[Senate Hearing 111-653, Part 4]
[From the U.S. Government Publishing Office]
S. Hrg. 111-653, Pt. 4
OIL RIG DISASTER IN THE GULF
=======================================================================
HEARING
before the
COMMITTEE ON
ENERGY AND NATURAL RESOURCES
UNITED STATES SENATE
ONE HUNDRED ELEVENTH CONGRESS
SECOND SESSION
TO
RECEIVE TESTIMONY ON ISSUES RELATED TO THE DEPARTMENT OF THE INTERIOR'S
MAY 27TH REPORT: INCREASED SAFETY MEASURES FOR ENERGY DEVELOPMENT ON
THE OUTER CONTINENTAL SHELF, INCLUDING OVERSIGHT OF RECENT ACTIONS
RECOMMENDED BY THE DEPARTMENT TO ADDRESS THE SAFETY OF OFFSHORE OIL
DEVELOPMENT
__________
JUNE 9, 2010
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Committee on Energy and Natural Resources
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COMMITTEE ON ENERGY AND NATURAL RESOURCES
JEFF BINGAMAN, New Mexico, Chairman
BYRON L. DORGAN, North Dakota LISA MURKOWSKI, Alaska
RON WYDEN, Oregon RICHARD BURR, North Carolina
TIM JOHNSON, South Dakota JOHN BARRASSO, Wyoming
MARY L. LANDRIEU, Louisiana SAM BROWNBACK, Kansas
MARIA CANTWELL, Washington JAMES E. RISCH, Idaho
ROBERT MENENDEZ, New Jersey JOHN McCAIN, Arizona
BLANCHE L. LINCOLN, Arkansas ROBERT F. BENNETT, Utah
BERNARD SANDERS, Vermont JIM BUNNING, Kentucky
EVAN BAYH, Indiana JEFF SESSIONS, Alabama
DEBBIE STABENOW, Michigan BOB CORKER, Tennessee
MARK UDALL, Colorado
JEANNE SHAHEEN, New Hampshire
Robert M. Simon, Staff Director
Sam E. Fowler, Chief Counsel
McKie Campbell, Republican Staff Director
Karen K. Billups, Republican Chief Counsel
C O N T E N T S
----------
STATEMENTS
Page
Bingaman, Hon. Jeff, U.S. Senator From New Mexico................ 1
Murkowski, Hon. Lisa, U.S. Senator From Alaska................... 3
Salazar, Hon. Ken, Secretary, Department of the Interior......... 5
APPENDIXES
Appendix I
Responses to additional questions................................ 43
Appendix II
Additional material submitted for the record..................... 47
OIL RIG DISASTER IN THE GULF
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WEDNESDAY, JUNE 9, 2010
U.S. Senate,
Committee on Energy and Natural Resources,
Washington, DC.
The committee met, pursuant to notice, at 9:36 a.m. in room
SD-366, Dirksen Senate Office Building, Hon. Jeff Bingaman,
chairman, presiding.
OPENING STATEMENT OF HON. JEFF BINGAMAN, U.S. SENATOR FROM NEW
MEXICO
The Chairman. OK. The hearing will come to order. The
committee will come to order.
Today, we are holding the fourth committee hearing here in
the Energy and Natural Resources Committee on the devastating
oil spill in the Gulf of Mexico. As large volumes of oil
continue to wreak havoc in the Gulf, our thoughts are first
with the people on the forefront of the disaster--the families
of those who have lost their lives in the explosion, those who
are working day and night to protect the places and the
wildlife they care about and often their livelihood as well.
I know all Americans are thinking of the residents of the
Gulf region and are grateful to them and to the other
responders for their work under these most difficult
circumstances.
It is clear that prior to the explosion of the Deepwater
Horizon rig neither the companies involved nor the Government
adequately appreciated or prepared for the risks involved in a
deepwater drilling operation of this type. The results of that
failure to properly assess risks and prepare for risks have
been disastrous. Lives have been lost. The livelihood and way
of life of many Gulf residents has been interrupted and in some
cases destroyed. The environmental damage has been immense.
Since BP has so far failed to stop the oil gushing into the
Gulf, the extent of the further damage that will be suffered is
not known.
Our purpose today is to review near-term actions that have
been taken and are planned to correct this longstanding failure
to properly assess risk and to ensure the safety of this and
other ongoing and future energy operations in the Outer
Continental Shelf. According to the Department of the Interior,
the Gulf of Mexico has nearly 7,000 active leases on the
Federal Outer Continental Shelf, 64 percent of which are in
deep water. As a result, there are now about 3,600 oil and gas-
related structures in the Gulf.
In 2009, 80 percent of all U.S. offshore oil production, 45
percent of natural gas production occurred in water depths in
excess of 1,000 feet, and industry had drilled nearly 4,000
wells to those depths. Operators have drilled about 700 wells
that--like Deepwater Horizon's well--are in water depths of
5,000 feet or greater on the Outer Continental Shelf.
In 2009, production from the Gulf accounted for 31 percent
of total domestic oil production and 11 percent of total
domestic natural gas production. Offshore operations provided
direct employment estimated at 150,000 jobs.
We are all aware of our country's demand for oil. As a
result of this accident, we are aware perhaps in a way that we
were not before of the true potential costs of that demand.
The challenge for regulators, and for Congress in enacting
statutory responsibilities and authorities to those regulators,
is to put appropriate requirements in place ensuring that this
horrible price is not paid again. At the same time, we are
reminded that we must continue with renewed vigor to find ways
to reduce our dependence on oil for both national security,
economic, and environmental reasons. It is particularly
challenging to do so while we are still in the midst of a
crisis.
Investigations are ongoing into the cause of this disaster.
We do not have certainty about what happened. The best minds in
the country must be focused on stopping this oil leak and
cleaning up the affected areas. Yet we must make sure, as an
urgent matter, that ongoing operations are safe.
Today, we hear from the Secretary of the Interior about the
administration's actions in this regard. At the President's
direction, his team has produced a report, on a 30-day
timeline, to identify near-term safety measures that need to be
taken. The regulators have acted quickly to impose some of
these new safety requirements immediately on ongoing
operations. In addition, the administration has taken measures
to halt certain operations to ensure their safety, while
allowing others to continue.
We appreciate the Secretary's efforts and his work to
ensure that there is an adequate response to the environmental
and safety crises presented by this accident. We also
appreciate his presence here today, look forward to working
together with the administration on our shared and urgent goal
of ensuring the safety of these operations.
Let me turn now to Senator Murkowski for her opening
remarks.
[The prepared statement of Senator Landrieu follows:]
Prepared Statement of Hon. Mary L. Landrieu, U.S. Senator From
Louisiana
Thank you, Mr. Chairman for holding this important hearing. I begin
each hearing remembering those who lives were lost in this terrible
accident. Our nation lost 11 men and our thoughts and prayers remain
with their families of those lost and injured.
Today we are here to discuss the Department of Interior's May 27th
report that was requested by the President on April 30th. Only 10 days
after the Deepwater Horizon explosion, the President requested a
thorough report on additional safety mechanisms that could be put in
place immediately to improve the safety of oil and gas exploration and
production operations on the OCS.
The intent of this report was to improve the safety of oil and gas
production in the Gulf of Mexico, not shut it down. Unfortunately, the
recommended 6 month drilling moratorium on deepwater leases, including
shutting down the 33 rigs that were already in the process of drilling
new wells, has halted all future production. And currently, no one
knows when companies will be allowed to drill again.
As such, this moratorium will exacerbate, rather than alleviate,
the impacts of this spill upon Louisiana's economy and the environment.
The immediate impacts to the economy are devastating. The idled 33
rigs employed approximately 36,300 crewmen, deck hands, engineers,
welders, ROV operators, caterers, helicopter pilots, etc. Many of these
offshore crewmen and women are from Louisiana and the neighboring
states.
That's like closing 12 large motor vehicle assembly plants at
once--with the impacts disproportionately in my state.
In addition, all the service jobs will also be impacted. Losing
tens of thousands of jobs will be a catastrophic blow to an already
tragic situation.
I know that many in the environmental community believe that
shutting down offshore oil and gas production will protect our
coastlines from oil washing ashore, but this is contrary to the facts.
The reality is our country will continue to rely on oil and gas for
years into the future as we move to more renewable and less carbon
intense sources of energy. If we are not going to produce oil and gas
domestically, then we will have to get it from somewhere else and
transport it by tanker.
On average, today's tankers carry about 2 million barrels of oil
each, and according to the National Research Council, are four times
more likely to be the cause of oil in the sea vs. an offshore drilling
facility. Increasing tanker traffic will only increase this risk--and
put our coastlines at greater peril--the opposite intent of the report.
I agree that we must ensure that we are doing everything possible
to increase the safety of OCS oil and gas production. I am supportive
of a pause on drilling to ensure that all the right safety mechanisms
are in place, but I do not believe a 6 month moratorium achieves the
results intended.
Once these drilling rigs get moved to international locations, they
will not return immediately. It could be years before they return,
leaving the U.S. more dependent on foreign oil, exporting jobs abroad,
weakening our economy and putting our shorelines are greater risk.
That is why I have asked the President to immediately reconsider
the six-month moratorium on deepwater drilling.
I hope for the sake of Louisiana's economy and shoreline, he
listens.
Thank you Mr. Chairman
STATEMENT OF HON. LISA MURKOWSKI, U.S. SENATOR
FROM ALASKA
Senator Murkowski. Thank you, Mr. Chairman. Good morning.
Good morning to you, Secretary. It has been a couple of
weeks now since you have been before the committee. I think
last time you were here, the oil from the spill had not yet
reached----
[Interruption from audience.]
Senator Murkowski. Mr. Chairman.
The Chairman. Let me ask the protesters to please exit the
room and allow us to proceed with our hearing.
Senator Murkowski. Thank you, Mr. Chairman.
Mr. Chairman, again, as I was saying, it has been several
weeks now since you have been before the committee. At that
time, the oil had not yet reached the shores and marshes of
southern Louisiana. A couple of weeks ago, we had the
opportunity, along with the chairman, to go, fly over that
spill. I think we all recognize the gravity of the situation
and the nightmare that it has become for the residents of the
Gulf region.
Today, we are examining the measures that the Interior
Department has recommended and implemented so far in response
to the Deepwater spill. We are examining not only the 4-page
report on immediate recommendations for improved safety and
environmental protections, but also we need to discuss the
moratorium that the Interior Department has implemented for all
deepwater exploration and the additional requirements and
suspensions for some shallow water exploration as well.
There can be no doubt, most certainly, that the public
outrage and the political pressure has mounted for the
Government to do more about this still-worsening situation, and
I think we are all sympathetic to those demands. Yesterday, I
had an opportunity to meet with an Alaskan--he is going to be
testifying this morning in another committee here on the Hill,
speaking on the long-term impacts of oil spills on fisheries as
we experienced after the Exxon Valdez. Unfortunately, his story
is familiar, very familiar to me and my constituents.
But our conversation wasn't just about the fisheries. It
was about the constant struggle in finding a balance between
the exploration and the production of oil, which our State
depends upon for the majority of its economy, against the
critical and very compelling interests of maintaining our
ecosystems, which support the remaining building blocks of our
fisheries and our tourism economies. The Gulf is certainly
faced with a stark picture of the associated tradeoffs right
now.
So I applaud the Interior Department for its efforts, as
you have stated in the report, to address the fact that
America's energy security is likely to carry exploration
increasingly into very deep water environments, and how to
reevaluate whether the best practices for safe drilling
operations developed over the years might be adjusted for the
unique challenges of drilling so very far under the sea.
These are not just technical challenges, but they are human
challenges as well, which we recognize can be difficult to
regulate without successfully creating a culture, both at the
regulatory and the industrial level, that prioritizes safety
and, in turn, protects from anything like Deepwater Horizon
ever happening again.
I am sure that we will look back at the lessons that have
been learned not only from what happened on April 20th, but
from the various operational responses to the spill, and most
certainly, we will learn lessons from our policy responses as
well. I think we just need to look to the news yesterday that
one of the largest independent offshore operators announced
that it is packing up and moving three of its rigs to foreign
waters.
So, I think the question that needs to be asked is, is this
consequence unintended? Is it something we are willing to
accept?
Mr. Chairman, there is certainly a lot to talk about here.
I want there to be no effort or expense spared to bring the
well under control and see to it that the victims of this spill
are compensated fairly and expeditiously, and I am certainly
working to make that happen. As we look at the policy moving
forward, I simply reiterate that we carefully consider the
impacts of this spill on long-term energy policy. We have got
to get it right.
Energy Secretary Chu announced yesterday that the
department is providing online access to diagnostic results and
other data about the malfunctioning blowout preventer. He said,
and I quote, ``Transparency is not only in the public interest,
it is part of the scientific process. We want to make sure that
independent scientists, engineers, and other experts have every
opportunity to review this information and make their own
conclusions.''
Mr. Chairman, I would echo Secretary Chu's statements. Let
us reform policy in a transparent, reasoned manner where the
public and the scientific community and all interested parties
can review it. We certainly have a lot of work to do.
With that, I appreciate the opportunity and look forward to
the comments from the Secretary.
The Chairman. Thank you. As Senator Murkowski said, we
welcome you back to the committee, Mr. Secretary. Of course,
your deputy David Hayes and your counselor Steve Black, we
welcome them as well. So please go ahead with your statement.
STATEMENT OF HON. KEN SALAZAR, SECRETARY, DEPARTMENT OF THE
INTERIOR
Secretary Salazar. Thank you very much, Chairman Bingaman
and Ranking Member Murkowski and all the U.S. Senators, and I
think all of you are former colleagues on this committee. So it
is always good to come to this committee, even when we are
dealing with difficult challenges that are facing our Nation.
I have prepared a statement for the record that we will
submit for the record. But I think in the interest of having a
dialog with you, what I want to do this morning to is to focus
in on a couple of key issues. The first is the status of
offshore drilling and the safety program which the President
has directed, which we are in the process of implementing. The
second is the reform that we have underway at the Department of
Interior with respect to the Minerals Management Service and
moving forward with efforts to develop a new organization
there.
It may be useful at the outset, before I speak to those two
central points here, to also just give you a quick overview of
what is happening even this morning. We are in a position where
we are directive of BP relative to making sure that they are
doing everything humanly and technologically possible to stop
the leak, to fight the oil on the seas, and to fight the
damages as they occur on shore.
This morning, Secretary Chu and I had our morning call with
BP executives. We were informed that the Enterprise vessel,
which is what they call the vessel that is doing the short-term
containment, is capturing about 15,000 barrels of oil a day. At
our insistence, they have moved forward with additional
capacity to be able to capture additional amounts of oil and to
make sure that the redundancies are built in over time so that
at the end of the day, as much of the pollution as is leaking
can be captured, will be captured.
Our goal is to get to zero pollution emanating from this
well and doing so in the interim, while they get to the final
effort, which will be to kill the well through the relief wells
which are penetrating the subsea and which now are close to
8,000 feet below the surface of the sea. So those efforts
continue. They are continuing in parallel, not in sequence, and
nothing is being spared to bring this problem under control.
In the headquarters at Houston, where I have now spent
probably 10 days in the last 3 or 4 weeks, the scientists from
the United States of America, from Sandia Labs, from Livermore,
and from Los Alamos Laboratories, along with scientists from
the United States Geological Survey, the Department of Defense
experts are all assembled there, making sure that the best
minds are being brought to focus in on the problem. That is at
the direction of the President.
Let me comment just then on two of the issues, and I know
that the committee will have many questions on these matters.
First, Deputy Secretary David Hayes has been involved on this
effort--now I think we enter day 51 or 52--nonstop, like the
rest of us. We are relentless. We haven't taken a day off from
the beginning, and we will continue to work at this same level
until we get this problem under control and we figure out the
future with respect to oil and gas and the Outer Continental
Shelf.
Steve Black, who is the counselor to the Secretary, has
been involved in all the energy issues at the Department of
Interior and was one of the key architects of the safety report
that was submitted to the President at his direction. So, he
may have answers to some of the questions with respect to the
safety report.
Let me speak to the status of offshore drilling because I
think that is something which many of you on this committee are
very interested in, wanting to find out where we are. No.1, the
President, following the Deepwater Horizon, directed the
Department of Interior to develop safety recommendations within
30 days.
The goal is simple. If we are going to move forward with
any kind of oil and gas production in the Outer Continental
Shelf, it must be done in a safe manner, and assumptions that
were made about safety in the past are not assumptions that
will be made in the future. To the extent that offshore
drilling will continue, it has to be done in a manner that we
can assure that it can be done in a safe way. So, the multiple
recommendations that came out to the President in the report
are now in the process of being implemented at the Department
of the Interior.
Those recommendations include additional enforcement and
safety measures. They include requirements, which essentially
amount to a recall of blowout prevention mechanisms and the
recertification of those blowout prevention mechanisms in the
Outer Continental Shelf.
They include requirements with respect to cementing and
with respect to casing, with respect to rig safety and a whole
host of other safety initiatives. They are being implemented
through Notices to the Lessees, which we implemented yesterday
by sending a Notice to Lessees that affects both deep water and
shallow water. So there is a panoply of safety measures which
are significantly enhanced from what had existed in the past
that are already being implemented as we speak here.
No.2, with respect to the status of offshore drilling, I
wanted to comment on the moratorium and also what we are doing
with respect to shallow water development. First of all, with
respect to the moratorium that the President and I have put
into place, it was our view that we needed to get to the
bottom, that we needed to find out exactly what it is that
happened out at the Deepwater Horizon so that as we move
forward with any kind of deepwater exploration that we can
assure the American public and we can assure everyone who is
watching that, in fact, it can move forward in a safe way.
The President's commission, which will take a look at all
of these issues, will have a recommendation based on the
President's directive within 6 months. Those recommendations
will then be incorporated into how we move forward with Outer
Continental Shelf drilling.
But between now and then, it was our view, it was the
President's directive that we press the pause button. That is
important for all of you on this committee to know that word.
It is the pause button. It is not the stop button, but it is
the pause button. It is a pause button so that we can make sure
that if we move forward with OCS drilling in the Outer
Continental Shelf that it can be done in a way that is
protective of people and protective of the environment as well.
With respect to the shallow waters, which I defined
essentially at a 500-foot level, we have allowed those oil and
gas shallow water production efforts and drilling efforts to
move forward if, in fact, the operators can certify to us that
they can meet the safety requirements. For most good operators,
they will be able to give us the requirements that we have
imposed on them, including certification that their blowout
prevention mechanisms, that their redundancies, that their
cementing procedures, that their casing procedures are all
working.
So, we wanted to allow shallow water drilling to move
forward if it could be done in a way that can assure safety,
and the Notice to Lessees that went out yesterday hopefully
will achieve that.
Let me then speak to the second point I wanted to cover
this morning, and that is with respect to the Minerals
Management Service and the changes that we are undertaking
within that agency. It is important to reflect back also at the
work that has gone on with MMS over the last 16, 17 months at
the Department of Interior, and there has been massive work
that has gone on.
From day one, we imposed ethics requirements on MMS that
had not existed before. We made ethics requirements a part of
the performance plans of supervisors within MMS. Those who were
involved in wrongdoing were referred to prosecution, or other
personnel action was taken with respect to people who had been
involved in wrongdoing.
Our purpose in taking those reforms was to change the
culture at MMS, and I believe that we have made significant
progress in moving on that agenda. Second, we also move forward
with a whole new agenda with respect to renewable energy,
recognizing oil and gas is important. We also have recognized
that there is tremendous opportunity with respect to wind power
in the offshore.
Yesterday, I signed a memorandum of understanding with 10
Governors along the Atlantic coast because we believe that a
very significant amount of the electricity needed along the
eastern seaboard can, in fact, be generated from wind power off
of the Atlantic, and the States along the Atlantic coast are
very interested and supportive of those initiatives. So we have
moved forward with a major renewable agenda, energy agenda
within MMS.
Finally, on reform efforts, the plans which we announced at
the end of March were a culmination of a very significant
amount of work taking into account and consideration two
different plans that have been put forward by the prior
administration, the 2007-2012 plan, as well as their 2010-2015
plan. The plan that we came out was very different from what
had been proposed.
We ended up postponing leases that had been planned in the
Chukchi and the Beaufort Sea, as Senator Murkowski well knows,
in large part because of the fact that we felt we needed
additional science and we needed additional information with
respect to oil spill response capability. We looked at places
like Bristol Bay in Alaska, and we said it was too special and
had the kind of ecosystem values there that needed to be
protected for the long term.
But we were also looking at making sure that those areas
where you had the right infrastructure, where you had the
support of, say, governments, where we had the geophysical
information, that we allowed oil and gas production to move
forward. Certainly, that was what we put forward with respect
to the Gulf of Mexico.
There are other places on the Atlantic, and I know Senator
Menendez and others have been very interested with respect to
the Atlantic. In the North Atlantic, we took that off the table
from any drilling exploration. In the Mid-and South Atlantic,
what we said we would do there is essentially develop
additional information so that we can make thoughtful decisions
relative to the future of the OCS. So that a plan that we came
up with, in fact, was a part of what I consider to be one of
the most significant changes that we came up with MMS.
Now, moving ahead, how do we take this very critical
function of the Department of the Interior of the United States
of America and organize it in a way so that we can make sure
that the functions of Government are being performed and being
performed well?
We have, through Secretarial Order, ordered the dismantling
of MMS as we knew it into what now will be three components
going forward. You all know on this committee that MMS exists
by virtue of a Secretarial Order. The Secretarial Order that I
have signed envisions the creation of a new direction forward
in terms of how we are organized, and let me just quickly walk
through that, and I will conclude my testimony.
The first is that we are separating the revenue collections
of MMS totally away from that part of the department. MMS has
historically been located within the Assistant Secretary of
Land and Minerals Management. There are approximately 900
people who work in that part of the department. Their job is to
go out and collect the money on behalf of the American
citizens, which they have done in good ways for a long time,
including an average of $13 billion a year.
Thirteen billion a year that comes into the Federal
Treasury from oil and gas, and most of it coming from offshore.
They do that day in and day out. Those functions of revenue
collections will be moved away from Land and Minerals and put
over into the Assistant Secretary of Policy Management and
Budget, who is an Assistant Secretary appointed by the
President, confirmed by the Senate. So, that will be a complete
separation of the revenue collections from the permitting and
the enforcement side.
Then what we will do with the rest of the agency is we will
divide it into two bureaus. One will be the Bureau of Ocean
Energy Management, which will have the responsibility for
moving forward with the lease sales, moving forward with the
environmental analysis, and moving forward with making sure
that the resource in the Outer Continental Shelf, both with
respect to conventional energy and renewable energy, is being
managed in the appropriate way.
We will also create a Bureau of Safety and Environmental
Compliance, which will be separate and apart from the agency
that has the responsibility for giving out the leases. That
will allow essentially the police function of Government to
operate independently of the part of the Government that will
be providing the leases and the planning with respect to the
OCS.
Now, how did we come up with this plan? I mean, we have
been working on a new reorganization for MMS for several
months. This plan, in large part, reflects what has happened as
well in places like the UK and Norway, where after horrific
incidents that they also had in their outer continental shelf,
they reorganized their departments relative to how they oversee
the outer continental shelf.
So as we move forward with the reorganization, Chairman
Bingaman and Senator Murkowski and the distinguished members of
this committee, I want to work closely with you to make sure
that the organization that we put into place will ensure the
goals which were articulated by you, Senator Bingaman, and that
is that we have safety and environment as a critical concern of
how we move forward with development in the OCS.
With that, Mr. Chairman, I would be happy to take your
questions.
[The prepared statement of Secretary Salazar follows:]
Prepared Statement of Hon. Ken Salazar, Secretary, Department of the
Interior
Thank you, Chairman Bingaman, Ranking Member Murkowski, and Members
of the Committee for the opportunity to be here today. I appreciate the
opportunity to discuss our ongoing safety and management reform efforts
related to offshore energy activities.
Since I last appeared before you several weeks ago, we have
continued our aggressive response to the BP oil spill in the Gulf of
Mexico and efforts to improve the Department of the Interior's ability
to respond to help prevent such events in the future.
I will discuss these reforms in more detail later in my statement,
but I want to be clear from the beginning that the changes that we have
been making are substantive and systemic, not just cosmetic. These
reforms are critical to help us prevent future occurrences of events
like the Deepwater Horizon drilling rig explosion and the subsequent BP
oil spill.
SUSTAINED EFFORT IN THE GULF
At the direction of the President, Department of Energy Secretary
Chu and I returned to Houston last week. Secretary Chu and I spent most
of the week with BP officials and engineers and federal scientists
continuing our work on ways to leverage the best science and
engineering minds from across the federal government, academia, and the
private sector to contain the BP oil spill. We have been monitoring
BP's containment operations, conducting independent analysis of the
data and operational plans to help maximize the chances of success.
Under the command of Admiral Thad Allen, I directed Dr. Marcia
McNutt, Director of the U.S. Geological Survey, to lead the effort for
an independent estimate of the flow rate for the out-of-control well.
We carried out this effort because we wanted our own assessment,
independent of the estimates provided by BP. This preliminary
scientific assessment, performed in collaboration with federal
scientists and respected members of the academic community, is an
independent estimate of the flow rate that will ensure that BP and
other responsible parties will be held accountable for the oil spill,
and will inform the response effort that is underway. The Flow Rate
Technical Group, chaired by Dr. McNutt, is now in the process of
determining a revised estimate of flow that takes into account the
cutting off of the riser.
Deputy Secretary David J. Hayes has continued to work virtually
around the clock on Gulf-related response activities, coordinating the
many efforts undertaken by the Department in responding to the spill,
both in terms of capping the well, implementing new safety measures
included in my recent report to the President, and in working to
protect our trust resources from damage from the spill.
Recently I named Bob Abbey, Director of the Bureau of Land
Management, as the acting director of the Minerals Management Service
(MMS) while we transition to new leadership. Bob has been one of our
leaders on onshore energy reform and I believe he has the kind of
experience we need as we continue moving forward with our reform and
restructuring of the MMS offshore leasing and development and revenue
collection programs.
My top natural resources and science leadership continue their
collective efforts on the Gulf Coast. Tom Strickland, Assistant
Secretary for Fish and Wildlife and Parks; Jon Jarvis, Director of the
National Park Service; and Rowan Gould, Acting Director of the U.S.
Fish and Wildlife Service are working hard and leading the efforts to
protect and assess damage to the complex ecology of the Gulf Coast in
our National Wildlife Refuges, National Parks, and National Seashores.
They and their bureau staffs are helping to develop and provide data
and information for use by the Unified Command.
A BACKDROP OF REFORM
When I appeared before you last time, I reviewed the major changes
that we have made at MMS. Since January 2009 we have taken the bureau
in a bold new direction, as exemplified by our massive undertakings to
tackle the ethics challenges at MMS, develop a new plan for oil and gas
development on the Outer Continental Shelf, and create the renewable
energy program.
We have worked to reform the MMS's culture of doing business by
issuing new ethics standards for all MMS employees during my first
weeks here at the Department in January 2009. I terminated the Royalty-
in-Kind program. I have implemented recommendations to improve MMS's
royalty collection program that came from the Department's Inspector
General and a committee chaired by former Senators Bob Kerrey and Jake
Garn.
We have also made major changes to the way that the offshore
program does business. I cancelled lease sales in the Chukchi and
Beaufort Seas because of concerns about the sensitivity of the Arctic
and its unique vulnerability to oil spills. I cancelled the oil and gas
lease sale scheduled for the magnificent fishing grounds of Bristol Bay
in Alaska. The President formally withdrew Bristol Bay from any oil and
gas leasing through June 30, 2017.
Taking a similar, bold approach to change the direction at MMS, I
extended the public comment period by 180 days on the Draft Proposed 5-
year Program for the OCS produced by the previous Administration. I
held regional meetings with thousands of stakeholders in Alaska,
California, Louisiana, and New Jersey.
The information and input gained from these additional meetings led
to our announcement, on March 31st, of a new and balanced strategy for
exploring and developing our oil and gas resources on the OCS. This
plan is intended to focus on development in the right ways and in the
right places, provide order and certainty to industry and investors,
and deliver a fair return to American taxpayers for the use of their
resources.
As we evaluate new areas for potential exploration and development
on the OCS, we will conduct thorough environmental analysis and
scientific study, gather public input and comment, and carefully
examine the potential safety and spill risk considerations.
Even before this occurred, I directed the National Marine Board, an
arm of the highly respected National Academy of Sciences, to conduct an
independent review of MMS's inspection program for offshore facilities.
And our fiscal year 2011 budget request provides funding to increase
the number of inspectors available for the offshore oil and gas program
by more than 10 percent.
This tragedy has also served to underscore the need to develop
clean, renewable sources of energy. Since the beginning of the Obama
Administration, the Department has been focused on these issues and has
set priorities for the environmentally responsible development of
renewable energy on our public lands and the OCS. As we have moved
forward to implement the President's clean energy goals, we have
expanded the scope of the MMS's portfolio to include a stronger and
more effective renewable energy program.
On March 11, 2009, I issued a Secretarial Order that made
facilitating the production, development, and delivery of renewable
energy on the Outer Continental Shelf and on public lands top
priorities at the Department. These goals are being accomplished in a
manner that does not ignore, but instead protects our signature
landscapes, natural resources, wildlife, and cultural resources, and
working in close collaboration with all relevant federal, state, Tribal
and other agencies with natural resource stewardship authority.
In April 2009 Chairman Wellinghoff of the Federal Energy Regulatory
Commission and I signed an agreement clarifying our respective
agencies' jurisdictional responsibilities for leasing and licensing
renewable energy projects on the OCS. This agreement allowed us to move
forward with the regulatory framework for OCS renewable energy
development that standardized the process and brought certainty to the
application process for OCS wind, solar and hydrokinetic resources.
This framework is important as it provides the ``rules of the road''
for states and companies to pursue development of projects on federal
submerged lands.
I also approved the Cape Wind project off Massachusetts' coast, and
we have taken the first steps to stand up major wind projects off the
coasts of New Jersey and Delaware. I am working with the Atlantic Coast
Governors to give renewed impetus to developing the potential for
offshore wind projects. In keeping with this goal, yesterday I
announced that the governors of East Coast states and I signed a
Memorandum of Understanding formally establishing an Atlantic Offshore
Wind Energy Consortium to promote the efficient, orderly, and
responsible development of wind resources on the Outer Continental
Shelf through increased federal-state cooperation. Under the MOU, the
consortium will develop an action plan setting forth priorities, goals,
and specific recommendations and steps for achieving the objectives
outlined in the agreement.
I also announced the establishment of a regional renewable energy
office, located in Virginia, which will coordinate and expedite, as
appropriate, the development of wind, solar, and other renewable energy
resources on the Atlantic Outer Continental Shelf.
The effort that we have put forward at the Department since January
2009 has been a massive effort to chart a new direction for the
Department of the Interior, including MMS.
SUBSTANTIVE AND SYSTEMIC IMPROVEMENTS
The tragedy and the massive spill for in the Gulf have made the
importance and urgency of this reform agenda clear. I have issued
Secretarial Order No. 3299 announcing the reorganization of the MMS and
the establishment of the Bureau of Ocean Energy Management; the Bureau
of Safety and Environmental Enforcement; and the Office of Natural
Resources Revenue.
Under the supervision of the Assistant Secretary for Land and
Minerals Management, the Bureau of Ocean Energy Management will ensure
the environmentally responsible and appropriate development of the
Outer Continental Shelf for both conventional and renewable energy in a
predictable and effective manner. The Bureau of Safety and
Environmental Enforcement will ensure that all production operations
are safe and that potential negative impacts on marine ecosystems and
coastal communities are appropriately considered in each phase of
development and mitigated to the fullest possible extent through its
independent regulation, oversight, and enforcement powers.
Under the supervision of the Assistant Secretary for Policy,
Management and Budget, the Office of Natural Resources Revenue will be
responsible for the royalty and revenue management function ensuring
the full and fair return to the American people for the utilization of
these resources.
I have asked the Assistant Secretary for Policy, Management and
Budget, Rhea Suh, the Assistant Secretary for Land and Minerals
Management, Wilma Lewis, and one of my Senior Advisors, Chris
Henderson, to oversee these reorganization and reform efforts. They all
have strong organizational skills and outstanding experience and
expertise in strategic planning, business administration, and
performance management in the public and private sectors that will be
invaluable assets as we move forward to implement this effort, which
will ensure the independence of the agency's inspections and
enforcement mission.
Mr. Chairman, I have testified before your Committee in support of
organic legislation for the functions now performed by MMS. The OCS
currently provides 31 percent of the Nation's domestic oil production
and almost 11 percent of its domestic natural gas production. The MMS
is one of the largest collectors of non-tax and non-trust revenue for
the Treasury, and has collected an average of more than $13 billion
annually for the past 5 years. Agencies with responsibilities of this
magnitude should be governed by thoughtfully considered organic
legislation.
The President submitted to Congress, along with other
Administration proposals to address the BP oil spill, legislation
requesting additional funds for the Department to inspect offshore oil
and gas platforms, draft enforcement and safety regulations, and carry
out studies needed in light of this event. The legislation would also
extend the time allowed by statute for MMS to review and approve oil
and gas exploration plans from 30 to 90 days.
A STEADFAST FOCUS ON SAFETY
Following the tragic and unprecedented explosion of the Deepwater
Horizon drilling rig, I ordered immediate inspections of all deepwater
oil and gas drilling operations in the Gulf of Mexico, and we issued a
safety notice to all rig operators reminding them of their
responsibilities to follow our regulations and to conduct full and
thorough tests of their equipment.
I also established an Outer Continental Shelf Safety Oversight
Board comprising top Departmental officials charged with strengthen
safety and improving overall management, regulation, and oversight of
operations on the Outer Continental Shelf.
On May 27th I delivered to the President the results of the 30-day
safety review that he ordered us to undertake. The purpose of that
Safety Report was to evaluate oil and gas safety measures that could be
put in place on an interim basis before the on-going investigations to
identify the root cause of the BP oil spill disaster have been
completed. We consulted with a wide range of experts from industry,
government, and academia in drafting this report, and the draft
recommendations contained in it were reviewed by independent
engineering experts.
The report recommends a number of specific measures that can be
taken on both a short and longer term basis to improve the safety of
offshore oil and gas activities, including aggressive new operating
standards and requirements for offshore energy companies. Key
recommendations include a recertification of all Blowout Preventers for
new floating drilling operations; stronger well control practices,
blowout prevention and intervention procedures; tougher inspections for
deepwater drilling operations; and expanded safety and training
programs for rig workers.
After reviewing the report, the President ordered us to immediately
implement a number of actions, including a continuation of the existing
moratorium and a suspension of the issuance of new permits to drill new
deepwater wells until the Presidential Commission investigating the BP
oil spill has completed its six-month review. We are taking these
immediate actions now, and we are laying the groundwork for additional
measures in the future. Just yesterday, for example, I announced the
release of a ``Notice to Lessees'' that provides an initial set of new
safety requirements that all offshore operators must meet, based on the
Safety Report.
CONCLUSION
Mr. Chairman, I look forward to working with you over the coming
weeks as we continue to implement real reform to improve the safety,
transparency, and efficiency of oil and gas exploration and production
operations on the Outer Continental Shelf.
The Chairman. Thank you very much.
Let me just start, ask about the moratorium that you put in
place. You have referred to it as ``pressing the pause
button.'' How does that affect producing wells in the Gulf? Are
there requirements you are putting on the wells that are
currently producing wells, not those that are being developed,
but those that have been in production and closed in and
operating?
Secretary Salazar. Senator Bingaman, with respect to the
moratorium and its application, we have the moratorium in
place, including with respect to the 33 deepwater drilling
operations that were underway. What we have ordered those
drilling rigs to do is to continue drilling to the point where
they can get to a safe place and then secure the well. At that
point in time, drilling will stop until we complete the safety
reviews and the Presidential commission reports and we can make
a determination about how we are going to move forward.
With respect to your question on production, production
continues in the Gulf of Mexico. There has been very little
interruption because of the Deepwater Horizon on production
from the Gulf of Mexico. We continue to do inspections and have
asked for additional inspectors through the request to the
Congress so that we can continue to inspect those facilities,
including those production facilities.
The Chairman. Let me ask on the--you mentioned the 15,000
barrels per day that were captured, I believe you said, by BP
in this effort they are making yesterday. Obviously, the key
question is not how many barrels are captured, but how many
barrels are coming into the Gulf that are not captured and how
much oil is there that is continuing to add to the
environmental damage and economic damage that that part of our
country is suffering.
Can you give us any more insight into how large that number
is?
Secretary Salazar. Senator Bingaman, I hope that in the
next several days we will have a number that is based on
science and includes pressure readings and the visuals of the
plume that is coming out. We have, at my direction and under
the command of Admiral Thad Allen, had Marcia McNutt, the
Director of the United States Geological Survey, come up with
our own independent numbers. We did not want to rely on BP to
come up with their numbers.
Before the riser was cutoff, the scientific group had come
up with an estimate that was between 12,000 and 19,000 barrels
per day. Now that the riser has been cutoff, there is an
additional effort to take a look at what is coming out of the
leaking well, and we hope to be able to have the scientists
that are looking at that issue have some numbers that we will
share with the American public and obviously with the members
of this committee relatively soon.
The Chairman. Is there any thought that perhaps the
procedure that BP went through to cutoff the riser added to the
quantity of oil coming out?
Secretary Salazar. You know, Chairman Bingaman, I will say
this and something that you might want to confirm with
Secretary Chu and the scientists from the labs that have been
involved in this. But their view, as it has been communicated
to me, is that the range of increase may have been somewhere
between 4 and 5 percent over what it was before.
The Chairman. OK. All right. Let me ask what do you expect
this other report, the one the President continues to refer to,
which is this 6-month report, what do you expect that to yield
in the way of is it going to make another series of
recommendations similar to the recommendations that came out of
your 30-day report? Or is it going to be trying to do something
different?
Secretary Salazar. I will have the Deputy Secretary David
Hayes respond to that because he is in charge of the
investigations and helping with the setting up of the
commission. But there are multiple investigations that are
going on, many reports that are coming in, and we are getting
to the root causes. Everything that is happening here and will
happen over the next several months will be fed into the
Presidential commission.
So, at the end of the day, there will be one report. But I
will have the Deputy Secretary provide some additional
information on that question.
Mr. Hayes. Senator, could I ask you again which report is--
--
The Chairman. The President has said that the moratorium
will be in place until he gets his 6-month report, and that is
the one that I am just interested in knowing what are we going
to learn from that report, or is it going to be another series
of recommendations in addition to an investigation, or what is
it going to be?
Mr. Hayes. Yes. Yes, thank you.
That is a report from the new commission that has been
established with Senator Graham and Bill Reilly. That
commission we will be working with closely, per the Secretary's
comments, to fold in everything that is going on so that they
have in front of them the full record.
There is, of course, a Minerals Management Service-United
States Coast Guard joint report that is going on right now,
joint investigation that will be fed into the Presidential
commission. There is an independent evaluation by the National
Academy of Engineering that will be fed into the commission,
and the commission itself will be undertaking its own
investigation. So we will be looking to the commission
ultimately, and we expect to be in dialog to make sure that
they have every piece of information potentially important for
their deliberations on what their long-term recommendations
are.
The Chairman. Senator Murkowski.
Senator Murkowski. Thank you, Mr. Chairman.
Secretary Salazar, you mentioned the decision as it related
to the Chukchi and the Beaufort and your request for additional
science and information. I don't know whether you have had an
opportunity to review the white paper that has been presented
by the U.S. Arctic Research Commission. They essentially are
advocating for additional research in sub Arctic conditions.
It is something that this commission has been focused on
for some time, spent a fair amount of study on. It is a final
draft, but I want to make sure that you have had an opportunity
to at least review that. So we will make sure that you get a
copy if you and your staff haven't.
I wanted to ask you about the study or the review that was
conducted, this 30-day review, prior to the new deepwater ban.
There was an immediate inspection ordered by you to review all
the deepwater OCS facilities. Can you give any more detail in
terms of the results of those inspections, and did you unearth
anything that was particularly revealing in terms of possibly a
culture of unsafe activities?
I know it was a very quick review, and you are now going
into the longer term review. But was there anything that was
noticeable in that initial review?
Secretary Salazar. No, we ordered the immediate inspection
of all 33 operations that were underway, and as I recall, the
information that came back to us is that they were all in
compliance with the requirements of the regulations and with
the exception of two or three. The incidence of noncompliance
were relatively minor.
I will say this, Senator Murkowski, that one of the things
that has been learned here is that there is much more that can
be done with respect to what we are doing concerning the safety
requirements imposed on companies. For example, the testing of
blowout prevention mechanisms, one of the things that I think
has already been learned by the Deepwater Horizon incident as
they have moved forward and started to drill the relief wells,
the two relief wells, which are the ultimate solution to this
particular spill, they have done the testing of these blowout
preventers in the subsea in ways that they haven't done before.
So, the new requirements that we imposed through the Notice
to Lessees that we sent out yesterday has significant
additional requirements, and so there will be a whole panoply
of those requirements that will now have to be met.
Senator Murkowski. Let me ask you specifically about that
because it was my understanding that the blowout preventer with
the Deepwater Horizon had actually undergone a couple of tests
only days before it failed, and those tests actually were
successful. So how are we going to--I mean, I understand the
purpose and don't disagree with additional testing. But do we
really believe that recertification of the BOP would have done
anything to enhance the reliability of that testing? Are we
doing the right test I guess is the question?
Secretary Salazar. There is a whole host of things that are
going to come out with respect to blowout preventers, including
the kinds of redundancies that are built in, additional casing
shear rams which we will be requiring and additional
redundancies in their actuation. So the safety report sets out
a number of recommendations, and I will ask Steve Black to
comment just briefly on the report because he was the principal
author of the report on the safety recommendations.
Senator Murkowski. When you do that, Mr. Black, in addition
to understanding that, I am curious to know there is going to
be a lot of new technical requirements that will be required
going forward, and I understand that. But what about
instituting some minimum training standards? For instance, if
you are going to have new standards on certification, will you
also require certification of people on the rig that are
working in these areas that are related to safety and control?
So you have got the technological side, but you also have
the human side. I think we recognize that there has been human
error here as well. So how does that integrate as well, if you
can address that?
Mr. Black. Thank you, Senator Murkowski. Mr. Chairman,
thank you for the courtesies of sitting here today with the
Secretary.
To your first question, Senator Murkowski, with respect to
the blowout preventer and the testing, I think it is important
to remember that this safety report doesn't presuppose any
investigation or the outcome of any investigation that is
currently ongoing. It instead attempts to identify safety
measures that can be taken immediately and improve the margin
of safety with respect to offshore drilling.
The blowout preventer on the Deepwater Horizon was, in
fact, tested. But I think what we have learned is that those
tests, as you suggest, didn't reveal perhaps modifications to
the blowout preventer equipment or incompatibility between the
ROV hot stabs and the ROV interface panel on the blowout stack.
So we want to make sure that all blowout preventers, all
subsea BOPs and surface BOP stacks, are reinspected in
accordance with the original manufacturer specifications and
that any repair or modification that has been made to the BOP
stack is properly reported and understood so that in the event
of an emergency, an intervention can occur.
With respect to training, the report does, in fact,
recommend that MMS, in conjunction with other stakeholders,
develop new guidance and new regulations with respect to
training, inspections, and a variety of other safety measures.
So those, in fact, will occur. The department will lead that
effort through workgroups that we set up at the department, but
we do very much intend to work with industry, work with other
stakeholders to develop that kind of requirement.
Senator Murkowski. Thank you, Mr. Chairman.
The Chairman. Senator Udall, is he here? I don't see him at
this point.
Let me go to Senator Shaheen.
Senator Shaheen. Thank you, Mr. Chairman.
Mr. Secretary, I appreciate the efforts that you have taken
and that you have talked about this morning to reform the
culture of corruption that has existed within MMS and recognize
that this is a culture that has been created over a number of
years, that you inherited when you took over this job. But I
continue to be concerned about whether reorganization efforts
will really address some of the corruption that exists there
and the individuals who may have been part of that.
Whether it is a reshuffling of the deck or whether it will
really allow you to deal with that culture and get rid of the
folks who have not been operating in a manner that they should
be as they are looking at what needs to be done to regulate
this industry. So can you talk a little bit about how confident
you are about the reorganization that you have underway?
Secretary Salazar. Senator Shaheen, it is a very good
question, and let me say our reorganization is not cosmetic.
Our reorganization is essentially blowing up MMS and putting it
into different parts of the department and separating functions
to avoid both perceived and real conflicts of interest. So it
is an overhaul of this function of the Government in every
complete sense of the way.
Now it doesn't mean that things that we did before will be
taken away. For example, still requiring ethics training and
having ethics counselors and having ethics part of the
performance standards, that all will be done as well. But what
we have done under the Secretarial Order and will be
implementing is a complete reconstruction of the MMS function.
Deputy Secretary David Hayes would like to comment on that
as well.
Mr. Hayes. Senator, you raise a point that is central to
our thinking in terms of the reorganization effort, and our
view is that what is most necessary is a clarity of mission.
Under the current structure, where you have the folks
forward leaning under the statute leasing and being encouraged
to do more and more leasing, more and more permitting, almost
by virtue of the statutory structure, you have the employees
accepting that mission and executing it. There has not been as
clear a mission on the enforcement and safety side, candidly.
We think that, structurally, by separating these functions,
creating a clear mission, there will be execution.
It has become evident to us, frankly, in the last 50 days
that the employees can execute a mission. We have asked them to
turn on a dime, to put in place some significant new safety
requirements, and they are doing it. So we have some views that
we can do this if we get clarity of mission by separating these
functions.
Senator Shaheen. Thank you.
I want to switch the topic a little bit. I know that
everyone is focused right now on ending the current spill and
dealing with the cleanup. But one of the things that struck me
when we had the principals from BP, Halliburton, and Transocean
here before this committee was their response when I asked them
what they were doing to address research on deepwater spills
and cleanup. The answer from all three was zero. They are
committing no resources to doing anything about how we deal
with these kinds of situations in the future.
As I am sure you all know, right now, we are spending about
$50 million a year as the Federal Government to fund R&D for
exploration and production of oil and gas in ultra deep waters,
but we are not spending nearly that amount to address cleanup
and containment and what happens when we get into the kind of
situation that we are in right now.
We are fortunate at the University of New Hampshire to have
the Coastal Response Research Center, which is one of the
premier centers in the country that is looking at these issues,
and in talking to their director, Dr. Nancy Kinner, one of the
points that she made to me is that right now what we really
lack is any funding, either in the industry or from the Federal
Government, to address this kind of research.
So can you talk about whether you think we should be
spending at least as much on cleanup and containment as we are
spending right now on how to drill in deep water and if you
have thoughts about how we should be looking at this issue in
the future and where the resources should come from?
Secretary Salazar. Senator Shaheen, this will be and is one
of the questions that will be addressed by the Presidential
commission and we are addressing as well. The fact is that BP
did have an oil spill response plan. The fact is that that plan
contemplated the ability to respond to a spill of several
hundred thousand barrels per day. The fact also is that that
plan has not been effective in protecting the sensitive ecology
of the Gulf of Mexico and the people of the Gulf of Mexico. So,
there will be a review of all of these issues to determine what
is it that is needed.
There is research underway with respect to oil spill issues
all of the time. In fact, in Senator Menendez's State of New
Jersey, there is an oil spill laboratory which looks at oil
spills and how to contain oil spills. So, this is an area,
obviously, which will be one of those lessons to be learned.
Senator Shaheen. But would you agree that, in fact, the
resources to really look at this issue have not existed?
Secretary Salazar. The answer to that is yes. I mean, the
resources in terms of looking at spill response and dealing
with some of the deepwater issues I don't think have been
there.
Senator Shaheen. Thank you.
The Chairman. Senator Sessions.
Senator Sessions. Thank you, Mr. Chairman.
Thank you, Mr. Secretary, for your directness. You have
talked to us directly. You haven't used notes. You obviously
have got your head straight on the challenges you face, and we
appreciate that. I want to work with you to deal with this
crisis.
We are now in the 51st day, and the people I talk to in my
State are concerned. They are concerned that we are not doing
enough to stop the flow, and they are concerned about the
effectiveness of our barriers and so forth.
I will say that Thursday and Friday of last week, I was in
Mobile and met with the Coast Guard and BP officials. We met
Friday with local mayors, county commissioners, State
representatives under the leadership of Governor Riley, who has
personally been committing much of his time to this effort, and
the mood was not good. People felt like that there had been a
lot of promises made, a lot of uncertainties there that they
still haven't gotten true facts about. But I believe our people
are determined. They want to bounce back from this, and I am
confident that we will. But we don't need to make any more
mistakes. We need to be as effective as we can.
So with regard to particularly a problem that I believe
resulted from a violation of an agreement with the Governor of
Alabama concerning the boom material that was removed from our
State, I do believe that you have responded to that, and there
has been some progress in restoring at least some of that. I
think that is important. It is just a matter of good faith.
If you are working with the Governor and you make
commitments, you need to try to make sure that that happens. I
guess this was a Coast Guard decision, but it is a matter that
was important as we build the kind of State, local, and Federal
teamwork that we need to deal with this crisis.
To follow up on the chairman's question about the flow,
first of all, I would like to get a little better picture about
the flow, how much is coming out. You have indicated that it
was originally projected to 12,000 to 19,000 barrels a day? Is
that correct? That is the last report you have, and you have
another report coming out soon?
Secretary Salazar. Yes, and I will speak more to it when
you finish your question.
Senator Sessions. That would be my question. What is the
status of the flow today? Do you expect to see any changes in
your report in the future, and I would like to follow up on
about how much is being captured and how much there has been a
reduction in the flow, if any?
Secretary Salazar. Let me make a comment, and then I will
have David Hayes, who has been working for most of the night on
this issue of the flow rate, also comment on it.
It was important for us to have our own independent
assessment with respect to the flow rate because there are
legal consequences, as you well know, from every barrel that is
spilled. So we have not relied on BP for the flow rate analysis
that has been done. Under the command of Admiral Thad Allen,
there has been a flow rate group that has been established,
which is headed by Marcia McNutt, the Director of the U.S.
Geological Survey.
A group of scientists came up with those initial ranges of
12,000 to 19,000. There is additional information that has been
developed now, post riser cut, which those scientists are
working on very hard to try to come up with a clear answer so
that the American public knows what the flow rate is and so
that we can make sure that we are as prepared as possible to
carry out the response----
Senator Sessions. Can I interrupt you? The information is
so different. For example, you indicated that after the cut of
the riser, we may have had a 4 or 5 percent increase in flow
rate, but originally, I think there was a projection from some
official source of a 20 percent increase. I see some people
have projected far more than that. How confident are you that
we have sustained just a 4 to 5 percent increase?
Secretary Salazar. Let me say that it is important for us
to have the right number, and that is what is being worked on
right now. In fact, Secretary Chu and Marcia McNutt and I have
a meeting on this coming up today to make sure that we get to
the right number.
We will get to that right number because the American
people need to know it. It has been difficult to get to the
right number because of the subsea conditions that have been
operated, and I am going to have David comment on that.
But I want to just respond, Senator Sessions, my friend,
that the issues relating to Alabama and the issues of boom, the
President and Thad Allen, who is the national incident
commander on this, he calls it as he sees it, and I think he
has resolved those issues with the Governor, including putting
in writing what was supposed to happen.
So let me just say that on the part of Thad Allen with whom
I work with multiple times every day, no effort is being spared
to make sure that the people of the Gulf coast are being
protected. If you find that there are things that are not going
on, Senator Sessions, in your State, please give me a call, and
we will get to Thad Allen immediately.
I would like, just because he has been working on it all
night and may have more recent information on the flow rate,
maybe to kind of give you a sense of what is going on because I
think it is of interest to the chairman, as well as to all the
members of the committee. So if that would be OK with you, Mr.
Chairman?
Senator Sessions. While you do that, Mr. Hayes, my question
is over. I would just hope that you would talk about how much
is being captured and what you project is a reduction, if any,
in the flow.
Mr. Hayes. Certainly, Senator. Let me sort of paint the
picture here of the Government's effort to identify the flow
rate. As the Secretary testified, a flow rate technical group
was formed, and Dr. Marcia McNutt, the Director of the USGS, is
in charge of that. There are seven independent scientists that
are on that group.
A couple of weeks ago, they--before the riser was cut,
looked at a variety of data streams to do an estimate of how
much might be leaking out. At that time, there were some leaks
in the kink of the riser and then at the end of the riser. Also
at that time, there was a tool that was bringing some of the
material up from the end of the riser, you will recall, and
collecting some of that material.
They had several different work streams. They had video
that they ordered, the Government required BP to provide the
video so they could look at the video and attempt to calculate
how much might be coming out. They also did a mass balance
based on aerial work and subsea work to try to estimate how
much was on the surface, how much had evaporated, and sort of
back-calculate how much might be coming out. Those were the
primary approaches.
What they came up with was a range. Two of the workgroups
came out with a range of 12,000 to 19,000 barrels a day. The
video workgroup came up with 12,000 to 25,000 barrels a day as
the potential estimate with a lot of uncertainty because there
was not good information about what the oil-to-gas ratio was.
So when you are looking at the video, it was difficult to
figure out, essentially, how much would be oil versus the gas,
which behaves differently.
They also were asked to estimate--this is to your question,
Senator--how much if we cutoff the riser would there be an
increase in the amount of flow. The Government scientists in
Houston, including Dr. McNutt, with the BP folks did a variety
of calculations and came up with a range of 6 to 20 percent as
a potential increase by virtue of losing some of the resistance
in the riser.
The Government scientists came out and said it could be as
much as 20 percent. That is not something BP wanted to say. In
fact, they did not say that. The Government said it could be as
much as 20 percent. The decision was made to do the riser cut
anyway because of the potential to capture more of that oil
through the top hat, which is now occurring.
What is happening now is a reevaluation of all of this,
both in terms of the original estimates and also we have new
information now that the riser is cut. We have ordered BP to
give us high-resolution video that the same group that looked
at and estimated the flow based on the video looked at. It is
much harder, frankly, to discern and evaluate leaks in the kink
and at the end of the riser, they are now looking at a single
point with high-resolution video.
We now have much better information on the oil-to-gas ratio
because of the material that has been coming up to the riser.
So we think that that group that is now looking at the video
and applying a gas-to-oil ratio will come up with a much better
estimate of how much is coming out of the riser.
As the Secretary alluded to, we are also getting additional
data. We have more information about relative pressure points,
and there is a lot of speculation, frankly, that the increase
may have been substantially less than 20 percent from the
cutting off of the riser. But we are going to find out very
soon from this group that is looking at this issue very hard.
In fact, all seven of these scientists just received what
they required of BP; very specific segments of the video from
the post riser cut. They actually had to take it--they got the
whole hard drive from BP, we required it. They got some
specialists to take the segments that they needed to look at.
They are now reviewing it. We expect to have additional
information very soon on that point.
They are also relooking at the earlier estimates. So you
will see a new Government estimate very soon on the flow rate.
In terms of the amount collected, we want that new flow rate,
and we will have it very soon and then can back-calculate
essentially how much we believe, therefore, has been out from
day one. I don't have that number, Senator, right now, but we
expect to have a much better number very, very soon. Thank you
for your patience.
Senator Sessions. You said 4 to 5 percent increase. Is that
some sort of an estimate to date that you think is accurate? Is
that Secretary Chu's----
Mr. Hayes. I think there is in terms of the group of
Government scientists that are looking at this, they are seeing
some data that suggests that the increase that occurred when
the riser was cutoff was less than we were afraid it might be.
So we hope to confirm that soon.
Senator Sessions. Soon? Soon, this is almost 2 months----
The Chairman. Let me move on to other questions here. You
have had more than 10 minutes.
Senator Sessions. Over time, I know.
The Chairman. Yes. Senator Menendez, go ahead.
Senator Sessions. I think they need a good number soon.
Senator Menendez. Thank you, Mr. Chairman.
Mr. Secretary, let me start off by applauding the
administration's decision, at least at this point, to cancel
lease sale, Virginia lease sale 220. I opposed it from the very
beginning. It puts the New Jersey shore directly at risk. You
know, that risk I think is more palpable today, as we have
tried to make the case for some time that oil cannot be
contained in neat little boxes in the ocean. It is certainly
not being contained in the Gulf of Mexico.
Now that we are entering hurricane season, even the natural
loop current and where the projections of the trajectory of
that oil is, is subject to mother nature. If you have hurricane
season and the hurricane hits the Gulf, the consequences of
where that oil goes for those of us on the east coast is
increasingly of concern. So I think it was smart at this point.
I appreciate the administration's decision to support
moving toward unlimited liability as it relates to the
responsibility of oil companies. It seems to me that if you
take and create unlimited consequences that you should have
unlimited liability. I think it is an opportunity for oil
companies to also have discipline knowing that if that is their
liability obligations that they will discipline themselves not
to take short cuts or to cut corners, as some have suggested
happened in this particular incident. I think that is important
as well.
But I heard when you said we are only having a pause
button. For those of us along the Atlantic, we want to see much
more than a pause button. We want to see an effort that clearly
makes it clear that we are not looking to put multi-billion
dollar--just New Jersey alone is a $50 billion coastal tourism
industry. So I hope that we understand that.
Let me just ask two questions that I think are critically
important. All the regulations in the world are good, but if
they are not enforced, it doesn't mean much. I know you know
that as a former Attorney General. The reality is, is that when
I look at BP's response plan, it doesn't take a rocket
scientist to know they couldn't have been very serious because
when they had sea otters, walruses, and seals as part of the
response that they would have to animals in the Gulf, last time
I looked, we don't have those animals in the Gulf.
Obviously, they didn't really have a plan to deal with the
worst-case scenario. It is something we have to look going
forward as to what, in fact, we permit. I mean, I don't
understand who reviewed that plan and saw those elements in
their plan and said you can't be serious. Maybe in the Arctic,
but not in the Gulf of Mexico. It doesn't take a rocket
scientist to figure that out. So you really have to question
who is reviewing these things.
Second, MMS--a Houston Chronicle review of accidents
investigated by MMS found that of nearly 400 offshore safety
investigations, MMS collected only 16 fines of 400
investigations. So I know that you are reforming MMS. The
question is are we going to have the right regulatory oversight
and vigorous oversight so that we don't relive this, including
on response plans?
Last, are we--in challenge, there have been some reports
that there is another drilling rig near the Deepwater Horizon
called the Ocean Saratoga that appears to be leaking with a 10-
mile long slick visible from satellite images. It was only
discovered because of the images of the Deepwater Horizon. Do
you have any information on whether that is, in fact, a spill
that is occurring? If so, what is being done to stop it?
Secretary Salazar. Let me, Senator Menendez, I appreciate
your comments and I know your passionate views on these issues
for a long time. Let me assure you that they are taken into
consideration.
With respect to the other spill that you speak about, my
understanding is that it is a remnant left over from Hurricane
Ivan and that it is leaking, I guess, at approximately about a
third of a barrel a day. But we will get some additional
information for you on that.
With respect to your----
Senator Menendez. Can you get for the whole committee, but
certainly I would like to know----
Secretary Salazar. Sure.
Senator Menendez [continuing]. How long that has been going
on as well?
Secretary Salazar. Sure. We will----
Senator Menendez. What is the intent to close it down?
Secretary Salazar. We will get that information to you.
With respect to the enforcement of regulations, it is
precisely the reason why we are moving forward with the
creation of a Bureau of Safety and Environmental Enforcement.
It needs to have the kind of police power to make sure and the
personnel and the culture to make sure that regulations are, in
fact, enforced. So, that is part of the reorganization and
overhaul of MMS that we are undertaking.
The goal is one which I very much share with you, Senator
Menendez, and that is we must have vigorous and complete
enforcement mechanisms in place with respect to any oil and gas
activities in the Outer Continental Shelf.
Senator Menendez. I will close. My time is finished. But
let me just say you can't be coach and referee. MMS has, as it
was constituted before, been both an advocate for the industry
and supposed to be the referee of making sure that safety and
soundness and a whole host of other things were observed. That
simply didn't happen. We had a police officer that was asleep
at the switch.
If you look at the response plan and see that it doesn't
make any sense, then alarm bells should have risen that, in
fact, these people really are not prepared for the worst-case
scenario. I hope we learn from that as we move forward.
Thank you, Mr. Chairman.
The Chairman. Senator Corker.
Senator Corker. Thank you, Mr. Chairman, and thanks for
having this hearing.
Mr. Secretary, I welcome you back. I am struck by the
dignity and directness with which you have presented today. I
thank you for that--and your two colleagues who are with you.
It actually has raised a question as I have watched you. I
watched, on the other hand, the White House, which seems to
exhibit some characteristics of adolescence or something like
that. I am wondering what is the relationship that we have at
present with BP?
I know you talked about the fact is that you don't have the
equipment. They have the equipment. What is that true
relationship? Do the machinations that come out of the White
House, do they contribute in a positive way toward that
relationship? Where are we with BP as far as carrying it out?
What is the actual direct relationship that you have with them
in causing this crisis, which is a national tragedy?
For what it is worth, I have said no critical comments
regarding that because it is just a national tragedy. We need
to all figure out the best way of dealing with it, and we can,
after the fact, do some quarterbacking. But what is that
relationship, and how are you carrying out these daily
operations?
Secretary Salazar. Thank you, Senator Corker.
The relationship is one in which we, the U.S. Government,
are directive of the things that are going on with BP. There is
a structure which is part of the national framework and the
national contingency plans, which are required by law which
have been effectuated. So, we have a commander, a unified
commander in Thad Allen, who is overall responsible for
everything that is going on.
But I think perhaps, to answer your question, even over the
last several days, what we have done is crafted orders that
have gone to BP that require them to move forward with leak
containment mechanisms, expanded beyond the amount that they
had contemplated initially. So they are responsive to the
orders and directives that we have given them.
Related in part to Senator Sessions's questions on flow
rates, for example, we are requiring them to provide additional
pressure information and take additional pressure readings so
that we can have better estimates with respect to flow rate. So
the relationship under the law and under the President's
direction has been to be one of being directive to BP, and we
have been carrying that out every day, whether it is in
Houston, whether it is in any of the Gulf States, or whether it
is----
Senator Corker. So, on a daily basis, do you get up and you
direct BP as to what to do?
Secretary Salazar. On a daily basis, 51 days into this
spill, let me just say we are on top of it with everything that
we have, and that is the President of the United States. It is
the White House personnel who have been involved in this effort
with us. It is my colleagues on the Cabinet, including
Secretary Napolitano, who oversees the Coast Guard.
Senator Corker. But let me just--and again, I really
respect you, and you know that. We have had a good friendship.
Do you all like tell them on a daily basis what activities to
engage in?
Secretary Salazar. We----
Senator Corker. I mean, that is what I am taking from this.
I am just----
Secretary Salazar. I receive, and it was at my order and
Thad Allen's order, a review from BP of what their work streams
are, all running in parallel because we didn't want them to run
sequentially. Those are received daily. That is at our
direction.
I have a personal conversation with Andy Inglis, who is the
head of BP running the operations out of Houston, to get an
update every morning. Secretary Chu joins me on some of those
meetings. When we find deficiencies, such as looking at the
fact now that we believe they need to have additional
redundancies in place, as you look at hurricane season before
you get to the ultimate sealing of the relief wells, we order
them to provide those additional containment capacities and
redundancies.
So it is a dynamic relationship, but it is a directive
relationship between the United States and BP, which is what is
contemplated, Senator Corker, by the law. I mean, the law is
very clear. BP is the responsible party.
They are responsible with respect to dealing with the oil
spill. They are responsible for dealing with all the damages
that flow from the oil spill. They are responsible for
compensating those that are damaged from the oil spill, and the
President has been very clear and very direct, as all his team
has been, that we will hold BP accountable.
The Chairman. Are you through with your----
Senator Corker. I have more questioning, but I will opt to
honor the time. Again, thank you for the way you conducted
yourself today. I appreciate that very much.
The Chairman. Senator Stabenow.
Senator Stabenow. Thank you, Mr. Chairman.
Welcome, Secretary Salazar. It is always wonderful to see
you, although these circumstances are ones that we all wish we
were not having to be involved in. To all of you, thank you for
your service. This is a horrendous situation.
I appreciate the efforts that you are taking and have taken
since the beginning of your term to focus on reforming what has
clearly been a broken process. I think it is important that we
learn lessons from history, from the past. Otherwise, we are
condemned to repeat them. That is certainly a very famous
phrase, and I think it is very, very true today in terms of the
way we approach the public interest in our jobs as it relates
to overseeing what is done in the private sector when it
relates to public risk.
In my judgment, this has been a perfect storm of a
particular company that has had, according to the records, 97
percent of all of the egregious and willful safety violations
being brought by this company, coupled with a philosophy that
has been in place for the last decade and other times in our
history that basically said step back and let industry police
itself, even when there is tremendous risk to the American
public if they cut corners.
We have seen that on Wall Street. We saw it with miners'
lives being lost. We are now seeing it with oil companies. So,
I would like you to respond to how we move forward to correct
that a little bit more.
But I do want to enter into the record something, a piece
of what was in the Washington Post yesterday because I think it
is very important. The headline was ``BP Had A History of
Problems.'' This goes to how we go forward on these kinds of
situations with companies with these kinds of histories. ``A
series of internal investigations over the past decade warned
senior BP managers that the oil company repeatedly disregarded
safety and environmental rules and risked a serious accident if
it did not change its ways. The confidential inquiries, which
have not previously been made public, focus on a rash of
problems at BP's Alaska oil drilling operations. They describe
instances in which the management flouted safety by neglecting
aging equipment, pressured employees not to report problems''--
and we have heard the same thing here with this instance--``cut
corners, delayed inspections to reduce production costs.
''Similar themes about BP operations elsewhere were sounded
in interviews with former employees in lawsuits and little-
noticed State inquiries, as well as emails. Taken together,
these documents portray a company that systematically ignored
its own safety policies across its North American operations
from Alaska to the Gulf to California. Executives were not held
accountable for the failures. In fact, some were promoted
despite them.``
It is pretty outrageous. Pretty outrageous. So, my question
relates to knowing that this landed in your lap. I mean, I
understand with the new administration, whether it was trying
to put us back from the edge on the financial crisis or
millions of people unemployed that landed in the laps of this
administration or whether it is this situation, the reality is
we have got to make sure that going forward we are changing the
philosophy.
The philosophy that got us here doesn't work in the public
interest. Just it hasn't worked. Millions of people are paying
the price--taxpayers, people who have lost their jobs, the
environment, and so on.
So, Secretary, as we look at going forward, the ethics
reform you have put in place, the March plan that you put in
place to begin to review permits and so on, the dismantling of
MMS, dividing it up, all of the important work that you are
doing now, do you see these kinds of things, a company like
this with their track record, coming forward that there will be
the new tools in place for you and for MMS or for the new
entities to be able to say no, to be able to stop these kinds
of things that have gone on in the past?
Secretary Salazar. Senator Stabenow, the answer is yes.
That is what our full intent and purpose is as we move forward.
I would respond in two ways. First, the Presidential commission
that has been formed and the investigations that are underway
will get to the root cause of what happened here. We have
preliminary information that points some to human error, some
to signs that were not caught, problems with cementing,
problems with casing, problems with some of the backup
redundancy systems, the safety systems, and so on.
So all that is going to be made public, and the American
people and the U.S. Government will know what exactly happened
here. With the root cause known and the actors known, it will
lead to whatever results they will lead, including whatever
culpability under the laws of the United States of America. So
that is our intention there.
We, in our overhaul of MMS, understand the importance of
the critical missions of MMS and the importance of separating
out the functions from the revenue collector from the part of
the agency that gives out the leases. So the Bureau of Safety
and Environmental Enforcement, which we are creating, will
provide us with that kind of vigorous enforcement, which you
want and which the American people want.
Senator Stabenow. Thank you.
The Chairman. Senator Burr.
Senator Burr. Thank you, Mr. Chairman.
Mr. Secretary, welcome. I am not going to ask you about
what went wrong because I truly believe that the President
understands that this is going to take a great deal of review,
and that is the purpose of the commission. I want to commend
you because I think that you have stayed focused on the 3 most
important things--one, to stop the leak; 2, start the cleanup;
three, then assess what went wrong and, more importantly, what
changes we need to make. I believe I have consistently heard
that out of you.
Let me ask you, can you comment on the agency's involvement
in preparing the Atlantic coast for any potential oil fallout
from the loop current?
Secretary Salazar. Let me just say that Thad Allen, who is
the commander on this, has been working tirelessly on making
sure that we are anticipating for the problems that will occur.
Right now, in terms of the States that are at risk are the ones
that are in the Gulf coast, but we are prepared for the worst-
case scenario. He is preparing for the worst-case scenario.
Senator Burr. I would encourage at the earliest point that
you can share that with the Atlantic coast States, we would be
happy to hear that and, more importantly, prepare as well.
Do you believe the areas in which you have implemented new
safety requirements cover the issues that caused Deepwater
Horizon's accident?
Secretary Salazar. I think that the areas where the safety
recommendations are being implemented will help have a safer
environment for drilling activities in the Outer Continental
Shelf. Those recommendations, which Steve Black led on my
behalf, came about through input, including from the National
Academy of Science's arm of engineering. So, my view is that
they are very good, and we are headed in the absolute right
direction.
Whether there will be additional requirements that will
come forward from the Presidential commission, we are open to
ideas. The goal is here that we need to have assurance of
safety whenever we are conducting any kind of OCS operations.
Senator Burr. Sure. Let me ask you for a very candid
answer, and David is closer to it, in case he wants to comment.
Has BP at any point refused to do what the Government has
asked?
Secretary Salazar. We have had a directive relationship
with them. So, we have wanted them to do something, it is
ordered and----
Senator Burr. Have they ever refused?
Secretary Salazar. They have not refused anything that I
have ordered them to do. Now, whether--but I am not running the
operation, and this is a national incident. So, it is----
Senator Burr. If you would like to check back on that and--
--
Secretary Salazar. I will check with Secretary Napolitano
and with Thad Allen.
Senator Burr. I was told by an industry technician that I
called in that didn't work for BP what steps the entire
industry and the science community were attempting, and he
said, Senator, everybody, every smart person is at the table.
Everybody from industry, regardless of the company, everybody
from the science community that might have input is at the
table making the decisions, evaluating the steps forward. Is
that an accurate statement?
Secretary Salazar. Let me just respond to that because I
have spent--the last 51 days on this and it has consumed most
every waking moment that I have had. I will say this, that in
the day or days after the explosion, I pulled together all of
the CEOs of companies that have operations in the Outer
Continental Shelf, directed BP to take their input and to make
sure that they were reaching out and getting the best science
of the world.
The President directed Secretary Chu and the Federal labs
also to be involved in making sure that those minds were being
brought to bear on the problem. So, from the point of view
which I have the best minds of the world are focused on this
issue and stopping the leak and resolving the problem.
Senator Burr. I appreciate the confirmation of what I have
been told.
The last question, Mr. Chairman, is the purpose of the
Graham commission to determine what failed and to make
recommendations on what changes should be made for the future?
Secretary Salazar. Yes.
Senator Burr. All right, thank you, Mr. Secretary.
Thank you, Mr. Chairman.
The Chairman. Thank you.
Senator Cantwell.
Senator Cantwell. Thank you, Mr. Chairman.
Secretary Salazar, good to see you. I wanted to ask you a
couple of questions about your recommendations today and just
to make sure that I am clear about them. Many of the
recommendations that are in your report apply to floating
vessels and floating drilling operations. But I think this
could potentially leave out about one-third of what are called
mobile offshore drilling units because only about one-third of
these are considered floaters and would be under this
definition of regulation.
So are you considering that definition and how to have a
tighter consideration and make sure we don't have a loophole
there, or is there something I am missing about the difference
between these facilities? Maybe Mr. Black is better to answer
this, I don't know.
Secretary Salazar. Let me just say we are aware of the
distinction, and the moratorium in place applies to deepwater
drilling. The Notice to Lessees that I talked about earlier
that imposes safety requirements for drilling that will occur
is now in the shallow waters that we define to be 500 feet or
less.
I will have Steve Black comment on the concept of the
floating vessel because that was a central component of the
report.
Mr. Black. Senator Cantwell, thank you.
If I understand your question correctly, floating rigs are
rigs that are not either jack-up rigs and anchored on the sea
floor or moored rigs, but instead mobile rigs that are
dynamically positioned and, therefore, have different risks, a
different risk profile and usually a subsea BOP stack. So the
recommendations are intended to cover all of the mobile
drilling rigs.
We may need to get more information from you just to
clarify that answer, but that is our intent.
Senator Cantwell. Yes, I think that in the term and in
definition I think you are missing some of those mobile
offshore drilling units. So I think a big number. So we should
look at that.
Then also I wanted to clarify the report has recommendation
to include third-party verification and validation of
technology in use and aspects of blowout preventers, but it
doesn't include a requirement for a full top-to-bottom look at
a system or classification by somebody like ABS, the American
Bureau of Shipping. So why not do that?
Mr. Black. Senator Cantwell, the third-party verification
requirement is an attempt, it is sort of one of the principles
of the safety recommendations. In addition to ensuring
redundancy, the Secretary recommended to the President, and the
President agreed, that with respect to recertification of
blowout safety equipment that those inspections should be
verified by a third party not affiliated with the company or
the drilling contractor.
That third party and the qualifications of that party, you
know, in the Notice to Lessees that the Secretary put out
yesterday, we specified that the company needs to hire a
qualified third-party verifier. So it may very well be that
someone with those qualifications would meet that test.
Senator Cantwell. I think we need to be more specific here,
too, on your recommendations because you don't want somebody
looking just at a blowout preventer and whether that works. You
are looking at the blowout preventer as part of a system, and
you want to understand whether the system is going to fail.
Or I am just going off of some of the testimony we have had
before us from the various people involved, and everybody down
the line pointed the finger at somebody else. ''Oh, well, it
was supposed to work, but you didn't have the right hydraulic
fluid,`` or this was supposed to happen.
So we want to make sure that we are looking at a validation
of this, I believe, by third parties. So, we would like to
suggest some language to you on that as well.
Secretary Salazar. Senator Cantwell, if I may, we are
obviously open to whatever recommendations that you might want
to give us. The safety recommendations dealt with much more
than just the blowout prevention mechanisms. They dealt with
cementing. They dealt with casing. They dealt with training and
a whole host of other things.
So there is a panoply of recommendations that we are
implementing at this point. If there are things that we have
missed, please let us know, and I am sure that as we go
forward, including getting the recommendations from the
Presidential commission, there will be additional requirements
that will have to be imposed.
Senator Cantwell. I think the American Bureau of Shipping
has provided a good third-party validation of these various
technologies, and I think we should continue to use them. But I
think getting the definition right so that people don't just do
a cursory look at it, but actually a systematic operation that
is going to be critical for moving forward.
So I thank the chairman and also the Secretary.
The Chairman. Thank you very much.
Senator Barrasso.
Senator Barrasso. Thank you very much, Mr. Chairman.
Mr. Secretary, I want to thank you for all of your hard
work on this. As you said, you have been working relentlessly,
and I think every member of this panel, both sides of the
aisle, think absolutely you have been working relentlessly on
this national tragedy. So I want to thank you.
A couple of questions, and you referred specifically to
pushing the pause button with regard to the 6-month moratorium.
I am concerned about jobs and the economy and want to visit
with you a little bit about that.
According to the Houston Chronicle, there are about three
dozen deepwater drilling rigs that are affected by the
moratorium that are expected to exit the Gulf and have new
multiyear contracts in Brazil, other deepwater hot spots. That
could lead to costly delays of projects and endanger jobs that
would otherwise be there for folks in the Gulf.
I think the Interior Department's May 27 report highlights
the importance of offshore oil and gas production. It said that
the OCS oil and gas industry provides high-paying jobs in
drilling and production activities. It estimated 150,000 jobs.
So there was an editorial in the Wall Street Journal today
called ''A Second Oil Disaster,`` and it talked specifically
about the specifics of the economics of those jobs. I am
wondering if, in any way, you are looking at or giving
consideration to lifting the moratorium, pushing that pause
button sooner than the 6 months in order to help protect the
jobs and the economy of that region from suffering a second
hit?
Secretary Salazar. Senator Barrasso, the importance of the
jobs that are at stake here has been very much on the mind of
the President and my mind as well. What we want to assure is
that as we move forward with programs on the OCS, that they are
going to be safe and that this circumstance that we are facing
with the Deepwater Horizon never happens again.
If it can be done before 6 months, then there is a
possibility that we could take a look at it before then. But
right now, we have multiple investigations that will culminate
through the President's commission, and I think it would be
unwise for us to move forward with deepwater drilling until we
have those recommendations that are in front of us that we can
then implement.
Senator Barrasso. Just looking at the BP 58-page oil spill
response plan for the region that was approved, I am trying to
think how long it is going to take to work through all of this.
For this specific well, the plan includes how to protect
walruses, sea lions, and seals, none of which actually live in
the Gulf. There was really minimal discussion on how to
actually stop a worst-case scenario oil spill.
So, I look at that and say can we be assured that at 6
months that the pause button will be pushed, or do we look at
possibly having a stop button and extending this even a longer
period of time, again focusing on the economics in that region.
Secretary Salazar. Senator Barrasso, the frank answer to
that question is I don't know today, and that is because
information is still being developed as to the root cause of
this particular incident, as to recommendations that we will
implement with respect to safety, as to the reorganization of
parts of the Department of Interior which I think are
essential, which I hope to work with the members of this
committee on so that we have organic legislation for these
functions.
But we are not waiting. The 30-day report that we submitted
to the President, we worked on that very hard and included
outside experts, including the engineering academy that was
very helpful with their recommendations. So we are not waiting.
We are moving forward to developing information and the
implementation of programs even in the interim as we speak.
Senator Barrasso. You had mentioned Admiral Thad Allen and
his involvement. He had said that BP has the means to fix the
problem, and they need to be held accountable to do it, but
with proper oversight, he said, and that is our job.
I was struck yesterday to hear that the CEO of BP said he
had not actually talked directly to the President of the United
States, and the President of the United States confirmed that
in an interview I think with Matt Lauer yesterday. I think a
lot of Americans were surprised because you would think that
there would be some value in the two of them talking.
Senator Burr a little earlier asked had BP refused to do
anything that the Government asked? Kind of a follow-up to that
is has the Government refused to do anything that BP has asked
in terms of trying to be helpful to stop this leak?
Secretary Salazar. I am not aware that the Government has
refused any request in terms of science from the labs, in terms
of Department of Defense capabilities if they are needed. Thad
Allen has the power and the ability to call on those resources.
Let me respond to your first question, if I may, Senator
Barrasso, and your comment on the President. The fact of the
matter is from the very beginning of this, we have been having
a directive relationship with BP. Whether it is Tony Hayward or
Andy Inglis or Lamar Alexander, I met with them on multiple
times. I pushed them to give the statement they have made to
the America people that they will not hide behind liability
caps and that they will pay for every cent of response cost, as
well as any damages that occur from this national tragedy.
So we have had the directive relationship, which I
characterized at one point as the Buddha on the neck of BP. I
told BP at the beginning that that was what the relationship
was going to be, and we will continue to have that kind of
relationship until we get a conclusion of this incident.
Senator Barrasso. Thank you, Mr. Secretary, for your hard
work.
Thank you, Mr. Chairman.
The Chairman. Senator Landrieu.
Senator Landrieu. Thank you, Mr. Secretary. I appreciate
your focus and attention on this issue, which is, of course,
extremely important to the people of Louisiana and the Gulf
coast in a very particular personal and emotional way because
of what is happening right off of our shore.
But it is what is happening on the shore that has me
concerned right now. You know what my question is going to be,
and it is one that everyone in Louisiana is asking, as well as
people from Mississippi, Texas, and Alabama.
In the appendix of this report, May 27, it lists the names
of 15 experts that you consulted with on your report. I
received a letter yesterday from 8 of them, a majority, that
say they disagree with your decision to impose the 6-month
moratorium.
In their words, ''The report does not justify the
moratorium as written. The moratorium as changed will not
contribute measurably to increased safety and will have an
immediate and long-term economic effect.``
These experts believe, and I agree, that this report
includes some important recommendations. But I don't believe,
like they don't believe, that this temporary pause, if it lasts
very much longer than a few months--not 6, just a few months--
it could potentially wreak economic havoc on this region that
exceeds the havoc wreaked by the spill itself.
I am going to submit to the record testimony from companies
that no one on this panel will recognize because they are not
oil companies. Aker Solutions employs 750 employees in Texas
and Alabama. Bollinger Shipyards has been in business for 64
years. They have testified to us they have never experienced
such an uncertain future. They could be laying off thousands of
workers.
Broadpoint, Inc., 27-year-old privately held company, 100
employees based in the Gulf coast, their operations will be 99
percent affected almost immediately. C&C Technologies, they
provide mapping. They are not even an oil company. They expect
layoffs immediately.
The consequences of this moratorium on the 33 deepwater
rigs where 100 to 200 people work on each one, and for every
one on the rig, there are four or five jobs directly supporting
that job, not counting the 10,000 jobs, this could be
devastating to our State and to the Gulf coast, an area that is
fragile economically from the ravages of the storms just
recently.
So, on behalf of the people I represent, I am asking can
you give any time certain, can you give any confidence that we
can keep our people at work, get our people back to work,
understanding there are some safety issues. If not, what are
you going to tell the potentially--according to the documents
that I am going to submit to the record, Mr. Chairman, it could
affect 330,000 people in Louisiana alone. I don't have the
Mississippi numbers. I don't have the Texas numbers. I don't
have the Alabama numbers.
Three hundred thirty thousand people, that is 13.4 percent
of Louisiana's work force. Now I know not this whole work force
is focused on deep water. It is on shallow. But if not a time
certain, a shorter time than 6 months, some confidence that you
are doing everything and the President is doing everything they
can to get to the root of safety implemented so we can produce
the oil not just for ourselves, Mr. Secretary, but for the
country that needs it.
Secretary Salazar. If I may, Senator Landrieu, respond to
the question in three ways. First, the experts that were
involved in crafting the report gave us their recommendations
and their input, and I very much appreciate those
recommendations. It was not their decision on the moratorium.
It was my decision and the President's decision to move forward
with the moratorium, but I do appreciate the experts and their
involvement and their point of view.
Second, the jobs are a concern to us. But we want to make
sure that as OCS development takes place that it is going to be
done in a safe way. That is why the Notice to Lessees that went
out yesterday will allow the shallow water development programs
still to continue.
The third point I would make, Senator Landrieu, to frame
the discussion perhaps in this committee, it seems to me that
we have three options. One would be to say full speed ahead.
The 33 drilling rigs that are out there----
Senator Landrieu. Nobody is suggesting----
Secretary Salazar [continuing]. Just go, don't stop. Move
forward. Another option would be what some Members of the
Congress would want us to do and other members of the public,
and that is just to stop and say no more drilling or
exploration activities in the Outer Continental Shelf.
The place where the President of the United States and I
have arrived at this issue is we have put the pause button
until we can have a sense of safety that this is never going to
happen again. Now when we lift our hand from the pause button
will be dependent on when we can get to that point.
Senator Landrieu. OK. Let me ask this and submit one thing
to the record, and I appreciate the chairman's leeway here. But
for the record, Texas uses, just the State of Texas, 1.1
billion barrels of oil a year. California uses 750 million. New
Jersey uses 226 million. Connecticut is the least. It is 795.
Now, nobody is suggesting these consumption numbers are
going to go down any time soon. So there are some economic
risk, some national security risk in terms of less oil being
produced domestically, as well as environmental risk. I am just
saying that needs to be balanced, and I know that you
understand that.
Then, finally, the question is, and you can answer it now
or in writing, if these long list of companies that are not oil
companies, but oil service companies have to either go out of
business or take bankruptcy or lay off thousands of works, are
you going to ask BP to pick up their salaries and to make them
whole?
Secretary Salazar. The answer to that is, yes, we will. BP
is responsible, and BP is responsible for all the damages that
flow from the BP oil spill, and these are some of the
consequences from that oil spill.
Senator Landrieu. Thank you.
The Chairman. Senator Bennett.
Senator Bennett. Thank you very much, Mr. Chairman.
I have listened through the testimony waiting to ask my
question, and no one else did until Senator Landrieu just
covered all of the issues I had in mind. She did it very
eloquently. So I won't take my full time, but simply call your
attention, which Senator Landrieu has done, to the comments
made by the outside experts that you turned to.
Specifically, the National Academy of Engineering
recommended a group of people as contributors and reviewers of
the department's 30-day review of the oil spill. A group of
them have signed a statement saying we were chosen because of
our extensive petroleum industry expertise and independent
perspectives.
Then they quote the report, say we broadly agree with the
detailed recommendations in the report and compliment the
Department of Interior for its efforts. However, we do not
agree with the 6-month blanket moratorium on floating drilling.
The moratorium was added after the final review and was never
agreed to by the contributors. Then they quote the report as
they reviewed it and then quote the report as it was changed.
You are correct, Mr. Secretary, you made the decision, and
it is your legal and proper right to make that decision. I am
not questioning that in any way. But simply quote the comments
of these folks, they say, ''We believe the moratorium as
defined in the draft report addresses the issues evident in the
case. We understand the need to undertake the limited
moratorium and actions described in the draft report to assure
the public that something tangible is being done. A blanket
moratorium is not the answer. It will not measurably reduce
risk further, and it will have a lasting impact on the Nation's
economy, which may be greater than that of the oil spill.``
So this is signed by Kenneth E. Arnold, Dr. Robert Bea, Dr.
Benton Baugh, and Ford Brett. Along with the material--oh, I am
sorry--Dr. Martin Chenevert, Dr. Hans Juvkam-Wold, and Skip
Ward, and Thomas Williams. I would ask unanimous consent that
their statement be included, along with that of Senator
Landrieu as presented.
Mr. Secretary, I join with the comments of all of my
colleagues in thanking you for your diligence and recognizing
the kind of burden that this has put upon your department. You
didn't sign up to deal with an oil spill. You thought you were
going to be worrying about jack rabbits in the West and an
occasional wilderness issue, and you have had to take this on,
and you deserve all of the compliments that you have received
from this committee.
I don't want to add to your burden, but I do want to put
this in the record as my own observation with respect to the
issues that Senator Landrieu has raised.
The Chairman. We will be glad to include whatever you have
there in the record and what Senator Landrieu offered as well.
Do you wish to respond to anything there, Secretary
Salazar?
Secretary Salazar. Just very quickly. I think I answered
the question already. I appreciate the comment on the role that
the engineers played and will continue to play as we try to
move forward with the new safety regime for OCS.
Let me also just comment, Senator Bennett, that when I
signed up for this job, I signed up for it in large part
because it is, in my view, the Department of America, and I
often describe it as going from sea to shining sea as well as
the 1.75 billion acres of the Outer Continental Shelf. We have
a job to do all over this country, and one of the jobs that we
have to do right now is to deal with this spill and to deal
with the future plans for the OCS, and we will get it done.
The Chairman. Senator Johnson.
Senator Johnson. Thank you, Mr. Chairman.
Welcome, Secretary Salazar. You have been doing a great
job. I associate myself with the remarks of Senator Stabenow,
and the last decade has been a hands-off policy, and you are
responsible for changing that policy.
Do you know whether the moratoriums and other actions will
have any effect on U.S. oil production? If so, what effects do
you anticipate?
Secretary Salazar. Senator Johnson, there will be, I think,
a report from the Energy Information Agency indicates that
there will be an economic consequence and a production
consequence that rises from this moratorium that we have
imposed. So we are aware of the fact that there will be some
reduction in oil and gas production. I don't have this document
in front of me, but I recall reading it sometime late last
night.
I think it said that there could be about a 5-day amount of
production that is consumed in the United States that would be
affected by the moratorium. So there will be an effect, and I
would be happy to get back to you with a more specific number.
Senator Johnson. What percentage would that accrete to,
daily production of the United States?
Secretary Salazar. I don't have those specific numbers in
front of me, but I would be happy to get those to you, Senator
Johnson. I don't know if Deputy Secretary David Hayes or Steve
Black, whether you have those numbers?
We would be happy to get those to you, Senator Johnson.
Senator Johnson. Are any shallow water production
operations halted as a result of Mr. Abbey's June 2 memorandum,
or does the action only affect wells currently in development
and not yet producing oil?
Secretary Salazar. Senator Johnson, the shallow water
drilling activities still have to comply with these safety
requirements, and our view is that companies that are out there
that are doing a good job will be able to comply with these
safety requirements to make sure that we have this added level
of safety which we must have with respect to OCS. So our view
is that shallow water development will be able to proceed and
that the safety requirements are ones that will be able to be
met by most of the companies.
Senator Johnson. Would you explain which oil and gas
operations are continuing in the Gulf of Mexico and which have
been halted by your moratorium?
Secretary Salazar. The oil and gas operations in the Gulf
of Mexico that continue are in large part all the production
activities. Production from the Gulf of Mexico has not been
significantly affected. It has only been minimally affected by
the Deepwater Horizon spill. So the production that was online
continues to produce much of the energy that we are using here
in this Nation today.
What has been affected, as Senator Landrieu and others
spoke about, has been the continuation of drilling activities,
especially in the deep water. Those have been halted, including
the wells that were being drilled from the 33 deepwater
drilling rigs that were out there. We ordered those companies
to get to a place where they could secure the well and then to
stop until we give them further orders.
Senator Johnson. Will you be revisiting the MOUs to confirm
that each operation has been temporarily suspended and complies
with the system regulations for a temporary plug and
abandonment?
Secretary Salazar. Senator Johnson, we will be making sure
that the orders that we have given to lessees are, in fact,
followed. The latest of those notices was one that was sent out
yesterday, and that went to all lessees in the Gulf, including
those in shallow and deep water.
Senator Johnson. Thank you, Mr. Secretary.
Secretary Salazar. Thank you very much, Senator Johnson.
The Chairman. Senator Dorgan.
Senator Dorgan. Mr. Chairman, thank you very much.
Let me just say my colleague Senator Corker, I don't think
he meant it quite as harshly as it sounded with respect to the
issue of adolescence and actions by the White House. You know,
my sense here is I agree with Senator Corker that this is a
natural disaster. The President didn't punch that hole in the
planet. He can't plug it either.
But this President, the administration, you, Mr. Secretary,
the Secretary of Energy, Dr. Tom Hunter, who I met with this
morning are all working hard. There is a seriousness of purpose
here that has brought together the best minds we have in this
country to work with all of you, and I know this is very tough.
You are as frustrated as we are on this committee that that
hole hasn't been plugged yet. I wish it had been plugged the
next day.
But this proves to be very difficult and raises questions
about regulations with respect to particularly deepwater
drilling and so on. But I don't think it was meant as harshly
as it sounded to me. I don't think there is any adolescent
behavior here at all. I think there has been a seriousness of
purpose by this administration and by everybody that is
interested in trying to stop this gusher in the Gulf of Mexico.
Let me ask a couple of questions. No. 1, you talked about
BP, their responsibility, their pledge and their commitment.
The fact is there is nothing legally binding in that. I asked
the Justice Department if the fact that BP made a pledge was
that binding on them? The answer is no.
I think it is time now, and I think BP should be standing
behind their pledge, as they have indicated they will. But who
knows 6 months or 16 months or 6 years from now whether that
will remain the commitment. I think it is time to ask for a
portion of funds. I propose $10 billion, which is a bit more
than the first quarter profits of BP, $6 billion or $7 billion,
be put in a Gulf coast recovery fund that is run by a master
who would be selected and perhaps a counselor from BP so you
would have joint management of that designated fund.
But in any event, I think it is time to move from a pledge
to some sort of binding requirement by BP. If BP would say, no,
we are not at this point going to direct money in a Gulf coast
recovery fund, then I think Congress ought to be considering
what we would do to secure that funding from BP, which is a
possibility.
There are people now who are sitting on an empty dock in a
small town on the coast who own a boat, a fishing boat that is
not being used, and they have got to make a payment at the end
of the month. That is a substantial cost. There is a person
perhaps there that is running a small cafe and nobody is going
there, and they have got to make payments.
So my point is I think it is time to start finding a way to
create a binding requirement here, and I won't ask your
evaluation of that. But I will ask you to consider that, and I
have passed that recommendation along to Justice and the
administration as well.
Let me ask two other things. One is this issue of shallow
water versus deep water. My guess is this gusher is going to
change everything about underwater drilling and probably
certainly for the better because there will be more regulations
and more requirements that have a greater margin of safety as
we do these things in the future.
Is there a substantial difference in shallow versus
deepwater drilling with respect to this type of accident? Had
this accident occurred in water of 500 feet or 750 feet, do you
think that the flow would have now been stopped?
Secretary Salazar. The answer to that is yes because it is
much easier to deal with these kinds of issues in shallower
water than in deep water. When you are 5,000 feet below the
sea, you can see the effort that BP has put together to try to
stop this leak, and we are now 51 days into the continuing
leak. It speaks for itself just the difficulty of operating at
those depths.
Some ask the seriousness of BP in stopping the leak. I have
seen the multiple plans that are running parallel in nature to
stop or contain this leak. As I have said before publicly, it
is an existential issue for BP. So I do believe that they are
throwing everything that they have at the problem and trying to
contain it.
We also believe that we ought not to allow BP to do it by
themselves, and that is why the President's directive has been
to bring people like Tom Hunter and other scientists to make
sure that we are riding herd, as the President has said, over
BP.
Senator Dorgan. There is a public interest here. BP has its
interest. Clearly, its interest must be to shut down this
gusher. I understand that. But it also, in terms of evaluating
various alternatives, is going to find a way to make certain on
behalf of its shareholders its interest is met. There is also a
public interest.
They may well run parallel in all cases, but at times maybe
not. But that is why there needs to be this concerted effort by
those who represent the public interest. I want to----
Secretary Salazar. If I may, just on that point?
Senator Dorgan. Yes.
Secretary Salazar. Because you mentioned Tom Hunter. I have
gotten to work with people like Tom Hunter a lot over the last
51 days. They are truly the best of scientists that America
has, and as it is at the President's direction that you have
people like Secretary Chu and Tom Hunter and Marcia McNutt, a
whole host of others essentially that are overseeing these
efforts.
Senator Dorgan. Dr. Tom Hunter, for those that don't know,
is the Director of Sandia National Laboratory, an extraordinary
American. But he is just one of a group of the best thinkers in
our country brought together by the administration to try to
figure out what do we do here.
If I have just another moment, and let me just say that you
all look like you could use like 10 to 15 hours of sleep. I
know the hours that you are likely working, and we thank you
for that.
Let me ask about when a hurricane enters the Gulf of
Mexico, in normal times rigs and production platforms are
prepared, are shut down, and personnel are evacuated to land.
Is there now a written plan for that? Because we are now going
into that season, and you have got a catastrophe out there with
this gusher. Yet, we may well have during hurricane season
something come along, and companies normally have had
procedures to deal with that situation. Is there a written plan
at this point for this circumstance?
Secretary Salazar. The answer to that is, yes, Senator
Dorgan, with respect to hurricanes that when they happened in
the past there is a shutdown that occurs within the Gulf of
Mexico. The answer also with respect to this particular leak is
that it is one of the issues which Secretary Chu and I have
insisted there be the capacity to deal with these issues even
as this leak continues in the month or two ahead as they get to
the relief well. So it is part of the program.
Senator Dorgan. Let me say I don't mean that the three of
you look awful----
[Laughter.]
Senator Dorgan [continuing]. When I said you need sleep.
But I know that you are weary because this has been a long
period of time, and you have not had a day off, I guess, in 51
days. So, thanks for your work, good for you. I think this
Congress wants to do everything possible it can do to be
supportive.
The Chairman. Senator Wyden.
Senator Wyden. Thank you, Mr. Chairman.
Mr. Secretary, the folks in the Gulf are hurting. As
Senator Dorgan noted, you all are putting in prodigious numbers
of hours at this point. I just want to ask you about two policy
questions that relate to the report that you are making
actually are, in my view, areas that the report doesn't get
into.
I feel very strongly that for the future, it is going to be
absolutely critical to close the revolving door between the
Interior Department and the oil and gas industry. There is a
specific law governing officers and employees of the department
involving the Outer Continental Shelf oil and gas program, but
it sure doesn't look to me like it is closing the revolving
door. Let me give you two examples.
The first comes from the Bush administration. An MMS
inspector applied for, got a job with the company that he was
inspecting. The second one I think concerns me even more. That
is, as of March 1, 2010, the previous Director of MMS is now
the president of the Ocean Industries Group. This is the
offshore oil and gas industry that he used to regulate. This is
as of March 1, 2010.
Now I am not saying this is breaking the law, but it sure
suggests to me that the rules to block this revolving door are
not tough enough. The report doesn't go into this. My question,
the first question is would you be willing to work with me--we
have worked together often--to toughen the conflict of interest
and ethics requirements in this area to finally, once and for
all, shut the revolving door?
Secretary Salazar. Senator Wyden, the answer to working
with you, absolutely. If there are things that need to be done
to enhance the ethics mandates which we have put into place
since I became Secretary of Interior and they can be enhanced,
we obviously would want to do that.
You know the history of MMS perhaps better than I think
almost anybody else that I have worked with, and there were
huge problems there. That is why people have been terminated.
People have gone to jail. People have been reprimanded.
Ultimately, what is essentially this blowup of MMS and the
reconstruction of it and the way that we have ordered under the
new Secretarial Order I think is essential, and the revolving
door issue is an issue which we need to make sure doesn't
happen.
Senator Wyden. Let us follow up on it, Mr. Secretary, and
particularly look at this one that I cited involving March 1,
2010, because that is an example to me where my initial take is
that the law may not have been broken. But for somebody who is
the previous director now at the offshore oil and gas industry,
let us follow it up.
Here is my second question. With respect to the emergency
response issue, I think there is a general consensus now that
the emergency response has not been adequate. The Federal
Government doesn't have the equipment to stop a gusher or deal
with it as fast as you and I would like. BP doesn't either.
What do you think about the idea of Congress requiring the
oil industry, not on a company by company basis, to establish a
permanent oil spill response capability. I am just putting this
out by way of trying to get an initial assessment of it. The
Congress has looked at previous approaches. The industry has a
check-off program for R&D, for propane, the oil heat industry.
There are other approaches that resemble this.
But if it is going to be important to strengthen the oil
spill response capability, do you think that this is an issue
that ought to be examined?
Secretary Salazar. Senator Wyden, it is an issue that needs
to be examined and will be examined. I know the President
himself has an interest in this and that we will look at the
report from the Presidential commission that I think will very
much address this issue.
Senator Wyden. So that would be--I appreciate the answer,
and I think what you have told me, it is on the table. That is
what I was hoping for. Let us go to work, as you and I have so
often in the past. Let us toughen up the conflict rules,
particularly as it relates to the revolving door. Let us work
on the emergency response capability, and we will look forward
to talking to you some more after you get some sleep.
Thank you, Mr. Chairman.
Secretary Salazar. Thank you, Senator.
The Chairman. That completes one round of questions. I have
no questions in addition to that.
I think Senator Murkowski indicates she does not have
additional questions.
Senator Corker, do you have----
Senator Corker. I have just one.
The Chairman. Go ahead.
Senator Corker. Just I wasn't going to bring up the issue
again. I know Senator Dorgan has elaborated. I want to say that
I was trying to contrast what appears to me to be a very
professional response from your department and other
professionals to the political responses that occur, and that
is all I was trying to do. I was trying to say that I
appreciate the maturity that it seems that you have displayed.
I realize on the political side people sort of move around,
try to figure out where best to be. I do think, for what it is
worth, that does affect the chain of command. It does affect
how professionals end up dealing with a crisis when, in fact,
the political side of it is trying to figure out where to be. I
think that creates some issues, and I think I may talk with you
offline about that. But if there are concerns about how you
carry out a rescue mission like this with all the flitting
around that seems to be taking place through the political
side.
But my question is one of Senator LeMieux--and he may have
already talked to you about this--has been on television I know
a couple of times and talked in our caucus a little bit about a
story that appeared in the Mobile Register on April 29, and it
talked about having nonflammable boom available so that when a
spill like this occurs--and apparently, there was a preapproval
process that took place so that when an emergency happens, you
burn off the oil immediately. But you have to do that within 24
hours, or the oil ends up being mixed up with the water, and
you cannot burn it.
That didn't occur in this case, and I know he has raised
that several times with Admiral Allen, and I think he has
written a letter to the Administrator of NOAA. But since you
are here and since I know he has been talking about that
publicly, I am sure you have a point of view on that, and I
wondered if you might share it?
He seems to think that 90 percent of the oil could have
been burned if that process--I am just repeating, OK? I hope I
am not repeating inaccurately. But much of it could have been
done away with very quickly if that had occurred in the first
24 hours.
I have heard people talk about the weather and other kinds
of things that may have been impediments, and I just thought I
might give you the opportunity to respond since I know it is
out there moving around in the public.
Secretary Salazar. Senator Corker, Secretary Napolitano in
so many ways, with Admiral Allen, has really moved forward to
do everything within human capacity to deal with the boom
issue. I know that they are doing everything that they can with
respect to the boom.
In terms of burns and booms that could contain oil close to
the vicinity of the blowout and then having burns conducted,
there have been literally dozens, in fact, I think over 100
burns that have already been conducted to basically burn the
oil on the sea. So it is a very active part of the leak
containment program that is underway.
As Admiral Allen often says, we are fighting the battle on
multiple fronts. We are fighting it in the subsea to stop the
leak. When the oil comes to the surface, we are fighting it on
the surface. When the oil comes close to the shore, we are
fighting to keep it from coming onshore. When it has come
onshore, we are fighting it there as well.
So, it has been a relentless effort. I would only comment
on this last point, Senator Corker, with respect to the
President's own involvement in this, I can tell you because I
work with him a lot. He has been relentless in terms of pushing
not only BP, but also the U.S. Government to do everything
possible to protect the people of the Gulf coast and to protect
the environment of the Gulf coast, and I can tell you that from
Cabinet meetings to meetings that I have had with him in the
Oval Office.
He is the reason some people may say I am tired today. It
is because there is a 51-day march that we have been on, and we
will continue on this march under the President's direction
until this problem is fixed and we figure out the way forward.
Senator Corker. Back to the question at hand then, what you
are saying is that is absolutely not an issue, that having
flammable boom available to jump on that right away, for
somebody to make a comment in that regard you are saying is
totally off base?
Secretary Salazar. Let me do this, Senator Corker. I will
have either Secretary Napolitano or Admiral Allen get back
directly to Senator LeMieux on the issue.
Senator Corker. That would be good. But since I have raised
the issue, too, I would love to hear about that.
Secretary Salazar. I will have them get back to you as
well.
Senator Corker. All right. Thank you.
The Chairman. Secretary Salazar, thank you very much for
your time, and Godspeed in getting this problem solved.
That concludes our hearing.
Secretary Salazar. Thank you, Senator.
[Whereupon, at 11:44 a.m., the hearing was adjourned.]
APPENDIXES
----------
Appendix I
Responses to Additional Questions
----------
Responses of Hon. Ken Salazar to Questions From Senator Menendez
Question 1. Relief wells are the only proven effective way to stop
major oil spills--should operators be required to drill a relief well
alongside and at the same time they drill exploratory wells in case a
major accident happens? If not, why not? If the Department has
determined that costs outweigh the benefits, where can I access that
analysis?
Answer. Regarding the drilling of relief wells, it may seem
reasonable to assume that relief wells reduce risk, and that we could
save time responding to any blowout by requiring operators to drill a
relief well alongside each well drilled in the Gulf of Mexico. However,
the risk of a blowout in the relief well may be the same as the risk of
a blowout in the initial well. This increased risk is a direct result
of drilling twice as many wells into a formation. Each well drilled
increases the risk of a blowout simply because each well presents its
own unique geologic and engineering risks. Relief wells have
historically been an effective method to stop the flow of oil from the
bottom of a well blowout and begin the process of pumping cement to
abandon the well. However, both the risk and costs of drilling relief
wells dictate that they are typically only drilled when necessary to
respond to a well blowout. As demonstrated with the Deepwater Horizon
response, there are other deepwater well containment options that may
be faster and equally effective in reducing or stopping the flow of oil
into the ocean. BOEMRE is in the process of establishing enforceable
mechanisms to ensure the availability of blowout containment resources.
And industry commitments have been made for new investments in
designing and developing a multi-scenario, multi-component containment
system.
In fact, on July 21 four of the nation's largest oil companies
announced that they have committed $1 billion to set up a rapid oil
spill response system to deal with deep-water blowouts in the Gulf of
Mexico. Exxon Mobil Corp., Chevron Corp., ConocoPhillips and Shell said
the system of underwater capture devices and surface containment
vessels will be similar to those used by BP to control the Macondo well
and will be designed to capture up to 100,000 barrels of oil a day
before it spills into the sea from wells sitting in water as deep as
10,000 feet.
The reality of future wells and production from the Gulf of Mexico
is that most of the remaining oil and gas resources are located in deep
formations with high pressures and temperatures, and exploratory and
development wells as well as any potential simultaneously drilled
relief wells all carry a risk of a blowout.
Question 2. Has the Interior Department been submitting all
government expenses to BP for reimbursement, including travel, lodging,
and even meals, for all federal employees who have gone to the Gulf to
respond to this spill? Is BP paying for your personal travel to
Louisiana? Your meals? Your lodging? If not why not?
Answer. Costs which fall within the statement of work under the
Pollution Removal Funding Agreement (PRFA) the Department has with the
U.S. Coast Guard are being reimbursed through a coordinated department-
wide process. Every bureau and office with a Deepwater Horizon related
PRFA is tracking these costs according to the USCG's PRFA reimbursement
guidance. Currently efforts to prepare and process reimbursement
packages for costs incurred beginning on April 21, 2010 within the
various PRFA agreements throughout the Department are underway. These
packages will be prepared and submitted to the USCG on a regular basis
until all Deepwater Horizon work is complete and expenses under the
PRFA's are reimbursed. The Administration regularly bills responsible
parties for oil removal costs, and has sent seven bills, to-date, of
which the first six have been paid in full by BP, totaling $518.4
million.More information about oil spill costs and the reimbursement
process--including copies of the bills that have been sent to
responsible parties--is available here: http://www.restorethegulf.gov/
release/2010/10/13/oil-spill-cost-and-reimbursement-fact-sheet.
Departmental costs that are identified as not currently being
reimbursed through one of the various PRFAs will be tracked in
accordance with interagency guidance and provided to DOJ for their
determination of whether to pursue reimbursement from the responsible
parties.
Question 3. What specific, near-term actions are being taken at MMS
to ensure that all existing oil response plans accurately describe
operators ability to respond to a worst-case scenario spill?
Answer. BOEMRE has been proactive in assuring that operators of
offshore facilities are able to respond to such an event in the Gulf of
Mexico. Relevant, near-term actions taken by the bureau include the
following:
On May 19, 2010, BOEMRE inspected the Marine Spill Response
Corporation and the National Response Corporation spill
response equipment stockpiles in Tampa, Florida to ensure its
operational status and contractor training.
BOEMRE continuously tracks the spill response equipment
inventory for the three major equipment providers here in GOMR.
BOEMRE worked with USCG concerning allocation of response
assets in the event of another spill.
BOEMRE consulted with USCG and the Environmental Protection
Agency regarding the emergency rule for Temporary Suspension of
Certain Oil Spill Response Time Requirements to support the
Deepwater Horizon Oil Spill Response. This temporary interim
rule allowed release of response equipment and vessels from
around the country for response to the Deepwater Horizon Spill
of National Significance. The USCG and EPA encouraged an
increase in available response resources for this response by
temporarily releasing these facilities and vessels from USCG
and EPA regulatory response time requirements, and EPA response
equipment identification and location requirements, if they
have had their own or contracted response resources relocated
to the Gulf of Mexico in support of the response to the
Deepwater Horizon spill. Additional information on this can be
found at: http://edocket.access.gpo.gov/2010/pdf/2010-15853.pdf
BOEMRE developed a method to verify the worst case discharge
volumes for wells through the Exploration Plan/Development
Operations Coordination Document (EP/DOCD) review process as
prescribed in NTL 2010-N06, Information Requirements for
Exploration Plans, Development and Production Plans and
Development Operations Coordination Documents on the OCS that
became effective on June 18, 2010.
BOEMRE is reviewing its ability to plan, implement, verify,
and adjust Oil Spill Response Plans given existing regulations,
in particular 30 CFR 254.30(e)(2), when relevant staff has
identified potential inadequacies based on the Deepwater
Horizon response.
Question 4. At the hearing, I asked you to confirm reports of a
second oil spill from another drilling rig, the Ocean Saratoga, near
the Deepwater Horizon, which you confirmed, and said may have begun
with Hurricane Ivan, in 2004. I request that you expeditiously provide
follow-up information about this spill to the Committee, including when
it began, the estimated flow rate, plans to clean up and investigate
the spill, and future monitoring plans of the Department to ensure all
oil spills are detected and addressed in a timely manner.
Answer. The oil leaks in the vicinity of the Diamond Ocean Saratoga
drilling rig are from wells originally drilled from a now downed
platform destroyed by Hurricane Ivan in September 2004. The platform is
located in 440 feet of water approximately 15 miles southeast of the
Mississippi River delta. The Ocean Saratoga is under contract to Taylor
Energy LLC, as operator of the Mississippi Canyon Block 20 (MC020)
platform destroyed by Hurricane Ivan, to drill relief wells and set
plugs in the destroyed wells to prevent future oil pollution.
The Mississippi Canyon Block 20 Project is managed under a Unified
Command consisting of the USCG, BOEMRE, and Taylor Energy, which holds
monthly operational meetings with Taylor Energy and contractors to
manage the well abandonments and site clearance operations for the
MC020 platform. Taylor Energy no longer operates active oil and gas
leases in the Gulf of Mexico, but is the operator of the MC020 Project
under a trust agreement created with the then-Minerals Management
Service in March 2008. Taylor Energy is reimbursed for well abandonment
and site clearance work from the trust fund after review of completed
work by the Unified Command. The oil leak flow rates in MC020 are
generally measured in gallons (i.e. less than one barrel per day).
While the wells have periodically discharged volumes exceeding several
barrels per day, the leaks have subsided due to the plugging of six
wells and the installment of an oil containment system. Taylor Energy
LLC and contractors designed, fabricated, and installed a containment
system of collection domes and a collection tank for containment of
these leaks. Under the direction of the Unified Command, Taylor Energy
has also contracted with an oil spill observer contractor to fly over
the MC020 site and report estimates of oil leak volumes to the Unified
Command.
Appendix II
Additional Material Submitted for the Record
----------
The Primary Recommendation in the May 27, 2010 report, ``INCREASED
SAFETY MEASURES FOR ENERGY DEVELOPMENT ON THE OUTER CONTINENTAL SHELF''
Given by Secretary Salazar to the President Misrepresents our Position
The National Academy of Engineering recommended us as contributors
and reviewers of the recent Department of Interior ``30 Day Review'' of
the BP Oil Spill. We were chosen because of our extensive petroleum
industry expertise, and independent perspectives. The report states:
``The recommendations contained in this report have been peer-
reviewed by seven experts identified by the National Academy of
Engineering. Those experts, who volunteered their time and expertise,
are identified in Appendix 1. The Department also consulted with a wide
range of experts from government, academia and industry.''
The BP Macondo blow out was a tragedy for eleven families, and an
environmental disaster of worldwide scale. We believe the blowout was
caused by a complex and highly improbable chain of human errors coupled
with several equipment failures and was preventable. The petroleum
industry will learn from this; it can and will do better. We should not
be satisfied until there are no deaths and no environmental impacts
offshore--ever. However, we must understand that as with any human
endeavor there will always be risks.
We broadly agree with the detailed recommendations in the report
and compliment the Department of Interior for its efforts. However, we
do not agree with the six month blanket moratorium on lfoating
drilling. A moratorium was added after the final review and was never
agreed to by the contributors. The draft which we reviewed stated:
Along with the specific recommendations outlined in the body
of the report, Secretary Salazar recommends a 6-month
moratorium on permits for new exploratory wells with a depth of
1,000 feet or greater. This will allow time for implementation
of the measures outlined in this report, and the consideration
of information and recommendations from the Presidential
Commission as well as other investigations into the accident.
In addition, Secretary Salazar recommends a temporary pause
in all current drilling operations for a sufficient length of
time to perform additional blowout preventer function and
pressure testing and well barrier testing for the existing 33
permitted exploratory wells currently operating in deepwater in
the Gulf of Mexico. These immediate testing requirements are
described in Appendix 1.
We agree that the report and the history it describes agrees with
this conclusion. Unfortunately after the review the conclusion was
modified to read:
The Secretary also recommends temporarily halting certain
permitting and drilling activities. First, the Secretary
recommends a six-month moratorium on permits for new wells
being drilled using floating rigs. The moratorium would allow
for implementation of the measures proposed in this report and
for consideration of the findings from ongoing investigations,
including the bipartisan National Commission on the BP
Deepwater Horizon Oil Spill and Offshore Drilling.
The Secretary further recommends an immediate halt to
drilling operations on the 33 permitted wells, not including
the relief wells currently being drilled by BP, that are
currently being drilled using floating rigs in the Gulf of
Mexico. Drilling operations should cease as soon as safely
practicable for a 6-month period.
We believe the moratorium as defined in the draft report addresses
the issues evident in this case. We understand the need to undertake
the limited moratorium and actions described in the draft report to
assure the public that something tangible is being done. A blanket
moratorium is not the answer. It will not measurably reduce risk
further and it will have a lasting impact on the nation's economy which
may be greater than that of the oil spill.
The report highlights the safety record of the industry in drilling
over 50,000 wells on the US Outer Continental Shelf of which more than
2000 were in over 1000 feet of water and 700 were in greater than 5000
feet of water. We have been using subsea blowout preventers since the
mid-1960s. The only other major pollution event from offshore drilling
was 41 years ago. This was from a shallow water platform in Santa
Barbara Channel drilled with a BOP on the surface of the platform.
The safety of offshore workers is much better than that of the
average worker in the US, and the amount of oil spilled is
significantly less than that of commercial shipping or petroleum
tankers. The US offshore industry is vital to our energy needs. It
provides 30% of our oil production, is the second largest source of
revenue to the US Government ($6 Billion per year), and has a direct
employment of 150,000 individuals. The report outlines several steps
that can be taken immediately to further decrease risk as well as other
steps that should be studied to determine if they can be implemented in
a way that would decrease risk even more.
This tragedy had very specific causes. A blanket moratorium will
have the indirect effect of harming thousands of workers and further
impact state and local economies suffering from the spill. We would in
effect be punishing a large swath of people who were and are acting
responsibly and are providing a product the nation demands.
A blanket moratorium does not address the specific causes of this
tragedy. We do not believe punishing the innocent is the right thing to
do. We encourage the Secretary of the Interior to overcome emotion with
logic and to define what he means by a ``blanket moratorium'' in such a
way as to be consistent with the body of the report and the interests
of the nation.
The foregoing represents our views as individuals and does not
represent the views of the National Academy of Engineering or the
National Research Council or any of its committees.
Kenneth E. Arnold, PE, NAE; Dr. Robert Bea,
Department of Civil and Environmental
Engineering, University of California at
Berkeley; Dr. Benton Baugh, President,
Radoil, Inc.; Ford Brett, Managing
Director, Petroskills; Dr. Martin
Chenevert, Senior Lecturer and Director of
Drilling Research Program, Department of
Petroleum and Geophysical Engineering,
University of Texas; Dr. Hans Juvkam-Wold,
Professor Emeritus, Petroleum Engineering,
Texas A&M University; Dr. E.G. (Skip) Ward,
Associate Director, Offshore Technology
Research Center, Texas A&M University;
Thomas E. Williams, The Environmentally
Friendly Drilling Project.
______
Service Companies Impacted by Deepwater Horizon Moratorium
Aker Solutions
Aker Solutions is a leading global provider of engineering
and construction services, technology products and integrated
solutions to the offshore oil and gas industry.
The moratorium will impact Aker Solutions' offshore related
operations on the Gulf Coast which include about 750 employees
in Texas and Alabama.
The company has already started to refocus their efforts to
international projects that hopefully can replace some of the
void.
Some of their offshore services work is coming to a halt
already; and unless they can refocus that workforce, including
vessels and tools, to international projects they are at risk
of losing jobs in Texas over the next few months.
Manufacturing jobs in Alabama are at risk from early 2011,
as the backlog runs out with no new orders of deepwater subsea
equipment coming in.
Engineering jobs in Houston are at risk of being reduced,
but may be able to be refocused internationally.
In summary, part of their workforce will be affected
directly or indirectly by the moratorium. Their goal is to try
to mitigate this by securing international projects.
ATP Oil & Gas Corporation
ATP Oil & Gas Corporation is an independent oil and gas
producer headquartered in Houston, Texas.
The moratorium has caused ATP to stop the drilling of a
natural gas development well (the Mississippi Canyon 305 # 2
well) and release the deepwater drilling rig. The MC 305 #2
well would have produced approximately 40 million cubic feet of
gas per day with a very small amount of condensate.
Additionally, ATP will not be able to drill and complete two
development wells (MC 941 #4 well and MC 942 # 2 well) using a
drilling configuration with two blowout prevention (BOP)
stacks, one on the seafloor and one at the surface. This is a
new design for improved safety, a first in the US Gulf of
Mexico and one that the company planned 3 years ago.
These wells were originally planned to be completed and
placed on production in 2010 at a combined rate of
approximately 14,000 barrels of oil per day using a platform
drilling rig attached to the ATP Titan platform.
As a result of the moratorium and the suspension of
operations, ATP expects to incur additional costs of
approximately $30,000,000 that otherwise would not have been
spent.
Additionally, ATP will defer revenues of more than
$1,000,000 per day as a result of not being able to drill and
complete the development wells planned for 2010.
Bollinger Shipyards, Inc.
Bollinger Shipyards, Inc. and its affiliated companies are
the leading provider of quality marine construction, repair and
conversion products, servicing both the military and commercial
marine industry. They also own and operate a fleet of Offshore
Supply Vessels that service the deepwater activities of the
OCS. Family owned and operated since 1946, Bollinger Shipyards
employs 3,000 people.
``In the 64 years of our existence, we have never been faced
with such an uncertain future. This moratorium has created an
environment leaving Bollinger Shipyards no choice but to
downsize our company thereby eliminating good paying jobs.''
Broadpoint, Inc.
Broadpoint is a 27 year old privately held company with a
100 employees based along the Gulf Coast with its headquarters
in Houston and a Network Operations Center in New Orleans with
an additional office in Lafayette, LA.
Their operations are 99% directly related to providing
telecommunication services in the Gulf of Mexico through
satellite communications and the ownership and management of a
100,000 square mile GSM/GPRS/Edge network operating in the
Gulf.
Broadpoint and its clients will be adversely affected as a
result of this shutdown and it will directly affect their
ability to operate. Reliable communications is essential for
the health and safety of individuals in the Gulf of Mexico.
CapRock Communications, Inc.
CapRock Communications is a 29 year old privately held
company employing 750 employees globally with headquarters in
Houston and operational offices in Lafayette and New Orleans,
LA.
Their operations are related to providing satellite
communication solutions that enable the oil and gas industry to
operate more efficiently in today's environment, serving the
communications needs of rig owners, service companies and
operators working on drilling rigs, production platforms and
other assets in the Gulf.
They currently have over 50 field service and operations
personnel supporting clients in the Gulf of Mexico and this
shutdown will directly impact their ability to maintain
operations.
Their field service personnel install and manage
communication systems onboard drilling rigs and energy support
vessels throughout the Gulf of Mexico. As their customers are
now required to cease or limit their operations, the amount of
business their company receives and the work they have for
their personnel in the region significantly declines.
They will be forced to redeploy personnel to different
regions or support them in finding other opportunities.
C&C Technologies, Inc.
C & C provides a wide range of survey and mapping services
for the land and offshore oil and gas industry, the
telecommunications industry and the U.S. government.
C&C expects to lay off approximately 10 employees as a
result of the moratorium, and will not be hiring the dozen or
so workers they expected to hire in the coming months.
Cobalt International Energy, Inc
Cobalt International Energy, Inc. (Cobalt) is an independent
oil and gas exploration and production company focused on the
deepwater U.S. Gulf of Mexico and the deepwater offshore Angola
and Gabon.
Cobalt was formed in 2005 and is headquarters in Houston,
Texas with an operational base in Port Fourchon, L.A. for their
deepwater GOM exploration activities, and an (soon to be
established) operational base in Luanda Angola for their Angola
exploration activities. At present Cobalt have some 65
employees and 25 consultants.
The GOM Drilling Moratorium has significantly impacted
Cobalt's GOM deepwater 2010 exploration and appraisal program
from a multitude of perspectives:
--Cobalt's exploration and appraisal drilling program for the
remainder of 2010 (3 wells of which 1 had all of the
necessary permits/insurance in place) is now on hold. Thus,
the exploration drilling rigs, services, vessels, tools,
people etc., that were contracted to support the drilling
programs have been released.
--Cobalt invoked the Force Majeure provision in a recent rig
contract, thus the company is paying capital for a period
of time while the rig is idle as well as the associated key
services (e.g. vessels). Cobalt has also experienced
unanticipated legal costs as a result.
--There is a follow-on impact in the form of delay in executing
their 2011 exploration and appraisal program (approx 9
wells) in the deepwater GOM. Thus the program has been
extended further/delayed into the future which will affect
the timing and thus cash flow they would have anticipated
sooner.
--As the deepwater GOM is a key focus area for Cobalt in light of
the position established (some 227 deepwater leases) in the
last few years, the company stock has been significantly
impacted (dropped 40%) amid concerns regarding the GOM
Drilling Moratorium; the value of the company has thus been
impacted by some $1.5 billion in the market.
--Cobalt will shift its capital spending program and resources to
their West Africa business. Resumption of their investment
program in the United States is completely dependent on the
termination of the GOM Drilling Moratorium.
Davis-Lynch, Inc.
Davis-Lynch is a privately owned company founded in 1947
that manufactures, sells, and services down-hole equipment for
the offshore oil and gas industry.
They employed over 300 people in 2009, but reduced their
workforce by approximately 100 people as a result of an
industry downturn. In 2010 with an upswing in business they
have recalled some of the people released in 2009.
Approximately 20% of their business is dedicated to
providing products and services to the offshore drilling
industry in the Gulf of Mexico, with a large portion associated
with water depths greater than 500 feet.
The moratorium leaves them no alternative other than to
implement another reduction in their workforce in locations
including Lafayette, LA; Houston, TX; and Corpus Christi, TX.
Delmar Systems, Inc.
Delmar Systems, Inc. is a leader in offshore mooring,
providing mooring solutions for the offshore oil and gas
industry.
Delmar is a 42 year old privately held company employing 300
employees based along the gulf coast with a technical office in
Houston and large operational base at Port Fourchon, LA.
Operations are 100% directly related to mooring deepwater
semi-submersibles in the Gulf of Mexico and as a result of this
shutdown, will directly affect ability to operate.
Thirteen of the thirty three deepwater wells involved
``moored'' or anchor semi-submersible rigs owned by four
drilling contractors.
Heerema Marine Contractors
Heerema is a 48 year old privately held Dutch company who
has been working in the Gulf of Mexico for 32 years and has
installed approximately 75% of all deep water facilities
currently producing in the Gulf . They own and operate three of
the four largest construction vessels in the world and the US
Gulf has always been a significant part of the revenue stream
of their company.
They currently employ 50 people between offices in Houston,
TX and an operational base at Port Fourchon, LA.
Their U.S. operations are directly related to installation
of new facilities and sub sea infrastructure in the deep water
Gulf of Mexico and as a result of this shutdown, their business
future is in a state of uncertainty here in the US.
Laborde Marine, LLC
Laborde Marine is a family-owned business headquartered in
New Orleans which owns and/or operate 21 vessels, all built in
U.S. shipyards; while employing over 300 people with a $14
million annual payroll.
They invested over $150 million to build or acquire this
fleet.
The moratorium is essentially telling them to ``park'' their
vessels for six months.
For Laborde to move internationally, they would have to
compete with vessels built in foreign ship yards at a much
lower cost and often subsidized by foreign governments.
``The moratorium may well be the death-knell for U.S.
businesses engaged in the energy service sector.''
J. Ray McDermott, Inc.
J. Ray McDermott is a Houston headquartered Company with
approximately 1,200 employees in Morgan City and New Orleans,
Louisiana and Houston, Texas.
The company provides engineering and construction services
to the offshore energy sector worldwide as well as in the Gulf
of Mexico through the engineering, construction and offshore
installation of the infrastructure necessary to develop and
produce offshore oil and gas fields.
According to the company, the shutdown of deepwater drilling
in the Gulf of Mexico will create a domino effect (movement of
rigs and other equipment out of the area, loss of jobs, etc.)
that will no doubt affect the timing of future developments and
the economic recovery of the region for years to come.
Oceaneering International, Inc.
Oceaneering is a global oilfield provider of engineered
services and products, primarily to the offshore oil and gas
industry, with a focus on deepwater applications.
Oceaneering reduced its 2010 earnings forecast on
expectations that the U.S. government's moratorium on deepwater
drilling activity in the Gulf of Mexico will hurt demand for
its deepwater services.
The oilfield-services and products company said it expects
the moratorium will cut second-half earnings by 45 cents a
share and is now looking for 2010 profit of $2.80 to $3.10 a
share.
Nearly one-quarter of Oceaneering's remotely-operated
vehicles operate in the Gulf, with about half of those in
drilling support services.
The company anticipates some early terminations and revised
contracts.
The stock is down 27% this year amid concerns about the Gulf
oil spill.
Otto Candies, LLC
Otto Candies is a marine transportation company started 68
years ago with a fleet of 40 vessels.
500 of their 600 U.S.-based employees could be impacted by
the moratorium, with some possibly needing to be relocated to
Brazil, Mexico, or West Africa.
Stone Energy Corporation
Stone Energy Corporation is an independent oil and natural
gas exploration and production company headquartered in
Lafayette, Louisiana, with additional offices in Houston, Texas
and Morgantown, West Virginia.
Stone has already experienced a 40% drop in the value of
their company in anticipation of punitive legislation and
regulation.
They will be forced to reduce jobs as will other operators.
Stone has a shelf platform rig at MC 109 which has been shut
down, wasting over $10 million dollars by having an idle rig
sitting there doing nothing.
This cash cost will be far exceeded by the lost revenue of
the five wells being drilled from the facility.
The 5 wells were anticipated to each produce approximately
1,000 barrels per day, assuming $70 per barrel, resulting in
$350,000 per day in potential lost revenues.
Stone also has a half-dozen exploratory wells that will be
delayed a year or more. This hurts their ability to sustain
reserves to convert to future production and growth.
One rig that was going to be used in this exploratory
program, the Deepwater Mariannas, is expected to be leaving the
Gulf for opportunities in foreign countries.
Southern States Offshore, Inc.
Southern States Offshore, Inc. is a privately held company
incorporated in 1996 and wholly owning and operating seven
offshore service and supply vessels, six of which were built
and delivered in Louisiana and Alabama in 1998, 2005, 2007,
2009 and 2010 at a cost of 48 million dollars.
They employ 53 mariners who live in Texas, Louisiana and
Alabama; with an office staff in Houston, Texas of ten
employees, all Texas residents.
According to the company, their employees, their families,
the ship yards, vendors, tax authorities, etc. that depend on
this industry to pay their mortgage, health care bills, cloth
their families and send their children to school all are at
risk of losing everything.
Zupt, LLC
Zupt is a privately owned, international service and
manufacturing company specializing in the integration and
application of inertial technologies to onshore and offshore
survey and positioning services to make operations more
efficient.
Were under contract with an operator who was 8 to 12 days
away from completing a well and Zupt was preparing to conduct
the metrology survey work when the operator was told to shut
the well. No metrology survey was conducted, an immediate loss
of revenue.
One of Zupt's engineers was laid off due to the near term
lost revenue.
During the moratorium the company is forced to seek work in
West Africa and the North Sea, and if unsuccessful they
anticipated being out of business within four months.
______
REPORTS AT BP OVER YEARS FIND HISTORY OF PROBLEMS
By Abrahm Lustgarten and Ryan Knutson
Tuesday, June 8, 2010; A01
PROPUBLICA
A series of internal investigations over the past decade warned
senior BP managers that the oil company repeatedly disregarded safety
and environmental rules and risked a serious accident if it did not
change its ways.
The confidential inquiries, which have not previously been made
public, focused on a rash of problems at BP's Alaska oil-drilling
operations. They described instances in which management flouted safety
by neglecting aging equipment, pressured employees not to report
problems and cut short or delayed inspections to reduce production
costs.
Similar themes about BP operations elsewhere were sounded in
interviews with former employees, in lawsuits and little-noticed state
inquiries, and in e-mails obtained by ProPublica. Taken together, these
documents portray a company that systemically ignored its own safety
policies across its North American operations--from Alaska to the Gulf
of Mexico to California and Texas. Executives were not held accountable
for the failures, and some were promoted despite them.
Tony Hayward has committed himself to reform since becoming BP's
chief executive in 2007. Under him, the company has worked to implement
an operating safety system to create ``responsible operations at every
BP operation,'' said Toby Odone, a company spokesman. BP has used the
system at 80 percent of its operations and expects to bring it to the
rest by the end of the year, he said.
Odone said the notion that BP has ongoing problems addressing
worker concerns is ``essentially groundless.''
Because of its string of accidents before the April 20 blowout in
the Gulf of Mexico, BP faced a possible ban on its federal contracting
and on new U.S. drilling leases, several senior former Environmental
Protection Agency department officials told ProPublica. That inquiry
has taken on new significance in light of the oil spill in the gulf.
One key question the EPA will consider is whether the company's
leadership can be trusted and whether BP's culture can change.
The reports detailing the firm's Alaska investigations--conducted
by outside lawyers and an internal BP committee in 2001, 2004 and
2007--were provided to ProPublica by a person close to the company who
thinks it has not done enough to fix its shortcomings.
A 2001 report noted that BP had neglected key equipment needed for
an emergency shutdown, including safety shutoff valves and gas and fire
detectors similar to those that could have helped prevent the fire and
explosion on the Deepwater Horizon rig in the gulf.
A 2004 inquiry found a pattern of the company intimidating workers
who raised safety or environmental concerns. It said managers shaved
maintenance costs by using aging equipment for as long as possible.
Accidents resulted, including the 200,000-gallon Prudhoe Bay pipeline
spill in 2006--the largest spill on Alaska's North Slope--which was
blamed on a corroded pipeline.
Similar problems surfaced at BP facilities in California and Texas.
California officials alleged in 2002 that the company had falsified
inspections of fuel tanks at a Los Angeles area refinery and that more
than 80 percent of the facilities didn't meet requirements to maintain
storage tanks without leaks or damage. Inspectors had to get a warrant
before BP allowed them to check the tanks. The company eventually
settled a lawsuit brought by the South Coast Air Quality Management
District for more than $100 million.
Three years later, a Texas City refinery exploded, killing 15
people. An investigation found that a warning system failed, and
independent experts found that ``significant process safety issues
exist at all five U.S. refineries, not just Texas City.''
BP spokesman Odone said that after the accident, the company
adopted a plan to update its safety systems worldwide. But last year,
the Occupational Safety and Health Administration fined the firm $87
million for not improving safety at that same Texas plant.
`ENVIRONMENTAL CRIMINAL'
BP has had more high-profile accidents than any other company in
recent years. And now, with the disaster in the gulf, independent
experts say the pervasiveness of the company's problems, in multiple
locales and different types of facilities, is striking.
``They are a recurring environmental criminal and they do not
follow U.S. health safety and environmental policy,'' said Jeanne
Pascal, a former EPA lawyer who led its BP investigations. Since the
late 1960s, the company has pulled oil from under Alaska, usually
without problems. But when it pleaded guilty in 1999 to illegal dumping
at an offshore drilling field there, it drew fresh scrutiny and set off
a cycle of attempted--and seemingly failed--reforms that continued over
the next decade.
To avoid having its Alaska division debarred--the official term for
a contract cancellation with the federal government--the firm agreed to
a five-year probationary plan with the EPA. BP would reorganize its
environmental management, establish protections for employees who speak
out about safety issues, and change its approach to risk and regulatory
compliance.
Less than a year later, employees complained to an independent
arbitrator that the company was letting equipment and critical safety
systems languish at its Greater Prudhoe Bay drilling field. BP hired
independent experts to investigate.
The panel identified systemic problems in maintenance and
inspections--the operations that keep the drilling in Prudhoe Bay
running safely--and warned BP that it faced a ``fundamental culture of
mistrust'' by its workers.
``There is a disconnect between GPB management's stated commitment
to safety and the perception of that commitment,'' the experts said in
their 2001 report.
The report said that ``unacceptable'' maintenance backlogs
ballooned as BP tried to sustain North Slope profits despite declining
production. The consultants concluded that the company had neglected to
clean and check valves, shutdown mechanisms and detection devices
essential to preventing explosions.
In May 2002--less than seven months later--Alaska state regulators
warned BP that it had failed to maintain its pipelines. Alaska
struggled for two years to make the firm comply with state laws and
clear the pipeline of sedimentation that could interfere with leak
detection.
Soon after, BP hired another team of outside investigators to look
into worker complaints on the North Slope. The resulting 2004 study by
the law firm Vinson & Elkins warned that pipeline corrosion endangered
operations.
It also offered a harsh assessment of BP's management of employee
concerns. According to the report, workers accused the company of
allowing ``pencil whipping,'' or falsifying inspection data. The report
quoted an employee who said employees felt forced to skip key
diagnostics, including pressure testing, pipeline cleaning and
corrosion checks.
The report said that Richard Woollam, the manager in charge of
corrosion safety in Alaska at the time, had ``an aggressive management
style'' and subverted inspectors' tendency to report problems.
``Pressure on contractor management to hit performance metrics (e.g.
fewer OSHA recordables) creates an environment where fear of
retaliation and intimidation did occur,'' it said. Woollam was soon
transferred.
MORE ACCIDENTS
Two years later, in March 2006, disaster struck. More than 200,000
gallons of oil spilled from a corroded hole in the Prudhoe Bay
pipeline. Inspectors found that several miles of the steel pipe had
corroded to dangerously thin levels.
When Congress held hearings later that year, Woollam pleaded the
Fifth Amendment. He now works in BP's Houston headquarters. Reached at
his Texas home last week, he referred questions to the BP media office,
which declined to comment.
In August 2006, just five months after the Prudhoe Bay spill, a
pipeline safety technician for a BP contractor in Alaska discovered a
two-inch snaggletoothed crack in the steel skin of an oil transit line.
Nearby, contractors ground down metal welds, sending sparks across the
work site. Technician Stuart Sneed feared that the sparks could ignite
stray gases, or that the work could worsen the crack, so he ordered the
contractors to stop working.
``Any inspector knows a crack in a service pipe is to be considered
dangerous and treated with serious attention,'' he told ProPublica.
Sneed said he thought the Prudhoe Bay disaster had made BP
management more amenable to listening to worker concerns about safety.
The company had replaced its chief executive for North America with
Robert Malone, who focused on reforming BP's culture in Alaska.
But instead of receiving compliments for his prudence, Sneed--who
had also complained that week that pipeline inspectors were faking
their reports--was scolded by his supervisor, who hadn't inspected the
crack but believed it was superficial, according to a report from BP's
internal employer arbitrators.
The next day, the report said, that supervisor criticized Sneed at
a staff briefing, then solicited complaints from colleagues that could
be used to justify Sneed's firing. Two weeks later, Sneed was gone.
During the investigation, BP inspectors substantiated Sneed's
concerns about the cracked pipe. The arbiter also confirmed his account
of what happened when he reported the problem. His dispute with the
company is unresolved.
The following year saw another BP shakeup. The company had replaced
its chief executive of Alaskan operations with Doug Suttles--who is now
in charge of offshore operations and cleanup of the gulf disaster. In
May 2007, it also named Hayward its new global chief executive.
But worker harassment claims continued in Alaska and elsewhere, and
more problems with the Alaska pipeline systems emerged.
In September 2008, a section of a gas line on the slope blew apart.
A 28-foot-long section of steel--the length of three pickup trucks--
flew nearly 1,000 feet through the air before landing on the Alaskan
tundra. Sneed had raised concerns about the integrity of segments of
the gas line system.
Three more accidents rocked the same system of pipelines and gas
compressor stations in 2009, including a near-catastrophic explosion.
According to a letter that members of Congress sent to BP executives,
obtained by ProPublica, the near-miss resulted from malfunctioning
safety and backup equipment.
Odone said that BP is continuing to roll out a company-wide
operating management system to help track and implement maintenance. He
said the company reduced corrosion and erosion-related leaks in Alaska
by 42 percent between 2006 and 2009.
NONCOMPLIANCE
As BP battled through the decade to avoid accidents in Alaska,
another facility operating under a different business unit, BP West
Coast Products, had similar problems.
For years, the subsidiary that refined and stored crude oil was
allowed to inspect its own facilities for compliance with emission laws
under the South Coast Air Quality Management District, the agency that
regulates air quality in Los Angeles.
In 2002, inspectors with the management district thought BP's
inspection results looked too good to be true. Between 1999 and 2002,
BP's Carson Refinery had nearly perfect compliance, reporting no tank
problems and making virtually no repairs. The district suspected that
BP was falsifying its inspection reports and fabricating its
compliance.
According to Joseph Panasiti, a lawyer for the management district,
the agency had to get a search warrant to conduct inspections required
by state law. When the regulators finally got in, they found equipment
in a disturbing state of disrepair. According to a lawsuit the
management district later filed against BP, inspectors discovered that
some tanker seals had extensive tears, tank roofs had pervasive leaks
and there were enough major defects to lead to thousands of violations.
``They had been sending us reports that showed 99 percent
compliance, and we found about 80 percent noncompliance,'' Panasiti
said.
The district sued BP for $319 million. After lengthy litigation,
the firm agreed to pay more than $100 million without admitting guilt.
Colin Reid, the plant's operations manager, was later promoted to a
vice president position in the United Kingdom. He recently left BP and
did not respond to requests for comment.
Allegations that BP or its contractors falsified safety and
inspection reports are a recurring theme. Similar allegations were
attributed to workers in 2001 and 2004 internal reports on Alaska, but
the internal auditors did not confirm that fraud had occurred.
Among the safety equipment that BP was criticized for not having in
place in its Alaska facilities, according to its own 2001 operational
integrity report, were gas and fire detection sensors and emergency
shutoff valves.
Now investigators are learning that similar sensors and their
shutoff systems were not operating in the engine room of the Deepwater
Horizon rig that exploded in the gulf.
In testimony before a Deepwater Horizon joint investigation panel
in New Orleans last month, Deepwater mechanic Douglas Brown said that
the backstop mechanism that should have prevented the engines from
running wild apparently failed--and so did the air-intake valves that
were supposed to close if gas entered the engine room.
He said the engine room wasn't equipped with a gas alarm system
that could have shut off the power.
Minutes later, the rig exploded in a ball of fire, killing 11
workers before sinking to the seafloor, where it left a gaping well
pipe that continues to gush oil and gas.
______
Fax to: Gov. Jindal: 225-342-7099
Senator Landrieu: 202-224-9735
Senator Vitter: 202-228-5061
From: Kenneth E. Arnold, PE, NAE,
3031 Shadowdale, Houston TX.
A group of those named in the Secretary of Interior's Report,
``INCREASED SAFETY MEASURES FOR ENERGY DEVELOPMENT ON THE OUTER
CONTINENTAL SHELF'' dated May 27, 2010 are concerned that our names are
connected with the moratorium as proposed in the executive summary of
that report. There is an implication that we have somehow agreed to or
``peer reviewed'' the main recommendation of that report. This is not
the case.
As outlined in the attached document, we believe the report itself
is very well done and includes some important recommendations which we
support. However, the scope of the moratorium on drilling which is in
the executive summary differs in important ways from the recommendation
in the draft which we reviewed. We believe the report does not justify
the moratorium as written and that the moratorium as changed will not
contribute measurably to increased safety and will have immediate and
long term economic effects. Indeed an argument can be made that the
changes made in the wording are counterproductive to long term safety.
The Secretary should be free to recommend whatever he thinks is
correct, but he should not be free to use our names to justify his
political decisions.