GABRIELLE GIFFORDS, Arizona          FRANK D. LUCAS, Oklahoma
DONNA F. EDWARDS, Maryland           JUDY BIGGERT, Illinois
MARCIA L. FUDGE, Ohio                W. TODD AKIN, Missouri
BEN R. LUJAN, New Mexico             RANDY NEUGEBAUER, Texas
PAUL D. TONKO, New York              BOB INGLIS, South Carolina
STEVEN R. ROTHMAN, New Jersey        MICHAEL T. MCCAUL, Texas
JIM MATHESON, Utah                   MARIO DIAZ-BALART, Florida
LINCOLN DAVIS, Tennessee             BRIAN P. BILBRAY, California
BEN CHANDLER, Kentucky               ADRIAN SMITH, Nebraska
RUSS CARNAHAN, Missouri              PAUL C. BROUN, Georgia
BARON P. HILL, Indiana               PETE OLSON, Texas
HARRY E. MITCHELL, Arizona
CHARLES A. WILSON, Ohio
KATHLEEN DAHLKEMPER, Pennsylvania
ALAN GRAYSON, Florida
SUZANNE M. KOSMAS, Florida
GARY C. PETERS, Michigan
JOHN GARAMENDI, California
VACANCY
                                 ------                                

                 Subcommittee on Energy and Environment

                  HON. BRIAN BAIRD, Washington, Chair
JERRY F. COSTELLO, Illinois          BOB INGLIS, South Carolina
LYNN C. WOOLSEY, California          ROSCOE G. BARTLETT, Maryland
BEN R. LUJAN, New Mexico             VERNON J. EHLERS, Michigan
PAUL D. TONKO, New York              JUDY BIGGERT, Illinois
EDDIE BERNICE JOHNSON, Texas         W. TODD AKIN, Missouri
DANIEL LIPINSKI, Illinois            RANDY NEUGEBAUER, Texas
GABRIELLE GIFFORDS, Arizona          MARIO DIAZ-BALART, Florida
JIM MATHESON, Utah                       
LINCOLN DAVIS, Tennessee                 
BEN CHANDLER, Kentucky                   
JOHN GARAMENDI, California               
BART GORDON, Tennessee               RALPH M. HALL, Texas
                  CHRIS KING Democratic Staff Director
         SHIMERE WILLIAMS Democratic Professional Staff Member
          ADAM ROSENBERG Democratic Professional Staff Member
            JETTA WONG Democratic Professional Staff Member
            ANNE COOPER Democratic Professional Staff Member
            ROB WALTHER Democratic Professional Staff Member
             DAN BYERS Republican Professional Staff Member
          TARA ROTHSCHILD Republican Professional Staff Member
                      JANE WISE Research Assistant
                    ALEX MATTHEWS Research Assistant









                            C O N T E N T S

                             June 23, 2010

                                                                   Page
Witness List.....................................................     2

Hearing Charter..................................................     3

                           Opening Statements

Statement by Representative Brian Baird, Chairman, Subcommittee 
  on Energy and Environment, Committee on Science and Technology, 
  U.S. House of Representatives..................................     7
    Written Statement............................................     9

Statement by Representative Ralph M. Hall, Ranking Minority 
  Member, Committee on Science and Technology, U.S. House of 
  Representatives................................................     9
    Written Statement............................................    11
Prepared Statement by Representative Jerry F. Costello, 
  Subcommittee on Energy and Environment, Committee on Science 
  and Technology, U.S. House of Representatives..................    12


                               Witnesses:

Mr. James Pappas, Vice President, Technical Programs, Research 
  Partnership to Secure Energy for America
    Oral Statement...............................................    14
    Written Statement............................................    15
    Biography....................................................    19

Dr. Benton Baugh, President, Radoil, Inc.
    Oral Statement...............................................    19
    Written Statement............................................    21
    Biography....................................................    24

Mr. Erik Milito, Group Director, Upstream and Industry 
  Operations, American Petroleum Institute
    Oral Statement...............................................    25
    Written Statement............................................    27
    Biography....................................................    28

Mr. Greg McCormack, Director, Petroleum Extension Service, 
  University of Texas-Austin
    Oral Statement...............................................    28
    Written Statement............................................    30
    Biography....................................................    32

Discussion
  The Safety of Current Technologies.............................    33
  Human Factors of Error.........................................    34
  More Information from Dr. Baugh................................    35
  A Drilling Moratorium..........................................    35
  Inherent Risks.................................................    37
  Safety Considerations at Individual Companies..................    39
  Potential Risks Taken by BP....................................    40
  Drilling in Shallower Waters...................................    40
  Accident Prevention............................................    41
  Responsibilities of the Permitters.............................    42
  Limited Remaining Oil Resources................................    43
  Funding for Research and Safety................................    44
  Support for Safety Mechanisms..................................    45
  How To Halt the Deepwater Horizon Spill........................    46
  Monitoring and Diagnostic Capabilities and Coordination........    49
  More on Activities Coordination................................    51
  Oil Spill Response Programs....................................    52
  A Potential Moratorium on West Coast Deepwater Drilling........    53
  Blind Shear Rams...............................................    54
  More on Funding Research.......................................    55
  Deepwater Drilling and EPAct Section 999.......................    56
  New Technology Development and DOE.............................    58
  More on Inherent Risks and Safety Improvement..................    58
  Closing........................................................    60

 
                           DEEPWATER DRILLING
                 TECHNOLOGY, RESEARCH, AND DEVELOPMENT

                              ----------                              


                        WEDNESDAY, JUNE 23, 2010

                  House of Representatives,
                     Subcommittee on Energy and Environment
                        Committee on Science and Technology
                                                    Washington, DC.

    The Subcommittee met, pursuant to call, at 10:03 a.m., in 
Room 2318 of the Rayburn House Office Building, Hon. Brian 
Baird [Chairman of the Subcommittee] presiding.



                            hearing charter

                  COMMITTEE ON SCIENCE AND TECHNOLOGY

                 SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

                     U.S. HOUSE OF REPRESENTATIVES

                     Deepwater Drilling Technology,

                       Research, and Development

                        wednesday, june 23, 2010
                         10:00 a.m.-12:00 p.m.
                   2318 rayburn house office building

Purpose

    The purpose of this hearing is to explore the technologies, 
standards, and practices for prevention and mitigation of oil spillage 
during deepwater oil and natural gas drilling operations; the role of 
government-sponsored technology development programs in advancing these 
technologies; and, in the wake of the Deepwater Horizon tragedy, how 
firms will assess risk as it relates to incident prevention and 
mitigation.

Witnesses

          Mr. James Pappas--Vice President, Technical Programs, 
        Research Partnership to Secure Energy for America (RPSEA). Mr. 
        Pappas will discuss the unique technological challenges of oil 
        and natural gas drilling in deepwater and ultra-deepwater, as 
        well as the role of RPSEA in developing technologies to prevent 
        and mitigate incidences.

          Dr. Benton Baugh--President, Radoil, Inc. Dr. Baugh 
        will address the adequacy of existing systems for incident 
        prevention and mitigation, as well as the need for 
        technological advances and the processes for deploying new 
        technologies in the field. Dr. Baugh is a member of the 
        National Academy of Engineering and an Adjunct Professor at the 
        University of Houston.

          Mr. Erik Milito--Group Director, Upstream and 
        Industry Operations, American Petroleum Institute. Mr. Milito 
        will address technical standards and best practices for 
        deepwater drilling incident prevention and mitigation.

          Mr. Gregory McCormack--Director, Petroleum Extension 
        Service, University of Texas at Austin. Mr. McCormack will 
        address advances in worker training as well as health and 
        environmental safety practices in the oil and natural gas 
        drilling industry.

Background

BP Deepwater Horizon Incident and Blowout Preventers (BOP)
    On April 20, 2010, an explosion and fire occurred on the Deepwater 
Horizon drilling rig in the Gulf of Mexico. The rig, owned by 
Transocean and leased by BP, was in the final stages of drilling an 
exploratory well at the Macondo prospect in BP-operated Mississippi 
Canyon Block 252, and had achieved a depth of approximately 18,360 feet 
in 5,000 feet of water. The accident resulted in the death of eleven 
workers, a massive release of oil into the Gulf, and a national 
response effort by Federal and state government agencies as well as BP. 
Oil continues to flow from the well at an estimated rate of up to 
60,000 barrels per day, and will likely continue at this rate until two 
relief wells are completed in August. While an investigation into the 
exact cause of the Deepwater Horizon accident is ongoing, it is 
understood to be a confluence of critical human errors and the failure 
of certain wellhead equipment designed to stop an incident. Through 
this hearing the Committee seeks to better understand the possible 
improvements in technologies to prevent and mitigate accidents during 
drilling operations, and the appropriate role of government-sponsored 
technology development programs in advancing these technologies and 
other methods to ensure safety.
    At the Macondo well, initial investigations indicate that the 
primary technology failure lay in the Blowout Preventer (BOP), which is 
a large mechanism that includes a series of high pressure hydraulic 
valves designed to stop an uncontrolled flow of oil and gas from the 
wellbore. The Deepwater Horizon's BOP included elements of three 
different types of valves, or ``rams.'' One type, known as a pipe ram, 
stops flow by sealing around the tubular components of a well. Another 
is a ``blind ram,'' which closes over an open wellbore that does not 
contain pipe. The final line of defense, and likely the most critical 
failure in the Macondo accident, is the ``blind shear ram,'' which uses 
two blades to cut through the metal drill pipe and seal the wellbore.
    A BOP can be activated either remotely by personnel from the rig 
via electrical signal, automatically via a ``deadman switch'' in the 
case of a catastrophic incident in which the rig becomes disconnected 
from the BOP or a signal cannot otherwise be activated by personnel, 
via acoustic signal from a vessel other than the drill rig, or manually 
by remotely-operated vehicles (ROV). Crew members aboard the Deepwater 
Horizon attempted unsuccessfully to activate the BOP, including the 
blind shear ram, before the fire forced an evacuation. Furthermore, the 
automatic deadman switch did not appear to activate the BOP, nor was it 
equipped with an acoustically-activated switch. A number of subsequent 
attempts to activate the BOP using an ROV also failed. Gamma ray 
imaging of the BOP--devised by the Department of Energy for this 
incident--indicates that one of the two blades of the blind shear ram 
activated, but it is otherwise unknown when and how this occurred.
    Several factors may have led to the failure of this BOP, but it 
appears that a leak in a ``shutter valve'' caused a catastrophic and 
irreparable loss of hydraulic pressure that rendered the blind shear 
rams too weak to cut through the drill pipe and seal the wellbore. It 
is not clear whether this leak happened before or after the blowout. 
However, even under normal operating conditions, the strength and 
reliability of blind shear rams have repeatedly been called into 
question by a number of studies and tests conducted in the last decade. 
In fact, some tests have concluded that the blind shear rams could only 
be counted on to fully activate approximately half of the time.
    Cutting through hollow drill pipe requires several thousand pounds 
per square inch of pressure from each of the two blades. However, up to 
one-tenth of the length of the drill string is made up of more solid 
joints that connect the drill pipes, and these joints are virtually 
impossible to cut with blind shear rams that currently are designed to 
cut only through hollow drill pipe. This is compounded by the apparent 
fragility of the hydraulic system, and possibly the effects of deep 
ocean pressures and temperatures, which can weaken the force the 
hydraulic system can apply and increase the resiliency of pipes. Some 
operators in the Gulf have opted to increase the reliability of their 
BOPs by including two blind shear rams in case one fails, yet two-
thirds of the rigs operating in the Gulf still have only one blind 
sheer ram. Still, many others both inside and outside of the industry, 
including the CEO of BP, have concluded that the design of blowout 
preventers must be rethought altogether.

Deepwater and Ultra-deepwater Drilling Technologies
    Completed in 2001 in South Korea by Hyundai Heavy Industries, the 
Deepwater Horizon was a semi-submersible ultra-deepwater mobile 
offshore drilling unit (MODU) capable of operating in harsh surface 
conditions and water depths up to 10,000 feet with a crew of 
approximately 135 personnel. It was a dynamically-positioned vessel, 
meaning that it was not moored to any fixed point, but instead 
maintained its position above the well using multiple propellers and 
thrusters. Though state of the art when introduced, by 2010 the rig was 
one of approximately 200 deepwater rigs capable of drilling in greater 
than 5000 feet of water, and some are drilling at depths greater than 
10,000 feet. In 2009 the Deepwater Horizon set the record for the 
deepest oil well in history by drilling to a depth of 35,000 feet.
    Often likened to space exploration in its complexity, deepwater and 
ultra-deepwater drilling presents a unique set of technological 
challenges, including for safety and incident prevention and 
mitigation. For instance, the greater the depth of water, the longer 
the drill string must be suspended without support from the rig, and 
the more important it then becomes for a rig to maintain its position 
above the well. Deviations can put considerable strain on equipment, 
causing failure or even a disconnection of the rig from the subsea 
(seafloor) architecture. This is made all the more difficult for a rig 
floating in open ocean that must endure high swells, high winds and 
strong currents. Consequently, the drill string must be considerably 
thicker and stronger for deeper wells, and thus requires larger BOPs 
with much higher pressure rams to shear the drill string. Greater 
depths also add significantly to the weight of the fluid column in the 
drill string, and thus add greater bottom hole pressure and require 
more energy to lift drilling fluids and other materials from the well. 
Furthermore, because of the tremendous overburden, the hydrocarbon 
reservoir may be under intense pressures far beyond those encountered 
in more conventional operations.
    To overcome some of these challenges, deepwater drilling operations 
utilize subsea installations to conduct a range of functions that would 
otherwise be done at the surface. Such equipment must be robust enough 
to operate under the extreme pressures and temperatures which can cause 
everything from hydraulic equipment to the hydrocarbons to behave 
differently. Because of the high cost of testing technologies in the 
field, the industry is increasingly reliant on simulations and modeling 
to predict the performance and failure of equipment at depth. However, 
the extreme conditions of deepwater drilling are impossible to fully 
replicate in a lab.
    The industry has devoted billions of dollars to researching and 
developing technologies for subsea and surface facilities specific to 
deepwater and ultra-deepwater drilling, especially those technologies 
which represent an increase in production efficiency. However, many 
contend that the industry has not devoted similar resources to the 
development of technologies and methods for accident prevention and 
mitigation. If there is a critical technology gap, the question remains 
as to the appropriate role of government-sponsored programs in 
assisting industry in developing more reliable technologies, overseeing 
their deployment, ensuring the development of more robust industry 
standards, and disseminating best practices.

Department of Energy Programs
    The Office of Oil and Natural Gas, in the Department of Energy's 
Office of Fossil Energy, supports research and policy options to ensure 
clean, reliable, and affordable supplies of oil and natural gas for 
American consumers. However, funding for this program in recent years 
has been relatively limited, resulting in few initiatives to develop 
technologies to avoid and mitigate incidences such as the Deepwater 
Horizon accident. From fiscal years 2007 through 2011, both the Bush 
and Obama administrations have made no request for funding of any oil 
technology research. However. Congress has continued to appropriate 
small amounts solely towards exploration and production technologies. 
The last appropriation to the Office of Fossil Energy's Petroleum--Oil 
Technology program was in 2009 for just under $5 million.
    Under section 965 of the Energy Policy Act of 2005, DOE has the 
authority to conduct research and development in oil and gas 
exploration and production as well as related environmental research. 
DOE has a wide range of intellectual and technical resources, including 
the national labs, that could be leveraged to conduct research and 
advance technologies in areas that individual companies alone are not 
likely to aggressively pursue.
    DOE also funds oil and gas R&D through authorization of $50 million 
in annual mandatory spending from offshore oil and gas royalty revenues 
collected by MMS. Through authorization in Section 999 of the Energy 
Policy Act of 2005, DOE conducts approximately $12.5 million of ``in-
house'' research at the National Energy Technology Laboratory (NETL). 
The remaining $37.5 million in R&D is managed by a public-private 
research consortium.

EPAct 2005, Section 999--Ultra-deepwater R&D and the Research 
        Partnership to Secure Energy for America (RPSEA)
    Section 999 of the Energy Policy Act of 2005 authorizes the 
Secretary of Energy to establish an ultra-deepwater and unconventional 
onshore resources research and development program. Management of the 
program was awarded to a research consortium headquartered in Sugar 
Land, Texas, known as the Research Partnership to Secure Energy for 
America, or RPSEA, which is overseen for DOE by the National Energy 
Technology Laboratory (NETL).
    The program under RPSEA is divided into three parts: ultra-
deepwater architecture and technology (UDW); unconventional onshore 
natural gas and other resources; and technology challenges of small 
producers.
    According to RPSEA, and consistent with EPAct 2005, the mission of 
the Ultra-Deepwater Program is to identify and develop economically 
viable (full life cycle) acceptable risk technologies, architectures, 
and methods for exploration, drilling, and production of hydrocarbons 
in formations under ultra-deepwater, or in the Outer Continental Shelf 
(OCS) in formations that are deeper than 15,000 feet.
    This mission of technology development encompasses:

          Extending basic scientific understanding of the 
        various processes and phenomena that directly impact the design 
        and reliable operation of an ultra-deepwater production system.

          Developing ``enabling'' technologies that facilitate 
        the development of additional technical advances.

          Enhancing existing technologies to help lower overall 
        cost and risks.

          Pursuing ``Grand Challenges'' (long-term, high-risk 
        research on applied science and on key leveraging and 
        transformational technologies capable of ``leapfrogging'' over 
        conventional pathways).

          Accomplishing ultra-deepwater resource development in 
        a safe and environmentally responsible manner.

          The goals of the UDW are to develop the ultra-
        deepwater resource base and to convert currently identified 
        (discovered) resources into economic recoverable (proven) 
        reserves, while protecting the environment.

    These goals will be achieved by:

          Reducing the costs to find, develop, and produce such 
        resources.

          Increasing the efficiency of exploration for such 
        resources.

          Increasing production volumes, production efficiency, 
        and ultimate recovery of such resources.

          Improving safety and environmental performance, by 
        minimizing environmental impacts associated with exploration 
        and production in ultra-deepwater.

    Since the inception of the program both the Bush and Obama 
administrations have sought to repeal funding of the Section 999 
program. However, Congress has kept the funding mechanism and the 
program in place. RPSEA currently has approximately 170 members, with 
representation from across industry, academia, NGOs, and government 
laboratories and programs. In the wake of the Deepwater Horizon 
tragedy, questions have arisen as to how this program, in conjunction 
with a more robust program in DOE Fossil Energy, could better serve the 
nation's needs for development of advanced environmental and worker 
safety technologies and practices while providing a Federal resource 
for technical expertise on deepwater and ultra-deepwater drilling 
technologies.

Industry Standards and Best Practices
    The Department of the Interior's Minerals and Management Service 
(MMS) is responsible for the promulgation of the nation's offshore 
operating regulations. According to MMS, the regulations are written to 
ensure ``safe operations and preservation of the environment, while 
balancing the Nation's needs for energy development.'' These 
regulations are often informed by industry standards developed by the 
industry through the American Petroleum Institute (API). API is the 
main U.S. trade association for the oil and natural gas industry and is 
also the main body responsible for the establishment of industry 
standards. API issues standards that fall into two categories: 
manufacturing specifications and recommended practices. API's standard-
making procedure is approved by the American National Standards 
Institute (ANSI) and convenes experts from manufacturers, drilling 
companies, operators, service providers, government regulators, and 
academia. Standards are also developed by other organizations such as 
the International Association of Drilling Contractors (IADC). MMS rules 
and regulations often incorporate these third-party organizations' 
standards which, when published in the Federal Register, have the 
``force and effect'' of law. There is growing support for MMS to 
transition from broader, industry-written performance goals to 
narrower, more prescriptive regulations.
    Chairman Baird. Good morning, everyone. Thank you for being 
here. Our hearing today will now come to order.
    I want to begin actually by speaking on a topic not 
particularly germane, and that is to acknowledge the tremendous 
contribution of the Ranking Member of this Committee, of our 
Subcommittee. That is Mr. Inglis, who is a dear friend, a 
respected colleague, who can't be with us today. He had an 
election yesterday, and from this Member of Congress's 
perspective, it was a remarkably unfortunate result. He is an 
outstanding human being, a great asset to this Committee and to 
the country, and I appreciate deeply his many years of service.
    I also should note that we have been informed that the 
Administration witness who we had hoped to join us today will 
be unable to participate, but we have received assurance that 
he or another member of the Administration will come and talk 
to us about this very issue at some future date. Given all they 
are dealing with down in the Gulf, we certainly can understand 
that and look forward to that testimony at some point in the 
future.
    Mr. Ehlers. Mr. Chairman.
    Chairman Baird. Yes, sir, Mr. Ehlers.
    Mr. Ehlers. I would like to join you in your accolades of 
Mr. Inglis. He is--I served with him both times he was in the 
Congress, and after his hiatus and he returned, he was a 
different person. He is very, very dedicated to this country 
and also to preserving its environment, but in a reasonable, 
sensible way, and I think he provided a lot of good leadership 
on this committee in his very quiet and subtle way. Our 
Congress is the worse for not having him around in the future. 
So thank you.
    Chairman Baird. I thank you, and obviously share that 
remark and very much appreciate it. Bob, by the way, is not 
dead. He is just--there was an unfortunate outcome and perhaps 
will have a better life for it. At any rate, he has just been a 
great Member of the Committee and he will be missed.
    So today's hearing is----
    Mr. Hall. Mr. Chairman.
    Chairman Baird. Mr. Hall.
    Mr. Hall. They may not know it, he was voted back to 
private life.
    Chairman Baird. That is a nice way to say it.
    Mr. Hall. He didn't pass away.
    Chairman Baird. That is right.
    Our hearing today is to discuss technologies, standards and 
practices to ensure safer deepwater and ultra-deepwater 
drilling. A wide range of technological innovations have 
allowed the industry to venture into ever-deeper waters to 
access the massive reserves of oil and gas found there. 
Admittedly, the payoff of pushing the technology envelope is 
enormous, and for the foreseeable future we are likely to be 
relying on fossil fuels, though I hope we will gradually and as 
soon as possibly reduce that reliance for a host of reasons.
    But the Deepwater Horizon tragedy proved that, in the high-
stakes game, poor judgment and faulty equipment can bring 
unimaginable consequences. It is precisely because this 
incident occurred in 5,000 feet of water that we are discussing 
an ongoing spill 64 days after it began.
    Committee staff and I just returned from visiting the 
Deepwater Horizon response efforts in the Gulf, and I want to 
pay my respects to the people down there who are working so 
hard. They are working 24/7 in extremely difficult conditions. 
We spent two days doing flyovers, on the ground, on the water, 
and met with them. I asked a group of folks in an integrated 
command system what can we do to help, and the first thing they 
said was interesting. They looked at me like I was from Mars 
and they said, ``Are you serious? Because we are not used to 
politicians asking how they can help. Usually what you do is 
get off an airplane, make a bunch of critical comments and get 
back on the airplane.'' And they said the single most important 
thing we can do is to tell the public about the good work that 
is being done, and not in any way minimize the enormity of the 
spill or the loss of human life or the consequences for the 
environment, but that people are doing all they can. Every 
branch of government virtually is represented down there. All 
branches of the uniformed services are there with their assets, 
a total of 30,000-plus people. It is 100-plus degrees out there 
and they are working very, very hard in dangerous conditions 
with shifting weather and a challenging and unpredictable 
adversary in the form of the oil. They are doing some really 
remarkable work in what is the largest recovery and restoration 
effort in the history of humankind, and they deserve our 
admiration and respect and appreciation, and it is time, I 
think, for all of us in Congress to get past the blame game.
    We need to understand it, but the goal really is to try to 
solve the problem for the future. And that is the purpose of 
this hearing, and I think it is important to say that it is not 
only the Federal agencies--and we met with NOAA, NIMS, Coast 
Guard, EPA, MMS--but also BP has got a lot of folks down there, 
and they are working hard and doing a good job, and I am proud 
to say a lot of folks from many of our states are there. I met 
Texans, I met Washingtonians, I met Michiganders and people 
from the DC area. Everybody, every state in this country, has 
got people down there working, and they deserve our 
appreciation. My personal goal is that at some point soon, if 
they are still insisting on having the spill image up, right 
beside that image is an image of the recovery and restoration 
efforts, because those deserve equal credit and that is where 
the real human beings are working really hard on the surface of 
the water and on the shores.
    Having said that, our charge today, however, is to 
understand the technological advances and best practices to 
ensure that drilling in the deepwater can be done, if it is to 
be done, with minimal risk to workers and the environment. 
Operating safely in such extreme environments entails immense 
engineering and technological challenges, the complexity of 
which is encountered in few other human endeavors.
    The technological expertise for drilling at these depths 
appears to reside almost solely right now with the private 
sector, and in the hyper-competitive field of energy, the 
industry is rightfully guarded about sharing information and 
collaborating on proprietary technology development. But safety 
interests are universal, and we lost 11 lives in this instance. 
We must now ask ourselves if the Deepwater Horizon tragedy 
calls for us to reevaluate the government's role in the 
development of accident prevention and mitigation technologies 
and in industry best practices.
    And I would assert here, as well, that I would hope 
shareholders will pay attention to this. Instead of just asking 
what our return on investment is and what the latest reservoir 
is, I hope shareholders will start asking, is it consequential 
to our market value if we have a spill? And the people of BP 
have learned that the hard way, but it is rare that the 
shareholders look at the quarterly reports with a careful eye 
to what is being done on safety and accident prevention. I hope 
they will start, and that corporate boards will be a lot more 
attentive to that. It should not be the sole responsibility of 
the Congress.
    So our goal today is to shed light on these important 
questions.
    [The prepared statement of Chairman Baird follows:]
               Prepared Statement of Chairman Brian Baird
    I want to welcome everyone to today's hearing to discuss 
technologies, standards, and practices to ensure safer deepwater and 
ultra-deepwater drilling. A wide range of technological innovations 
have allowed the industry to venture into ever deeper waters to produce 
the massive reserves of oil and gas found there. Admittedly, the payoff 
of pushing the technology envelope is enormous, and for the foreseeable 
future the world will be highly-reliant on these fossil fuels.
    But the Deepwater Horizon tragedy proved that, in this high-stakes 
game, poor judgment and faulty equipment can bring unimaginable 
consequences. It is precisely because this incident occurred in 5,000 
feet of water that we are discussing an ongoing oil spill 64 days after 
it began.
    Committee staff and I just returned from visiting the Deepwater 
Horizon response efforts in the Gulf. While the coordination and scale 
of the Federal effort is truly impressive and should be commended, 
witnessing it firsthand only strengthened my resolve to ensure that we 
never find ourselves in this situation again.
    Whether the moratorium on drilling activities in the Gulf is lifted 
in 30 days or 30 years, we must accept that the hydrocarbon reserves in 
these fields will be produced someday. And if not there, it will 
certainly be done somewhere else in the world. Our charge is to 
understand the technological advances and best practices to further 
ensure that drilling in the deepwater can be done with minimal risk to 
workers and the environment.
    For good reason, drilling at these depths is often compared to 
space exploration. Operating safely in such extreme environments 
entails immense engineering and technological challenges, the 
complexity of which is encountered in few other human endeavors.
    However, unlike space exploration, the technological expertise for 
drilling at these depths appears to reside almost solely within the 
private sector. In the hyper-competitive field of energy, the industry 
is rightfully guarded about sharing information and collaborating on 
proprietary technology development. But safety is universal. We must 
now ask ourselves if the Deepwater Horizon tragedy calls for us to 
reevaluate the government role in the development of accident 
prevention and mitigation technologies and industry best practices.
    At the least, we must identify the critical gaps in safety 
technology and practices, identify the resources already in place in 
government-sponsored research programs and laboratories, and push to 
coordinate these resources to meet both the needs of the taxpayers and 
the safety requirements of the industry. It's time we push the 
technological envelope of environmental and worker safety in offshore 
operations.
    My goal is to shed light on these important questions through 
today's hearing.

    Chairman Baird. With that, I yield to our distinguished 
Ranking Member of the Full Committee, Mr. Hall, my friend from 
Texas.
    Mr. Hall. Thank you, Mr. Chairman, for holding the 
Committee hearing, and as the response effort on the Gulf 
enters its third month, we are beginning to get, I guess, a 
more clear picture of what went wrong in the Deepwater Horizon 
and what needs to be done to make sure it doesn't happen again. 
I hope and expect the S&T Committee to play an important role 
in this effort, particularly as we inform and contribute to the 
legislation package that the House will pursue in July. This 
package may seek to address and provide guidance on whether or 
not a short-term or a permanent moratorium on deepwater 
drilling is necessary.
    As is evidenced by yesterday's granting of injunctive 
relief by the United States District Court for the Eastern 
District of Louisiana suspending enforcement of the 
Administration's 6-month moratorium, more time is needed to 
craft a reasoned and measured response and solution to this 
incident and to others like it.
    It is important to remember that prior preparation and 
understanding provide the best foundation for long-term 
solutions. The economic impact of the moratorium would be deep 
and lasting. Thousands of people have lost their jobs already. 
An estimated 40,000 additional jobs hang in the balance as the 
uncertainty associated with the moratorium remains unsettled.
    Beyond jobs, the moratorium would also introduce a 
significant new environmental risk. The enormous global demand 
for drilling rigs would be likely to result in their departure 
from the Gulf to other countries, increasing U.S. dependence on 
imported oil and on oil tankers which are much more prone to 
spills than undersea pipelines. The moratorium would also drive 
skilled workers off the rigs and onto the onshore jobs, meaning 
that a high percentage of new, less experienced will be 
responsible for operations when drilling resumes. These events 
related to the moratorium would appear to increase, not 
decrease, environmental risk while inflicting economic damage 
on the people of the Gulf that would rival, if not surpass, 
that caused by the spill itself.
    I hope that today's hearing will be informative in this 
regard, and I am pleased that we have some of the world's 
leading drilling technology experts before us. I hope the 
witnesses can help the Committee better understand the 
contributing factors to the Deepwater Horizon disaster, 
particularly as it relates to the soundness of the drilling 
technology itself versus the practices governing its use and 
its application.
    The evidence gathered thus far indicates that technology 
concerns may not have been at issue. Rather, it seems a failure 
to follow industry-wide best practices created an environment 
ripe for a blowout. If this is indeed the case, it is my hope 
that these procedural shortcomings can and will be quickly 
addressed. I have heard from experts in the well intervention 
and oil spill containment fields that state-of-the-art 
technology currently exists in the form of state-of-the-art 
vessels and systems designed to respond to such situations and 
now finally being used to contain the BP spill itself. In 
discussions with these experts, it has been noted that a 
missing piece of an effective oil spill policy is planning for 
containment. I am interested in hearing more about how these 
technologies can be incorporated into the process so effective 
for planning and containment becomes the norm.
    Regardless of the ultimate causes and best responses to the 
disaster, it makes sense to continue pursuing improvements to 
deepwater drilling, architectures and systems which will only 
increase its safety. In 2005, I helped create a program to do 
just that at the Department of Energy known as the Super 999, 
or Ultra Deep program. It supports cutting-edge technology 
through a collaborative effort between DOE and industry into 
safe and environmentally responsible offshore and onshore oil 
and gas development. This program has been a success. Its 
contributions to deepwater drilling technologies are helping us 
recover energy supplies that we knew existed but were unable to 
access. This has returned significant benefit to taxpayers in 
the form of domestic jobs and affordable energy as well as 
increasing royalties to the fund that pays for the program in 
the first place. And unfortunately and despite the program's 
strong record of support in Congress, the Administration has 
repeatedly--both Administrations, Republicans and Democrats, 
have repeatedly called for its termination and it has also 
zeroed out funding for oil and gas R&D within the fossil energy 
program at DOE.
    I think this represents a clear misprioritization and I 
hope the Administration will reconsider its position in light 
of the section 999 program's potential to advance safe and 
environmentally responsible drilling. Unfortunately, the 
Administration inexplicably backed out of this commitment to 
testify before our Committee at the last minute, so we won't 
get a chance to discuss the position on section 999 today.
    I thank the witnesses who kept their commitments for 
appearing before us today, and I realize that you are very 
busy, very valuable hours to spend and that you give up 
something to come before us because we rely on you to tell us 
what is best for the greatest good of the greatest number of 
this country and we know that you are making a contribution to 
us, and I appreciate you being here and appearing before us 
today, and I look forward to the testimony and discussion, Mr. 
Chairman, to a good chairman, I yield back whatever time I 
have.
    [The prepared statement of Mr. Hall follows:]
           Prepared Statement of Representative Ralph M. Hall
    Mr. Chairman, thank you for holding this hearing today on deepwater 
drilling technology, research, and development.
    As the response effort in the Gulf enters its third month, we are 
beginning to get a clearer picture of what went wrong on the Deepwater 
Horizon, and what needs to be done to make sure it doesn't happen 
again.
    I hope and expect the S&T Committee to play an important role in 
this effort, particularly as we inform and contribute to the 
legislative package that the House will pursue in July.
    This package may seek to address and provide guidance on whether or 
not a short term or permanent moratorium on deepwater drilling is 
necessary. As is evidenced by yesterday's granting of injunctive relief 
by the United States District Court for the Eastern District of 
Louisiana, suspending the enforcement of the Administration's 6 month 
moratorium, more time is needed to craft a reasoned and measured 
response and solution to this incident and others like it. It's 
important to remember that prior preparation and understanding provide 
the best foundation for long term solutions.
    The economic impact of the moratorium would be deep and lasting. 
Thousands of people have lost their jobs already, and an estimated 
40,000 additional jobs hang in the balance as the uncertainty 
associated with the moratorium remains unsettled.
    Beyond jobs, the moratorium would also introduce significant new 
environmental risks. The enormous global demand for drilling rigs would 
be likely to result in their departure from the Gulf to other 
countries, increasing U.S. dependence on imported oil--and on oil 
tankers, which are much more prone to spills than undersea pipelines.
    The moratorium would also drive skilled workers off of the rigs and 
into onshore jobs, meaning that a high percentage of new, less 
experienced workers will be responsible for operations when drilling 
resumes.
    These events related to the moratorium would appear to increase, 
not decrease, environmental risks, while inflicting economic damage on 
the people of the Gulf that would rival--if not surpass--that caused by 
the spill itself.
    I hope that today's hearing will be informative in this regard, and 
I am pleased that we have some of the world's leading drilling 
technology experts before us. I hope the witnesses can help the 
Committee better understand the contributing factors to the Deepwater 
Horizon disaster, particularly as it relates to the soundness of the 
drilling technology itself, versus the practices governing its use and 
application.
    The evidence gathered thus far indicates that technology concerns 
may not have been at issue; rather, it seems a failure to follow 
industry wide best practices created an environment ripe for a blowout. 
If this is indeed the case, it is my hope that these procedural 
shortcomings can and will be quickly addressed. I have heard from 
experts in the well intervention and oil spill containment fields that 
state of the art technology currently exists in the form of state of 
the art vessels and systems designed to respond to such situations, and 
now finally being used to contain the BP spill. In discussions with 
these experts it has been noted that a missing piece of effective oil 
spill policy is planning for containment. I am interested in hearing 
more about how these technologies can be incorporated into the process 
so effective planning for containment becomes the norm.
    Regardless of the ultimate causes of and best responses to the 
disaster, it makes sense to continue pursuing improvements to deepwater 
drilling architectures and systems, which will only increase its 
safety.
    In 2005, I led creation of a program to do just that at the 
Department of Energy. Known as the ``Section 999'' or ``Ultra-Deep'' 
program, it supports cutting-edge technology through a collaborative 
effort between DOE and industry into safe and environmentally 
responsible offshore and onshore oil and gas development.
    The program has been a success--its contributions to deepwater 
drilling technologies are helping us recover energy supplies that we 
knew existed but were unable to access. This has returned significant 
benefits to taxpayers in the form of domestic jobs and affordable 
energy, as well as increasing royalties to the fund that pays for the 
program in the first place.
    Unfortunately, and despite the program's strong record of support 
in Congress, the Administration has repeatedly called for its 
termination, and also zeroed out funding for oil and gas R&D within the 
fossil energy program at DOE.
    I think this represents a clear mis-prioritization, and I hope the 
Administration will reconsider its position in light of the Section 999 
program's potential to advance safe and environmentally responsible 
drilling.
    Unfortunately, the Administration inexplicably backed out of its 
commitment to testify before our committee at the last minute, so we 
won't get a chance to discuss its position on Section 999 today.
    I thank the witnesses that kept their commitments for appearing 
before us today, and I look forward to the testimony and discussion.
    I yield back.

    Chairman Baird. Thank you very much, Mr. Hall. I 
acknowledge the presence also of the Full Committee chair, Mr. 
Gordon, who has been a champion of safety and environmental 
protection and development of technologies. I understand Mr. 
Gordon has no opening comments to make, but thank you for being 
here, Mr. Chairman.
    We all know, my colleagues know well if there are other 
members who wish to submit opening statements, those will be 
added to the record at this point.
    [The prepared statement of Mr. Costello follows:]
         Prepared Statement of Representative Jerry F. Costello
    Good Morning. Thank you, Mr. Chairman, for holding today's hearing 
to discuss technologies, standards, and practices to prevent oil spills 
in deepwater and ultra-deepwater drilling operations.
    The explosion of the Deepwater Horizon oil rig in April 2010 has 
resulted in the largest oil spill in U.S. history and an environmental 
and economic disaster for the Gulf Coast region. Following the 
disaster, President Obama declared a moratorium on deepwater drilling 
in the Gulf until the government and oil companies understand what 
happened on Deepwater Horizon and how it can be prevented. If the 
President lifts this moratorium and allows for deepwater drilling to go 
forward, we must ensure drilling mechanisms are tested and safe in 
deepwater. Further, as we develop new practices and technologies for 
deepwater drilling in the future, we must invest in research and 
development of safe and efficient drilling techniques.
    First, it is imperative that the Federal Government and private 
industry inspect and test new technology before deploying it in 
deepwater drilling operations. Under the Bush administration, there 
were no requirements for companies to test and certify equipment and 
technology before beginning to drill. Further, neither the Bush nor the 
Obama administration requested any funding for programs within the U.S. 
Department of Energy to research and develop deepwater drilling 
technologies and practices that mitigate risks. In particular, Section 
999 of the Energy Policy Act of 2005 has not been funded since it was 
established, and Congress has funneled small sums towards these 
research programs. The Deepwater Horizon explosion makes clear that 
Congress and the Obama Administration have a responsibility to provide 
adequate Federal funding for research on how oil companies who engage 
in deepwater and ultra-deepwater drilling can prevent explosions and 
quickly respond when something does go wrong.
    Second, it appears that the blowout preventer (BOP) on Deepwater 
Horizon is likely the source of the explosion, fire, and leak. This BOP 
passed through several international companies and was never tested at 
5,000 feet before it was put in use in the Gulf Both British Petroleum 
and Transocean have no experience with a failure of these dimensions at 
this depth or to fix the leak. Even if more extensive testing were 
required, according to researchers, precisely replicating the 
conditions of a deepwater drilling site in a laboratory setting is 
nearly impossible. However, without appropriate testing, companies have 
no knowledge of the risks they may face at 10,000 feet below sea level 
or how best to respond when something does go wrong. I would like to 
hear from our witness what safety tests they complete before deploying 
new drilling technology in deepwater. Further, I am interested in how 
researchers account for differences between real-life and laboratory 
conditions and what role Congress can play in improving the current 
testing programs to better replicate the conditions in deepwater 
drilling sites.
    I welcome our panel of witnesses and I look forward to their 
testimony.

    And now, it is my pleasure to introduce our first panel of 
witnesses at this time. Mr. James Pappas is the Vice President 
of Technical Programs at the Research Partnership to Secure 
Energy for America. My staff here has given me the acronym we 
all know as RPSEA but unfortunately the way they have written 
it, it looks like R-I-P-S-E-A, which is rather unfortunate. Dr. 
Benton Baugh is the President of Radoil, Incorporated. Dr. Erik 
Milito is the Group Director of Upstream and Industry 
Operations at the American Petroleum Institute. Did I say that 
right?
    Mr. Milito. No, you just gave me a doctorate, and I 
appreciate that.
    Chairman Baird. Well, I have got a doctorate. I am not sure 
that is a promotion, so you pick. I will call you whatever you 
want. When we say there is a doctor in the house, we won't look 
at you.
    And Mr. Greg McCormack is the Director of the Petroleum 
Extension Service at the University of Texas in Austin, a very 
distinguished and capable group of witnesses. As we discussed 
before with the witnesses, you have five minutes for your 
spoken testimony. We will have lots more time after that in the 
Q&A with the panelists so you will have more time, and feel 
free at some point, you know, if we haven't asked a question 
that you think is important, feel free to, you know, speak out 
on that. We will try to lead things in a good direction here, 
but if there is something really critical, let us know. When 
you have completed your spoken testimony, we will begin with 
questions. Each Member of our panel will have five minutes to 
question the witness.
    And with that, Mr. Pappas, please begin. Thank you all for 
being here.

STATEMENTS OF JAMES PAPPAS, VICE PRESIDENT, TECHNICAL PROGRAMS, 
       RESEARCH PARTNERSHIP TO SECURE ENERGY FOR AMERICA

    Mr. Pappas. Thank you, sir. Good morning, Chairman and 
Members of the Subcommittee. I represent RPSEA, and the Marine 
Technology Society also asked me to represent it today.
    The Research Partnership to Secure Energy for America, 
RPSEA, is a 501(c)(3) nonprofit organization. Through the 
Energy Policy Act of 2005, section 999, RPSEA administers a 
public-private partnership that performs research and 
development for the ultra deepwater Gulf of Mexico on 
conventional onshore natural gas and other petroleum resources 
in the United States, namely small producing companies. RPSEA 
has over 170 member companies, including 26 research 
universities, companies and other organizations and it manages 
$37.5 million per year of U.S. government funds plus cost share 
from project groups. Government funds are generated from 
royalties and distributed to RPSEA through NETL on behalf of 
the U.S. Department of Energy.
    RPSEA is unique in that we administer our program through a 
collaborative research environment that includes subject-matter 
expert volunteers from leading research universities, vendor 
companies and Federal organizations, small operators, 
individuals, private labs, government labs and offshore 
operators. Furthermore, RPSEA is proud and fortunate to have 
members from several prominent environmental and safety 
concerns within our ranks. The fully transparent process that 
we have has proved to result in high-quality technology and 
research development. We currently have 71 projects in progress 
or completed and an additional 28 projects are in contract 
negotiations.
    I have been invited to discuss oil prevention and 
mitigation technologies in deepwater, as well as standards for 
deepwater gas and oil drilling. We pinpointed several areas of 
study, including technology enhancement to minimize incidents. 
This program will identify and develop technologies to prevent 
incidents from occurring in the first place. These technologies 
will improve safety, protect the environment, and ensure well 
bore integrity of offshore operations. The program should 
consist of an evaluation of existing safeguards and 
international offshore procedures, standards and practices. It 
should also identify promising technologies to address safety 
and environmental concerns associated with deepwater and harsh 
environments.
    Identification, development, and improvement of proactive 
and reactive response procedures and processes will address the 
research required to minimize response time to an incident so 
that environmental impact is also minimized. The industry has 
various vessels and equipment on standby use to contain spills, 
to skim, or to deploy dispersants. A research program should be 
established to identify state-of-the-art technologies and 
methodologies and identify other necessities to enhance 
response to an emergency situation. This program can also 
include early warning sensors to identify potential hazards to 
the environment.
    The second area of study is the development of an 
understanding of the value ecosystems services and location 
identification of high-value and seasonally dynamic ecosystems. 
The goal of this program would be to study deepwater coastal 
regions in the Gulf Coast wetlands in order to identify high-
value areas and to place monitoring and early warning devices 
in there.
    RPSEA has several research projects that relate to safety 
and environmental studies ongoing already. In addition, every 
project that RPSEA has in its program is required to employ a 
level of understanding of safety and environmental impact. 
Example projects are detailed in my written statement. They 
include the self-standing riser system that has recently been 
developed with an ongoing demonstration project for use in 
deepwater well interventions. This technology can enable 
operators to do various deepwater tasks more safely.
    RPSEA, through its oversight by the Department of Energy, 
stands at the forefront of the development of systems to enable 
industry to improve energy security. The Research Partnership 
to Secure Energy for America uniquely provides the structure 
for researchers and other interested parties from a multitude 
of research universities, environmental organizations, safety 
concerns, companies, and others to exchange ideas, transfer 
technologies, and provide unbiased science to develop sound 
policies so that industry can operate in a safe manner. It is 
because of the role of the Federal Government through the EPAct 
section 999 program that RPSEA has been successful and that its 
members are willing and anxious to participate, to lead in 
these activities that are so important to our country. Funding 
currently is not sufficient to pay for all of the projects that 
have been recommended by our expert review panels.
    Thanks for the invitation and the opportunity to discuss 
the ongoing research and needs related to deepwater spill 
prevention and mitigation.
    [The prepared statement of Mr. Pappas follows:]
                   Prepared Statement of James Pappas
    Good morning, Chairman and members of the Subcommittee. My name is 
James Pappas. I am employed by the Research Partnership to Secure 
Energy for America, RPSEA--a 501(c)3 non-profit organization 
(www.rpsea.org). Through the Energy Policy Act of 2005 Section 999, 
RPSEA administers a public-private partnership that performs research 
and development for the ultra-deepwater in the Gulf of Mexico, 
unconventional onshore natural gas, and other petroleum resources of 
the United States, namely for small producing companies. RPSEA has over 
172 members, including 26 research universities, companies, and other 
organizations and manages the $37.5 million per year of U.S. Government 
funds, plus cost share funds from project groups. RPSEA is unique in 
that we also have an Environmental Advisory Group that enables 
prominent environmental organizations to assist us in managing our 
program. Government funds are generated from royalties and funneled to 
RPSEA through NETL, the National Energy Technology Lab, on behalf of 
the U.S. Department of Energy. Additionally, the National Energy 
Technology Laboratory at the Department of Energy (NETL) has a $12.5 
million per year complementary program under the same Act. Our two 
groups work together to ensure that research is properly prioritized 
and funding is effectively utilized.
    Deepwater offshore exploration and production is challenging in 
many respects. Each prospect is full of unknowns, and the industry must 
be prepared for the worst. Its toolkit is vast but it has not kept up 
with the challenges. A proactive approach that studies possible 
outcomes, plans and prepares people, contains the proper amount of 
safety features and methods to employ them, sets responsible oversight 
and regulations, and is available to all for use is paramount to the 
safe and environmentally responsible success of the judicious use of 
America's oil and gas resources. RPSEA, through its oversight by the 
Department of Energy through NETL, stands at the forefront of the 
development of systems to enable the industry to improve energy 
security. The Research Partnership to Secure Energy for America 
uniquely provides the structure for researchers and other interested 
parties from a multitude of companies, research universities, 
environmental and safety organizations, and others to exchange ideas, 
transfer technologies, and provide unbiased science to develop sound 
policy. It is because of the role of our Federal Government through the 
EPAct Section 999 Program that RPSEA has been successful and that its 
members are willing and anxious to participate--to lead--in these 
activities that are so important to our country.
    RPSEA is unique in that we administer our program through a 
collaborative research environment that includes subject matter expert 
volunteers throughout the oil and gas industry, outside of the 
industry, research universities, national labs, and other state and 
Federal organizations. Furthermore, RPSEA is proud and fortunate to 
have members from several prominent environmental and safety concerns 
within our ranks. The inclusion of so many experts from such a large 
base makes this program a success. All stakeholders are represented. 
Our fully transparent process has proved to result in high quality 
technology research and development that is advancing all sciences 
related to our function. Thus, this one-of-a-kind, all inclusive 
organization truly represents the public interest. We currently have 71 
projects in progress or completed, and an additional 28 projects are in 
contract negotiations.
    Through our experts, who cover all technical disciplines, we 
develop a five-year plan that we update annually. Specifically, the 
annual plan (http://www.rpsea.org/annual-plans) is submitted by RPSEA 
only after an exhaustive and comprehensive review of technology ideas 
generated by nine committees of subject matter experts. More than 700 
individuals work to identify and develop these ideas and the subsequent 
plan. RPSEA takes its direction from the Secretary of Energy when he 
approves the annual plan after consultation with a Federal Advisory 
Panel. The needs are prioritized, we balance our near and long term 
goals, and then we publicly issue requests for proposals. Proposals are 
evaluated by independent experts and projects are selected that follow 
Federal Acquisition Regulations. Each project must not only meet the 
technical objectives, but it must also provide a plan that ensures that 
the technology will be safe and have no adverse environmental impact. 
In fact, some of the current projects specifically address improved 
safety and environmental performance. Although the projects are managed 
by RPSEA, they utilize industry advisory boards to assure that they 
meet their objectives. This process is meant to act as a check-and-
balance, and it also assists in early development and commercialization 
of any related technologies. Our aggressive technology transfer efforts 
ensure the work being conducted is applied in a cost effective manner.
    I have been invited to discuss oil spill prevention and mitigation 
technologies in deep water, as well as standards for deepwater gas and 
oil drilling. The recent incident involving the Deepwater Horizon is a 
tragedy that has resulted in the loss of 11 lives, an environmental 
nightmare, and hardship on countless Americans. Clearly, no one 
expected this incident to happen. The U.S. offshore drilling industry 
had an extraordinary safety record prior to its occurrence. Quite 
appropriately, the incident has resulted in everyone reflecting, 
refocusing, and rethinking the importance of offshore production, as 
well as the research required to ensure the safe and environmentally 
sound production of these precious resources. As efforts continue to 
rein in the blowout, to clean-up the environment, and to identify the 
root cause of the accident, the failure of the overall system and the 
resulting impacts have already identified specific areas requiring 
research.
    Through RPSEA's Environmental Advisory Group, as well as its 
Drilling Advisory Group, we have pinpointed several areas of study:

          Technology enhancement to minimize incidents--This 
        program will aim to prevent incidents from occurring in the 
        first place. A review of the state-of-the art of technologies 
        that may be used to improve safety, protect the environment, 
        and ensure wellbore integrity of offshore operations will 
        identify priorities, as well as technology gaps and further 
        research needs. The review should consist of an evaluation of 
        existing safeguards and international offshore procedures, 
        standards, and practices. It should also identify promising 
        technologies to address safety and environmental concerns 
        associated with deepwater, harsh environments.

          One of RPSEA's projects, the Environmentally Friendly 
        Drilling Systems Program (www.efdsystems.org), enlists the 
        participation of several research universities, national 
        laboratories, and industry contributors. Its advisory committee 
        includes members from all stakeholder groups including 
        environmental organizations, academia, industry, and other 
        concerned citizens. The project is focused on identifying and 
        developing new technologies for environmentally sensitive 
        development of unconventional onshore energy resources. Its 
        objective is to identify, develop, and transfer critical, cost 
        effective, new technologies to allow onshore reserves 
        development in a safe and environmentally friendly manner. This 
        project can serve as a model for a similar offshore program 
        that will enable all stakeholders to identify needed research, 
        to provide direction, and to follow progress. Furthermore, the 
        new offshore program can be developed using the same 
        organizational structure as the Environmentally Friendly 
        Drilling Systems Program, and might also explore various 
        approaches to regulate safe activity in the offshore sector, in 
        addition to identifying and developing new technologies. For 
        example, it might investigate the feasibility of a performance-
        based systems approach to enhance or complement the current 
        prescriptive-based method of laws and regulations. It might 
        also address recommendations contained in the Secretary of 
        Interior's May 27, 2010 report: ``Increased Safety Measures for 
        Energy Development on the Outer Continental Shelf,'' 
        particularly recommendations concerning well control systems 
        and safety equipment. Other research needs related to wellbore 
        integrity include cement evaluation technologies, methods to 
        maintain communication and power between the surface and subsea 
        safety systems, and increasing the intervention capability of 
        remotely operated vehicles.

          Identification, development, and improvement of 
        proactive and reactive response procedures and processes will 
        address the research required to minimize response time to an 
        incident, so that environmental impact is minimized. The 
        primary response objectives in any open-water marine spill are:

                  Prevent the spill from moving onshore

                  Reduce the environmental impact

                  Speed the degradation of any unrecovered oil while 
                minimizing the harm on the ecosystems

                  Mobilize rapid well intervention/containment standby 
                equipment

          The industry has various vessels and equipment on standby 
        used to contain spills, to skim, and to deploy dispersants. But 
        quite frankly, the research in this area has been lagging and 
        as evident was not prepared for this past incident. RPSEA is in 
        a position to immediately conduct a research program to 
        identify the state-of-the-art technologies and methodologies to 
        enhance a response to an emergency situation. The Secretary of 
        Interior's report, previously mentioned, also recommends a 
        comprehensive study of methods for more rapid and effective 
        response to deepwater blowouts. This program can also include 
        early warning sensors to identify potential hazards to the 
        environment. And it should also include studies to understand 
        the effect on marine life and other wildlife movements 
        resulting from an incident. Other evaluations might include the 
        effects of using different dispersants on the ocean and marine 
        life, advancing skimming technologies and separation/water 
        handling technologies, prescribed burns impacts, and general 
        emergency preparedness logistics improvements.

          Development of an understanding of the value of 
        ecosystem services and location identification of high value in 
        a seasonally dynamic ecosystem--This program will aim to 
        determine the value of ecosystems. The goal is to study 
        deepwater, coastal regions and Gulf Coast wetlands, in order to 
        identify high value areas to place monitoring and early warning 
        devices. Valuation of ecosystem services can furthermore be 
        used to prioritize spending on ecosystem protection.

    RPSEA has several research projects related to safety and 
environmental studies. In addition, every project in the RPSEA program 
is required to employ a level of understanding of safety and 
environmental impact. Example projects include:

          Our composite riser for ultra-deepwater high pressure 
        wells project is aimed to decrease weight requirements, thus 
        easing the task of riser installation and reducing the 
        potential for human injury.

          The fatigue performance analysis of high strength 
        risers in sour environments project is aimed to improve our 
        understanding of long term riser fatigue physical changes under 
        various dynamic conditions, for various fluid types.

          The effects of climate change on hurricane activity 
        project is a study to better forecast storms in the Gulf of 
        Mexico that can inevitably allow companies to safely and 
        effectively shut down operations and may have an additional 
        benefit of improving hurricane early warning for all Gulf Coast 
        Americans.

          Included in another project is a Self Standing Riser 
        System (SSR) that has recently been developed, with a 
        demonstration project for use in deep water well intervention 
        ongoing. This technology includes a riser and an adjustable air 
        can that may enable operators to do various deep water tasks in 
        an easier, timelier, and safer manner. The system may include 
        blowout preventers at both the mudline (seafloor) and at the 
        water's surface, adding redundancy to current systems.

          Both the hybrid power systems study and the ultra-
        deepwater electrical power distribution systems projects aim to 
        place power where it is needed--near the wellhead. Doing so can 
        increase monitoring and control capabilities, add levels of 
        redundancy to current systems, and reduce response times.

          Similarly, wireless subsea communications can be a 
        game changer when it comes to monitoring and control.

          The new technologies to monitor and inspect pipelines 
        project has the potential to revolutionize early warning 
        methods in that arena.

          The 3-D, high resolution, laser imaging project 
        similarly has the potential to greatly improve offshore 
        equipment inspection, maintenance, and repair.

    Abstracts describing each of these projects and others can be found 
online under the RPSEA public access section at http://www.rpsea.org/
en/cms/?1475
    When the thorough investigation of the Deepwater Horizon incident 
is completed, there will be identified needed changes in deepwater 
drilling standards. Areas that might, require additional standards or 
recommended practice development include:

          Blowout preventer inspection and enforcement 
        procedures, including backup equipment, and reporting 
        requirements

          Well control procedures, training programs, and/or 
        response mechanisms for deepwater wells

          Improved comprehensive safety management programs

          Emergency equipment certification and testing 
        improvements

          Streamlined reporting systems to Governmental 
        agencies

          Additional safety barriers during critical well 
        construction stages

          Well construction certification procedures for cement 
        and tubular equipment

          Standardized well construction procedures from 
        wellhead to the reservoir

          Increased enforcement by Government agencies, 
        including training and development of additional personnel

    RPSEA is currently in the process of developing our 2011 Annual 
Plan for research. The Deepwater Horizon incident has greatly 
influenced us, and thus we will place even more emphasis on safety and 
environmental research. The Deepwater Horizon incident has greatly 
influenced us, and thus we will place even more emphasis on safety and 
environmental research. We must do all we can to make certain that an 
incident like that involving the Deepwater Horizon never happens again.
    The value of collaborative research is important. It is precisely 
because of government funding that a combined group from academia, 
research organizations, and industry can perform this type of research, 
which otherwise would not be cost effective. Thanks to government 
funding through the Energy Policy Act, coupled with significant 
industry cost share, the higher risk technology challenges are being 
addressed, The Section 999 funding of $50 million per year ($37.5 
million to RPSEA and $12.5 million to NETL for complementary research), 
has been far from sufficient to address all the concerns. I hope you 
will agree with the over 170 member companies of RPSEA that this 
program is a great value to our country. We could be far more effective 
if additional funds that have been authorized were appropriated.
    The universities, the subject matter experts, the vendor community, 
the small producers, and the major integrated operators, in cooperation 
with NETL and the DOE, have the network in place to immediately begin 
to develop the technologies needed to add increased safety and 
environmental protection to our drilling efforts. I urge you to see 
RPSEA as a part of the solution to balancing our nation's energy 
imperatives and environmental requirements. We are ready now. We have 
the network now. We are up and running and there will be no delay 
because our relationship with the government and other stakeholders is 
already in place. We can begin developing solutions now.
    Thank you for this opportunity to discuss the ongoing research and 
needs related to deepwater spill prevention and mitigation.

                       Biography for James Pappas
    James Pappas is Vice President of Technical Programs for RPSEA, the 
Research Partnership to Secure Energy for America, in Sugar Land, TX. 
He has held the positions of Global Technology Coordinator, Facilities 
Engineer in the Deepwater & International Well Engineering & Facilities 
Division, Deepwater Project Coordinator for Devon Energy in the past, 
as well as Production Engineer in the Gulf of Mexico Division for 
Devon, and Santa Fe Snyder prior to their merger. He has also held 
drilling, completions, production, operations superintendent, 
reservoir, and acquisitions and divestitures (A&D) positions with Fina 
Oil and Chemical Company, UPRC, and Amoco Production Company.
    He has been involved with the Society of Petroleum Engineers for 30 
years. He is both the immediate past SPE International Production and 
Operations Technical Director and SPE Technical Programs and Meetings 
Committee Chair, and is a former chair of the 13,000-member SPE-Gulf 
Coast Section. He serves on several technical program committees for 
meetings including: the Offshore Technology Conference (OTC), SPE 
Annual Technical Conference and Exhibition (ATCE), the Latin American 
Continental Petroleum Exhibition and Conference (LACPEC), the SPE R&D 
Conference, and the SPE Production & Operations (P&O) Conference. He is 
also the immediate past Private Industry Practice Chair and Executive 
Committee member of the Texas Society of Professional Engineers and 
serves on that body's Legislative and Governmental Affairs Committee. 
He is also active in the American Petroleum Institute (API), National 
Society of Professional Engineers (NSPE), the American Association of 
Drilling Engineers (AADE), and Marine Technical Society (MTS), and he 
chairs the University of Texas Petroleum Engineering Advisory Council.
    James has authored over 40 papers or spoken at various conferences 
and interviews on various technical and professional topics including: 
Monte Carlo reservoir simulation, hydraulic fracture analysis, well 
conformance remediation, subsea tiebacks, flow assurance issues, 
floating platform concepts, project management, drilling, government 
and the oil and gas industry, engineering, professionalism, recruiting, 
training and development, retention, volunteerism, and ethics.
    James earned a Bachelor of Science degree in Chemical Engineering, 
as well as a Bachelor of Arts in Chemistry with Math and Spanish 
minors, from the University of Texas at Austin in 1979. He graduated 
with a Master of Business Administration with highest honors from the 
University of Texas at Tyler in 1993. He has earned numerous accolades 
including the SPE Gulf Coast Section and Gulf Coast Region Service 
Awards, Houston Area Engineer of the Year in 2007, Texas Engineer of 
the Year by the Texas Society of Professional Engineers in 2008, and 
was selected Distinguished Engineer in Texas by the Texas Engineering 
Foundation in 2008. He has been a Registered Professional Engineer in 
Texas since 1985.

    Chairman Baird. Thank you, Mr. Pappas.
    Dr. Baugh.

      STATEMENTS OF BENTON BAUGH, PRESIDENT, RADOIL, INC.

    Dr. Baugh. My name is Benton Baugh and I have been asked to 
give testimony on the current state of the drilling equipment 
and whether or not it provides an adequate level of safety for 
doing deepwater drilling. It is my opinion that the systems are 
currently developed to a state that they are completely 
adequate to provide protection to the environment and safety of 
the personnel. My opinion is based upon working in this 
industry for more than 50 years, having received more than 100 
U.S. patents primarily in this area, and specifically having 
received a patent on almost every subassembly of a deepwater 
drilling system.
    Subsea drilling has existed for about 50 years--from the 
early 1960s when it was considered to be ultra-deep drilling to 
drill in 250 feet of water, to now where we are commonly making 
equipment for 10,000, 12,000 feet of water. Overall, there is 
an impressive safety record for having drilled in this time.
    The subsea business that we are talking about--and I will 
be talking primarily from the point of view of a manufacturer--
the subsea business system is dominated by three major 
manufacturers. Each of these has highly specialized safety 
systems, highly developed manufacturing systems, and each of 
them has ISO-quality certification and follows conventional 
practices of design, testing, and verification of their 
equipment. You can fully expect that any equipment in the field 
has been pressure-tested to 50 percent higher than the pressure 
it will ever see in the field. It has been loaded to loads 50 
percent higher than any load that it is ever expected to see in 
the field. You can also expect that this equipment is regularly 
tested in the field, and is certified on an ongoing basis to 
maintain the quality of equipment.
    The company I work for is a second-level company, and that 
means that, basically, we sell equipment to a first-level 
company who provides it directly to the operators. On the first 
slide you see here is a set of reels which we would provide to 
a company like one of the major first-level companies. The 
yellow and blue reel there handles electrical umbilicals that 
go down and control the control pods on the sea floor. The 
white one will be a hydraulic hose that takes hydraulic power 
down and provides power for the systems on the sea floor.
    What you see on the left of this slide is an ISO 9001 
certification which our company has received. It is a 
certification that we have systems in place to maintain quality 
and traceability of all equipment that we do. It is a very 
difficult certificate to get for a manufacturer. On the right 
side is a type of approval certificate which is for a piece of 
equipment. It says that not only a third party, in this case, 
Det Norske Veritas, has certified that we have good equipment. 
They have it certified as a standard type of equipment, so in 
the future anything similar to that is automatically approved, 
because they have done a complete analysis on it.
    On this slide, what you will see is what we call a FAT 
test. We do this on every piece of equipment that leaves our 
company. On the left side is simply the cover sheet of it. On 
the right side, what you see is page ten of 15 of the FAT test, 
and what you will notice coming down is, on the left column, 
there will be a signature by the Radoil employee that confirmed 
that this step was successfully accomplished during this FAT 
test. Toward the center of the page you will see little round 
circles. That means that the customer's inspector has come and 
has certified that this has successfully passed the test as 
specified. On the right there is an oval stamp. That is the 
American Bureau of Shipping. That says a third party has come 
in and has certified that it has passed these steps in the 
test. This happens over 15 pages on these reels and this is 
characteristic of what you would expect in the offshore 
industry. All of our products don't require this level of 
quality, but this is characteristic of what you would expect to 
see if something goes offshore.
    Again, these are practices you would expect of all the 
first-level manufacturers. There is an obligation, basically, 
that if a manufacturer buys something from an ISO-certified 
supplier, you automatically get accepted as a supplier. For 
instance, if we choose to accept some equipment from someone 
that is not ISO certified, it becomes our requirement to do the 
ISO certification for it. We must do the inspection, we must do 
all things to make it good. Again, this is what you expect from 
these first-tier providers. They provide good equipment. It is 
very well certified.
    The well that we are talking about here is not something 
where they were doing experimental things, pushing the 
envelope. It was drilled in about 5,000 feet of water. It is 
very likely that this very same rig had drilled in at least 
10,000 feet of water, and, I can assure you, if it hadn't 
drilled in 10,000 feet of water, it was most likely certified 
to be able to drill in 10,000 feet of water. There is very 
little difference when you go offshore between drilling in 
1,000 feet of water and 10,000 feet of water. It is just wet. 
The biggest change you see is what happens on the nitrogen 
accumulator banks, and that is a well-studied subject, but, 
basically, there is very little difference in 1,000, 5,000 or 
10,000 feet of water. This is highly capable equipment.
    Again, the actual cause of what we are talking about here 
may never be known. Depending on how we get closure on this 
particular well, it could be submitted up right to the top and 
never touch it and not ever take a chance on the thing, but it 
appears reasonable that there is a good chance it had nothing 
to do with equipment, that it had to do with the ways some 
operations were done. It is potentially not an equipment 
problem at all.
    Chairman Baird. Dr. Baugh, I am going to ask you to 
conclude at this point. We have got five minutes per witness, 
and----
    Dr. Baugh. Oh, I am sorry.
    [The prepared statement of Dr. Baugh follows:]
                   Prepared Statement of Benton Baugh
    I have been asked to give testimony as to whether current subsea 
drilling equipment is sufficiently developed to provide an adequate 
level of safety for deepwater drilling operations.
    It is my opinion that the current state of technology of subsea 
drilling system is completely adequate to provide an appropriate level 
of safety to control wells being drilled, protect the environment, and 
provide safety for personnel. The basis of my opinion is more than 50 
years of working in oilfield equipment design and manufacturing, 
receiving more than 100 U.S. patents, and having personally received a 
patent on almost every subassembly of a subsea drilling system.
    Subsea drilling systems have existed for approximately the same 
period of time, from the early 60s when 250, of seawater was considered 
ultra-deep, until now when we are drilling in 12,000, of seawater. 
Overall they have an impressive safety record. The BOP or blowout 
preventer stack is a piece of seafloor equipment approximately 12 foot 
square by 80 feet tall which typically weigh 600,000 to 800,000 lbs. 
They are connected to a surface vessel by a 21" outside diameter steel 
riser pipe with flotation added to give it approximately a four foot 
diameter.
    This subsea equipment business we are discussing is dominated by 3 
major first level manufacturers. Each of these suppliers have highly 
developed and refined systems. Each of these suppliers is ISO quality 
certified and follows conventional procedures of design, development, 
testing, and independent verification. You can fully expect that any 
system in the field has been tested to loads and pressures 50% higher 
than the loads and pressures ever anticipated to be seen in operations, 
and that the testing has been verified by independent third parties. 
You can equally well expect that the equipment is regularly tested to 
the maximum working pressures to confirm ongoing workability.
    The company I work with is a second level company which sells large 
reels to each of these first level suppliers. On the first slide 
presented you can see a set of these reels of the type which will hold 
10-12,000, of umbilical or hose to send signals and power to the subsea 
BOP control pods. The second slide on the left hand side shows a copy 
of the ISO 9001:2008 certification which we have received to certify 
that we have systems in place to promote the delivery of quality 
products. The right side of the same slide shows a ``Type Approval'' 
which we have received for a design, implying that not only has a 3rd 
party certifier checked the design, but has approved it as a type of 
design.
    The third slide shows a factory acceptance test or FAT test for a 
product, in this case a reel. On the left side is the first page of the 
FAT and on the right side is page number 10 of 15 pages of this FAT 
test. On the right side you will notice that our personnel have signed 
that each step has been successfully accomplished. Each of the small 
round stamps indicate that our customer's quality control personnel 
have witnessed and confirmed each requirement. Each of the oval stamps 
indicates that an independent third party, in this case the American 
Bureau of Shipping, has witnessed and confirmed each step. This occurs 
on every performance step, every pressure step, and every load step. 
All of our products do not require this level of quality and 
verification, but this is characteristic of what goes offshore.
    These are the practices you would expect of the current first level 
suppliers. Clearly the systems for appropriate design, testing, and 
verification are in place today.
    The well in question does not represent a ``pushing of the 
envelope'' in terms of what has been done. It is in 5000, of water and 
likely the exact rig had drilled other wells in depths greater than 
10,000,. There is very little difference in drilling in 1000, of 
seawater and 10,000, of seawater. Probably the biggest difference is in 
what happens to the nitrogen charge in the accumulators which is well 
studied. The actual cause of the current problems is not known, and may 
well never be known depending on how ultimate closure happens to this 
well. Clearly it is the confluence of a number of events, none of which 
may have been the fault of the drilling system.
    In spite of the current difficulties with the Maconda well blowout, 
there have been approximately 4000 offshore wells drilled and the last 
significant spill from a U.S. offshore well was in the Santa Barbara 
Channel, about 30 years ago. This is an impressive record of complex 
systems handling the critical sources of energy upon which our 
civilization is based.
    The present question is whether a work stoppage will improve or 
reduce safety and technology. There is not a question whether we need 
fossil fuels in our lifetime. In spite of substantial investments to do 
so, it is clear that there will be no substitute for fossil fuels in 
our lifetime. A substantial work stoppage or moratorium will mean:

        1.  A reduction in safety because when the work restarts it 
        will restart with a high percentage of less skilled workers. 
        The most dangerous time for operations is when new workers 
        start up a new task, and that is exactly what this will cause.

        2.  A reduction in safety because stopping drilling will cause 
        more oil to come from foreign sources by tanker. It is far less 
        safe for oil to be brought to the U.S. by tanker than it is to 
        flow in a passive subsea pipeline to the shore. In fact, the 
        last significant spill oil spill in the U.S. was that of a 
        tanker--the Exxon Valdez.

        3.  Financial damage to the work force and U.S. companies will 
        likely be more extensive than the oil spill itself, with no one 
        to pay for it.

    I assure you that the technology is in place and the systems are in 
place to do safe deepwater drilling. For these reasons I recommend:

        1.  The moratorium be lifted as soon as practical.

        2.  As equipment comes back to the surface, it be retested to 
        confirm compliance with original factory acceptance testing and 
        systems integration testing and have full independent 3rd party 
        verification. If it is, the rig needs to go right back to work 
        and continuity of the work force needs to continue.

        3.  All equipment and systems fabricated for collecting the 
        present spill be captured and further developed in case another 
        spill happens in the future.

        4.  Shear rams and shear ram actuators need continuing 
        development as the wall thickness and material strength of the 
        drill pipe is increased.

        5.  Tertiary back-up systems be commonly defined and 
        implemented.

        6.  ROV interface systems be further developed for a fourth 
        level of back-up control.
        7.  To a large extent, if existing rules, regulations and 
        practices are enforced the overall quality and safety of the 
        industry will be approved.

    I encourage and promote ongoing and aggressive new product 
development and systems upgrade, not for 6 months but forever. At this 
time, in the past, and in the future it has been or will be appropriate 
to pursue upgrades in safety and technology. We will never reach 
perfection except in the smallest areas. We need to put our people and 
the country back in business now, not after some future arbitrary date.





                       Biography for Benton Baugh
    Benton F. Baugh, Ph.D., P.E. is President of Radoil, Inc. which 
does oilfield engineering and manufacturing and Baugh Consulting 
Engineers, Inc. which does oilfield related consulting and expert 
witness work. Significant product areas are Reels for Deepwater Control 
Systems, Deepwater Drilling Riser Centralizers, J-Lay Pipeline Towers, 
Arctic Platforms, and pipeline blockage remediation activities.
    He is a registered professional engineer having earned a BSME 
degree from the University of Houston and earned MS and Ph.D. degrees 
from Kennedy Western University. Prior to starting his own businesses, 
he worked with Beta Division of Brown Oil Tools, Vetco Valve Company, 
Vetco Offshore, Cameron Iron Works, Camco, and Bowen Tool Company
    He is a member of the National Academy of Engineering, an Adjunct 
Professor at the University of Houston, a Fellow in the American 
Society of Mechanical Engineers; and a member of the Marine Technology 
Society. He has written numerous technical papers, holds more than 100 
patents, has been Chairman of the ASME Petroleum Division, President of 
the University of Houston Engineering Alumni Association, Chairman of 
the ASME/UH OTC Cajun Crawfish Boil, on the Board of Directors of the 
Offshore Technology Conference and on the Board of the Offshore Energy 
Center.

    Chairman Baird. That is all right. If there will be other 
points you want to make, I am sure we will have a chance to do 
those in questioning.
    Mr. Milito.

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

    Mr. Milito. Good morning, Chairman Baird, Members of the 
Subcommittee. Thank you for the opportunity to address 
deepwater technology, research and development. My name is Erik 
Milito and I am the Upstream Director for the American 
Petroleum Institute. API has more than 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 in the Gulf of Mexico related to the 
offshore development business, and this industry provides most 
of the energy that America needs.
    First, our thoughts and prayers go out to families who have 
loved ones, to the workers who were injured, and to our 
neighbors in the Gulf who are affected by this tragic accident.
    In testimony just last month, Secretary Salazar said the 
offshore oil and natural gas industry is a very highly 
regulated industry. Indeed, offshore operators are subject to 
27 statutory authorities, 88 CFR parts in terms of the Federal 
regulations, and 27 permits and approvals. All these apply to 
offshore operations. However, our industry's top priority is to 
provide energy in a safe, technologically sound and 
environmentally responsible manner. We thus take seriously our 
responsibility to work in cooperation with the government to 
develop practices and equipment that improve the operational 
and regulatory processes across the board. We support the 
government's ongoing review of the incident and the existing 
systems in place. The industry will take the necessary steps to 
prevent accidents like this from occurring again.
    As further proof of our commitment, API has been the leader 
for nearly nine decades in developing voluntary industry 
standards that promote reliability and safety through proven 
engineering practices. API's standards program is accredited by 
the American National Standards Institute, the authority on 
U.S. standards, and undergoes regular program audits to ensure 
it meets ANSI's essential requirements. API standards are 
developed through a collaborative effort with industry experts, 
as well as the best and brightest technical experts from 
government, academia, and other stakeholders.
    API maintains more than 500 standards which include 
recommended practices, specifications for equipment, codes, 
technical publications, reports, and studies that cover all 
aspects of the industry, including 240 focused on exploration 
and production activities related to offshore development. The 
standards are normally reviewed every five years to ensure they 
remain current, but some are reviewed more frequently based on 
need. In the case of the Deepwater Horizon incident, we are 
already going to work and we have activity in place to review 
standards and to develop new standards already. API standards 
are frequently referenced in Federal regulations because they 
are recognized to be industry best practices. The Minerals 
Management Service references 78 API standards in its offshore 
regulations. Overall, nearly 100 API standards are referenced 
in more than 270 citations by government agencies, including 
the Environmental Protection Agency, the U.S. Department of 
Transportation, and the Occupational Safety and Health 
Administration, in addition to the MMS.
    Complementing our standards program, API has a separate 
industry quality program. First established in 1924, the API 
Monogram provides for the consistent and reliable manufacture 
of equipment and materials in accordance with our standards and 
recommended practices. The program grants manufacturing 
licenses for more than 70 API equipment specifications. The 
Monogram program is governed by consensus committees consisting 
of technical experts from the industry, government, academia, 
and other stakeholders. More than 5,000 licenses have been 
issued to some 3,000 facilities in 70 countries to companies 
ranging from small firms to multinational corporations making a 
wide range of equipment.
    The industry is committed to a goal of zero fatalities, 
zero injuries, and zero incidents. I appreciate the Chairman's 
comments at the outset which recognize the efforts in the Gulf 
region, and the industry is committed to helping out in those 
efforts and has already taken steps to look across at what the 
industry is doing throughout offshore operations to elevate 
industry standards to make sure that we have the best systems 
in place. Immediately following the incident, the API and the 
industry as a whole assembled the world's leading experts to 
conduct a top-to-bottom review of offshore drilling procedures 
from operations to emergency response. Two industry task forces 
that are addressing issues related to offshore equipment and 
offshore operating practices delivered recommendations to the 
Interior Department last month. In fact, the Interior 
Department report of May 27th actually includes a lot of the 
recommendations made by industry with regard to equipment and 
procedures. Two other task forces to address subsea well 
control and oil spill response have also begun their work.
    We intend to use any findings from the incident 
investigation to continue to improve the technologies and 
practices to achieve safe and environmentally sound operations. 
As part of this process, we will work to develop new API 
standards, and will revise and adapt existing standards to 
raise the bar of performance. We look forward to providing 
constructive input as this Committee, the Congress, and the 
Administration consider changes to existing policy.
    This concludes my statement, Mr. Chairman, and I welcome 
questions from you and your colleagues. Thank you.
    [The prepared statement of Mr. Milito follows:]
                   Prepared Statement of Erik Milito
    Good morning Chairman Baird, Ranking Member Inglis, and members of 
the subcommittee. Thank you for the opportunity to address deepwater 
technology research and development.
    My name is Erik Milito. I am the upstream director for the American 
Petroleum Institute. API has more than 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 America needs.
    First, our 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 
affected by this tragic accident.
    In testimony last month, Secretary Salazar said the offshore oil 
and natural gas industry ``is a very highly regulated industry.'' 
Indeed, offshore operators are subject to significant Federal 
regulatory requirements, including 27 statutory authorities, 88 Code of 
Federal Regulations parts, and 24 significant approvals and permits.
    However, our industry's top priority is to provide energy in a 
safe, technologically sound and environmentally responsible manner, and 
we therefore take seriously our responsibility to work in cooperation 
with government to develop practices and equipment that improve the 
operational and regulatory process across the board. We, therefore, 
support the government's ongoing review of the incident and the 
existing systems in place and industry will take the necessary steps to 
prevent accidents like this from occurring again.
    As further proof of our commitment, API has been the leader for 
nearly nine decades in developing voluntary industry standards that 
promote reliability and safety through proven engineering practices. 
API's Standards Program is accredited by the American National 
Standards Institute (ANSI), the authority on U.S. standards, and 
undergoes regular program audits to ensure it meets ANSI's Essential 
Requirements. API's standards are developed through a collaborative 
effort with industry experts, as well as the best and brightest 
technical experts from government, academia and other stakeholders.
    API maintains more than 500 standards--recommended practices, 
specifications, codes, technical publications, reports and studies--
that cover all aspects of the industry, including 240 focused on 
exploration and production activities. The standards are normally 
reviewed every five years to ensure they remain current, but some are 
reviewed more frequently based on need.
    API's standards are frequently referenced in Federal regulations 
because they are recognized to be industry best practices. MMS, for 
example, references 78 API standards in its offshore regulations. 
Overall, nearly 100 API standards are referenced in more than 270 
citations by government agencies, including USEPA, the Department of 
Transportation and OSHA, in addition to MMS.
    Complementing our standards program, API has a separate industry 
quality program. First established in 1924, the API Monogram Program 
provides for the consistent and reliable manufacture of equipment and 
materials in accordance with our standards and recommended practices. 
The program grants manufacturing licenses for more than 70 API 
equipment specifications.
    The Monogram Program is governed by consensus committees consisting 
of technical experts from industry, government, academia and other 
stakeholders. More than 5,000 licenses have been issued to some 3,000 
facilities in 70 countries to companies ranging from small firms to 
multinational corporations making a wide range of equipment.
    The industry is committed to a goal of zero fatalities, zero 
injuries and zero incidents. It has already taken steps to improve 
safety and environmental performance in the aftermath of the Gulf 
incident. Immediately following the incident, we assembled the world's 
leading experts to conduct a top-to-bottom review of offshore drilling 
procedures, from operations to emergency response. Two industry task 
forces that are addressing issues related to offshore equipment and 
offshore operating practices delivered recommendations to the Interior 
Department last month. Two other task forces, to address subsea well 
control and oil spill response, have also begun their work.
    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 work 
to develop new API standards and revise and adapt existing API 
standards to raise the bar of performance to a higher level.
    We look forward to providing constructive input as this committee, 
the Congress and the Administration consider changes to existing 
policy.
    This concludes my statement, Mr. Chairman. I welcome questions from 
you and your colleagues. Thank you.

                       Biography for Erik Milito
    Erik Milito is the Director of Upstream and Industry Operations for 
the American Petroleum Institute (API), which is the national trade 
association representing more than 400 companies involved in all 
aspects of the oil and gas industry, including exploration production, 
refining and transportation. Mr. Milito's work covers regulatory and 
legislative matters related to domestic exploration and production, 
including access to domestic oil and natural gas resources both onshore 
and offshore. Prior to his current position, Mr. Milito served as 
managing counsel covering a host of issues, including oil and gas 
leasing, royalty, environmental, fuels, transportation, safety, and 
civil justice reform. Prior to joining API, Mr. Milito served for over 
four years on active duty in the U.S. Army as a judge advocate, and 
additional four years in the U.S. Army Reserve, resigning at the rank 
of Major. Mr. Milito was assigned to active duty tours in Hawaii, Korea 
and Aberdeen Proving Ground, Maryland, and he served as a prosecutor, 
defense attorney and command advisor. Mr. Milito was awarded the 
Meritorious Service Medal and Army Commendation Medals during his 
military tenure. After leaving the Army, Mr. Milito worked as a career 
attorney with the Solicitor's Office of the U.S. Department of the 
Interior. While at Interior, Mr. Milito worked on royalty, employment 
law, and disability access issues. Mr. Milito attended the University 
of Notre Dame on an R.O.T.C. scholarship, and received a bachelor's 
degree in business administration. Mr. Milito then received his juris 
doctor from Marquette University Law School, where he was a member of 
the law review. Mr. Milito has authored and co-authored several papers 
related to natural resources issues and has served as a guest speaker 
on multiple occasions. Until recently, Mr. Milito served on the Board 
of Trustees of the Rocky Mountain Mineral Law Foundation. Mr. Milito 
and his wife Elizabeth have two children, William and Helen, and live 
in Alexandria, Virginia.

    Chairman Baird. Thank you, Mr. Milito.
    Mr. McCormack.

  STATEMENTS OF GREG MCCORMACK, DIRECTOR, PETROLEUM EXTENSION 
              SERVICE, UNIVERSITY OF TEXAS-AUSTIN

    Mr. McCormack. Mr. Chairman, Members of the Committee, and 
staff, thank you for inviting me to present and talk about 
training. Training is the key to safe application of industry 
technologies.
    You may wonder why the University of Texas is here to talk 
about training. The University of Texas is a land-grant 
institution, which means when it was first established over 100 
years ago, it was given three million acres out in west Texas. 
The three million acres then were worth nothing, but guess 
what? We found oil and natural gas on those three million 
acres, and so it became quite important to the University 
system. Back in 1944, the industry found itself with a skill 
gap shortage. The legislature of the State of Texas mandated 
that the University would provide training to the oil and gas 
industry, and we have been doing that ever since. We provide 
not only training, but we also provide training material and 
audiovisuals to the industry. We have trained Minerals 
Management Service, Bureau of Land Management, Homeland 
Security, JWAC, and most of the companies that are involved in 
the petroleum industry.
    I personally have worked in the industry for 40 years and 
have seen many changes, and what hasn't changed is the impact 
of technology on this industry. It has been a technology-driven 
industry almost right from the inception. Training is a 
critical component of this industry, but it has not improved at 
the same speed as the technology. As a trend, I have observed 
over 40 years a shift from an investment-based industry to a 
more cost-focused business. Technology drives down cost. 
Unfortunately, training is looked at as cost and not an 
investment. Without appropriate training, technology comes with 
risk.
    Today, training is down 25 percent over the training that 
was done in 2008. I would challenge the industry through its 
associations to have its members step up and increase their 
funding for training. The American Petroleum Institute, 
respected worldwide, a leader in setting standards in many 
places for the industry, should also be a leader in training 
standards. I notice a very direct correlation to profitability 
of the industry and the amount of investment and training. With 
fluctuating profitability, there is a fluctuation in training, 
and it should not be surprising that the results and 
effectiveness of training fluctuate, as well.
    For the most part, the industry has created relevant 
content that should allow anyone who is trained in this content 
and passes appropriate testing to become knowledgeable about 
drilling rig safety and drilling rig operations. But training 
is not experience. This industry currently is losing experience 
at a faster rate than it is gaining it. So we have a problem in 
experience attrition.
    One of the other real issues at hand is the growing 
multigenerational aspects of the workforce, with its mix of 
four distinct generations with disparate life experiences, 
varying ways of communicating, and distinctly different goals 
for professional careers. We have not learned how to train this 
multigenerational workforce.
    The days of cheap oil are over. The great technological 
challenges in locating, drilling for, and producing 
hydrocarbons have taken a quantum leap forward in complexity. 
Unfortunately, training has not kept up with that complexity.
    New technologies and training are invaluable. Ironically, 
it is the new generation that invented many of the new 
multimedia technologies. Fortunately, they are also very 
comfortable using those technologies. Though online training 
has existed for some time, in most cases, it has not been very 
interactive or intuitive. It is therefore necessary to rethink 
and reposition online training in formats that are familiar to 
newer generations of professionals.
    What can the government do? I think the government can step 
in and look at the best practices of training that are underway 
today and pull those together and communicate them to all 
parties. It could include a training reporting system similar 
to the financial reporting system. They could audit the 
effectiveness of training providers. There is a great spectrum 
of training providers with great capabilities, and some with 
not so great capabilities.
    The third area is to encourage the industry to fund 
fundamental research in how to train and retain the 
multigenerational workforce. Billions are spent on research; 
half a billion cumulatively spent on alternative fuels. I know 
of no funds that are being expended on research on training 
methodologies.
    [The prepared statement of Mr. McCormack follows:]
                  Prepared Statement of Greg McCormack

Training is Key to Safe Application of Industry Technologies

    Thank you for the invitation to present our views on Science and 
Technology as it pertains to training in the oil and gas industry. The 
University of Texas through PETEX (Petroleum Extension Service) has 
been providing training and training materials to the oil and gas 
industry since 1944. We work with the industry through its many 
organizations and associations to define its needs and produce quality 
training, publications and audiovisual products. I have personally 
worked in the industry for 40 years and have seen many changes, and 
what hasn't changed is the impact of technology on the industry. It has 
been a technology-driven industry almost from its inception. From 
locating oil from natural seeps to having the ability to drill in 
12,000 feet of water to a total vertical depth of 30,000 feet, 
technology has enabled the industry to succeed. Without relatively 
inexpensive oil and gas, growth in world economies would have slowed.
    Training is a critical component of this industry. As we drill 
deeper in more remote locations, the need for technology has become 
greater along with the need for training to apply technology safely and 
effectively. A trend that I have observed over my 40 years of 
experience is a shift from an investment-based industry to a
    more cost-focused business. Technology drives cost down. 
Unfortunately, training is looked at as a cost and not an investment. 
Without appropriate training, technology comes with risk. Today, 
training is down by over 25% from levels experienced in 2008. I would 
challenge the industry through their associations to have their members 
step up and increase their funding for training. The American Petroleum 
Institute, the leader in setting standards in many places for the 
industry, should also be the leader in training standards. My 
perception is that there has been a reluctance to put capital into 
training because it is difficult to measure the return you get from 
that investment. On the other hand, everyone in a leadership role in 
the oil and gas industry has been educated and trained both as an 
undergraduate and in further development during in their career. I 
believe that they feel it was a wise investment. I am not sure that 
they feel that a similar investment in training for entry-level 
personnel is as valuable. I notice a very direct correlation to 
profitability of the industry and the amount of investment in training. 
With fluctuating investment in training, it should not be surprising 
that the results and effectiveness of the training fluctuates.
    There are two different kinds of training required to safely and 
successfully operate a drilling rig, whether on land or over water. The 
first type of training relates to the operation and maintenance of the 
drilling rig itself. The second type of training is very specific to 
the oilfield services provided to support the drilling activities. 
These include, cementing, casing, drilling fluids, logging while 
drilling (LWD), measurement while drilling (MWD), running wireline, 
perforating, etc. The first type of training is usually provided by 
third-party training providers or carried out in-house. The second type 
is usually provided by the companies that are providing the oilfield 
services, because it is very specific to each individual company's 
equipment and products. I am going to address the first type of 
training.
    The oil and gas industry faces many challenging issues in training, 
now and in the future. For the most part, the industry has created 
relevant content that should allow anyone who is trained in this 
content and passes appropriate testing to become knowledgeable about 
drilling rig safety and drilling rig operations. The knowledge gap 
created by ``The Great Crew Change'' that exists in most companies has 
been well documented and discussed. This knowledge gap was caused by 
inconsistent hiring during periods of low oil and gas prices. The 
problem is not one of filling the gaps. There are sufficient numbers of 
people entering the workforce to do that. The problem is one of 
``experience attrition,'' and it is a challenge that must be addressed. 
We should not expect that in replacing a retiring person with over 30 
years of experience with an entry-level person that performance would 
not decline without extra efforts to replace years of experience with a 
significant increase in training. I don't see this situation being 
addressed. With large gaps in experience, personnel are promoted from 
one position to the next at a faster rate than in the past.
    The characteristics and expectations of `Generation Y' or the `New 
Millennials' have been examined and debated. They learn differently and 
in much shorter spans of time. The real issues at hand are the growing 
multigenerational aspects of the workforce with its mix of four 
distinct generations with disparate life experiences, varying ways of 
communicating, and distinctly different goals for their professional 
careers. The first of the baby boomers reached age 60 in 2008. In 
perspective, the average age for retirement in the oil and gas industry 
is 59. Along with the global economic slowdown and stock market slump 
is a rise in the average retirement age. These three impacts--boomers, 
industry retirees, and economic changes--are all interrelated and 
impacted by the cyclical nature of the oil and gas industry.
    This cyclicality is our industry's hurdle in trying to resolve 
issues surrounding the employment of top talent going forward. 
Cyclicality is also the area over which the industry has least control. 
It is inevitable that the industry will be cyclical because it is 
based, quite simply, on supply and demand.
    Why is cyclicality so important? The answer becomes clear from the 
perspective of career time spans and talent management. Most employees 
in the oil and gas industry are responsible for developing a career 
spanning an average of 35 to 40 years. During the last 40-year time 
span, there have been seven business cycles. Driven by Wall Street and 
shareholder interests, the industry has always reacted to these cycles 
by reducing fixed costs as they would in any downturn in the economy. 
However, the main element of fixed costs is employee expense. So if the 
oil and gas industry is driven by quarterly earnings, as are many other 
industries, then it will respond by driving down fixed costs and 
therefore, employee costs. This industry will need the brightest and 
the best to deliver what the world needs, which is energy to drive 
economic growth. Energy means oil and gas accompanied by great 
technological advances that require great technical talent. Is the 
industry ready to attract, train, and--the biggest challenge--retrain 
professionals to step up to the plate? Companies seem to have little 
difficulty in investing in new technologies and equipment that have 
long payout times but are reluctant to invest in training that could 
have immediate results. There are no easy answers.
    A look forward to 2025 forecasts an increasing worldwide demand for 
oil, from 85 million BBLS/day to 115 million BBLS/day. Fossil fuels--
oil, natural gas, and coal--make up 86% of the world's energy supply. 
Matters are complicated by the fact that fossil fuels are under attack 
by proponents of global warming. Production will have to increase by 30 
million BBLS/day in the next 15 years or equivalent substitutes for oil 
will be necessary. Currently, 98% of transportation fuels come from 
crude oil, yet production from existing fields is declining anywhere 
from 10% to 60% depending on the field.
    Another contemporary issue is that new supplies of oil and gas are 
coming from deeper and more difficult formations. The technological 
challenges in locating, drilling for, and producing hydrocarbons have 
taken a quantum leap forward in complexity. The 93% of conventional 
resources that currently exist are owned or controlled by National 
Governments (NOG) or National Oil Companies (NOC). This leaves only 7% 
of conventional hydrocarbons, and a large part of the unconventional 
ones, in play to the highest bidder. Of course, the NOGs and NOCs still 
require a full suite of technically skilled personnel.
    The question arises: What are unconventional hydrocarbons anyway? 
Put simply, they are either very heavy oils or hydrocarbons held 
tightly in reservoirs of very low permeability. What new technologies 
will be required to extract these unconventional hydrocarbons and what 
training is going to be needed to support these technologies?
    Locating and reaching these hydrocarbons requires new technologies 
in the form of highly sensitive equipment, higher speed processing of 
seismic data, better software algorithms, electromagnetic field 
interactions to supplement seismic and visualization techniques--all 
requiring significant and continuous training investments. The new 
frontiers of exploration and production will require not only training 
in those regimes but also new materials and modes of operations to 
succeed.
    The petroleum industry started globalizing in the 1920s. This 
movement has accelerated in the past two decades and has significantly 
impacted the types of skills required to succeed. These tend to be the 
``soft skills'' needed in relating to a multicultural workforce and in 
dealing with NOGs and NOCs.
    The immediate challenge today is transmitting the soft and hard 
skills necessary to quickly bridge the gaps between new and existing 
personnel. Productivity is an ongoing training concern, both in time to 
train and time to be trained. Today, training is moving closer to sites 
of operations--a trend that will only increase as the number of new 
entrants to the industry increases. Those personnel who might be 
released for extended periods of time from the worksite to train will 
be in short supply. To decrease time away and increase productivity at 
the worksite, travel time must be eliminated or reduced.
    New technologies in training are invaluable. Ironically, it is the 
new generation who invented many of the new multimedia technologies. 
Fortunately, they are also very comfortable using them. Although online 
training has existed for some time, in most cases, it has not been very 
interactive or intuitive. It is therefore necessary to rethink and 
reposition online training in formats that are familiar to a newer 
generation of petroleum professionals.
    Company trainers and good trainers in general are also in short 
supply; so as a consequence, training of employees will be done in 
smaller increments and more frequently, allowing more time on duty. The 
qualifications for being an effective trainer in the oil and gas 
industry need to be researched. But if we rely on distributed training, 
blended learning, and smaller increments of training, how do we track 
the extent and effectiveness of our training? Learning management 
systems become important in tracking training effectiveness and e-
learning comprehension through testing both written and on-the-job 
skills application. The whole area of blended learning needs to have a 
lot of attention paid to it. There is no clearly defined mix of 
learning modes that gives the greatest outcome.
    Companies, government agencies, and society at large demand that 
training provide competence. It is going to be the joint responsibility 
of training providers and companies to certify competence. At the end 
of the day, companies want a measurable return on investment (ROI). 
They want to achieve a reduction in accidents, an improvement in oil 
and gas measurement yield, and fewer lost days of production. The 
measured ROI will require considerable effort to develop a system that 
can isolate the effects of training on an organization.
    Moving forward, the industry will be challenged by its cyclicality 
of financial results. There will be an intense need to hire the 
brightest and most technically competent employees to meet the future 
challenges. The industry cannot afford to be seen as an unstable 
workplace.
    What role if any should the government take in training? I think 
that there are three things that the government should be prepared to 
do. The first is to develop a set of best practices from all of 
training underway in the industry today and communicate them to all of 
the involved parties. This could include a training reporting system 
similar to the Financial Reporting System (FRS) that focuses on key 
metrics for training. The second is audit the effectiveness of training 
providers. This can be done by testing the personnel that have been 
trained after they have been on the rig for a period of time. This 
should be ``surprise'' testing to determine the retention rate of 
training. This will do a number of things: it will allow an assessment 
of the training providers and it will provide metrics to determine the 
retraining periodicity. This can be done in conjunction with API and 
the International Association of Drilling Contractors (IADC) who have 
certification criteria for training providers. The third area is to 
encourage the industry to fund fundamental research in how to train and 
retrain the multigenerational work force that exists in industry today. 
We need to determine the best mix of learning delivery systems that is 
the most effective in delivering results.

                      Biography for Greg McCormack
    Gregory M. McCormack is director of PETEX (Petroleum Extension 
Service), a continuing education unit of The University of Texas at 
Austin. He leads the organization's efforts in providing quality 
education and training to oil and gas industry personnel worldwide. 
With oversight of expanding facilities in both Austin and Houston, he 
focuses on continuing business development and workplace excellence in 
response to the oil industry's growing training demands. Prior to 
director, McCormack served as PETEX marketing manager in charge of 
developing the organization's marketing strategy and promoting the 
unit's mission externally. McCormack's lengthy petroleum industry 
career has concentrated on midstream and downstream activities of 
pipelines, refineries, and petrochemicals. For the past six years he 
has focused his activities on the upstream industry--drilling and 
production. He frequently trains and gives speeches on the oil and gas 
industry. He has held positions in business development, operations, 
strategic planning, budgeting, process control, health and 
environmental safety; and has directed efforts in North America, 
Europe, and Asia. He consistently engages research and evaluation teams 
in studying organizational issues, business needs, and client 
requirements. He has an MBA, a BASc in chemical engineering, and has 
advanced management training. Currently based at PETEX's Houston 
Training Center, he travels frequently to Austin headquarters where 
publications and training materials are produced and distributed to 
clients around the world.
    His prior work experience included working for Cambridge Energy 
Research Associates were he focused on clients strategic needs in the 
oil and gas industry. He also worked for SRI International (Menlo Park) 
helping to develop new technologies and moving them into the petroleum 
industry.

                               Discussion

    Chairman Baird. Thank you, Mr. McCormack. I thank all the 
witnesses. You hit the mark on time and much appreciated. I 
will recognize myself for five minutes and following that we 
will recognize the members in alternating order.

                   The Safety of Current Technologies

    Very important and informative testimony, and I want to, if 
I may use the expression, drill down on a little bit of it 
here. Dr. Baugh, I was actually a little bit surprised--and I 
think a lot of people might be surprised--by the statement that 
you made. Maybe I am not understanding it well, but the current 
state--and you said it in your written testimony as well: ``The 
current state of technology of subsea drilling systems is 
completely adequate to provide an appropriate level of safety 
control of wells being drilled, protect the environment, 
provide safety to personnel.'' If that is so, why are we having 
this hearing?
    Dr. Baugh. Obviously some serious mistakes were made and 
you have people involved in the system. If I were going to 
fault the system, it would not be the equipment out there. It 
is well developed. Sooner or later you are going to have a 
problem such as the one we have, and we have not done a good 
enough job of the contingency equipment to go out and capture 
this spill, but I would suggest to you that the equipment 
itself is well developed. The downstream systems are not as 
well developed.
    Chairman Baird. But there are reports that some of the last 
line of defense equipment appears to have failed. Now, given 
the nature of the problem, we don't know exactly why that is. I 
understand the Deepwater Horizon folks and BP are trying to 
understand it, but it seems that this was a combination of 
hardware and human failure. And so the question from me was, if 
we were to take that quote at face value, it would sort of 
imply that, hey, there is nothing to worry about. And there is 
a lot to worry about somewhere, and I am worried when people 
say we don't have to worry because everything is fine.
    Dr. Baugh. No, I do think you need to worry. We have a good 
set of equipment out there at this time. At all points in 
history you need to be continuing to develop better safety 
systems, keep on doing R&D and look at the next thing. We have 
not done the next thing, which is basically to say sooner or 
later you are going to get some kind of a leak and the next one 
will be different than this one, but we have spent all of our 
money getting oil out of drilling. We have not done a good job 
of capturing a potential spill, whether that would be from a 
tanker or from a pipeline rupture, just a rupture in the earth, 
a blowout. But I have studied and tried to get all the 
information I could on this particular incident and I literally 
have designed every piece of equipment that you are talking 
about, and the bits of information that are you getting are 
conflicting. There is something strange that happened here.
    Chairman Baird. Okay. I appreciate that. That helps me 
understand where you are coming from.

                         Human Factors of Error

    Let me pick up something you said and go to Mr. McCormack. 
You know, some years ago, right here in this city, there was a 
tragic aviation accident where an airplane iced up while 
waiting to take off and went into the Potomac and a lot of 
lives were lost. Subsequent data and other aviation accidents, 
FAA looked at a lot of human communication. They realized that 
you can build the best airplane in the world, but if the people 
flying it don't operate it according to its specifications, 
they are going to have a problem. I am curious--and Mr. Pappas, 
maybe you can address this, Mr. McCormack--what percentage of 
our research goes into the kind of things Mr. McCormack was 
saying in terms of how to better train people for RPSEA, and 
what percentage of it goes to the human factor side? In FAA, 
they changed the flight deck rules. It had been basically pilot 
is God, co-pilot is passenger, and if God says, you go. FAA 
changed that. They are now co-gods in the aircraft, and if one 
says I don't think it is safe, that person has the career 
protection for saying so for the best interest of the safety of 
the passengers. What have we done in the API--any of you want 
to--I am very interested in this question, because my read of 
it is that there were hardware physical failures of equipment, 
but there are also failures to wire it correctly, failures to 
install it correctly, apparently, and apparently grievous 
decision differences between BP and Deepwater about how fast to 
move forward. What do we know about human factors, Mr. Pappas, 
from RPSEA's perspective? Then we will work on down.
    Mr. Pappas. All right. I will start. Thank you. We have one 
project that we have got on our onshore program that considers 
that. What it is looking at is the combination of smart systems 
and utilization of new technologies to help people decide when 
to turn on and turn off equipment, when to move forward and 
move back. It is a different way of learning, and what we are 
trying to do is focus it on the onshore program right now, 
specifically for the unconventional resources. The reason we 
are doing that is that there are many systems around, but a lot 
of times they are not compatible with each other. They don't 
talk well. They don't play well. And the issue is that there 
are many different companies that develop these things. What we 
have to do is, we have got to find a way to put them together 
in a systematic way so that they create a logical response that 
covers all bases and doesn't make mistakes. So that is what we 
are looking at specifically in our program.
    Chairman Baird. Mr. Milito?
    Mr. Milito. I think the point that I would like to make on 
this is that, you know, when we are looking at this, we are 
looking at it from a prevention standpoint. You don't even want 
to get to the blowout preventer, and to that end, what the 
industry is doing is looking at the best ways to have the 
procedures in well design in place so you don't have conflicts 
of opinions on how you design it, so that you have elevated the 
design of the well and the operating practices to a point where 
there is no question as to how you are going to do it. You are 
going to have the barriers in place, you are going to have the 
casing strings done in a way that is the highest level of 
performance. So if any of these human factors could potentially 
arise, they would be resolved already because of the standards 
in place. So the industry is doing it across the industry to 
elevate everybody to a point where the standard is at a higher 
level.
    Chairman Baird. So if there is a conflict, somebody could 
say, ``I disagree with you, you are violating standard,'' but 
what do they do if the person paying their salary insists they 
violate it?
    Mr. Milito. Well, you know, we are open to a system where 
those people should be empowered to be able to raise that 
question, and, if need be, you stop any kind of operations if 
there is a safety issue. Safety is the priority, and if there 
is a safety question and there are operations ongoing, there 
should be an opportunity there to make sure that that does not 
occur.
    Chairman Baird. Mr. McCormack, very briefly, because I have 
exceeded my own time here.
    Mr. McCormack. Ninety-eight percent of the operations on a 
drill rig are very routine. It is the two percent that are not 
routine. We train towards the technologies. We don't train the 
soft skills: communication, chain of command. We don't bring 
the whole team together and train them that way. That really 
does need to be done. We need to be doing a lot more research 
in that area. We are doing so little research in training. It 
is disappointing.
    Chairman Baird. Thank you very much. I appreciate the 
witnesses.
    Mr. Hall is recognized.

                    More Information from Dr. Baugh

    Mr. Hall. Thank you, Mr. Chairman.
    Dr. Baugh, you apparently hadn't concluded your 
presentation. Could you do that? If I am kind enough to give 
you half of my five minutes. could you do it in that?
    Dr. Baugh. Okay. As a practical matter, the remainder of my 
presentation is exactly what you said, and you said it more 
eloquently than I could. You basically said it. I was going to 
suggest that there are--one thing additional was that there are 
some specific areas that we should be funding research in, 
specifically tertiary controls systems for subject BOP stacks 
and more comprehensive ROV control systems for BOP stacks and 
upgrading shear ram, shear ram actuators, are specific areas we 
need to be doing development work in. But other than that, you 
said it very well.

                         A Drilling Moratorium

    Mr. Hall. I want to go to the court ruling last evening. 
Last night Secretary Salazar announced that he was going to be 
issuing a new moratorium that addresses the shortcomings that 
the court set out, and as knowledge of the causes of the 
blowout continue to grow, he says a moratorium is going to be 
proven necessary and just. I don't know how he arrived at that. 
He is simply going to issue a new one. I don't know how many 
moratoriums, how many more he has in line to--as fast as the 
court knocks them down--dig up. But luckily we have the three 
branches of government and the courts get the last guess at 
what the law is, whether it is us Congressmen doing it or some 
bureaucrat, and right now that knocking out the moratorium just 
looks to me like another step by this Administration to lessen 
our dependency on energy that we have here that we know we have 
here and that we ought to be getting here.
    Dr. Baugh. I do have a suggestion on that. A blanket 
moratorium, which is what we have right now, is only punitive 
and does damage to everybody. We need to establish what I would 
call a rig moratorium, where you shut down every rig at the 
next convenient stopping point and recertify that rig to pass 
its FAT test, its systems integration test. And you certify 
every rig individually, and when a rig certifies that it is 
good, it is as it is supposed to be, let it go back to work. At 
that point, you either put people back to work or you put them 
to work making the rig right, but you have people gainfully 
employed rather than unemployed.
    Mr. Hall. Well, from his statement it is clear that he is 
convinced that a moratorium is necessary to ensure the safety 
of drilling operations and protect the environment. Considering 
the evidence of the spill you have seen thus far and the 
increased risk posed by a moratorium as you mentioned in your 
testimony--and I thank you for that--I will ask this question. 
Is there any scientific or engineering justification you can 
think of that would also pass muster in a rigorous peer review 
process that would justify a moratorium?
    Dr. Baugh. I think probably the opposite, because if you 
presume a moratorium is to determine some greater level of 
safety that you would like to achieve, you are going to spend 
six months in a moratorium figuring out what to do, and then 
you need to tell the good people of south Louisiana that they 
are going to be out of work for two or three years while you 
implement whatever it is that justified your having the 
moratorium in the first place. So I would say that a six-month 
moratorium is not a credible thing. We are going to have a two- 
and three-year moratorium if we are going to accomplish 
something, or we are going to institute best practices, 
recertify rigs, put them back to work, and then continue to 
spend money, continue to do development, continue to train 
better. But, basically, we need to be in the oil business while 
we are doing this.
    Mr. Hall. I have almost--would you like to enlarge any more 
on your opening statement? I have about 20 seconds left I can 
give you.
    Dr. Baugh. I think I have said everything I know.
    Mr. Milito. Mr. Hall, if I could add to your discussion on 
a moratorium, I think we have already seen the Administration 
take significant action in light of the incident. The first 
thing they did was they went out and inspected 33 rigs and 
found only minor infractions. I think you are looking at things 
like expired eyewash bottles and things like that. And, in 
addition to that, they came out with a notice to lessees, which 
outlines the requirements that the operators have to undergo, 
and they are significant requirements, so steps have been taken 
to ensure safety. That is called a safety NTL. Measures are 
being taken, so you wonder why you need a moratorium when the 
safety measures are being put in place.
    Mr. Hall. I don't think that justifies laying off the 
thousands and thousands of people who are going to be laid off. 
We are going to lose a workforce that we can't replace.
    Mr. Milito. I agree with you. Some of the economic numbers 
show hundreds of thousands of jobs at risk here.
    Mr. Hall. I yield back. Thank you, Mr. Chairman.
    Chairman Baird. Thank you, Mr. Hall.
    Dr. Lipinski.

                             Inherent Risks

    Mr. Lipinski. Thank you, Mr. Chairman. I appreciate you 
holding this hearing. I think we have certainly heard a lot of 
talk about this disaster in the Gulf, and I am happy that we 
are having a hearing now where I think we can actually look at 
some of the issues that we really need to look at instead of 
just having a lot of heat. Hopefully some light is shed on what 
happened here and where we should move on in the future.
    I really want to focus on what the witnesses think that 
the--maybe we have to put aside what has happened here. What do 
you believe is the real risk and the likelihood of such a 
disaster like this happening? Obviously, you know, some people 
would say with the disaster that we now see in the Gulf there 
is no risk worth taking. Obviously there is always going to be 
a risk no matter what kind of, you know--say we are just 
looking at energy. With any kind of energy, whether it is 
exploration or using that energy source, there is always going 
to be a risk. What do you really think the risk was before this 
happened of such an accident occurring? Obviously there should 
be a calculation being made for this type of risk, so would 
each of you place a percentage on the risk of this occurrence? 
I don't know if everyone feels that they can, but we will 
start. If you don't think you can, just let me know that. Mr. 
Pappas?
    Mr. Pappas. Thank you, sir. First, I would like to say 
that, obviously, people didn't recognize this as a risk at all.
    Mr. Lipinski. I mean, everyone has to say that there is 
some risk of this happening no matter how small it may be.
    Mr. Pappas. What I am saying is that it is obvious that the 
industry did not recognize it beforehand and now they do. Now 
the industry does. RPSEA as a group is ready to do some work. 
We have got the people in place to do that. Now, regarding your 
question, the risk obviously was small but disastrous, and, you 
know, if you have to put a number on it, is it one in 999,000? 
I have heard that number before, but I don't have any 
substantiation. The real problem is that we don't have all the 
facts right now, so the real question that I would have, that I 
would turn around and ask, is, do you want to wait until you 
get more of the facts, or do you want to take a chance on what 
you know now and decide where you need to go? The question 
really is a fundamental one.
    Mr. Lipinski. Dr. Baugh?
    Dr. Baugh. I think there have been something like 4,000 
wells drilled in water depths such as this since the last 
significant spill that we had from drilling, so that would be 
one chance in 1,000 something like this might happen. But there 
was--from all the information I have seen, there was really an 
odd confluence of events, as, for instance, the casing hanger 
wasn't locked down. Potentially, the casing hanger floated up 
and blocked the blowout preventers, and it is provided some 
restriction, but, if that is what happened, if we do something 
as simple as make sure that they lock down every casing hanger, 
this would never happen again. But it is equipment. Equipment 
does fail occasionally. It would be difficult to say that you 
are never going to have another spill like this. It would be a 
shame to say that we have come out of this and we don't have 
equipment to collect this kind of a spill and take care of it.
    I want to assure you that if I had come to you and said a 
year ago that we need to put $100 million aside to make sure 
that if a pipeline cracks, if a BOP splits open or whatever 
happens, that we go out there and be able to suck it up and 
take it onto vessels and property take care of it--a year ago I 
would assure each of you would have laughed at me. This year, 
nobody is laughing. I would like to suggest to you that we end 
up with $100 million invested in the Gulf of Mexico and in the 
world because in some place in Southeast Asia or something 
there is going to be another leak that happens and we need to 
be able to go down there and vacuum it up, process it, take 
care of it on the spot, not spend 65 days trying to figure out 
how to do it.
    Mr. Lipinski. Mr. Milito.
    Mr. Milito. Yes, I think prior to this event, we have had 
over 42,000 wells drilled in the Gulf of Mexico, over 2,000 of 
those in deepwater, and nationwide in the offshore, over 16 
billions of oil produced, and, of that, less than 1/1000th of a 
percent spilled. That being said, the industry understands that 
there are risks, and over the course of last 80 to 90 years, 
industry has been working hard to continue to develop the best 
practices and technologies. Our standards program is 
continually updating documents. We have recently had a new 
document come out on isolation of flow zones so that you can 
manage these types of situations, and we are recommending that 
be adopted by the government. In addition to that, Dr. Baugh 
mentioned casing hanger latching. That is something that 
Interior put in its report that should be done. So what I am 
getting at is the Administration has taken action on a number 
of items that should be included in offshore operations to 
ensure safety, and if these things are done across the board, I 
think you are minimizing the risk to even lower levels so that 
we can safely operate.
    Mr. Lipinski. Mr. McCormack, is there anything you can add?
    Mr. McCormack. Usually on a blowout, there are seven to 11 
events that occur that lead up to the blowout. Some of them are 
equipment, some of them are human intervention. We need to make 
sure that the human intervention succeeds. We need to train the 
people properly.
    Mr. Lipinski. But is there a--I know I am out of time here, 
but I think we need to look at--first of all, is there a 
calculated level of risk here? And I would assume that if you 
are engaged in this activity, that any company engaged in this 
would be calculating for themselves what the level of risk is 
and what can be done to lower that level of risk. This isn't 
just something that we look at after an accident, but also 
beforehand when you are engaged in such an activity. There 
obviously is a catastrophic failure here and a disaster that no 
one wants to see, but if we are going to move forward with this 
drilling, we have to be looking at not only what caused this, 
but at each point, where is the risk and where is the 
possibility potential of that risk calculating all that risk in 
making a decision? As policymakers, we need to make a decision 
of what risks we are willing to live with for having such a 
catastrophe happen again in the future, and I think that is 
what we should be looking at as we move forward and where in 
the system--technologically, human factors--how we can really 
lower this risk.
    Chairman Baird. Thank you, Dr. Lipinski.
    I want to recognize Dr. Ehlers now. Thank you.

             Safety Considerations at Individual Companies

    Mr. Ehlers. Thank you, Mr. Chairman.
    I do not profess to be an expert on anything relating to 
the oil industry but I did discuss this with someone who I do 
consider a fairly good expert, and this person went down and 
spent some time in Houston, talked to a number of the oil 
executives, people who are experienced in this field of 
drilling. There is sort of a universal reaction to some of the 
questions along the line of this could only happen to BP. This 
is a reflection of the feeling of a number of people in the 
industry that BP is less careful than most of the other 
companies that are drilling in the Gulf. I don't know if that 
is true or not but it brought me up short that you are talking 
about equipment, you are talking about training. Those are all 
very important components, absolutely essential components. But 
are there companies--and I am not going to point a finger a BP 
because I can't verify that. But are there companies that tend 
to pay far less attention just as a matter of company policy, 
either policy neglect or of intention, that pay less attention 
to safety issues or issues of this sort than other companies 
do? In other words, are there some good citizens among the 
companies and some bad citizens? I appreciate any comments 
anyone could offer.
    Dr. Baugh. I would like to respond to that, if you don't 
mind. I think one of the problems is that BP has been one of 
the most aggressive companies. They have gone from not so much 
here to a lot. If you compare BP to Exxon Mobil, you would 
think Exxon Mobil is much safer, and I think their actual 
record is safer, and so there tends to be a thing when you hire 
new people, you expand, you try to get the people that you can, 
there tends to be a little bit more of a risky situation, which 
is one of the primary reasons we would suggest that the 
moratorium is not a good idea. It sort of puts everybody right 
back in that mode. But I have personally been on several BP 
rigs and my general impression of BP has been they have been so 
anal about safety, it was nauseous. The time it takes to get a 
permit to breathe on a BP rig, it just drives me crazy. I work 
with a small company, and we pride ourselves on being quick and 
responsive. When I go out to a BP rig, I never get the feeling 
that we have got people that are being dangerous or they are 
cowboys. I have always gotten the impression that they were 
very conscious of safety. I think that their real downfalling 
is they expanded rapidly. They are trying to do a lot of 
things. Exxon Mobil is very staid, doing the same thing all the 
time and so they have a good appearance of being very safe but 
they are very conservative.
    And so BP probably has some culture problems. They need to 
address them. I can assure you they will be addressing them 
better after this time, but I would not characterize BP as a 
company which was just reckless. I think you see some 
individual decisions--people trying to catch up on their 
schedule, doing some things where people push the envelope 
some--but I would not characterize BP as just being a bad 
company.
    Mr. Ehlers. Any other comments?
    Mr. McCormack. I think what we are seeing is BP did not 
take the most conservative approach in their operations in the 
deepwater Gulf compared to other companies, and I think that is 
a fair statement.
    Mr. Ehlers. In your opinion, is that likely to lead at some 
point to a disaster?
    Mr. McCormack. If you cumulatively don't take the most 
conservative approach and take the most aggressive approach, 
just building on what Mr. Lipinski says, you are certainly 
going to increase the risk factor.

                      Potential Risks Taken by BP

    Mr. Ehlers. I was also struck recently when 60 Minutes 
interviewed someone who worked on the rig, and he had an 
interesting perspective. He related the events that had gone up 
to it where at various points the BP person in charge had said, 
this isn't quite right but we have to get this done. Have you 
heard any verification of that or that type of approach?
    Mr. McCormack. What I can say about that is that the BP 
company man on the rig was a land-based man with very little 
experience on deepwater rigs. Deepwater rigs have a certain 
higher risk factor to them. Drilling processes are the same, 
but the risk factors for failure are much different. You cannot 
put someone on an exploratory well--which is the first well in 
that formation and has very unknown activities that are going 
to occur during the period of drilling--and not have 
experienced people representing both the company and the 
drilling.
    Mr. Ehlers. Dr. Baugh, you wanted to add something?
    Dr. Baugh. No.
    Mr. Ehlers. Any other comments?
    I yield back. Thank you.
    Chairman Baird. Thank you, Dr. Ehlers.
    Next on our side is Eddie Bernie Johnson.

                      Drilling in Shallower Waters

    Ms. Johnson. Thank you very much, Mr. Chairman.
    I need to ask our guest, Mr. McCormack, isn't there 
drilling between the deepwater that was being done and no 
drilling at all?
    Mr. McCormack. I am sorry. I don't understand the question, 
Ms. Johnson.
    Ms. Johnson. Well, this particular incident was one of the 
deepest drilling in history, I understand. Isn't there other 
drilling that is not nearly as deep that has been successful?
    Mr. McCormack. Oh, the shallow water, which is anything 
less than 1,000 feet, has been incredibly successful. This is 
not the deepest well. They have drilled in 10,000 feet of water 
and gone down 20,000 feet, so it is a 30,000-foot well. So this 
is definitely not the deepest, but this is an exploratory well. 
This is in a new formation that hasn't been drilled into. You 
can make estimations of core pressure and the temperatures and 
pressures that you are going to incur on that, but until you 
drill the well, you don't know exactly what you are going to 
come across.
    Ms. Johnson. Has this been deeper in the Gulf of Mexico?
    Mr. McCormack. Yes, we drilled deeper in the Gulf of 
Mexico.
    Ms. Johnson. If the drilling continues in more shallow 
water, would all the jobs be lost?
    Mr. Milito. I think--I am sorry. I think part of that has 
to do with where the oil is. We have been operating in the Gulf 
for close to 50, maybe 60 years at this point, and we are 
really picking over bones and having to go out in these deeper 
waters where we are allowed to get it, where there has 
essentially been a moratorium in place off the Pacific and 
Atlantic coasts. So there is a lot of oil in the deeper waters. 
The companies are able to find it there and it makes business 
sense to go out there and develop it, because that is where it 
is.
    Ms. Johnson. Are there any----
    Dr. Baugh. Excuse me. Could I address that?
    Ms. Johnson. Yes.
    Dr. Baugh. You are really, I think, asking, is there a 
safer place to drill and a not-so-safe place to drill, and 
probably the distinction you are looking for is development 
drilling and exploratory drilling. Development drilling means 
they have already drilled into a formation and have a good idea 
of what is there and so they are just drilling more wells for 
production. Exploratory means you are drilling in, you don't 
know quite what is there and you may hit a high-pressure 
pocket, and a compromise you may be looking at a short term is 
to allow people to continue drilling, but to do development 
drilling so that they are producing more oil and basically have 
a moratorium more along the idea of doing exploratory drilling 
where you are drilling into unknown formations.
    Ms. Johnson. Yes?
    Mr. Pappas. Short comment. Shallower wells closer to the 
coast are typically gas producers these days and not oil 
producers, as was mentioned. Most of the oil has been pulled 
from those wells.

                          Accident Prevention

    Ms. Johnson. Anyone can answer this for me. What would you 
suggest that needs to be done to avoid this type of accident? I 
know there is not a perfect situation where you can predict 
that it will never happen again but what improvements would 
have made a difference in this incident?
    Mr. Pappas. May I, Representative Johnson?
    Ms. Johnson. Yes.
    Mr. Pappas. As I mentioned earlier, RPSEA has a group of 
over 700 subject-matter experts in the oil and gas business and 
they run the gamut from environmental and energy companies, 
vendors, research universities and interested parties, other 
interested parties. These experts are the people that we should 
ask that question of. It should not, in my opinion, be the 
decision of just a single group of people that have a dog in 
the fight. They all have to have different opinions and we need 
to put those all together. In my estimation, we need to put 
this group together and a group like RPSEA is one of those that 
is excellent at putting these diverse groups of people 
together. If we could do that and utilize the process that we 
have in place, it won't take very much time at all. We can come 
up with a distinctive list of technologies that need to be 
looked at and technologies that are already in place, whether 
they be state-of-the-art or accepted already to see which 
direction we need to go.
    Ms. Johnson. Anyone else?
    Mr. McCormack. Representative Johnson, all blowouts can be 
prevented. There are signs that a kick--meaning oil and gas--is 
entering the well bore when you don't want it to be there. 
There are signs ahead of time. The problem when you are 
drilling this deep is, the amount of time that you have to 
react is shortened, so you have to be able to recognize and 
respond much quicker. But all blowouts can be prevented.
    Ms. Johnson. Thank you very much. My time is expired, Mr. 
Chairman.
    Chairman Baird. Thank you, Ms. Johnson.
    I have got Mr. Bartlett--Dr. Bartlett.

                   Responsibilities of the Permitters

    Mr. Bartlett. Thank you very much.
    Several days after the blowout, the Wall Street Journal had 
a fairly long article, kind of a moment-by-moment story of what 
was happening. I was struck with how detailed the permitting 
process was. It would seemed to me they could hardly tighten a 
screw without going to the regulators to say is it okay for us 
to do this. It seems to me there was a very meticulous 
procedure for making sure that the regulators knew everything 
they were doing. Was there any time during these procedures 
that the regulators said hey, guys, aren't we cutting a few too 
many corners? Did that kind of an inquiry ever happen? It 
wasn't in the story. There was no indication in the story in 
the Wall Street Journal that that ever happened.
    The reason I am asking this question is that if you are 
subject to meticulous regulation, isn't there a shared guilt 
here if in fact there is some guilt? Isn't there a shared guilt 
here? If BP couldn't make a move without getting permission 
from the regulators, why is 100 percent of the blame placed on 
BP here? Help me understand that.
    Mr. McCormack. Mr. Bartlett, the inspector for the MMS had 
just come over four months ago from a production platform. 
Platforms are completely different than drilling platforms, so 
we had basically a very inexperienced inspector from MMS making 
some of these decisions.
    Mr. Bartlett. My concern is that, you know, everybody did 
what they thought was the right thing here and we end up--there 
were two entities involved in it. Clearly there is a very tight 
partnership here between the drilling people and the regulators 
because I was struck with how frequently the drilling people 
had to go to the regulators, hey, is it okay for us to just 
change the size of a pipe, for instance, they have to go and 
say is it okay to do this, and the answer is yes, it is okay to 
do that. So my question is, why do you think that we are 
assigning 100 percent of the blame to BP and the regulators are 
never, ever mentioned as being complicit in this problem? Yes, 
sir.
    Mr. Pappas. Representative Bartlett, I will just give you 
my personal experience. From the times I worked offshore, the 
Minerals Management Service representatives were very 
professional, and, in some cases, were a real pain in the neck 
for me. It was because they had such stringent requirements and 
we had to follow everything, and the relationship that I 
developed with those people on a personal basis was purely 
professional and I understood that they had a job to do, and 
that is the way I took it.
    Now, that being said, my understanding is that BP is being 
pinpointed because they are the operator of record and that 
that is the law. Besides that, I am not sure I could help you.
    Mr. Bartlett. But if they couldn't move without getting 
permission from the regulators, why isn't there some shared 
responsibility here? There is clearly shared responsibility. I 
just don't see that noted in the press.

                    Limited Remaining Oil Resources

    Mr. Milito, you mentioned that we have now produced, what 
was it, 16 billion barrels of oil from Gulf drilling. Is that 
the number?
    Mr. Milito. The 16 billion is offshore development for 
domestic production activities.
    Mr. Bartlett. Sixteen billion?
    Mr. Milito. And I would assume that, you know, 90-some 
percent of that is from the Gulf of Mexico, because that is 
really the only area that we have access to at this point. 
There is some production off the coast of California.
    Mr. Bartlett. It is kind of interesting to put this problem 
in some perspective. That 16 billion barrels of oil will last 
the world 192 days. Every 12 days we use a billion barrels of 
oil. I think the significance of that escapes most people. 
Every day we use 84 million barrels of oil. Check my 
arithmetic. I think 84 goes into a thousand roughly a dozen 
times. Doesn't that mean that every 12 days we use a billion 
barrels of oil? So we find a huge reserve out there, 10 billion 
barrels of oil, and we heave a sigh of relief, gee, guys, no 
problem now, we have got plenty of oil. That will last 120 
days. Do you think there should be a broader recognition of the 
role that the trifling amounts of oil that are yet to be found 
compared with what we are using?
    Mr. Milito. In terms of that there is a small amount yet to 
be found or that----
    Mr. Bartlett. Well, I don't think that there is a whole lot 
yet to be found, and we use a billion barrels of oil every 12 
days. You find 10 billion barrels of oil, that is a big find, 
that will last the world 120 days. Big deal. My time is up. But 
I just think it is important to put this in context.
    And you really need to ask the question, do you think it is 
worth the question? I have 10 kids, 17 grandkids and two great-
grandkids. We are leaving them a huge debt. I would like to 
leave them a little oil. Is that okay? Thank you very much.
    Chairman Baird. Thank you, Dr. Bartlett.
    Mr. Tonko.
    Mr. Tonko. Thank you, Mr. Chairman. I just have to respond 
to that last question. I agree with the sentiment. It is time 
for us to begin to explore new alternatives and renewable 
opportunities because of the limitations that face us.

                    Funding for Research and Safety

    With that being said, Mr. Pappas, in your work with the 
Research Partnership to Secure Energy for America, how much of 
the research funding would you say has been focused toward 
extracting technologies as compared to safety technologies?
    Mr. Pappas. That is a really good question, and I would say 
that eight of the 71 projects that we have are specific to 
environmental and safety side of the business, but every one of 
those projects has a component of environmental and safety to 
them. So small parts of every project, but eight are specific 
to environmental and/or safety concerns.
    Mr. Tonko. And with the growth of investment in technology, 
there seems to be an indication that, in reports from as much 
as 10 or 15 years ago, there were recommendations to invest 
much more heavily in technology. But then we see situations 
like that of, I believe it was May 2008, where an exemption was 
granted to BP where a valve that perhaps could have been 
utilized that cost a half a million dollars could have avoided 
tens of billions of dollars of impact here. How would you 
characterize the exemption? Would it be because of overreach, 
or is it because of being deemed unnecessary or duplicative? 
What would technology explain is a reason for exempting a 
company like BP from that requirement?
    Mr. McCormack. Maybe I can answer that. I think what you 
are talking about is an acoustic switch that you can operate 
from the surface to close the blowout preventers. The blowout 
preventers failed and an acoustic switch would not have been 
able to actuate the blowout preventers. So in this case, it 
would not have helped. In other cases it might help.
    Mr. Milito. If I can add to that, my understanding is all 
the rigs operating do have secondary means of shutting down the 
well and the blowout preventer. There may not be a requirement 
that they do have that. But with regard to an acoustic 
regulator, there are some concerns about posing other risks, 
and in deepwater there are concerns about regulators being 
triggered by things like vessels passing by. What is being 
recommended by the industry as we look at that type of 
equipment and technology to see where it would be most 
appropriate to include that because we don't want to be 
increasing risk when we are trying to improve safety.
    Mr. Tonko. Okay. So with those increased risks or some of 
the awkwardness of utilizing that technology, why wasn't there 
a more aggressive approach to come up with the technology that 
would avoid all of that potential impact and have something 
that was streamlined and directed to do what it needed to do?
    Mr. Milito. Well, as I was saying, I think most every rig 
has a dead-man shutoff, which means when there is a separation 
in the riser from the BOP, that you are supposed to have an 
automatic shutoff, or, if there is a disconnect between 
communication from the BOP and the rig floor, you are supposed 
to be able to have an automatic shutoff. This gets to what Mr. 
McCormack was talking about. The BOP wasn't functioning so it 
wasn't how you control it. We really need to see the final 
results of the investigation to see why that thing didn't shut 
down.
    Mr. Tonko. Thank you, Mr. Chair. I have no further 
questions.
    Chairman Baird. Thank you, Mr. Tonko.
    Mr. Rohrabacher.

                     Support for Safety Mechanisms

    Mr. Rohrabacher. Thank you very much, Mr. Chairman, and let 
me note that I agree with Dr. Bartlett's analysis that we 
should be developing alternatives to our dependence on oil and 
gas right now, and I would suggest, however, that we cannot do 
that at the expense of not doing the research and development 
of technologies that we need to make sure that our current 
structure is safe, and I would suggest that that is exactly 
what has been going on here in that we have, for example, last 
year the Department of Agriculture alone, their spending on 
basically global warming money--pardon me for bringing that up 
again--was 16 percent higher than all of the research and 
development in the DOE in terms of oil and gas. So just the 
money spent by the Department of Agriculture on global warming 
research was basically 16 percent higher than what we spent 
trying to make our own oil and gas safer. That is a false 
priority. I mean, yes, we have to prepare for the future but 
you don't prepare for the future in a way that you have a 
greater emphasis than making sure that what you are doing today 
is safe, and apparently that is what has been going on, and I 
have been told that DOE fossil fuel research programs, that the 
DOE in their fossil fuel research programs, they are moving 
almost entirely towards the issues of capturing and storage of 
carbon rather than safety and rather than trying to see how we 
can produce more oil and gas in a safer way. Again, that is a 
false priority based on this concept of global warming that I 
think has been misdirecting our resources.
    Let me just ask a question here. From what you have seen in 
this catastrophe that we have had down in the Gulf, were 
there--were all of the standards and accepted procedures, were 
they being followed or can we say that this tragedy is a result 
of not following accepted standards and accepted procedures?
    Mr. Milito. I think at this point we really have to wait to 
see the root cause analysis that comes out of the 
investigation. We are hearing a lot of reports in the media, 
and there is some talk about well design and operating 
procedures, but we really do have to wait. That being said, the 
industry did put together several task forces, including two on 
equipment and operating procedures. Putting this incident 
aside, they looked across to see what is being done at a higher 
level to----
    Mr. Rohrabacher. Well, we have standards in place, and Mr. 
McCormack has made it clear that had we had everything going 
the right way and doing what was sulfur dioxide to have 
happened, this would not have been a catastrophe. So I am 
assuming that the standards and the procedures were not being 
followed, and I understand, for example, safety equipment was 
not maintained. Is there anybody who understands that? Some of 
the safety equipment that should have gone into place like you 
say, it should have functioned that were not maintained 
properly? Batteries were not present and things like that.
    Mr. Pappas. I will say that one of the things that I had 
heard is that the blowout preventer had some of the valves that 
had been changed over and there is a possibility that they may 
not have been properly inspected by a professional engineer. 
That is entirely possible. We will have to wait and see and 
wait for the root cause.
    Mr. Rohrabacher. Well, let us just note that there is risk 
in any endeavor. I mean, I fly an airplane every week and 
sometimes there are airplane crashes, but we recognize that 
people have high standards, and as the Chairman pointed out, a 
change in standards for airlines that made it safer for us. We 
must pay attention to training and standards and make sure that 
we have a very high level of commitment to that, and perhaps 
again, there may not have been the commitment to this in 
British Petroleum as in some of the other companies and that 
may have been one of the reasons, and so--but whenever we have 
any endeavor, there is going to be risk involved and actually 
minimizing the risk is part of their job but also it is part of 
our job, Mr. Chairman, and what I am suggesting is that we have 
not even in Congress done our part because we have had our 
priorities shifted way and money being spent on things that 
should have had less priority than making sure that our current 
dependence was on equipment and technologies that were 
reliable.
    So with that said, thank you very much, Mr. Chairman, and 
let me congratulate you, Mr. Chairman. This is an excellent 
panel and you have done a great job of leadership in this 
issue, and I respect that.
    Chairman Baird. Thank you. While my colleagues are all 
here, I hope we can get a CODEL, another trip down to the Gulf 
area. I was just there this weekend. Some of you came after I 
mentioned that. We are going to try to get another trip down 
there to see firsthand the work that is being done, so we will 
try to give you advance notice on that.
    Mr. Lujan.

                How To Halt the Deepwater Horizon Spill

    Mr. Lujan. Mr. Chairman, thank you very much, and before I 
begin my questioning, Mr. Chairman, I want to submit an article 
to the record from the Los Alamos Monitor that highlights two 
individuals that have come up with what appears to be a simple 
idea, as well. I know that, as we are looking to make sure that 
we have a vehicle to be able to accept some of these thoughts 
and ideas for true vetting, that this is one that we want to 
make sure that we get a close look at. So if there is no 
objection, Mr. Chairman, I would ask permission to submit this 
into the record.
    [The information follows:]
    
    
    

    Chairman Baird. Okay.

        Monitoring and Diagnostic Capabilities and Coordination

    Mr. Lujan. Mr. Pappas, given the events in the Gulf, it has 
become apparent there is a need for new diagnostics and 
technology to monitor the state of the deep-sea wells and their 
safety equipment. The more we know about the wells deep under 
the ocean--its pressure, its flow rate, its composition, 
whether we are talking about gas, fluid or mud--and the more we 
know about the state of safety equipment is important such as 
the blowout preventer, the better we will be able to prevent 
accidents and the more we will be able to deal with accidents 
should they occur. There are DOE entities right now and brain 
trusts that are private and public that are engaging in 
diagnostic activity as we speak. Do you agree that there is a 
need to develop improved diagnostics, and if so, what 
diagnostics are most urgently needed?
    Mr. Pappas. Thank you. Representative Lujan, I think that 
we are moving in the right direction. Unfortunately, it is for 
the wrong reasons because of what has happened, but the notice 
to lessees that came out had some excellent, excellent 
recommendations to improve systems just to start with. I 
believe what we need to do is we need to dissect the issue, 
dissect it into its components and take a look at it, and then 
see how it gets put back together into a system. We need to get 
those experts together to formulate where we need to go. 
Obviously, communications is an issue. Obviously, training is 
an issue, as was mentioned earlier. Hardware is probably going 
to be an issue, not necessarily because it--it may be that it 
is adequate for right now, but will it be adequate in the 
future since we continue to move into deeper and harsher 
environments in both gas and oil drilling? We all know that we 
need that as a bridge to get us to the next generation of 
energy. So, to start with, that is where we need to go.
    The programs that I outlined a little while ago I think are 
focused on the environment and on the safety issues, but every 
one of these components, I think, needs to be looked at from 
the environmental impact side and also from the safety side.
    Mr. Lujan. And with that being said, Mr. Pappas, how might 
RPSEA be better integrated with DOE's drilling research 
activities as well?
    Mr. Pappas. Yes. You know, we work very, very closely with 
the Department of Energy. We have meetings from time to time. 
We try to keep in touch. They have a complementary program 
through NETL that works with us very closely. So we are moving 
in that direction. One of the problems that we have is that 
money that was authorized was $100 million, but only $50 
million was appropriated, and as I mentioned, we have other 
projects that could have taken priority. And then in addition 
to that, what we have uncovered because of this recent 
catastrophe is that we could probably utilize another $100 
million, and we probably still wouldn't have enough.
    Mr. Lujan. Mr. Milito, if we wanted to set up a focused, 
quick response DOE partnership with some of the efforts that we 
see underway now, a program to develop new safety diagnostics 
of deployment as soon as possible, do you have thoughts on if 
the Office of Fossil Energy or ARPA-E would be a better 
location for partnerships and collaborations that you are 
engaged with now?
    Mr. Milito. Yes, it certainly should be something that we 
need to consider. We have to make sure that all the agencies 
that are doing the research are coordinating and collaborating 
with what the industry is doing. It is an effort that Congress, 
the Administration, Department of Energy, Department of 
Interior, and the trade associations need to work together on. 
So, if there is a way to manage that and have the coordination, 
we should have that discussion and make sure it happens because 
a lot of ideas are being generated. We are providing them to 
Interior, but if Energy is going to play a significant role 
here, as it should, then we have to make sure that that 
discussion is held.
    Mr. Lujan. And is API currently engaged with the evaluation 
of diagnostics to see what we can be doing better based on what 
we know is occurring around the Gulf that we should be 
expecting to see in some of the reports soon to be released?
    Mr. Milito. Some of the recommendations that have come out 
from the industry have to do with the blowout preventers and 
the remote operated vehicles, and a lot of those 
recommendations concern testing that has to be done at the rig 
level as well as underneath the water. So we are moving forward 
with changes to the standards on BOPs and ROVs to address some 
of those issues, so that is occurring.
    Mr. Lujan. And any thoughts on how we might be able to 
better integrate with the DOE drilling research activities?
    Mr. Milito. Same thing. We just have to have an open 
dialogue and make sure that--and our standard-setting process 
is open to the government. David Miller, our standards 
director, is here, so we can make sure that we have an 
opportunity to have them as a participant or an observer, 
however DOE thinks that they would best fit in.
    Mr. Lujan. I appreciate that.
    And Mr. Chairman, I know we didn't have time to get----
    Mr. Pappas. Mr. Lujan, could I add something very quickly?
    Mr. Lujan. Mr. Pappas.
    Mr. Pappas. One of the things that I see is that the 
function of government--and the Department of Energy in 
particular--is to look at the fundamental type of research. 
When it gets into application, it is probably best left to 
people that are little bit closer to the industry. Now, the 
oversight may continue to be from the government level, but I 
believe that the subject-matter experts sit down in Houston and 
offshore and in New Orleans and so forth, and those are the 
folks that we need to ask to get to applications so that we can 
utilize what we best need. Thank you.
    Mr. Lujan. And Mr. Chairman, maybe along those lines, there 
are existing entrepreneurial lead programs that exist at the 
labs to work with small business startups. There may be a lead 
program along the lines where you can work and you can 
integrate these activities to best make sure that we are 
accelerating them. Thank you, Mr. Chairman.
    Chairman Baird. Mr. Garamendi.

                    More on Activities Coordination

    Mr. Garamendi. Thank you, Mr. Chairman. I am going to 
follow up on some of the questions that Mr. Lujan had raised. 
Specifically, I want to go to the moratorium. A lot of 
discussion going on around here and perhaps in other places, I 
guess also in a Federal court about moratoriums. When the 
military in 2008 lost two T-38 trainers, jet fighter trainers, 
the Air Force stood down until they could figure out what is 
going on. The moratorium should be the same purpose. We have 
had a horrendous problem. Why did it occur? What are the 
elements of it? A moratorium in my view is absolutely necessary 
until we find out what goes on and what has gone on. You have 
described the difference between development and exploration. 
Understood.
    My specific question is, what is the industry doing in 
coordination with the Department of Interior on standards and 
procedures including both the oversight of the government and 
the policy procedures and equipment that is to be used in the 
exploratory processes?
    Mr. Milito. When we put together the task forces on 
equipment and operating procedures, this was shortly after 
Secretary Salazar had a meeting with the exploration and 
production presidents and vice presidents, quickly assembled 
them and quickly started having a dialogue with Interior. Those 
task forces really came up with three buckets of 
recommendations that went to Interior. There are 22 
recommendations. The first bucket has a lot to do with a lot of 
the discussion we have had. It has to do with risk management 
and making sure that the drilling contractors have a safety 
program in place, making sure that the operators have a safety 
program in place and making sure those two programs are 
talking. And then there is a recommendation that has to do with 
operating procedures, making sure you have the appropriate 
barriers underneath the wellhead to ensure that hydrocarbons 
cannot breach the well, and then making sure you have the right 
interfacing between BOPs, ROVs, and making sure that you have 
sharability. All those technical recommendations have been 
made. Sixteen of the 22 were accepted by Interior in its 
report, and then some of the other work. We have a recommended 
practice in isolating flow zones for drilling operations. We 
have recommended that it gets adopted and we are moving forward 
with working, improving our standards on BOPs and ROVs. So 
there is a lot going on and they are not stopping the work. 
They are going to continue to work in the long term.
    Mr. Garamendi. To wrap up this one question, it just seems 
to me absolutely essential that, before we continue to do 
deepwater exploration, we have all of those procedures in 
place, including the oversight, review, and appropriate role of 
the Department of Interior's new organizational structure. 
Until that happens, we ought not do any more exploration. As to 
development, that is another question. The same things would 
apply. I think there would probably be different kinds of 
requirements.

                      Oil Spill Response Programs

    The next question, I think, Dr. Baugh, you raised this 
point. I want to go to it. In California, we have had since 
1990 a very sophisticated oil spill response program. It does 
have in-place funding. It does have in-place materials, 
communication programs located in southern California, northern 
California, I think also in the central coast of California. 
Does such a program exist in the Gulf, and if so, is it--
obviously it is not sufficient. What would you do to make it 
better? A hundred million dollars was a number that you came up 
with a moment ago.
    Dr. Baugh. That number came out of thin air, for what it is 
worth.
    Mr. Garamendi. It sounds----
    Dr. Baugh. There are----
    Mr. Garamendi. --on track.
    Dr. Baugh. You saw a lot of booms deployed in the Gulf of 
Mexico, which says there is a lot of response capability in the 
Gulf of Mexico, but I would suggest to you that we should not 
be sitting at the surface letting oil come to the surface, come 
to the beaches, and then try to collect it. We need to go to 
the site of the spill and we need to vacuum it up and take care 
of it there and not let it pollute the beaches.
    Mr. Garamendi. My question doesn't go to how we do it, but 
is there is--obviously there is not a sufficient program in 
place. The program in California is funded by the industry, 
both the transportation industry as well as the development 
industry. And it seems to me we must have such a program 
everywhere oil is drilled and developed and explored. Otherwise 
we are going to be left with wondering how are we going to deal 
with this. A question for all of you: Would the industry 
support such a robust program in the Gulf area?
    Dr. Baugh. I think the problem is that individual companies 
have difficulty taking care of these systems. This is something 
that the Federal Government, MMS, should be very much involved 
in and directing, but literally it may well be that you could 
get a high response characteristic out of--do you know what a 
cold tubing unit is? Basically, it is a rig which has three and 
a half inch pipe you roll up like a hose, but it could be very 
small, very portable to be able to do a lot of things, and it 
could be here. It could go to California and do a lot of 
things, but there is a next generation of capability that needs 
to be done that is just not there, and MMS would be the 
appropriate people to take a lead in that.
    Mr. Milito. Congressman, if I could add to that, the 
industry does support a robust program in the Gulf of Mexico. 
In fact, I think a lot of the activities that you see occurring 
are being occurred by the OSROs, the oil spill response 
organizations. Those are funded by the industry. And if there 
are improvements to be made, we need to make them.
    Mr. Garamendi. Mr. Chairman, I would recommend that 
legislation forthcoming deal specifically with this. California 
is a model, perhaps not the best. There may be other models 
around the United States and around the world but we really 
must have in the Gulf and other places where oil is produced in 
the marine environment a very robust, ready-to-go program in 
place to deal with all the eventualities, whether it is shallow 
drilling, tanker, pipes or deepwater drilling. It does not 
appear to have existed previously or to exist presently in the 
Gulf, and we need to do that.

        A Potential Moratorium on West Coast Deepwater Drilling

    My final point is just very, very quick, and that is, I am 
the author of a ban on deepwater drilling, new leases off the 
West Coast. I think it is absolutely essential. There is a lot 
of talk about ``well, we are going to need oil.'' It is in fact 
true that several, well, two to three billion barrels of oil 
off the coast of California in California waters could be 
accessed from the shore, and, in fact, you can get into Federal 
waters, nine miles now, with directional drilling. You don't 
need to be in the marine environment with all of the all too 
obvious hazards associated with marine environment. And so we 
ought to think about that. However, Mr. Bartlett is quite 
correct. We have to move beyond oil, and that is the 
fundamental policy, Mr. Rohrabacher. That is the fundamental 
policy we ought to be pursuing.
    Thank you very much, Mr. Chairman.
    Mr. Baird. Thank you, Mr. Garamendi.
    Mr. Carnahan is next. Thank you.

                            Blind Shear Rams

    Mr. Carnahan. Thank you, Mr. Chairman and our Ranking 
Member, for calling this important and timely hearing on how we 
can make improvements to technology.
    I wanted to start really my first question with Dr. Baugh. 
We have seen many studies over the last decade that have 
questioned the strength and reliability of the blind shear rams 
in terms of again their--they suggest, you know, many of them 
do not function properly and, in fact, Transocean indicated 
that 11 of its 14 rigs in the Gulf have two blind shear rams. I 
guess my question is, do you believe every blowout preventer 
should have two in terms of backup, but, also, are there things 
that can be done to improve the reliability, as well?
    Dr. Baugh. I would have a personal preference for dual 
blind shears on every BOP stack. It becomes a single point of 
failure, and you would like to have no more single points of 
failure than practical. It will take a while to put them on 
there, and I think all industry needs to be moving in that 
direction. There are things that can be done to improve the 
ability to shear. We have a very small company, but we have an 
intensive research program and we are personally working on 
ways to improve how you would shear drill pipe and potentially 
shear drill collars that are in the well. But there not only 
needs to be an upgrade of the ability to shear and shear 
reliably, but also there are times when you are going to put 
equipment in front of the shear rams that cannot be sheared, 
period, and you need to--we potentially need procedure so that, 
whenever you are going to put something in front of the shear 
rams that cannot be sheared, you would know it. So potentially 
you stop and you wait five minutes and see if you get any flow 
of oil but check your returns to make sure there is nothing 
coming in from the formation before you put something in front 
of the rams. So I think we need procedure and equipment 
upgrades in this area.
    Mr. Carnahan. And any others on the panel that want to 
comment on that, please?
    Mr. Pappas. I will. I would say that API recommended 
practice 17-N addresses the reliability for subsea equipment, 
and if we can utilize that to determine if additional 
improvements need to be made of any sort that we should take 
advantage of that.
    Mr. Carnahan. Do you think some of the data that suggests 
that the blind shear rams could only be counted on to fully 
activate about half of the time, is that consistent with data 
you have seen?
    Mr. Pappas. That is true.
    Mr. Carnahan. Any others?
    Mr. McCormack. Yes, I think the reason for having two blind 
shear rams is that it is very difficult to shear the tool 
joint, which is the joint between the drill pipes. So if you 
have them four feet apart, if one is on the drill tool joint, 
the other will be on the pipe, and it is much easier to shear 
that. The problem, though, if you had the drill collar, which 
is the heavy part of the drill stem in the blowout preventer, 
it is almost impossible to shear that.

                        More on Research Funding

    Mr. Carnahan. Let me go on to the second question I have 
that really has to do with how additional research can be paid 
for. Certainly the industry has devoted billions of dollars for 
research, but it has largely focused on ways to increase 
production, not so much devoted to accident prevention and 
mitigation. So I guess my first question is, how do we have a 
more balanced mix toward that? And the other is, I guess models 
of how other countries are paying for this kind of research 
with regard to royalties, lease fees, and how that needs to be 
better put to use, particularly at a time in recent years when 
we have seen oftentimes record profits being reported from 
several companies in the industry. Let me start with Mr. Milito 
and we will go on from there.
    Mr. Milito. Recent information from the National Science 
Foundation shows just what you have said, that there are $200-
plus billion spent in 2008 on R&D among the $300 billion in 
capital expenditures in the industry. While a lot of that is 
spent on production capabilities, when you are looking at, you 
know, BOPs and drill ships and things like that, you are 
building those and designing them to have safety components 
embedded in the process. Along with that, the industry as a 
whole is working on best practices which provide the safety 
mechanisms to be in place as we move forward. That said, in the 
wake of this incident we have to look at everything. We have to 
look at the opportunities and the needs to do further research 
to make sure that we are operating in a safe manner, so it is 
something we have to consider.
    Mr. Carnahan. Mr. Pappas.
    Mr. Pappas. Thank you. You know, the European Union 
basically spends two percent of what it gets out of the ground 
basically and turns it back into R&D. The United States doesn't 
do anything near that. We have such a small percentage. From my 
understanding, royalties that the U.S. government retains is 
the second largest revenue producer after the IRS. We know that 
that money isn't being reverted back to R&D in the energy 
industry, and in my opinion, it needs to be because it is a 
priority. It is definitely a priority.
    Mr. Carnahan. Excuse me. Do you know what our percentage 
is? You said it is way under two percent.
    Mr. Pappas. I think it is 2/100ths of a percent in the oil 
and gas business or something like that. So that is one point 
that I would make.
    The second point has to do with what percentage to put into 
safety and environment versus ongoing productivity. In my 
opinion, you need to have a healthy percentage, ten to 15 
percent probably should be at the very least. When you have an 
issue like this, you need to throw a lot more at it and you 
need to throw it at it very quickly, not because you want a 
quick answer, but because you want the right answer soon.
    And the third question, if I am not mistaken, had to do 
with how we fund this stuff and why the government should fund 
more versus private companies. Private and public companies 
basically answer to their stakeholders and their stockholders, 
and what they look at is they look at R&D and technology 
development as it relates to economics for them, and that is a 
capitalist society that we are in. What the government needs to 
do is, they need to assist us to move on beyond that, to look 
at things that may not be economically viable as we see right 
now, and lo and behold, we may learn something that may 
actually open up some doors and it may actually improve it for 
everybody.
    Mr. Carnahan. Any others on the panel?
    If not, thank you, Mr. Chairman. I yield back.
    Chairman Baird. Thanks, Mr. Carnahan. To my colleagues, we 
have been informed that we expect votes to start any moment 
now. Mr. Hall has notified me he has a brief question he wants 
to follow up. I have one brief one, and then unless there are 
other burning issues----
    Mr. Rohrabacher. Mr. Chairman, I have just one very brief 
thing.
    Chairman Baird. Well, how about we recognize Mr. Hall first 
and then I will recognize Mr. Rohrabacher, and then I will 
finish.
    Mr. Hall. Thank you, Mr. Chairman.

                Deepwater Drilling and EPAct Section 999

    Well, to Mr. Lujan, I say he had a lot of good questions 
but they were really questions that ought to have been directed 
to the DOE, who could have answered them but they chose not to 
show up, and Mr. Carnahan, I like him with his idea of how 
something has to be paid for, because way back 10 or 15 years 
ago, I was on the Energy and Commerce Committee and we were 
looking for how to drill the depths of the Gulf, and with a lot 
of outside help. The major problem we had was how we were going 
to pay for it and what was there, and I sought a bill some ten 
years before it was passed. It was passed into I believe the 
2005 bill is when that last good energy bill was passed that 
was supported by Democrats and Republicans, maybe mostly from 
the energy states, but it had support by both parties there. 
But they put my Ultra-Deep in as an amendment. I tried to put 
it in for ten years and finally we got it in that bill. I based 
it on the fact that we at that time knew the energy was there 
but we didn't have the technology to get it to the top, so Mr. 
Carnahan hits the ball right on the face of the bill when he 
says we need to have a way to pay for it. We detected a way to 
pay for it, to get people to do the technology parts and it 
became a technology bill more so than an energy bill with I 
think some 24 universities that were providing that technology. 
We paid them with energy we got up from there that we couldn't 
have gotten up without their technology, and with their 
technology we could, and I think that is operating now. It is 
known as the section 999 or the Ultra-Deep program.
    Mr. Pappas, I think that you have some knowledge on that. I 
just want to ask you one quick question. I would like you to 
highlight some results of the R&D supported by the RPSEA and 
how it impacted our ability to conduct safe drilling, but I 
will just get right to the point and ask you those. How can the 
section 999 program address technical challenges that improve 
deepwater drilling safety?
    Mr. Pappas. The safety side of the business, yes, sir. 
Well, we have got several projects that are ongoing right now 
that really look promising. One of them is a composite riser 
for ultra deepwater, and what that would do is lighten the 
load. It makes it easier to move. It makes it safer and makes 
it more environmentally friendly. Another one would be a 
fatigue performance analysis. We don't have a correct way to 
look at analysis of risers and drilling equipment. It doesn't 
seem to work in deepwater right now. We use empirical 
equations. What we are trying to do is get down to the 
fundamental physics here, and so that helps out a whole lot.
    I talked about the self-standing riser system. That has to 
do with interventions going back into wells that have been 
drilled and trying to help them out. There is no way of doing 
that economically right now, but what this does besides that is 
it gets you away from the heavy vessels, the heavy lifting that 
is necessary so it improves the safety of the people that are 
on board doing those kinds of things. A hybrid power system 
study that we are looking at would use other types of power 
such as wave energy and wind energy to try to supplement some 
of the power that we need for the production, not necessarily 
for drilling, but for production of wells. So if you can try to 
combine some of these things, perhaps they make sense so that 
we can go ahead and be more efficient in the way that we do 
business. So that is environmentally friendly in its own way.
    Mr. Hall. Well, I might say that we had a lot of support, 
technical support from men of industry just like you that are 
coming and giving your time here today, one of whom is in the 
audience here that was of great benefit to me as we pushed for 
this. I rode with President Bush out to New Mexico to sign the 
energy bill. My amendment was in that bill for the first time 
in ten years. I felt good about it until, he, when he was 
signing it, recognized me standing behind him as there only to 
get some free coffee off of Air Force One. What he didn't know 
was I had six of his coffee mugs in my briefcase at that very 
time. But he signed that, and then later because he got knocked 
around a lot saying that he was supporting big energy firms, he 
turned and decided that he wanted to kill that bill and took a 
shot at us on the Floor through Congressman Markey, which he 
was turned back with the help of Republicans and Democrats, 
some 245 votes to 161, and there would be other assaults on 
that but it is the safe, paid-for thrust.
    And the gentleman on the end suggested maybe a moratorium 
on drilling. Maybe he means a moratorium on the dangerous type 
of drilling, the most ultra deep, and he probably has a foot to 
stand on there but I can't understand anybody that wants just a 
whitewash all moratorium and knock out thousands and thousands 
of jobs right now to pursue a safety that they don't know 
whether it is safety or not, because like you say, we won't 
know until we get there and get that out. We won't know why 
their four checks didn't work but those are things that we will 
find out.
    I yield back. I thank you for the time.
    Chairman Baird. Thank you, Mr. Hall. I have actually spoken 
to former President Bush about his decision and he said that 
will teach Mr. Hall to steal my darn coffee cups.
    Mr. Hall. He hasn't spoken to me since.
    Chairman Baird. There is a take-home lesson here.
    Mr. Rohrabacher, and then I will briefly ask a question and 
then we will finish up.

                   New Technology Development and DOE

    Mr. Rohrabacher. Well, thank you very much, Mr. Chairman, 
and again, I appreciate your leadership. Let us note that right 
here in this room we had a hearing a couple weeks ago, and 
Kevin Costner was here and he sat right over there where Mr. 
McCormack is sitting and told us that he had put considerable 
amount of investment of his own money into developing a 
technology that could have been put to use in doing what Dr. 
Baugh has described today of sucking up oil and water and 
separating it, but we are not now prepared to do that, but 
Kevin Costner a decade ago put his own money into that 
technology and it sat there, it sat unused and not put into a 
place where we could now mobilize it to help us solve this 
disaster or come to grips with it. So that, number one, was 
what came out of that hearing, and the Chairman and I want to 
note we met with Mr. Costner later and I think that again we 
must make sure we are doing our part here, and we are making 
sure that the Kevin Costners of the world or the people in the 
oil business were doing their part but we need to do our part 
here as well.
    And one of the things we need is to make sure the executive 
branch, this isn't just legislative branch, it is very 
disappointing that the Department of Energy was not here today 
to participate. There are some serious questions that needed to 
be asked and they weren't here. But I think all of our 
witnesses presented some very fine ideas and insights and I 
thank them, and I thank you, Mr. Chairman.
    Chairman Baird. Thank you, Mr. Rohrabacher. I share that 
concern. We hope to--we got a commitment from the Executive 
Branch to get a witness here, and we lament the absence, as 
well, but I appreciate that the Committee is focused on the 
witnesses who are here.

             More on Inherent Risks and Safety Improvement

    I just want to thank my colleagues for their good questions 
and then our witnesses. This issue of risk--you know, Mr. 
McCormack, you talked about the cumulative effects of small 
risk. You know, NASA some years ago when they first started the 
moon mission, they set what appeared to be a microscopic 
probability of risk and it was something like one out of 
100,000, a really low number, and people said, ``why are you 
being so rigorous?'' And they said, you know how many parts 
there are on a spaceship, and you add those up and even a 
little tiny valve fails and that prevents hydraulic fluid from 
going somewhere else, et cetera, et cetera. And so I am 
concerned about that, but then also, when we look at this, we 
too often in this institution say, well, how much money did you 
throw out, that shows whether you care or not, okay, and I 
don't think we should do that. But conversely, if you throw 
relatively little money at something relative to everything 
else, it doesn't suggest a high priority. So when we look at 
RPSEA's expenditures and you say, you know, you listed some 
things and they all sounded impressive, they seem to have 
safety as an artifact almost. Maybe it will be a direct result. 
But how do we say going forward from here with RPSEA and API, 
look, we lost 11 lives, we are spending hundreds of billions of 
dollars over time--not hundreds of billions yet but we are 
spending many billions. Let us say that. How do we focus more 
on safety? And how do we know what we are doing is actually 
safety and whether it is human factors and training, whether it 
is better physical technology? Dr. Baugh mentioned improved 
shear technology. Then, as I listened to the shear things, it 
is like we have got the technology there. Unless there is 
something in the way, which there often is and then it doesn't 
work, so we need two of them, but there could also be something 
in the way of that second one and then it doesn't work. That is 
not reassuring. How do we say--I mean, if we know that, if we 
know our safety equipment can be blocked from working and yet 
we say to ourselves we are reassured. It is like I have a smoke 
detector in my house with no batteries in it, so educate me. 
How do we make sure RPSEA and API spend more attention so we 
are not here five years from now or ten years from now doing 
the same thing?
    Mr. Pappas. Okay. Thank you very much. Mr. Chairman, as I 
mentioned earlier, we didn't realize we had a problem; the 
industry did not, anyway. So we have come together, and I 
detailed three different scenarios that we could look at going 
forward. You mentioned drilling down as a pun, but that is 
exactly what we have done, and we have come up with a list, and 
if I can read very quickly, okay?
    Chairman Baird. Please do.
    Mr. Pappas. Blowout preventer inspection and enforcement 
procedures including backup equipment and reporting 
requirements. Looking into all these things, by the way. Well 
controls procedures, training programs and/or response 
mechanisms for deepwater wells. Improved comprehensive safety 
management programs need to be looked at also. Emergency 
equipment certification, which was noted also, and testing 
improvements, streamlined reporting systems to governmental 
agencies, additional safety barriers during critical well 
construction stages such as what we had, well construction 
certification procedures for cement and tubular equipment, 
standardized well construction procedures from wellhead to 
reservoir, increased enforcement by government agencies 
including the training and the development of additional 
personnel. These are the ones that we identified right off the 
bat that need to be looked at as a group, and we have got folks 
in place to look at those.
    Chairman Baird. I thank you, and I thank all the witnesses. 
Did you want to add to that, Mr. Milito? Please.
    Mr. Milito. Well, I was just going to point out that this 
is something industry is doing, but I think an important part 
of it is making sure that the regulators understand how the 
technology is advancing. And as part of our process, part of 
Mr. Pappas's process, MMS as a regulator should be involved in 
that. They should be in our standards meetings so they can see 
how the industry is working together and what the technologies 
are so that the regs don't fall behind technology. In addition, 
they need to see what Mr. Pappas's group is doing so that the 
regulatory system is at that level, that we are not missing out 
on these opportunities.
    Chairman Baird. And it would seem those regulators need to 
have, as Mr. McCormack pointed out, not only comparable levels 
of training, but also expertise in the specific type of 
environment that they are regulating rather than saying we are 
going to take something from dry land put it over on deepwater 
or shallow water onto deepwater, different exigencies of the 
environment.
    Mr. Milito. Agreed.

                                Closing

    Chairman Baird. I want to thank the witnesses. The reason 
we are having these hearings and Mr. Gordon is working so hard 
and all of my colleagues are is that we don't want to see this 
happen again, and if we are going to try to respond to this, we 
think we need to improve our research portfolio, how it focuses 
on this, and maybe our regulatory portfolio. We want to do so 
in a way that is responsible and informed, not just something 
for symbolic, you know, we all feel good because we had a good, 
clever name to a bill. And your testimony today and your input 
will be incredibly helpful, and, as always on this Committee, 
the record will remain open for two weeks to give you all a 
chance to respond to any questions from members or if you have 
additional information you want to submit, and also for any 
additional statements from members.
    With that, Mr. Hall has a final comment.
    Mr. Hall. I just want to say we will miss Mr. Inglis in 
this Committee but we are also going to miss Dr. Ehlers and Dr. 
Baird, who have been good guidance for us and helpful in 
encouraging men and women like you to come and testify and give 
us your time, and we are going to miss you, Doctor, very much. 
I will miss some of the trips that we didn't get to make that 
we always planned, but you have been a gentleman and I have 
agreed with you not 100 percent of the time but when I didn't 
agree with you, you were probably wrong.
    Chairman Baird. I will accept that.
    Mr. Hall. Or maybe I was the one that was wrong. Anyway, we 
thank you for your long service here and look forward to 
working with you even after you are gone. Come on back. My door 
will always be open to you.
    Chairman Baird. I am honored by that. Thank you.
    The witnesses did an outstanding job both in preparation 
and your presentation today. We are grateful for your service. 
Again, if there is any information we didn't cover in the 
limited time, feel free to let us know. Thank you.
    With that, the Committee stands adjourned. Thanks to all my 
colleagues for their good questions and input.
    [Whereupon, at 12:00 p.m., the Subcommittee was adjourned.]

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