[House Hearing, 112 Congress]
[From the U.S. Government Publishing Office]



 
                    FINAL REPORT OF THE PRESIDENT'S


                      NATIONAL COMMISSION ON THE


                       BP DEEPWATER HORIZON OIL


                      SPILL AND OFFSHORE DRILLING

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

                           OVERSIGHT HEARING

                               before the

                     COMMITTEE ON NATURAL RESOURCES
                     U.S. HOUSE OF REPRESENTATIVES

                      ONE HUNDRED TWELFTH CONGRESS

                             FIRST SESSION

                               __________

                      Wednesday, January 26, 2011

                               __________

                            Serial No. 112-1

                               __________

       Printed for the use of the Committee on Natural Resources



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                               index.html
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          Committee address: http://naturalresources.house.gov




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                     COMMITTEE ON NATURAL RESOURCES

                       DOC HASTINGS, WA, Chairman
             EDWARD J. MARKEY, MA, Ranking Democrat Member

Don Young, AK                        Dale E. Kildee, MI
John J. Duncan, Jr., TN              Peter A. DeFazio, OR
Louie Gohmert, TX                    Eni F.H. Faleomavaega, AS
Rob Bishop, UT                       Frank Pallone, Jr., NJ
Doug Lamborn, CO                     Grace F. Napolitano, CA
Robert J. Wittman, VA                Rush D. Holt, NJ
Paul C. Broun, GA                    Raul M. Grijalva, AZ
John Fleming, LA                     Madeleine Z. Bordallo, GU
Mike Coffman, CO                     Jim Costa, CA
Tom McClintock, CA                   Dan Boren, OK
Glenn Thompson, PA                   Gregorio Kilili Camacho Sablan, 
Jeff Denham, CA                          CNMI
Dan Benishek, MI                     Martin Heinrich, NM
David Rivera, FL                     Ben Ray Lujan, NM
Jeff Duncan, SC                      Donna M. Christensen, VI
Scott R. Tipton, CO                  John P. Sarbanes, MD
Paul A. Gosar, AZ                    Betty Sutton, OH
Raul R. Labrador, ID                 Niki Tsongas, MA
Kristi L. Noem, SD                   Pedro R. Pierluisi, PR
Steve Southerland II, FL             John Garamendi, CA
Bill Flores, TX                      Colleen W. Hanabusa, HI
Andy Harris, MD
Jeffrey M. Landry, LA
Charles J. ``Chuck'' Fleischmann, 
    TN
Jon Runyan, NJ
Bill Johnson, OH

                       Todd Young, Chief of Staff
                      Lisa Pittman, Chief Counsel
                Jeffrey Duncan, Democrat Staff Director
                   Rick Healy, Democrat Chief Counsel
                                 ------                                

                                CONTENTS

                              ----------                              
                                                                   Page

Hearing held on Wednesday, January 26, 2011......................     1

Statement of Members:
    Flores, Hon. Bill, a Representative in Congress from the 
      State of Texas, Prepared statement of......................    52
    Hastings, Hon. Doc, a Representative in Congress from the 
      State of Washington........................................     1
        Prepared statement of....................................     3
    Holt, Hon. Rush D., a Representative in Congress from the 
      State of New Jersey, Prepared statement of.................    69
    Landry, Hon. Jeffrey M., a Representative in Congress from 
      the State of Louisiana, Prepared statement of..............    70
    Markey, Hon. Edward J., a Representative in Congress from the 
      State of Massachusetts.....................................     4
        Prepared statement of....................................     5
    Wittman, Hon. Robert J., a Representative in Congress from 
      the State of Virginia, Prepared statement of...............    70

Statement of Witnesses:
    Graham, Hon. Bob, Senator, Co-Chairman, National Commission 
      on the BP Deepwater Horizon Oil Spill and Offshore Drilling     9
        Prepared statement of....................................    11
        Joint response to questions submitted for the record.....    71
    Reilly, Hon. William K., Former Administrator of the 
      Environmental Protection Agency, and Co-Chairman, National 
      Commission on the BP Deepwater Horizon Oil Spill and 
      Offshore Drilling..........................................     7
        Prepared statement of....................................    11
        Joint response to questions submitted for the record.....    71

Additional materials supplied:
    Wall Street Journal editorial ``Gulf Political Spill'' dated 
      January 13, 2011, submitted for the record.................    66


   OVERSIGHT HEARING ON THE FINAL REPORT OF THE PRESIDENT'S NATIONAL 
COMMISSION ON THE BP DEEPWATER HORIZON OIL SPILL AND OFFSHORE DRILLING.

                              ----------                              


                      Wednesday, January 26, 2011

                     U.S. House of Representatives

                     Committee on Natural Resources

                            Washington, D.C.

                              ----------                              

    The Committee met, pursuant to call, at 2:19 p.m., in Room 
1324, Longworth House Office Building, Hon. Doc Hastings 
[Chairman of the Committee] presiding.
    Present: Representatives Hastings, Young, Bishop, Lamborn, 
Wittman, Fleming, Coffman, McClintock, Thompson, Denham, 
Benishek, Rivera, Duncan of South Carolina, Tipton, Gosar, 
Labrador, Southerland, Flores, Harris, Landry, Fleischmann, 
Runyan, Johnson, Markey, Pallone, Grijalva, Boren, Lujan, 
Christensen, Sarbanes, Tsongas, and Hanabusa.

    STATEMENT OF THE HON. DOC HASTINGS, A REPRESENTATIVE IN 
             CONGRESS FROM THE STATE OF WASHINGTON

    The Chairman. The Committee on Natural Resources will come 
to order.
    The Committee is meeting today to hear testimony on the 
report by the President's National Commission on the BP 
Deepwater Horizon Oil Spill and Offshore Drilling.
    Under Committee Rule 4(f), any oral opening statements at 
hearings are limited to the Chairman and the Ranking Minority 
Member. This will allow us to hear from our witnesses sooner 
and help keep Members on their schedules. If other Members have 
statements, they can be included in the hearing record under 
unanimous consent.
    So I ask unanimous consent that all Members' opening day 
statements be made a part of the hearing record if they are 
submitted to the Chief Clerk by 5:00 p.m. today. Hearing no 
objection, so ordered.
    We have two witnesses today, and I will make the formal 
introductions after our opening statements, but I am very 
pleased that they are here. They are spending all day on the 
Hill. The first part of the day was spent on the other side of 
the Capitol, and now they are here, and I will welcome them 
formally in a moment.
    It has been 9 months since the horrific explosion and oil 
spill in the Gulf of Mexico that resulted in the death of 11 
men and the burning and the sinking of the Deepwater Horizon. 
Since then, nearly 5 million barrels of oil spilled into the 
Gulf, resulting in the economic displacement of tens of 
thousands of fishermen, tourist workers, and people connected 
to the offshore energy industry.
    The oil spill was a terrible tragedy and the effects are 
still being felt today. As this Committee proceeds with its 
oversight duties, we must be mindful of how we respond because 
that response could significantly impact American energy policy 
in the future. The response to this event could be the 
difference between making offshore drilling the safest in the 
world or locking up our resources, putting more Americans out 
of work and further relying on foreign countries for our energy 
needs.
    It is because of these serious implications that I have 
stressed from day one the need to have all of the facts and 
information surrounding the cause of this incident before there 
is a rush to judgment or a rush to legislate. When President 
Obama announced that he was personally appointing an oil spill 
commission, many in Congress and around the country were deeply 
concerned with both the makeup and the mandate of the 
Commission.
    There were concerns that the President's Commission didn't 
have enough experts in engineering or experience in the oil and 
gas industry and that it was comprised of individuals who had 
dedicated a significant portion of their career to opposing oil 
and gas drilling. While understanding these concerns, I kept 
and am keeping an open mind on the recommendations of the 
President's Commission.
    This is why this is the first scheduled Committee hearing 
in this Congress, and I am anxious to hear from the Co-Chairs. 
This report provides further insight into the accident and will 
be a factor in Congress' discussions. However, even with the 
Commission's report, we still don't know precisely what caused 
the explosion or why the blowout preventer failed to work. Now, 
there will be additional reports from the joint Coast Guard-
BOEM Marine Board hearings and the Chemical Safety Board 
hearings. And hopefully they will provide answers to these 
lingering questions among others.
    Through this uncertainty, what I do know for sure is that 
America needs American-made energy. We need to keep and create 
American jobs. And we need to mitigate America's dependence on 
foreign energy that threatens potentially our national 
security. The oil spill, as I mentioned, was a terrible 
tragedy, but it should not be used as an excuse to further 
reduce America's access to our energy resources.
    Some in Congress view this bill as an opportunity to shut 
down offshore drilling. To me, that is not a solution. That is 
giving up. Legislation aimed at this goal was introduced last 
year and will predictably be proposed again in this Congress--
this despite the strong support among the American people for 
continued offshore energy productions.
    Republicans want to make offshore energy drilling the 
safest in the world. We believe in the need to make smart, 
effective reforms that are centered on improving safety, 
putting people back to work and allowing responsible drilling 
to move forward. The right response to this bill is to focus on 
making drilling safe, not impossible.
    The importance of this Committee's future work cannot be 
understated. Gas prices are steadily rising. Iran has assumed 
the presidency of OPEC, and rigs are leaving the Gulf for 
foreign countries like Cuba, Brazil and Mexico, taking American 
jobs with them. This isn't speculation. It is happening.
    My colleagues from the Gulf can attest to the real economic 
pain being felt by people and businesses due to this 
Administration's drilling moratorium. Production in the Gulf of 
Mexico has already fallen by more than 200,000 barrels per day, 
and it is predicted by the Energy Information Administration to 
fall by more than 500,000 barrels per day by 2012. Every barrel 
that we don't produce from the Gulf means more lost revenue to 
the Federal Government, more lost jobs, and an additional 
transfer of American wealth to hostile nations.
    I believe in American ingenuity, and I know that we can get 
this right. The answer is to address what went wrong and make 
smart reforms and allow drilling to resume. The stakes are too 
high to give up. Our economic competitiveness, American jobs, 
and national security are on the line.
    And with that, I recognize the distinguished Ranking 
Member.
    [The prepared statement of Chairman Hastings follows:]

          Statement of The Honorable Doc Hastings, Chairman, 
                     Committee on Natural Resources

    It's been nine months since the horrific explosion and oil spill in 
the Gulf of Mexico that resulted in the death of 11 men and the burning 
and sinking of the Deepwater Horizon rig. Since then nearly five 
million barrels of oil spilled into the Gulf; resulting in the economic 
displacement of tens of thousands of fishermen, tourism workers, and 
people connected to the offshore energy industry.
    The oil spill was a terrible tragedy and the effects are still 
being felt today.
    As this Committee proceeds with its oversight duties, we must be 
mindful of how we respond, because that response could significantly 
impact American energy policy in the future. The response to this event 
could be the difference between making offshore drilling the safest in 
the world . . . or locking-up up our resources, putting more Americans 
out of work, and further relying on foreign countries for our energy 
needs.
    It is because of these serious implications that I have stressed 
from day one the need to have all the facts and information surrounding 
the cause of this incident before there is a rush to judgment . . . or 
a rush to legislate.
    When President Obama announced that he was personally appointing an 
Oil Spill Commission, many in Congress and around the country were 
deeply concerned with both the make-up and mandate of the Commission.
    There were concerns that the President's Commission didn't have 
enough experts in engineering or experience in the oil and gas industry 
and that it was comprised of individuals who had dedicated a 
significant portion of their career to opposing oil and gas drilling.
    While understanding these concerns, I kept, and am keeping, an open 
mind on the recommendations of the President's Commission. This is why 
it is the first scheduled Committee hearing of this Congress and I'm 
eager to hear from its Co-Chairs.
    This report provides further insight into the accident and will be 
a factor in Congress' discussions. However, even with the Commission's 
report, we still don't know precisely what caused the explosion, or why 
the blowout preventer failed to work.
    Additional reports from the joint Coast Guard-BOEM Marine Board 
hearings and the Chemical Safety Board are forthcoming and I'm hopeful 
they will provide answers to some of the lingering questions.
    Through all this uncertainty, what I do know for sure is that 
America needs American-made energy.
    We need to keep and create American jobs.
    And we need to mitigate America's dependence on foreign energy that 
threatens our national security.
    The oil spill was a terrible tragedy, but it should not be used as 
an excuse to further reduce America's access to our energy resources. 
Some in Congress view this spill as an opportunity to shut down 
offshore drilling. That is not a solution . . . that is giving up.
    Legislation aimed at this goal was introduced last year and will 
predictably be proposed again this Congress. This despite the strong 
support among the American people for continued offshore energy 
production.
    Republicans want to make offshore drilling the safest in the world. 
We believe in the need to make smart, effective reforms that are 
centered on improving safety, putting people back to work, and allowing 
responsible drilling to move forward. The right response to this spill 
is to focus on making drilling safe . . ., not making it impossible.
    The importance of this Committee's future work cannot be 
understated. Gas prices are steadily rising, . . . Iran has assumed the 
Presidency of OPEC, . . . and rigs are leaving the Gulf for foreign 
countries--like Cuba, Brazil and Mexico--taking American jobs with 
them. This isn't speculation . . . it's happening.
    My colleagues from the Gulf can attest to the real economic pain 
being felt by people and businesses due to this Administration's 
drilling moratorium.
    Production in the Gulf of Mexico has already fallen by more than 
200,000 barrels per day, and is predicted by the Energy Information 
Administration to fall by more than 500,000 barrels per day by 2012.
    Every barrel we don't produce from the Gulf means more lost revenue 
to the federal government, more lost jobs, and an additional transfer 
of American wealth to hostile nations.
    I believe in American ingenuity and I know we can get this right. 
The answer is to address what went wrong, make smart reforms and allow 
drilling to resume. The stakes are too high to give up. Our economic 
competitiveness, American jobs and natural security are on the line.
                                 ______
                                 

 STATEMENT OF THE HON. ED MARKEY, A REPRESENTATIVE IN CONGRESS 
                FROM THE STATE OF MASSACHUSETTS

    Mr. Markey. I thank the Chairman very much, and we thank 
you.
    And on behalf of the Democratic Members of the Committee, 
please accept our sincere congratulations on your appointment 
as Chairman.
    We, on this side of the aisle, look forward to a productive 
working relationship with you and with the majority, 
occasionally punctuated by knockdown drag-out fights over 
issues that we all care about deeply.
    While I applaud the Chairman for holding this hearing 
today, I am also deeply saddened that this hearing is 
necessary. Industry and Federal regulators assured the American 
public that a disaster like the BP Deepwater Horizon spill 
could not happen. The events of last April and the subsequent 
investigations have demonstrated that those assurances were 
worthless. The American people are left to count the economic 
and environmental costs and 11 families are left without their 
loved ones.
    It is vital to our Nation's energy future that we examine 
the causes of this tragedy with clear eyes, assess the lessons 
to be learned with open minds, and commit ourselves to 
fundamental reform with firm resolve.
    In the testimony submitted for this hearing, the Commission 
Co-Chairmen--and we thank you both so much for your service to 
our country--point out that ``the United States has the highest 
reported rate of fatalities per hours worked in offshore oil 
and gas drilling among its international peers.''
    Mr. Chairman, that shocking statistic does not mean that BP 
or Transocean or Halliburton operate unsafely. It means that 
the entire American offshore oil and gas industry operates 
unsafely compared to its international peers.
    To quote from our witnesses again: ``The central lesson to 
be drawn from the catastrophe is that no less than an 
overhauling of both current industry practices and government 
oversight is now required.''
    Mr. Chairman, this is not a time for half measures or 
tinkering around the edges. This is a time for bold reforms. 
The lives lost and the damage done as a result of this tragedy 
require nothing short of fundamental change in the way we 
conduct the business of offshore oil and gas development and 
production.
    I am proud that Democrats in the House took a major step 
toward such an overhaul by passing the Consolidated Land, 
Energy and Aquatic Resources Act in the last Congress, known as 
the CLEAR Act. The legislation included many of the 
recommendations contained in the Commission's report.
    While my colleagues on the Republican side may not have 
liked all that was in that legislation, it is my hope that now 
the Commission has made many of the same recommendations, that 
we can work together in a bipartisan effort to craft new 
legislation.
    To that end, I have joined with Ranking Members Waxman and 
Rahall, Miller and Johnson, along with Energy Ranking Member 
Rush Holt and other Members to introduce new legislation 
combining the best elements of the CLEAR Act with 
recommendations from the Commission. We welcome review of that 
legislation by the Commission and by our colleagues on both 
sides of the aisle.
    If we are shortsighted and complacent, today's hearing will 
be an end. If we are visionary and engaged, today's hearing is 
only the beginning of having America have the safest and most 
productive oil and natural gas industry. That should be our 
goal. And that is the goal I think every American should be 
aiming to achieve in any legislation we pass.
    In closing, again, let me offer my sincere gratitude to 
Senator Graham; to you, Administrator Reilly; and to all of the 
Commission members and the staff for their Herculean effort and 
their willingness to take on this investigation and their 
dedication to completing it in such a short period of time and 
with such thoroughness.
    This Committee and the American people are in your debt, 
and I thank you for your efforts. And I thank the Chairman for 
extending me those few extra seconds.
    [The prepared statement of Mr. Markey follows:]

     Statement of The Honorable Edward J. Markey, Ranking Member, 
                     Committee on Natural Resources

    Thank you Chairman Hastings and on behalf of the Democratic members 
of the Committee, please accept our sincere congratulations on your 
appointment as Chairman. We on this side of the aisle look forward to a 
productive working relationship--punctuated by knock-down, drag-out 
fights over issues we all care about deeply.
    While I applaud the Chairman for holding this hearing today, I am 
also deeply saddened that this hearing is necessary. Industry and 
federal regulators assured the American public that a disaster like the 
BP Deepwater Horizon spill could not happen.
    The events of last April and the subsequent investigations have 
demonstrated that those assurances were worthless. The American people 
are left to count the economic and environmental costs and eleven 
families are left without their loved ones.
    It is vital to our nation's energy future that we examine the 
causes of this tragedy with clear eyes, assess the lessons to be 
learned with open minds, and commit ourselves to fundamental reform 
with firm resolve.
    In the testimony submitted for this hearing, the Commission Co-
Chairmen point out that, ``the United States has the highest reported 
rate of fatalities per hours worked in offshore oil and gas drilling 
among its international peers.''
    Mr. Chairman, that shocking statistic does not mean that BP or 
Transocean or Halliburton operate unsafely; it means that the entire 
American offshore oil and gas industry operates unsafely, compared to 
its international peers.
    To quote from our witnesses again, ``the central lesson to be drawn 
from the catastrophe is that no less than an overhauling of both 
current industry practices and government oversight is now required.''
    Mr. Chairman, this is not a time for half measures or tinkering 
around the edges; this is a time for bold reforms. The lives lost and 
the damage done as a result of this tragedy require nothing short of 
fundamental change in the way we conduct the business of offshore oil 
and gas development and production.
    I am proud that Democrats in the House took a major step toward 
such an overhaul by passing the Consolidated Land, Energy, and Aquatic 
Resources Act in the last Congress. Known as the CLEAR Act, that 
legislation included many of the recommendations contained in the 
Commission's report.
    While my colleagues on the Republican side opposed that effort, it 
is my hope that, now that the Commission has made many of the same 
recommendations, we can work together in a bipartisan effort to craft 
new legislation. To that end, I have joined Ranking Members Waxman, 
Rahall, Miller, and Johnson, along with Energy Subcommittee Ranking 
Member Holt and other Members, to introduce new legislation combining 
the best elements of the CLEAR Act with recommendations from the 
Commission. We welcome review of our legislation by the Commission and 
by our colleagues on both sides of the aisle.
    If we are shortsighted and complacent, today's hearing will be an 
end. If we are visionary and engaged, today's hearing is only the 
beginning.
    In closing, let me offer my sincere gratitude to Senator Graham, 
Mr. Reilly, and all the Commission members and staff for their 
willingness to take on this investigation and their dedication in 
completing it so thoroughly. This committee and the American people are 
in your debt.
                                 ______
                                 
    The Chairman. I thank the gentleman.
    And I thank the gentleman for his opening comments. I, too, 
look forward to working with you. And I want to welcome the two 
witnesses here today. I know that since this event happened and 
since the appointment of the Commission, there is a lot of work 
done by both of you.
    The Honorable Bill Reilly is a former Administrator of the 
EPA and, of course, on the Hill people do remember the Florida 
Senator, Bob Graham, and former Governor, if I am not mistaken, 
of the State of Florida. So certainly there is expertise.
    So, with that, I would just remind you that under Committee 
rules, you have 5 minutes for your oral testimony. However, 
your full statement will appear in the record.
    You note that over here, we have these little boxes that 
have green lights, yellow lights and red lights. When the red 
light comes on, you know you are at 5 minutes. When the yellow 
light is on, you are up to 4.5 minutes and you have 30 seconds.
    With that, we will allow both of you to testify and then we 
will open up to questions to an eager Committee that wants to 
talk.
    So, with that, I will first introduce Mr. Reilly. Mr. 
Reilly, you are on.

     STATEMENT OF THE HONORABLE WILLIAM K. REILLY, FORMER 
   ADMINISTRATOR OF THE ENVIRONMENTAL PROTECTION AGENCY, CO-
 CHAIRMAN, NATIONAL COMMISSION ON THE BP DEEPWATER HORIZON OIL 
                  SPILL AND OFFSHORE DRILLING

    Mr. Reilly. Thank you, Mr. Chairman, Ranking Member Markey, 
members of the Committee, it is a privilege and an honor for us 
to appear before you as it has been for us to serve on this 
Commission, particularly for me to serve with my distinguished 
friend and long time, long time friend and colleague, Bob 
Graham. I will make a brief statement and ask that my testimony 
be included in the record.
    I want to begin by saying that with respect to oil and gas, 
we need the resource. It is vital to the economy, to our 
mobility, to our way of life. It is itself, the oil and gas 
industry, a significant contributor to productivity, to jobs, 
to our GDP and to avoiding even more necessity to import from 
the international oil market.
    This Commission believes that we can develop offshore oil 
and gas resources safely; we can do it in the deep water, and I 
would signal that the deep water is where it is. That is where 
the industry has been going and will be going in an even more 
significant way in the years to come.
    But the country's confidence in offshore oil and gas 
development has been shattered. The Commission determined that 
the government and industry both were characterized by an aura 
of complacency. That has attracted a good deal of attention and 
some criticism. I would just say very briefly that, as I 
learned from Tony Hayward, the CEO of BP, the week after I took 
office as Commission Co-Chairman, when you learn from him that 
there is effectively no subsea containment technology or 
capability, when you look at response plans that talk about 
protecting walruses in the Gulf of Mexico, when you see the 
wholly inadequate response technology that has not evolved 
since I oversaw it 20 years before in Prince William Sound, and 
when you see that there have been 79 instances of loss of well 
control between 1996 and 2009 in the Gulf and that we have, as 
was mentioned, a fatality rate that is 5 times that of the 
North Sea in a much more punishing environment--and then 
finally that you have key omnipresent contractors who are 
deeply implicated in the bad decisions that contributed to the 
high risk that we uncovered--you have to conclude both that 
there was an aura of complacency--and so many industry leaders 
have said, which I would have said myself, we didn't think this 
was possible, and we didn't think this could happen--but also 
that contractors who have supplied faulty cement to a BP rig or 
who have failed to detect gas rising in the drill pipe on a BP 
rig, it is inconceivable given their presence in all of the 
oceans in the world where oil and gas are developed, it is 
inconceivable to us that this would only have been confined to 
one company, to a rogue company, which was my own conviction, 
my own premise starting out.
    So we did conclude this is a systemic problem that has been 
characterized by an atmosphere of complacency.
    I want to signal one more thing and that is the history of 
the budget of the government regulatory agency of which we are 
quite hard, we are quite critical of its effectiveness, its 
capability, its lack of professionalism, to carry out the 
assignment that the law gives it to monitor and control and 
regulate this industry. The budget for MMS, the predecessor to 
the Bureau of Ocean Energy Management, Regulation and 
Enforcement (BOEMRE), has gone down 20 percent since 1984, 
while offshore oil and gas production has tripled.
    So to address these issues, we have three principal 
proposals: First is for a safety authority within the Interior 
Department entirely walled off from political interference with 
a Director appointed for a term much like the FBI Director and 
adequately resourced and budgeted, provided for.
    We recommend that industry establish a safety institute. 
The high-risk industries that have had catastrophes have 
learned from them: The chemical industry after Bhopal with 
Responsible Care and the nuclear industry after Three Mile 
Island with the Institute for Nuclear Power Operations (INPO). 
Those should be focused on best practice and should bring up 
the game for everybody and allow the best companies to have 
some means of ensuring that one laggard company, one bad 
performer does not bring everybody down and cause all their 
rigs to be shut down in the Gulf, as was the case last summer.
    Finally, I just want to signal the international dimensions 
of our issue. If you look at a map of the Gulf of Mexico, the 
United States has sovereign jurisdiction over far less than all 
of it. We now know Mexico intends to go into deep water in two 
years, Cuba within the next year or two, and we need some kind 
of international understanding or treaty with respect to the 
standards that will apply to those activities.
    We also need it in the Arctic, where Russia is intending to 
go into its Arctic waters with BP and Rosneft. Canada. Denmark 
has already begun, and Greenland last summer. We need the same 
kind of attention on the part of our State Department to ensure 
that the Arctic waters are given the kind of special protection 
that they deserve. We make a number of recommendations 
particularly relevant to science and the science that is needed 
to pursue oil and gas development in those very different 
waters with all of the high risks that special storm action, 
fog and deep cold entail.
    Well, those are some of the principal recommendations I 
wanted to cover, Mr. Chairman. I would only say that they are 
relatively modest in my view, in terms, both of money, 
certainly in terms of bureaucracy and disruption. To reorganize 
the Interior Department will not take much in the way of money. 
To budget adequately the BOEMRE, it will take some, but it is 
relatively small in lieu of both the huge cost of the accident 
we just experienced and the overall revenues that the United 
States receives from offshore oil and gas development leases 
and royalties. I think it is money that would be well invested, 
and we look forward to your questions and recognize that from 
the point of view of the Commission, we are just about done. So 
it really is over to you.
    Thank you, sir.
    The Chairman. Thank you, Mr. Reilly. I appreciate very much 
your testimony.
    Senator Graham, you are on.

 STATEMENT OF THE HONORABLE BOB GRAHAM, SENATOR, CO-CHAIRMAN, 
 NATIONAL COMMISSION ON THE BP DEEPWATER HORIZON OIL SPILL AND 
                       OFFSHORE DRILLING

    Mr. Graham. Thank you very much, Mr. Chairman, Ranking 
Member Markey and other members of this Committee.
    And I know many of you are commencing your service in 
Congress, and let me extend my congratulations. You are 
beginning a journey which will have immense gratification and 
personal pleasure. I congratulate you and wish you well in your 
service.
    Mr. Chairman, our Commission was established in May of last 
year. We were given three responsibilities: First was to 
determine the cause of the Deepwater Horizon explosion; second, 
to evaluate the response to that disaster; and third to advise 
the Nation about future energy exploration, particularly in the 
offshore environment.
    On January 11th, we submitted our report, called ``Deep 
Water: The Gulf Oil Disaster and the Future of Offshore 
Drilling.'' We had been initially subject to some criticism. 
One was that we lacked independence. In the course of our 
investigation, we were able to make just about everybody mad at 
us. From time to time, the industry was mad, and the White 
House was mad. Maybe this Committee escaped that. I believe we 
established the fact that we were looking at this from the 
perspective of the American people's interest and none other.
    Second, there was some criticism that we weren't competent 
to carry out this task. It would be immodest to try to defend 
our competency. I would just submit our report, its findings 
and recommendations, and you can evaluate whether you think 
that we had the skills, both among the seven commissioners and 
in an excellent staff led by Mr. Richard Lazarus, who gave us 
tremendous support throughout this endeavor.
    I would like to make one general comment before I turn to 
the two areas that I am particularly going to discuss, and that 
is that there is a difference in the offshore of the Gulf from 
what we knnw well, which is onshore oil and gas production. 
Onshore oil and gas production is a combination of drilling on 
privately owned land and public land. All of the drilling in 
the Gulf of Mexico is on publicly owned land, land which 
belongs to the people of the United States of America.
    So I think the way to look at this is not just as a 
regulator, a government regulating a private enterprise going 
about its private business. We also are in the role of a 
landlord. We have an obligation to protect this asset that 
belongs to all of the people of America and to be able to 
continue to draw upon it for a variety of purposes. Yes, 
energy, but also it is a major source of American seafood, and 
it is one of our major tourist areas, just to mention three of 
the benefits that we derive from the Gulf. So are we fulfilling 
our responsibility to be a prudent landlord?
    I am going to discuss the area of response and containment 
and then the issue of, where do we go from here in terms of 
restoration of the Gulf?
    My good friend, Bill Reilly, has already mentioned that the 
response to this event was, to say the least, very 
disappointing. Although there were some respondents who acted 
quickly, some heroically, the Commission concluded that neither 
BP nor the Federal Government was prepared to conduct an 
effective response. There was a failure to plan in advance for 
such an event, a failure to coordinate, particularly between 
Federal agencies and State and local officials. In addition, 
neither the industry nor the Federal Government had invested in 
the research to understand in an anticipatory way what we would 
be facing if we had such an event as the Macondo blowout.
    Much of the technology that we were able to bring to this 
problem was the same technology that had been used 20 years 
earlier in the Exxon Valdez, which is to say there was almost 
no technological advances taken as a result of the experience 
of Exxon Valdez.
    We have made a number of recommendations on response and 
containment, including that the Department of the Interior, in 
consultation with other agencies, should develop a more 
rigorous set of requirements for industry response plans. No 
more polar bears or walruses in the response plans for the Gulf 
of Mexico.
    The EPA and the Coast Guard should involve State and local 
governments as significant players; the Congress should provide 
adequate and sustained funding for oil spills, including and 
particularly research into how to mitigate oil spills; and the 
industry should fund a private organization to develop, adopt 
and enforce standards of excellence to assure continuous 
improvement in the technology for oil spill response.
    The second area is restoration. The day before this event 
was April 19, 2010. If we define our goal as being to restore 
the Gulf to the condition that it was in on April 19th, we have 
missed an enormous opportunity. Frankly, the Gulf on April 19th 
was a degraded area. It had suffered from decades of misuse and 
most dramatically shown by the marshes of Louisiana, which have 
been receding at a rate of over one football field every 30 
minutes.
    We felt that this was a chance to begin a major process of 
restoring this very important part of our Nation. We have 
recommended that 80 percent of the fines and penalties that we 
anticipate will be assessed under the Clean Water Act be 
directed at Gulf restoration. That will require your approval. 
Only Congress can make that commitment of those fines and 
penalties. But we believe that it would be money well spent.
    We recognize that it will require a significant amount of 
time, probably in the range of 20 to 30 years, to complete an 
effective restoration. We believe that these funds would be the 
basis of a major down payment toward that objective.
    I would like to conclude my remarks--and I got the signal, 
Mr. Chairman--that drilling is inherently risky. We can never 
reduce it to zero. But we believe the steps that we have 
recommended will substantially reduce the probabilities of a 
repeat Macondo and, should that happen, will significantly 
enhance our capacity to restrain its consequences.
    Mr. Chairman, I will submit my full report. I appreciate 
your willingness to receive it. I look forward to responding to 
your questions.
    [The joint prepared statement of Mr. Reilly and Senator 
Graham follows:]

Statement of The Honorable Bob Graham and The Honorable William Reilly, 
Co-Chairmen, National Commission on the BP Deepwater Horizon Oil Spill 
                         and Offshore Drilling

I. Introduction
    Chairman Hastings, Ranking Member Markey, and members of the 
Committee, thank you for the opportunity to testify today on behalf of 
the National Commission on the BP Deepwater Horizon Oil Spill and 
Offshore Drilling.
    The explosion that tore through the Deepwater Horizon drilling rig 
last April 20, as the rig's crew completed drilling the exploratory 
Macondo well deep under the waters of the Gulf of Mexico, began a 
human, economic, and environmental disaster.
    Eleven crew members died, and others were seriously injured, as 
fire engulfed and ultimately destroyed the rig. And, although the 
nation would not know the full scope of the disaster for weeks, the 
first of more than four million barrels of oil began gushing 
uncontrolled into the Gulf--threatening livelihoods, the health of Gulf 
coast residents and of those responding to the spill, precious 
habitats, and even a unique way of life. A treasured American 
landscape, already battered and degraded from years of mismanagement, 
faced yet another blow as the oil spread and washed ashore. Five years 
after Hurricane Katrina, the nation was again transfixed, seemingly 
helpless, as this new tragedy unfolded in the Gulf. The costs from this 
one industrial accident are not yet fully counted, but it is already 
clear that the impacts on the region's natural systems and people were 
enormous, and that economic losses total tens of billions of dollars.
    On May 22, 2010, President Barack Obama announced the creation of 
the National Commission on the BP Deepwater Horizon Oil Spill and 
Offshore Drilling (the ``Commission''): an independent, nonpartisan 
entity, directed to provide thorough analysis and impartial judgment. 
The President charged the Commission to determine the causes of the 
disaster, and to improve the country's ability to respond to spills, 
and to recommend reforms to make offshore energy production safer. And 
the President said we were to follow the facts wherever they led.
    This Commission report (the ``Report''), which we ask be made part 
of the hearing record in its entirety, is the result of an intense six-
month effort to fulfill the President's charge. As a result of our 
investigation, we conclude:
          The explosive loss of the Macondo well could have 
        been prevented.
          The immediate causes of the Macondo well blowout can 
        be traced to a series of identifiable mistakes made by BP, 
        Halliburton, and Transocean that reveal such systematic 
        failures in risk management that they place in doubt the safety 
        culture of the entire industry.
          Deepwater energy exploration and production, 
        particularly at the frontiers of experience, involve risks for 
        which neither industry nor government has been adequately 
        prepared, but for which they can and must be prepared in the 
        future.
          To assure human safety and environmental protection, 
        regulatory oversight of leasing, energy exploration, and 
        production require reforms even beyond those significant 
        reforms already initiated since the Deepwater Horizon disaster. 
        Fundamental reform will be needed in both the structure of 
        those in charge of regulatory oversight and their internal 
        decision-making process to ensure their political autonomy, 
        technical expertise, and their full consideration of 
        environmental protection concerns.
          Because regulatory oversight alone will not be 
        sufficient to ensure adequate safety, the oil and gas industry 
        will need to take its own, unilateral steps to increase 
        dramatically safety throughout the industry, including self-
        policing mechanisms that supplement governmental enforcement.
          The technology, laws and regulations, and practices 
        for containing, responding to, and cleaning up spills lag 
        behind the real risks associated with deepwater drilling into 
        large, high-pressure reservoirs of oil and gas located far 
        offshore and thousands of feet below the ocean's surface. 
        Government must close the existing gap and industry must 
        support rather than resist that effort.
          Scientific understanding of environmental conditions 
        in sensitive environments in deep Gulf waters, along the 
        region's coastal habitats, and in areas proposed for more 
        drilling, such as the Arctic, is inadequate. The same is true 
        of the human and natural impacts of oil spills.
    We reach these conclusions, and make necessary recommendations, in 
a constructive spirit: we aim to promote changes that will make 
American offshore energy exploration and production far safer, today 
and in the future.
II. The Root Causes of the Explosion
    The Commission examined in great detail what went wrong on the rig 
itself. Our investigative staff uncovered a wealth of specific 
information that greatly enhances our understanding of the factors that 
led to the explosion. The results of that investigation are described 
in detail in Chapter 4 of the Report. The separate report of the chief 
counsel, to be published soon, will offer the fullest account yet of 
what happened on the rig and why. There are recurring themes of missed 
warning signals, failure to share information, and a general lack of 
appreciation for the risks involved. In the view of the Commission, 
these findings highlight the importance of organizational culture and a 
consistent commitment to safety by industry, from the highest 
management levels on down.
    To summarize, the Macondo blowout happened because a number of 
separate risk factors, oversights, and outright mistakes combined to 
overwhelm the safeguards--promised by both government and by private 
industry--to prevent just such an event from happening. But most of the 
mistakes and oversights at Macondo can be traced back to a single 
overarching failure--a failure of management by BP, Halliburton and 
Transocean. Set out below are what Commission investigative staff 
determined were ``key facts.''
    Key Facts: The investigation team identified several key human 
errors, engineering mistakes and management failures including:
          A flawed design for the cement slurry used to seal 
        the bottom of the well, which was developed without adequate 
        engineering review or operator supervision;
          A ``negative pressure test,'' conducted to evaluate 
        the cement seal at the bottom of the well, identified a 
        cementing failure but was incorrectly judged a success because 
        of insufficiently rigorous test procedures and inadequate 
        training of key personnel;
          Flawed procedures for securing the well that called 
        for unnecessarily removing drilling mud from the wellbore. If 
        left in place, that drilling mud would have helped prevent 
        hydrocarbons from entering the well and causing the blowout;
          Apparent inattention to key initial signals of the 
        impending blowout; and
          An ineffective response to the blowout once it began, 
        including but not limited to a failure of the rig's blowout 
        preventer to close off the well.
    Key Findings: The ``key facts'' led investigators to make the 
following ``key findings'':
          Errors and misjudgments by at least three companies--
        BP, Halliburton and Transocean--contributed to the disaster.
          Management failures included:
            Inadequate training of key personnel.
            Inadequate management of numerous late-stage well 
        design decisions.
            Poor communication within and between the companies 
        involved.
            Inadequate risk evaluation and risk mitigation 
        measures.
          The disaster could have been prevented. Notably, 
        workers on the rig incorrectly interpreted clear warning signs 
        of a hydrocarbon influx during the negative pressure test. If 
        recognized, those warning signs would have allowed them to shut 
        in the well before the blowout began.
          Government regulations did not address several key 
        causes of the blowout, and regulators lacked the resources or 
        technical expertise to address others.
          Whether purposeful or not, many of the risk-enhancing 
        decisions that BP, Halliburton, and Transocean made saved those 
        companies significant time (and money).
    The Commission's investigation concludes that these failures were 
preventable. Errors and misjudgments by at least three companies--BP, 
Halliburton and Transocean--contributed to the disaster. Federal 
regulations did not address many of the key issues. For example, no 
regulation specified basic procedures for the negative pressure test 
used to evaluate the cement seal or minimum criteria for test success. 
The chapter also notes that, '' . . . whether purposeful or not, many 
of the decisions that BP, Halliburton, and Transocean made that 
increased the risk of the Macondo blowout clearly saved those companies 
significant time (and money).''
    Attached to this testimony is a table that sets out decisions that 
increased risk at Macondo, while potentially saving time.
III. Regulatory Oversight and the Need for Reform
Regulatory Oversight
    The responsibilities assigned to the Minerals Management Services 
(MMS) in an effort to regulate the offshore oil and gas industry have 
created conflicts of interest and have been subject to pressure from 
political and industry interests. MMS was not only responsible for 
offshore leasing and resource management; it also collected and 
disbursed revenues from offshore leasing, conducted environmental 
reviews, reviewed plans and issued permits, conducted audits and 
inspections, and enforced safety and environmental regulations.
    Over the course of many years, political pressure generated by a 
demand for lease revenues and industry pressure to expand access and 
expedite permit approvals and other regulatory processes often combined 
to push MMS to elevate revenue and permitting goals over safety and 
environmental goals. As a result, the safety of U.S. offshore workers 
has suffered. The United States has the highest reported rate of 
fatalities per hours worked in offshore oil and gas drilling among its 
international peers (the U.K., Norway, Canada, and Australia) but has 
the lowest reporting of injuries. This striking contrast suggests a 
significant under-reporting of injuries in the United States.
    These problems were compounded by an outdated organizational 
structure, a chronic shortage of resources, a lack of sufficient 
technological expertise, and the inherent difficulty of coordinating 
effectively with all of the other government agencies that have had 
statutory responsibility for some aspect of offshore oil and gas 
activities. Besides MMS, the Departments of Transportation, Commerce, 
Defense, and Homeland Security, and the Environmental Protection Agency 
(EPA) were involved in some aspect of the industry and its many-faceted 
facilities and operations, from workers on production platforms to 
pipelines, helicopters, drilling rigs, and supply vessels.
Reorganization Needed
    To remedy this conflict of interest, Congress should create an 
independent agency with enforcement authority to oversee all aspects of 
offshore drilling safety (operational and occupational) as well as the 
structural and operational integrity of all offshore energy production 
facilities, including both oil and gas production and renewable energy 
production. The roles and responsibilities of BOEMRE should be 
separated into three entities with clearly defined statutory 
authorities.
        (1)  The Offshore Safety Authority would have primary statutory 
        responsibility for overseeing the structural and operational 
        integrity of all offshore energy-related facilities and 
        activities, including both oil and gas offshore drilling and 
        renewable energy facilities. Congress should enact an organic 
        act to establish its authorities and responsibilities, 
        consolidating the various responsibilities now under the OCSLA, 
        the Pipeline Safety Act, and Coast Guard authorizations. This 
        should include responsibility for all workers in energy related 
        offshore activities.
        (2)  The Leasing and Environmental Science Office would be 
        charged with fostering environmentally responsible and 
        efficient development of the Outer Continental Shelf, and would 
        act as the leasing and resource manager for conventional 
        renewable energy and other mineral resources on the OCS. The 
        Office would also be responsible for conducting reviews under 
        the National Environmental Policy Act (NEPA).
        (3)  The Office of Natural Resources Revenue would be 
        responsible for revenue collection and auditing.
    Congress should review and consider amending where necessary the 
governing statutes for all agencies involved in offshore activities to 
be consistent with the responsibilities functionally assigned to those 
agencies. The safety-related responsibilities of the new offshore 
safety agency should be included in a separate statute.
    Since the Commission issued its final report on January 11th, 
Secretary of the Interior Ken Salazar has already announced changes in 
the organization within Interior that reflect many of the Commission's 
recommendations. Other Commission recommendations will require 
congressional action, especially those recommendations that seek to 
promote the independence of the Offshore Safety Authority from 
politics. For instance, the Commission recommends that the head of the 
Safety Authority be appointed to a fixed term that cuts across any one 
Presidential Administration, a change that can be accomplished most 
effectively only by statute.
Regulation to Better Manage Risk
    The Commission also recommends a more comprehensive overhaul of 
both the leasing program and the regulatory policies and institutions 
used to oversee the safety and environmental protection of offshore 
activities. The goals must be to reduce and manage risk more 
effectively, using strategies that can keep pace with a technologically 
complex and rapidly evolving industry, particularly in high-risk and 
frontier areas, and to secure the resources needed to execute the 
leasing function and provide adequate regulatory oversight. To 
accomplish these goals the Commission offers the following three 
recommendations:
          The DOI should promulgate prescriptive safety and 
        pollution-prevention standards that are developed and selected 
        in consultation with international regulatory peers and that 
        are at least as rigorous as the leasing terms and regulatory 
        requirements of peer oil-producing nations.
          The Department of the Interior (DOI) should develop a 
        proactive, risk-based performance approach specific to 
        individual facilities, operations, and environments, similar to 
        the ``safety case'' approach in the North Sea which requires 
        drilling rigs to be certified and have safety management 
        obligations separate and apart from the operator.
          Working with the International Regulators' Forum and 
        other organizations, Congress and the DOI should identify those 
        drilling, production, and emergency-response standards that 
        best protect offshore workers and the environment, and initiate 
        new standards and revisions to fill gaps and correct 
        deficiencies. These standards should be applied throughout the 
        Gulf of Mexico, in the Arctic, and globally wherever the 
        international industry operates. Standards should be updated at 
        least every five years, as under the formal review process of 
        the International Organization for Standardization (ISO). (See 
        below for expansion on the development of international 
        regulations.)
    BOEMRE currently relies heavily on prescriptive regulations 
incorporating a number of industry technical standards. Prescriptive 
regulations must be the basis of an effective regulatory system, but 
given the many variables in deepwater drilling, prescriptive rules can 
never cover all cases. The federal agency responsible for offshore 
activity must have a regulatory approach that integrates more 
sophisticated risk assessment and risk management practices into its 
oversight of energy developers operating offshore. The focus should 
shift from prescriptive regulations covering only the operator to a 
foundation of augmented prescriptive regulations, including those 
relating to well design and integrity, supplemented by a proactive, 
risk-based performance approach that is specific to individual 
facilities (production platforms and drilling rigs), operations, and 
environments. Both the operator and the drilling rig owners would have 
a legal duty to assess and manage the risks of a specific activity by 
engaging all contractors and subcontractors in a coordinated safety 
management system.
    To ensure that Interior has the ability to provide adequate leasing 
capabilities and regulatory oversight for the increasingly complex 
energy-related activities being undertaken on the OCS, budgets for 
these new offices as well as existing agencies should come directly 
from fees paid by the offshore industry, akin to how fees charged to 
the telecommunications industry pay for the expenses of the Federal 
Communications Commission, the Nuclear Regulatory Commission, the 
Office of Pipeline Safety which are essentially fully funded by such 
regulated industry payments. Through this mechanism, Congress, through 
legislation, and DOI, through lease provisions, could expressly oblige 
lessees to fund the regulation necessary to allow for private industry 
access to the energy resources on the OCS, including renewables.
IV. Environmental Review
    As part of its inquiry into the existing regulatory structure for 
offshore drilling, the Commission reviewed existing mechanisms for 
protecting the environment. In its work on this question, the 
Commission focused on two issues: (1) the application of National 
Environmental Policy Act (NEPA) requirements to the offshore leasing 
process and (2) the need for better science and greater interagency 
consultation to improve decision-making related to management of 
offshore resources.
NEPA
    Based on the Commission's review of leasing and permitting 
processes in the Gulf of Mexico before the Deepwater Horizon incident, 
the Commission concluded that the breakdown of the environmental review 
process for OCS activities was systemic and that Interior's historical 
approach to the application of NEPA requirements for offshore oil and 
gas activities needs significant revision. In particular, the 
application of tiering, use of categorical exclusions, the practice of 
area-wide leasing, and failure to develop formal NEPA guidance all 
contributed to this breakdown. The Commission recommends that the 
Council on Environmental Quality and the Department of the Interior 
revise and strengthen the NEPA policies, practices, and procedures to 
improve the level of environmental analysis, transparency, and 
consistency at all stages of the OCS planning, leasing, exploration, 
and development process.
Improved Interagency Consultation and Environmental Science
    Under OCSLA, it is up to the Secretary of the Interior to choose 
the proper balance between environmental protection and resource 
development. In making leasing decisions, the Secretary is required to 
solicit and consider suggestions from any interested agency, but he or 
she is not required to respond to the comments or accord them any 
particular weight. Similar issues arise at the individual lease sale 
stage and at the development and production plan stage. As a result, 
NOAA--the nation's ocean agency with the most expertise in marine 
science and the management of living marine resources--effectively has 
the same limited role as the general public in the decisions on 
selecting where and when to lease portions of the OCS. The Commission 
recommends a more robust and formal interagency consultation process in 
which NOAA, in particular, is provided a heightened role, but ultimate 
decision-making authority is retained at DOI. The Commission further 
recommends the creation of an Office of Environmental Science, led by a 
Chief Environmental Scientist, with specified responsibilities in 
conducting all NEPA reviews, coordinating other environmental reviews, 
and whose expert judgment on environmental protection concerns would be 
accorded significant weight in leasing decision-making.
V. Reforming Industry Safety Practices
Changing Business As Usual
    Without effective government oversight, the offshore oil and gas 
industry will not adequately reduce the risk of accidents, nor prepare 
effectively to respond in emergencies. However, government oversight 
alone cannot reduce those risks to the fullest extent possible. 
Government oversight must be accompanied by the oil and gas industry's 
internal reinvention: sweeping reforms that accomplish no less than a 
fundamental transformation of its safety culture.
    Even the most inherently risky industry can be made much safer, 
given the right incentives and disciplined systems, sustained by 
committed leadership and effective training. The critical common 
element is an unwavering commitment to safety at the top of an 
organization: the CEO and board of directors.
Industry Self-Policing as a Supplement to Government Regulation
    One of the key responsibilities of government is to regulate--to 
direct the behavior of individuals and institutions according to rules. 
Many businesses and business groups are involved in internal standard 
setting, evaluation, and other activities that constitute self-policing 
or self-regulation. But even in industries with strong self-policing, 
government also needs to be strongly present, providing oversight and/
or additional regulatory control--responsibilities that cannot be 
abdicated if public safety, health, and welfare are to be protected.
    Industry-standard setting and self-policing organizations are 
widespread in the United States and in most industrialized nations--
typically for operations marked by technical complexity, such as the 
chemical, nuclear power, civil aviation, and oil and gas industries, 
where government oversight is also present. These processes coexist 
where there are relatively limited numbers of people with the requisite 
expertise and experience, making it hard for government to be able to 
rely solely on its own personnel (especially when government cannot 
compete with private-sector salaries for those experts). Support for 
standard setting and self-policing also arises in industries whose 
reputations depend on the performance of each company, and where 
significant revenues are at stake. However, industry self-policing is 
not a substitute for government but serves as an important supplement 
to government oversight.
    After Three Mile Island, the nuclear power industry established the 
Institute of Nuclear Power Operations (INPO), a nonprofit organization 
with the ambitious mission ``to promote the highest levels of safety 
and reliability--to promote excellence--in the operation of commercial 
nuclear power plants.'' The oil and gas industry, like the nuclear 
power industry, has both the substantial economic resources and the 
necessary economic incentive to make it happen. INPO was formed because 
doing so was in the industry's self-interest. As the Deepwater Horizon 
disaster made unambiguously clear, the entire industry's reputation, 
and perhaps its viability, ultimately turn on its lowest-performing 
members. If any one company is involved in an accident with widespread 
and potentially enormous costs, like those that followed the Macondo 
blowout, everyone in the industry--companies and employees--suffers, as 
do regional economies and the nation as a whole. No one, in industry or 
in government, can afford a repeat of the Macondo explosion and spill.
    Like the nuclear power industry in 1979, the nation's oil and gas 
industry needs now to embrace the potential for an industry safety 
institute to supplement government oversight of industry operations. To 
be credible, any industry-created safety institute would need to have 
complete command of technical expertise available through industry 
sources--and complete freedom from any suggestion that its operations 
are compromised by multiple other interests and agendas. As a 
consensus-based organization, the American Petroleum Institute (API) is 
culturally ill-suited to drive a safety revolution in the industry. For 
this reason, it is essential that the safety enterprise operate apart 
from the API. API's longstanding role as an industry lobbyist and 
policy advocate--with an established record of opposing reform and 
modernization of safety regulations--renders it inappropriate to serve 
a self-policing function.
    The INPO experience makes clear that any successful oil and gas 
industry safety institute would require in the first instance strong 
board-level support from CEOs and boards of directors of companies for 
a rigorous inspection and auditing function. Such audits would need to 
be aimed at assessing companies' safety cultures and encouraging 
learning about implementation of enhanced practices. The inspection and 
auditing function would need to be conducted by safety institute staff, 
complemented by experts seconded from industry companies. There would 
also need to be a commitment to share findings about safety records and 
best practices within the industry, aggregate data, and analyze 
performance trends, shortcomings, and needs for further research and 
development. Accountability could be enhanced by a requirement that 
companies report their audit scores to their boards of directors and 
insurance companies.
    The industry's safety institute could facilitate a smooth 
transition to a regulatory regime based on systems safety engineering 
and improved coordination among operators and contractors--the 
principles of the U.K.'s ``safety case'' that shifts responsibility for 
maintaining safe operations at all times to the operators themselves. 
It should drive continuous improvement in standards and practices by 
incorporating the highest standards achieved globally.
    The industry also needs to benchmark safety and environmental 
practice rules against recognized global best practices. The Safety and 
Environmental Management Program Recommended Practice 75 (API RP 75) 
developed in 1993 by the API and incorporated by reference in the 
Department of the Interior's new workplace safety rules, adopted in 
October 2010, is a reasonable starting point.
VI. Response and Containment
    As part of its charge from President Obama, the Commission looked 
at the effectiveness of the response to the spill. There were 
remarkable instances of dedication and heroism by individuals involved 
in the rescue and cleanup. Much was done well--and thanks to a 
combination of good luck and hard work, the worst-case scenarios did 
not all come to pass. But it is impossible to argue that the industry 
or the government was prepared for a disaster of the magnitude of the 
Deepwater Horizon oil spill. Twenty years after the Exxon Valdez spill 
in Alaska, the same blunt response technologies--booms, dispersants, 
and skimmers--were used, to limited effect. On-the-ground shortcomings 
in the joint public-private response to an overwhelming spill like that 
resulting from the blowout of the Macondo well are now evident, and 
demand public and private investment. So do the weaknesses in local, 
state, and federal coordination revealed by the emergency.
    Neither BP nor the federal government was prepared to conduct an 
effective response to a spill of the magnitude and complexity of the 
Deepwater Horizon disaster. Three critical issues or gaps existed in 
the government's response capacity: (1) the failure to plan effectively 
for a large-scale, difficult-to-contain spill in the deepwater 
environment; (2) the difficulty of coordinating with state and local 
government officials to deliver an effective response; and (3) a lack 
of information and understanding concerning the efficacy of specific 
response measures, such as dispersants or berms. Moreover, the 
technology available for cleaning up oil spills had improved only 
incrementally since 1990. The technologies and methods available to cap 
or control a failed well in the extreme conditions thousands of feet 
below the sea were also inadequate. Although BP was able to develop new 
source-control technologies in a compressed timeframe, and the 
government was able to develop an effective oversight structure, the 
containment effort would have benefitted from prior preparation and 
contingency planning.
Improved Oil Spill Response Planning
    The Department of the Interior should create a rigorous, 
transparent, and meaningful oil spill risk analysis and planning 
process for the development and implementation of better oil spill 
response. Several steps are needed for implementation:
          Interior should review and revise its regulations and 
        guidance for industry oil spill response plans. The revised 
        process should ensure that all critical information and spill 
        scenarios are addressed in the plans.
          In addition to Interior, other agencies with relevant 
        scientific and operational expertise should play a role in 
        evaluating spill response plans to verify that operators can 
        conduct the operations detailed in their plans. Specifically, 
        oil spill response plans, including source-control measures, 
        should be subject to interagency review and approval by the 
        Coast Guard, EPA, and NOAA. Other parts of the federal 
        government, such as Department of Energy national laboratories 
        that possess relevant scientific expertise, could be consulted. 
        Plans should also be made available for a public comment period 
        prior to final approval and response plans should be made 
        available to the public following their approval.
          Interior should incorporate the ``worst-case 
        scenario'' calculations from industry oil spill response plans 
        into NEPA documents and other environmental analyses or 
        reviews.
Spills of National Significance
    The Gulf oil spill presented an unprecedented challenge to the 
response capability of both government and industry. Though the 
National Contingency Plan permitted the government to designate the 
spill as one of ``national significance,'' this designation did not 
trigger any procedures other than allowing the government to name a 
National Incident Commander.
    EPA and the Coast Guard should establish distinct plans and 
procedures for responding to a ``Spill of National Significance.'' 
Specifically, EPA should amend or issue new guidance on the National 
Contingency Plan to:
          Increase government oversight of the responsible 
        party, based on the National Contingency Plan's requirement 
        that the government ``direct'' the response where a spill poses 
        a substantial threat to public health or welfare.
          Augment the National Response Team and Regional 
        Response Team structures to establish additional frameworks for 
        providing interagency scientific and policymaking expertise 
        during a spill. Further, EPA, NOAA, and the Coast Guard should 
        develop procedures to facilitate review and input from the 
        scientific community--for example, by encouraging disclosure of 
        underlying methodologies and data.
          Create a communications protocol that accounts for 
        participation by high-level officials who may be less familiar 
        with the National Contingency Plan structure and create a 
        communications center within the National Incident Command--
        separate from the joint information center established in 
        partnership with the responsible party--to help transmit 
        consistent and complete information to the public.
Strengthening State and Local Involvement
    The response to the Deepwater Horizon disaster showed that state 
and local elected officials had not been adequately involved in oil 
spill contingency planning, though career responders in state 
government had participated extensively. Unfamiliarity with, and lack 
of trust in, the federal response manifested itself in competing state 
structures and attempts to control response operations that undercut 
the efficiency of the response overall.
    EPA and the Coast Guard should bolster state and local involvement 
in oil spill contingency planning and training and create a mechanism 
for local involvement in spill planning and response similar to the 
Regional Citizens' Advisory Councils mandated by the Oil Pollution Act 
of 1990.
    In addition, a mechanism should be created for ongoing local 
involvement in spill planning and response in the Gulf. In the Oil 
Pollution Act of 1990, Congress mandated citizens' councils for Prince 
William Sound and Cook Inlet. In the Gulf, such a council should 
broadly represent the citizens' interests in the area, such as fishing 
and tourism, and possibly include representation from oil and gas 
workers as ex-officio, non-voting members.
Research and Development for Improved Response
    The technology available for cleaning up oil spills has improved 
only incrementally since 1990. Federal research and development 
programs in this area are underfunded: In fact, Congress has never 
appropriated even half the full amount authorized by the Oil Pollution 
Act of 1990 for oil spill research and development.
    Specifically, Congress should provide mandatory funding (i.e. 
funding not subject to the annual appropriations process) at a level 
equal to or greater than the amount authorized by the Oil Pollution Act 
of 1990 to increase federal funding for oil spill response research by 
agencies such as Interior, the Coast Guard, EPA, and NOAA. In addition, 
Congress and the Administration should encourage private investment in 
response technology more broadly, including through public-private 
partnerships and a tax credit for research and development in this 
area.
Dispersants
    Prior to the blowout, the federal government had not adequately 
planned for the use of dispersants to address such a large and 
sustained oil spill, and did not have sufficient research on the long-
term effects of dispersants and dispersed oil to guide its decision-
making.
    EPA should update and periodically review its dispersant testing 
protocols for product listing or pre-approval, and modify the pre-
approval process to include temporal duration, spatial reach, and 
volume of the spill. EPA should update its dispersant testing protocols 
and require more comprehensive testing prior to listing or pre-
approving dispersant products. The Coast Guard and EPA should modify 
pre-approvals of dispersant use under the National Contingency Plan to 
establish procedures for further consultation based on the temporal 
duration, spatial reach, or volume of the spill and volume of 
dispersants that responders are seeking to apply. EPA and NOAA should 
conduct and encourage further research on dispersants.
Containment
    The most obvious, immediately consequential, and plainly 
frustrating shortcoming of the oil spill response set in motion by the 
events of April 20, 2010 was the simple inability--of BP, of the 
federal government, or of any other potential intervener--to contain 
the flow of oil from the damaged Macondo well.
    At the time of the blowout on April 20, the U.S. government was 
unprepared to oversee a deepwater source-control effort. Once the 
Secretary of Energy's science team, the U.S. Geological Survey, the 
national laboratories, and other sources of scientific expertise became 
involved, the government was able to substantively supervise BP's 
decision-making, forcing the company to fully consider contingencies 
and justify its chosen path.
    The National Response Team should develop and maintain expertise 
within the Federal government to oversee source-control efforts. The 
National Response Team should create an interagency group--including 
representation from the Department of the Interior, Coast Guard, and 
the Department of Energy and its national laboratories--to develop and 
maintain expertise in source control, potentially through public-
private partnerships.
Industry's Spill Preparedness
    Beyond attempting to close the blowout preventer stack, no proven 
options for rapid source control in deepwater existed when the blowout 
occurred. The Department of the Interior should require offshore 
operators to provide detailed plans for source control as part of their 
oil spill response plans and applications for permits to drill.
    These plans should demonstrate that an operator's containment 
technology is immediately deployable and effective. In applications for 
permits to drill, the Interior should require operators to provide a 
specific source-control analysis for each well. As with oil spill 
response plans, source-control plans should be reviewed and approved by 
agencies with relevant expertise, including the Interior and the Coast 
Guard.
Improved Capability for Accurate Flow Rate Estimates
    Early flow rate estimates were highly variable and difficult to 
determine accurately. However, the understated estimates of the amount 
of oil spilling appear to have impeded planning for and analysis of 
source-control efforts like the cofferdam and especially the top kill.
    The National Response Team should develop and maintain expertise 
within the federal government to obtain accurate estimates of flow rate 
or spill volume early in a source-control effort. The National Response 
Team should create an interagency group--including representation from 
Interior, the Coast Guard, the national laboratories, and NOAA--to 
develop and maintain expertise in estimating flow rates and spill 
volumes. In addition, EPA should amend the National Contingency Plan to 
create a protocol for the government to obtain accurate estimates of 
flow rate or spill volume from the outset of a spill. This protocol 
should require the responsible party to provide all data necessary to 
estimate flow rate or spill volume.
More Robust Well Design and Approval Process
    Among the problems that complicated the Macondo well-containment 
effort was a lack of reliable diagnostic tools and concerns about the 
well's integrity. The Department of the Interior should require 
offshore operators seeking its approval of proposed well design to 
demonstrate that:
          Well components, including blowout preventer stacks, 
        are equipped with sensors or other tools to obtain accurate 
        diagnostic information--for example, regarding pressures and 
        the position of blowout preventer rams.
          Wells are designed to mitigate risks to well 
        integrity during post-blowout containment efforts.
Industry Responsibilities for Containment and Response
    Industry's responsibilities extend to efforts to contain any big 
spills as quickly as possible and to mitigate the harm caused by spills 
through effective response efforts. Both government, which must be 
capable of taking charge of those efforts, and industry were woefully 
unprepared to contain or respond to a deepwater well blowout like that 
at Macondo. All parties lacked adequate contingency planning, and 
neither had invested sufficiently in research, development, and 
demonstration to improve containment or response technology.
    From now on, the oil and gas industry needs to combine its 
commitment to transform its safety culture with adequate resources for 
containment and response. Large-scale rescue, response, and containment 
capabilities need to be developed and demonstrated--including 
equipment, procedures, and logistics--and enabled by extensive 
training, including full-scale field exercises and international 
cooperation.
    To that end, at least two industry spill containment initiatives 
have emerged that build on ideas and equipment that were deployed in 
response to the Macondo blowout and spill. The nonprofit Marine Well 
Containment Company was created in July 2010 by four of the major, 
integrated oil and gas companies. The second spill containment 
initiative is being coordinated by Helix Energy Solutions Group, which 
played a role in the Macondo well containment efforts.
    Yet neither the Marine Well Containment Company's planned 
capabilities nor Helix's go past 10,000 feet despite the fact that 
current drilling technology extends beyond this depth. Also it seems 
that neither is structured to ensure the long-term ability to innovate 
and adapt over time to the next frontiers and technologies. What 
resources, if any, either initiative will dedicate to research and 
development going forward is unclear.
    The primary long-term goal of a spill containment company or 
consortia should be to ensure that an appropriate containment system is 
readily available to contain quickly spills in the Gulf of Mexico with 
the best available technology. Any spill containment company or 
consortia should ensure that it remains focused on this goal, even when 
doing so potentially conflicts with the short-term interests of its 
founding companies, in the case of MWCC, or the parent company, in the 
case of Helix. An independent advisory board, with representatives from 
industry, the federal government, state and local governments, and 
environmental groups could help keep any spill containment initiative 
focused on innovative, adaptive, effective spill response over the long 
term.
VII. Financial Responsibility
    Oil spills cause a range of harms, including personal, economic and 
environmental injuries, to individuals and ecosystems. The Oil 
Pollution Act makes the party responsible for a spill liable for 
compensating those who suffered as a result of the spill--through human 
health and property damage, lost profits, and other personal and 
economic injuries--and for restoring injured natural resources. The Act 
also provides an opportunity to make claims for compensation from a 
dedicated Oil Spill Liability Trust Fund. The Oil Pollution Act, 
however, imposes limits on both the amount for which the responsible 
party is liable, and the amount of compensation available through the 
trust fund. In the case of the Deepwater Horizon spill, BP (a 
responsible party) has placed $20 billion in escrow to compensate 
private individuals and businesses through the independent Gulf Coast 
Claims Facility. But if a less well capitalized company had caused the 
spill, neither a multi-billion dollar compensation fund nor the funds 
necessary to restore injured resources, would likely have been 
available.
    Liability for damages from spills from offshore facilities is 
capped under the Oil Pollution Act at $75 million, unless it can be 
shown that the responsible party was guilty of gross negligence or 
willful misconduct, violated a federal safety regulation, or failed to 
report the incident or cooperate with removal activities, in which case 
there is no limit on damages. Claims up to $1 billion for certain 
damages can be made to, and paid out of, the Oil Spill Liability Trust 
Fund, which is currently supported by an 8-cent per-barrel tax on 
domestic and imported oil.
    The Oil Pollution Act also requires responsible parties to 
``establish and maintain evidence of financial responsibility,'' 
generally based on a ``worst-case discharge'' estimate. In the case of 
offshore facilities, necessary financial responsibility ranges from $35 
million to $150 million.
Inadequacy of Current System
    There are two main problems with the current liability cap and 
financial responsibility dollar amounts. First, the relatively modest 
liability cap and financial responsibility requirements provide little 
incentive for oil companies to improve safety practices. Second, as 
noted, if an oil company with more limited financial means than BP had 
caused the Deepwater Horizon spill, that company might well have 
declared bankruptcy long before paying fully for all damages. In the 
case of a large spill, the Oil Spill Liability Trust Fund would likely 
not provide sufficient backup. Thus, a significant portion of the 
injuries caused to individuals and natural resources, as well as 
government response costs, could go uncompensated.
    Any discussion of increasing liability caps and financial 
responsibility requirements must balance two competing public policy 
concerns: first, the goal of ensuring that the risk of major spills is 
minimized, and in the event of a spill, victims are fully compensated; 
and second, that increased caps and financial responsibility 
requirements do not drive competent independent oil companies out of 
the market. A realistic policy solution also requires an understanding 
of the host of complex economic impacts that could result from 
increases to liability caps and financial responsibility requirements.
Options for Reform
    As this Committee and others in Congress consider options for 
addressing these problems, the Commission recommends that first, 
Congress significantly increase the liability cap and financial 
responsibility requirements for offshore facilities. To address both 
the incentive and compensation concerns noted above, Congress should 
significantly raise the liability cap. Financial responsibility limits 
should also be increased, because if an oil company does not have 
adequate resources to pay for a spill, the application of increased 
liability has little effect. Should a company go bankrupt before fully 
compensating for a spill, its liability is effectively capped. If, 
however, the level of liability imposed and the level of financial 
responsibility required are set to levels that bear some relationship 
to potential damages, firms will have greater incentives to maximize 
prevention and minimize potential risk of oil spills and also have the 
financial means to ensure that victims of spills do not go 
uncompensated.
    Second, the Commission recommends that Congress increase the limit 
on per-incident payouts from the Oil Spill Liability Trust Fund. If 
liability and financial responsibility limits are not set at a level 
that will ensure payment of all damages for spills, then another source 
of funding will be required to ensure full compensation. The federal 
government could cover additional compensation costs, but this approach 
requires the taxpayer to foot the bill. Therefore, Congress should 
raise the Oil Spill Liability Trust Fund per-incident limit. Raising 
the Oil Spill Liability Trust Fund's per-incident limit will require 
the Fund to grow through an increase of the per-barrel tax on domestic 
and imported oil production. An alternative would be to increase the 
Trust Fund through a surcharge by mandatory provisions in drilling 
leases triggered in the event that there are inadequate sums available 
in the Fund.
    Third, the Commission recommends that the Department of the 
Interior enhance auditing and evaluation of the risk of offshore 
drilling activities by individual participants (operator, driller, 
other service companies). The Department of the Interior, insurance 
underwriters, or other independent entities should evaluate and monitor 
the risk of offshore drilling activities to promote enhanced risk 
management in offshore operations and to discourage unqualified 
companies from remaining in the market.
    The Interior Department currently determines financial 
responsibility levels based on potential worst-case discharges, as 
required by the Oil Pollution Act. Although the agency's analysis to 
some degree accounts for the risk associated with individual drilling 
activities, it does not fully account for the range of factors that 
could affect the cost of a spill, and thus the level of financial 
responsibility that should be required. Interior should analyze a host 
of specific, risk-related criteria when determining financial 
responsibility limits applicable to a particular company, including, 
but not limited to: geological and environmental considerations, the 
applicant's experience and expertise, and applicable risk management 
plans. This increased scrutiny would provide an additional guard 
against unqualified companies entering the offshore drilling market.
VIII. Spill Impacts and Gulf Restoration
    Even before the highly visible damages caused by the spill became 
clear, many crucial Gulf economic and ecological resources--fisheries, 
transportation, tourism--faced long-term threats. First, more than 
2,300 square miles of coastal wetlands--an area larger than the State 
of Delaware--have been lost to the Gulf since the United States raised 
the massive levees along the lower Mississippi River after the 
devastating Great Flood of 1927. Exceptionally powerful hurricanes, 
always a threat to the region, struck the coast in 2005 (Katrina and 
Rita) and 2008 (Gustav and Ike), causing even more wetland loss. 
Second, low-oxygen bottom waters were in the process of forming a 
massive ``dead zone'' extending up to 7,700 square miles during the 
summer of 2010. Referred to as hypoxia, this phenomenon has intensified 
and expanded since the early 1970s as a result of nutrient pollution, 
mainly from Midwestern agriculture. And finally, the Deepwater Horizon 
disaster made matters worse: 11 rig workers killed in the explosion and 
17 injured; many thousands of people exposed to contaminated waters, 
coasts, beaches, and seafood; thousands out of work; birds and sea 
animals killed and significant habitats damaged or destroyed. The 
Commission's investigation made plain that existing authorities are not 
adequate to redress these significant harms and ensure restoration of 
the Gulf.
Human Health Impacts
    The National Contingency Plan overlooks the need to respond to 
widespread concerns about human health impacts. For smaller oil spills, 
the response effort is generally carried out by trained oil spill 
response technicians, but given the scale of the response to the 
Deepwater Horizon spill and the need to enlist thousands of previously 
untrained individuals to clean the waters and coastline, many response 
workers were not screened for pre-existing conditions. This lack of 
basic medical information, which could have been collected if a short 
medical questionnaire had been distributed, limits the ability to draw 
accurate conclusions regarding long-term physical health impacts. EPA 
should amend the National Contingency Plan to add distinct procedures 
to address human health impacts during a Spill of National 
Significance. Spills of this magnitude necessarily require a 
significant clean-up effort, potentially exposing workers to toxic 
compounds in oil and dispersants.
Consumer Confidence
    Images of spewing oil and oiled beaches in newspapers and on 
television set the stage for public concern regarding the safety of 
Gulf seafood. Additional factors contributed to the lingering 
impression that the public could not trust government assurances that 
the seafood was safe: the unprecedented volumes of dispersants used, 
confusion over the flow rate and fate of the oil, frustration about the 
government's relationship with BP in spill cleanup, and lawsuits filed 
by fishermen contesting the government's assurance of seafood safety. 
The economic blow to the Gulf region associated with this loss of 
consumer confidence is sizable. BP gave Louisiana and Florida $68 
million for seafood testing and marketing, as well as money to assess 
impacts on tourism and fund promotional activities. As of early 
December 2010, BP was considering a similar request from Alabama.
    In future spills, however, there is no guarantee that a responsible 
party will have the means or the inclination to compensate such losses. 
Such indirect financial harms are currently not compensable under the 
Oil Pollution Act. Nevertheless, losses in consumer confidence are real 
and Congress, federal agencies, and responsible parties should consider 
ways to restore consumer confidence in the aftermath of a Spill of 
National Significance.
    The Commission recommends that Congress, federal agencies, and 
responsible parties take steps to restore consumer confidence in the 
aftermath of a Spill of National Significance.
Lack of Sustained Funding for Gulf Restoration
    A lack of sustained and predictable funding, together with failed 
project coordination and long-term planning, has resulted in incomplete 
and often ineffective efforts to restore the Gulf's natural 
environment. No funding source currently exists to support regional 
restoration efforts. While cost estimates of Gulf restoration vary 
widely, according to testimony before the Commission, fully restoring 
the Gulf will require $15 billion-$20 billion, or a minimum of $500 
million per year, over 30 years. A number of different sources 
currently provide funding to individual states for restoration, however 
none of these sources provides funds for Gulf-wide coastal and marine 
restoration, and none is sufficient to support the sustained effort 
required. Most policymakers agree that without a reliable source of 
long-term funding, it will be impossible to achieve restoration in the 
Gulf.
    Several Gulf States and the federal government have filed or are 
expected to file suit against BP and other companies involved in the 
spill, which will likely create opportunities to direct new restoration 
funds to the region. In some cases, congressional action will be 
required to ensure that funds are directed to this purpose. The 
Commission recommends that 80 percent of any Clean Water Act penalties 
and fines be directed to Gulf restoration. Should such penalties and 
fines not be directed to the Gulf, Congress should consider other 
mechanisms for a dedicated funding stream not subject to annual 
appropriations. Although such mechanisms face hurdles, the fact remains 
that resources are needed if progress on coastal restoration is to 
continue. Inaction is a prescription for further degradation. Should 
CWA penalties not be redirected to Gulf restoration, Congress should 
consider other mechanisms for a dedicated funding stream not subject to 
annual appropriations.
Decision-making Body for Expediting Work
    In order for funding to be most efficiently directed at long-term 
restoration, a decision-making body is needed that has authority to set 
binding priorities and criteria for project funding. The Gulf Coast 
Ecosystem Restoration Task Force is now in place, as recommended by the 
September 2010 report on restoration from Secretary of the Navy Ray 
Mabus to the President, and subsequently established by Presidential 
Executive Order. According to the Executive Order, the job of the Task 
Force is to begin coordinating the different restoration projects being 
undertaken by various jurisdictions in the Gulf, coordinating related 
science activities and engaging stakeholders. However, as many in 
Congress and the Administration have suggested, the Task Force lacks 
some features necessary to effectively direct long-term restoration 
efforts in the Gulf--most importantly the ability to set binding goals 
and priorities.
    The Commission recommends that Congress establish a joint state-
federal Gulf Coast Ecosystem Restoration Council. The Council should 
implement a restoration strategy for the region that is compatible with 
existing state restoration goals. Experience in major restoration 
endeavors, including those in the Gulf, has shown that, absent binding 
goals to drive the process, restoration projects are insufficiently 
funded, focused, or coordinated. Therefore, the restoration strategy 
should set short- and long-term goals with binding criteria for 
selecting projects for funding. Key criteria should include national 
significance; contribution to achieving ecosystem resilience; and the 
extent to which national policies--such as those related to flood 
control, oil and gas development, agriculture, and navigation--directly 
contributed to the environmental problem. Congress should also ensure 
that the priorities and decisions of the Council are informed by input 
from a Citizens Advisory Council that represents diverse stakeholders.
Restoration Rooted in Science
    Finally, but essentially, restoration decisions must be rooted in 
science. An approach that draws heavily on information and advice from 
scientists will result in project selection and funding allocations 
that are more likely to lead to an effective region-wide restoration 
strategy. Such an approach will also advance transparency in decision-
making and enhance credibility with the public.
    The Commission accordingly recommends the establishment of a Gulf 
Coast Ecosystem Restoration Science and Technology Program that would 
address these issues in three ways: (1) by creating a scientific 
research and analysis program, supported by the restoration fund, that 
is designed to support the design of scientifically sound restoration 
projects; (2) by creating a science panel to evaluate individual 
projects for technical effectiveness and consistency with the 
comprehensive strategy; and (3) by supporting adaptive management plans 
based on monitoring of outcomes scaled both to the strategy itself and 
to the individual projects or categories of projects included in it.
Managing Ocean Resources
    The Commission recommends that as a part of management and 
restoration efforts in the marine environment, greater attention should 
be given to new tools for managing ocean resources, including 
monitoring systems and spatial planning. Marine scientists have emerged 
from the Deepwater Horizon incident with more precise questions to 
investigate, as well as a better sense of monitoring needs in the Gulf 
of Mexico, which because of its multiple uses and economic value should 
be a national priority. To that end, the National Ocean Council, which 
the President initiated in July 2010, should work with the responsible 
federal agencies, industry and the scientific community to expand the 
Gulf of Mexico Integrated Ocean Observing System, including the 
installation and maintenance of an in situ network of instruments 
deployed on selected production platforms. Participation in this system 
by industry should be regarded as a reasonable part of doing business 
in nation's waters.
    Coastal and marine spatial planning has the potential to improve 
overall efficiency and reduce conflicts among ocean users. Congress 
should fund grants for the development of regional planning bodies at 
the amount requested by the President in the fiscal year 2011 budget 
submitted to Congress. Ocean management should also include more 
strategically sited Marine Protected Areas, including but not limited 
to National Marine Sanctuaries, which can be used as ``mitigation 
banks'' to help offset harm to the marine environment. Given the 
economic and cultural importance of fishing in the Gulf region--and the 
importance of Gulf seafood to the rest of the country--scientifically 
valid measures, such as catch share programs, should be adopted to 
prevent overfishing and ensure the continuity of robust fisheries.
IX. The Future of Offshore Drilling
    The central lesson to be drawn from the catastrophe is that no less 
than an overhauling of both current industry practices and government 
oversight is now required. The changes necessary will be transformative 
in their depth and breadth, requiring an unbending commitment to safety 
by government and industry to displace a culture of complacency. 
Drilling in deepwater, however, does not have to be abandoned. It can 
be done safely. That is one of the central messages of the Commission's 
final report. The Commission's recommendations are intended to do for 
the offshore oil and gas industry what new policies and practices have 
done for other high risk industries after their disasters. The 
Commission believes that the potential for such a transformation to 
ensure productive, safe, and responsible offshore drilling is 
significant, and provides reason for optimism even in the wake of a 
disaster.
    The significance of the Deepwater Horizon disaster, however, is 
broader than just its relevance to the future of offshore drilling. The 
disaster signals the need to consider the broader context of the 
nation's patterns of energy production and use, now and in the future--
the elements of America's energy policy. The explosion at the Macondo 
well and the ensuing enormous spill--particularly jarring events 
because of the belief they could never happen--force a reexamination of 
many widely held assumptions about how to reconcile the risks and 
benefits of offshore drilling, and a candid reassessment of the 
nation's policies for the development of a valuable resource. They also 
support a broader reexamination of the nation's overall energy policy.
    Important decisions about whether, when, where, and how to engage 
in offshore drilling should be made in the context of a national energy 
policy that is shaped by economic, security, pace of technology, 
safety, and environmental concerns. Offshore drilling will certainly be 
an important part of any such policy, but its relative importance today 
will not, and should not, be the same a half-century from now. The 
nation must begin a transition to a cleaner, more energy-efficient 
future. Otherwise, its security and well-being will be increasingly 
dependent on diminishing supplies of nonrenewable resources and on 
supplies from foreign sources.
    Drilling for oil in the Gulf of Mexico, however, is not solely a 
matter for U.S. consideration. Both Mexico and Cuba have expressed 
interest in deepwater drilling in the Gulf in the near future. 
Potential sites are close enough to the United States--Cuba's mainland 
lies only 90 miles from Florida's coast and the contemplated wells only 
50 miles--that if an accident like the Deepwater Horizon spill occurs, 
fisheries, coastal tourism, and other valuable U.S. natural resources 
could be put at great risk. It is in our country's national interest to 
negotiate now with these neighbors to agree on a common, rigorous set 
of standards, a system for regulatory oversight, and operator adherence 
to an effective safety culture, along with protocols to cooperate on 
containment and response strategies in case of a spill.
Frontier Areas
    Our Commission also examined prospects in so called ``frontier 
areas.'' On December 1, in the wake of the Deepwater Horizon 
experience, Interior Secretary Ken Salazar announced that the 
Administration would not proceed with drilling in areas where there are 
``no active leases'' during the next five-year leasing plan. As a 
result, exploration and production in certain frontier areas--the 
eastern Gulf and off of the Atlantic and Pacific coasts--are deferred. 
The Secretary also indicated that plans for 2011 drilling in Alaska's 
Beaufort Sea would be subjected to additional environmental 
assessments.
    The major interest in offshore Alaska reflects the likelihood of 
finding significant new sources of oil there. The Chukchi and Beaufort 
Sea off Alaska's north coast rank behind only the Gulf of Mexico in 
estimated domestic resources. But finding and producing those 
potentially important supplies of oil offshore Arctic Alaska requires 
the utmost care, given the special challenges for oil spill response 
and containment, and heightened risks associated with this frontier, 
especially its extreme cold, extended seasons of darkness, hurricane-
strength storms, and pervasive fog--all affecting access and working 
conditions--and the extraordinary richness of its ecosystems and the 
subsistence native communities dependent upon their protection. To deal 
with these serious concerns about Arctic oil spill response, 
containment and the heightened environmental stakes the Commission 
recommends three approaches before the Department of the Interior makes 
a determination that drilling in a particular area is appropriate. 
First, the Department should ensure that the containment and response 
plans proposed by industry are adequate for each stage of development 
and that the underlying financial and technical capabilities have been 
satisfactorily demonstrated in the Arctic. Second, the Coast Guard and 
the oil companies operating in the Arctic should carefully delineate 
their respective responsibilities in the event of an accident--
including search and rescue--and then must build and deploy the 
necessary capabilities. Third, Congress should provide the resources to 
establish Coast Guard capabilities in the Arctic, based on the Guard's 
review of gaps in its capacity.
    The Arctic is shared by multiple countries, many of which are 
considering or conducting oil and gas exploration and development. The 
extreme weather conditions and infrastructure difficulties are not 
unique to the U.S. Arctic. Damages caused by an oil spill in one part 
of the Arctic may not be limited to the waters of the country where it 
occurred. As a result, the Commission recommends that strong 
international standards related to Arctic oil and gas activities be 
established among all the countries of the Arctic. Such standards would 
require cooperation and coordination of policies and resources.
    Bringing the potentially large oil resources of the Arctic outer 
continental shelf into production safely will require an especially 
delicate balancing of economic, human, environmental, and technological 
factors. Both industry and government will have to demonstrate 
standards and a level of performance higher than they have ever 
achieved before.
    Creating and implementing a national energy policy will require 
enormous political effort and leadership--but it would do much to 
direct the nation toward a sounder economy and a safer and more 
sustainable environment in the decades to come. Given Americans' 
consumption of oil, finding and producing additional domestic supplies 
will be required in coming years, no matter what sensible and effective 
efforts are made to reduce demand--in response to economic, trade, and 
security considerations, and the rising challenge of climate change.
    The extent to which offshore drilling contributes to augmenting 
that domestic supply depends on rebuilding public faith in existing 
offshore energy exploration and production. We have proposed a series 
of recommendations that will enable the country and the oil and gas 
industry to move forward on this one critical element of U.S. energy 
policy: continuing, safe, responsible offshore oil drilling to meet our 
nation's energy demands over the next decade and beyond. Our message is 
clear: both government and industry must make dramatic changes to 
establish the high level of safety in drilling operations on the outer 
continental shelf that the American public has the right to expect and 
to demand. It is now incumbent upon the Congress, the executive branch, 
and the oil and gas industry to take the necessary steps.
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    .epsThe Chairman. Thank you very much.
    And I thank both of you. For the record, it was not me that 
cleared my throat that you responded to. But nevertheless, I 
appreciate that.
    Mr. Graham. The message was clear.
    The Chairman. I did want both of you to finish your 
remarks, and I allowed that, but we do want to try to stay as 
closely as we can.
    I just have an observation and a question that I want to 
ask both of you. Right from the get-go, when this event 
happened and I was asked to respond, I said something on the 
order: Number one, we need to stop the leak; number two, we 
need to hold BP accountable; and number three, we need to make 
sure that the restoration can get that part of the country back 
to normalcy, however you describe that.
    I have been saying that right from day one. You have spent 
a great deal of time on it in your report. Your testimony 
talked about what should be done in the future, and I alluded 
to this in my opening statement. I would like you both to 
respond to it. We still don't know what caused the explosion, 
unless I missed something, and we don't know how or why the BOP 
malfunctioned, if that was the case. And I would like both of 
you to respond to that, and is there maybe a time in the future 
when you are going to answer that, or do we wait for other 
reports to come in before we draw conclusions? Whoever wants to 
go first. I would like both of you to respond to that.
    Mr. Graham. Well, what we know is that the event occurred, 
and we know a great deal about why the event occurred. We have 
identified in our report nine instances, nine human decisions 
that were made in the hours before the Macondo explosion, which 
we think were the precipitating cause of this immediate event.
    It is true that no one at this point has had the benefit of 
the full forensic examination of the blowout preventer. It is 
at a NASA facility in New Orleans being closely examined. But 
what we do know is that it didn't perform as it should have. If 
it had been able to perform at an optimal level, it is 
questionable whether that would have avoided the explosion 
because the gas had already gotten beyond the blowout preventer 
at the time that it would have gone into effect.
    So I believe that our report adequately, accurately, 
comprehensively addresses both the immediate cause and then the 
context in which that occurred, which was a long period in 
which government had done a very inadequate job of regulation, 
at which the industry had fallen into this culture of 
complacency, and where the consequences have been an enormous 
economic and environmental cost to the people of the United 
States.
    Mr. Reilly. I would just add, Mr. Chairman, we know enough. 
We know what happened. We know that the negative pressure test, 
which was supposed to determine whether cementing had 
effectively sealed off the well; we know that inconsistent 
information came from the kill line and the drill pipe. And the 
good news was accepted that while the conflicting information 
was rejected in the drill pipe itself, indicating that had not 
been a seal, the cementing had failed. We know that. We know 
that as gas did rise in the drill pipe, it was not noticed, 
although we have the documentation of the instrumentation, the 
record that should have been recognized by a professional 
monitoring that instrumentation to indicate that gas was coming 
up the riser. It was not recognized until it was too late. So 
we know those things. Those are a couple of examples.
    A number of decisions were made by people who are not 
alive, and we cannot but speculate on how they came to make 
some of those decisions or to have missed some of the 
information that they did have.
    And if you look at page 125 of our report, we list about 
nine decisions, seven of which had the corollary benefit of 
saving time. No doubt they were identified as more efficient 
ways to proceed, but there were alternatives to most of them, 
and they weren't chosen. So the immediate proximate cause was a 
series of bad decisions, very hard to understand decisions on 
the day of April 20th and leading up to it with respect to 
Halliburton's supply of cement which failed three of its own 
tests and nine tests that were subjected to by our Commission 
by Chevron's laboratory for testing cement. So we do know those 
things. And I am quite confident that we have established the 
facts here.
    The Chairman. Since my time is running out, I would just 
make this observation. What you have alluded to, both of you, 
is the fact that somewhere along the line, there is human 
error; something wasn't read. We heard that in testimony, 
frankly, from the industry when they were here shortly after. 
They said, we don't know what happened, but we suspect that 
this is going to be the case. And that you have confirmed.
    But we still don't know what mechanically or whatever else 
broke down, and I just wanted to thank you for responding to 
that.
    Mr. Markey.
    Mr. Markey. Thank you, Mr. Chairman, very much.
    Thank you for this report. This report is a blistering, 
scalding indictment of the practices engaged in by the industry 
and by regulators that created the conditions that made this 
accident possible. My question to you is if your 
recommendations are not adopted or provisions similar to those 
which you recommend, do you think we run the risk of repeating 
that catastrophe once again in the waters of the United States?
    Mr. Graham. Yes. As I said, even if all of the 
recommendations were adopted, no one could issue an insurance 
policy that there would be no repetition.
    But I could issue an insurance policy that the likelihood 
of a repetition and the consequences of the repetition will be 
significantly less if these recommendations are adopted.
    One of the things that characterizes these recommendations 
is they are not from outer space. Most of them are from the 
North Sea, a place which has a more punishing environment than 
the Gulf of Mexico, yet has a dramatically different record in 
terms of fatalities. We believe that some of the experience 
there--and ironically, the same companies that are operating in 
the Gulf are operating under those standards in the North Sea. 
So it is not a mystery or a new set of standards for those 
companies themselves.
    And as I said in my report, I am concerned that if we don't 
act, if we are timorous and if we have an enhanced likelihood 
similar to the Macondo, that we are all going to be pointed at 
as to why we were unable to recognize and why we were unwilling 
to act in the public interest.
    Mr. Markey. Do you agree, Mr. Reilly?
    Mr. Reilly. I do agree. And I would add that this is a very 
dynamic industry, which has transformed itself in the last 25 
years as it has moved from shallow water into deep water, which 
is a much more high-risk environment. It has not adapted its 
own risk protections, its management systems adequately to 
either prevent or to respond to a problem of this sort.
    And I will tell you one of the things that--well, it is 
reassuring that BOEMRE has issued new prescriptive regulations 
to try to govern a lot of the activities that would take place 
in the future, and that gives us some encouragement. Frankly 
speaking, we don't consider that agency as it is now staffed, 
formed, trained and compensated adequate to the task that they 
have; and that if it is not strengthened, I suspect that we 
will again see an incongruity grow between the sophistication 
of the industry and its dynamism and the failure of inspectors 
even to understand some of the basic technologies to stay on 
top of it.
    Mr. Markey. Let me follow up on that then because you have 
recommendations here that can be implemented administratively 
by the Obama Administration, but there are other 
recommendations here that really need congressional action so 
that we change the laws. Do you think it would be wise for us 
not to act legislatively to give that authority to the 
government so that they can change business as usual? Would we 
be running a risk if we did not pass legislation?
    Mr. Reilly. I think you would be running a big risk. There 
are two crucial moves that I believe the Congress has to take. 
One is to reorganize the Interior Department, simply to ensure 
that leasing revenue concerns of the sort that animated the 
agency over several administrations and three MMS Directors 
testified to before our Commission, that those no longer infect 
safety and environment regulation. And the way to do that is 
statutorily, the way to do it on any kind of sustainable basis, 
by creating a walled-off regulator within the Department of the 
Interior with a term appointment for the Director.
    And the second, the second requirement--and the first 
doesn't cost anything--the second requirement is to adequately 
fund the BOEMRE to carry out the responsibilities that it has.
    Mr. Markey. Thank you.
    Just to note here, BP had 760 OSHA fines--versus one for 
ExxonMobil--so we can understand that there is something 
fundamentally wrong here that a company like that was allowed 
to continue to operate.
    Senator Graham, your recommendation on legislation?
    Mr. Graham. Well, I would agree with those two points, and 
then the third is the one I made relative to restoration, that 
only Congress can designate a portion of these fines and 
penalties for the specific purpose of restoration, which we 
think, in terms of the national interest in this region of 
America, the fact that many of the problems that have led to 
the degradation of the Gulf of Mexico had the Federal 
Government at least as a partner if not the primary indicted 
figure.
    Mr. Markey. And can I just say very quickly, some people 
say, well, it is just BP and that the other actors didn't play 
a role, including the government, that the other companies 
didn't play a role; true or not true?
    Mr. Graham. In the area of response, it was not just BP 
that was incapable. If this same thing had happened on 
virtually any of the rigs in the Gulf, we would have had the 
same response because we had the inadequate, unplanned-for 
capabilities that made this such an unnecessarily significant 
impact on the economy and the environment of the Gulf of 
Mexico.
    Mr. Markey. I thank you both for your service.
    The Chairman. I thank the gentleman.
    Mr. Young of Alaska.
    Mr. Young. Thank you, Mr. Chairman. I thank the witnesses.
    Mr. Chairman, I have reviewed the report, and I have also 
reviewed the members of the Commission. And I have statements 
from every one of the members of the Commission that do not 
support offshore drilling, including the two witnesses before 
us.
    And that concerns me because I cannot figure out how this 
can be a report that was supposed to look for the cause is now 
trying to ask us to pass legislation when their basic goal is 
against offshore development. In your statement you said you 
were for it; you know the importance. But one gentleman said we 
can establish 75 years as the goal for independence. To meet 
that goal, we would have to reduce domestic production, not 
increase it.
    I am just questioning the Commission and the sincerity of 
really seeking a solution to a needed commodity, which is oil.
    Now, I personally have another question because of this 
Administration. From either one of you, from the technical 
perspective, what makes drilling in the deepwater Gulf of 
Mexico so different? And are these conditions typical of the 
other areas of the U.S. OCS? What is different between the Gulf 
and Alaska?
    Mr. Reilly. Well, the difference between the Gulf and 
Alaska is the deep water that we are involved with in the Gulf, 
5,000--we are going to 10,000 feet. Three rigs have been 
commissioned that will take----
    Mr. Young. That I know and I appreciate your answer. I 
appreciate your answer.
    But as I read your report, your position on Arctic drilling 
with the President is, in fact, we have to step forward with 
caution; we have to make sure it can't be done too rapidly, et 
cetera, et cetera.
    But it is 150 feet versus 2,000 some odd feet or, excuse 
me, 20,000 feet, 18,000 feet. And I am worried about this 
country. We are going to spend about $400 billion again to buy 
our oil. And this Commission--the make up of this Commission, 
they are all against the development of offshore drilling and 
onshore, by the way. Some on the Commission voted against 
opening ANWR; 39 billion barrels were 74 miles from the 
pipeline.
    We are facing bankruptcy because we have not been able to 
develop our fossil fuels. And yet the Commission, the majority 
of them, in fact all of them, their intent is not to have 
fossil fuels. And I think that is inappropriate.
    Now, last, if I can suggest one thing, Mr. Chairman, we 
have drilled in the Gulf about 42,000 wells, including 2,500 
deepwater wells. No where do you report in your report or 
suggest why that was successful. We have had one big spill 
since Santa Barbara. Now, how do you answer that? Was there any 
credit given for what was done before and for those who did it? 
Question. Answer.
    Mr. Reilly. Well, I referred to 79 losses of well control. 
I think many of those contributed to accidents and several 
contributed to fatalities. That is the record that we have for 
the Gulf, and it is not a pretty one.
    Mr. Young. How many spills? How many spills?
    Mr. Reilly. I don't know how many spills were associated 
with those, but if you look at that list in the report, if they 
weren't spills, they were near misses and close calls and 
enough to kill people, and there were fires.
    Mr. Young. Just like driving down the street, slipping on 
the ice.
    Mr. Reilly. I would like to say that again with respect to 
ice.
    Mr. Young. Like driving down the street, slipping on the 
ice. There is going to be a chance. There is no fail-safe way 
to do anything.
    Mr. Reilly. No. And it can be done better. As Senator 
Graham said, you cannot eliminate risk; you can reduce it 
significantly.
    I would point out to you, Mr. Young, that--first of all, 
when you say what we really believe--what we really believe is 
in this report. And it is pretty detailed, and I think we have 
a lot of authority and documentation behind the recommendations 
and findings that are in here. So I actually would suggest that 
instead of interpreting comments made by Commissioners perhaps 
in an earlier time without this mission, you look at this as a 
definitive record of where we really stand.
    And we are for offshore oil and gas development. We think 
it can be done safely. And we also specifically recommend 
against a moratorium in Alaska in the Arctic.
    Mr. Young. And that means that you, in fact, want us to go 
forth?
    Mr. Reilly. Yes, sir.
    Mr. Young. Will you express that in your report? It doesn't 
say that.
    Mr. Reilly. This Commission believes that we can go forward 
to drill in the offshore the Chukchi and Beaufort Seas, but it 
recommends a series of scientific analyses of Coast Guard 
search-and-rescue movements, of a range of activities that will 
have to be supplied--either by government or the industry--to 
ensure over the long term that it will be done safely. But we 
specifically say that should not be a barrier to moving 
forward.
    Mr. Young. It does say, then, you are supporting Arctic 
drilling in the report?
    Mr. Reilly. Yes, sir.
    Mr. Young. I didn't read that. And if you do so, I wish you 
would explain that to the President.
    Mr. Reilly. You said in your remarks that we recommended it 
be done with caution and that is certainly true. We have a 
distinctive set of challenges that are being presented there.
    Mr. Young. That is what happens, though. We have the 
studies--for 40 years, we have been drilling in the Arctic, 
just not Prudhoe Bay. We had been drilling there when we had 
the PET-4, when we had the new line operation. We have been 
doing the drilling, and we have done the studies. We have done 
the work. And all of the sudden now we have that moratorium in 
place by someone that doesn't believe in fossil fuels.
    You heard him last night on the Floor. He doesn't believe 
in fossil fuels. And I think it is wrong for this country. I 
want all forms of power, but all of the sudden, we have a 
Commission report I don't believe that really suggests we can 
do without a big long delay. But we will send the money 
overseas.
    Mr. Chairman, my time is up.
    The Chairman. Thank you very much.
    Mr. Pallone from New Jersey.
    Mr. Pallone. Thank you.
    Thank you, Chairman Hastings and Ranking Member Markey, for 
having the hearing today.
    The report in front of us today is clear in my opinion that 
we cannot drill safely off our shores under the current system 
and that our coastal communities need protection from 
untrustworthy big oil.
    Only big oil will claim that they can drill safely and look 
to expand drilling in the wake of our country's worst 
environmental disaster and the finding of their systematic 
failures.
    Now, since the Deepwater Horizon disaster, the President 
has reversed course and, thankfully, taken drilling in the 
Atlantic off the table, at least for the next five years, and I 
commend him for that action and believe we must make that 
policy permanent. Only then can we be safe from the greed of 
the oil industry.
    Also, House Democrats passed the CLEAR Act to prevent 
another catastrophic spill, and at that time, my Republican 
colleagues opposed the legislation, saying we needed to wait 
for this Commission's report. Now that we have it, it is time 
to take action to prevent big oil from wreaking havoc on our 
environment, and that is why I introduced the No New Drilling 
Act to prevent the expansion of offshore drilling, which I 
believe must be the policy, at least until we can be certain 
another Deepwater Horizon incident will not happen again.
    I represent a district along the Jersey Shore. I live along 
the Jersey Shore, as well. I have all my life. And one of the 
things I wanted to ask the two members of the panel is that I 
believe very strongly that the farther you go out and the 
deeper you are, the more dangerous it becomes. In arguing 
against the need for reform, the oil and gas industry likes to 
make the argument that the BP spill was like an outlier, and 
they point to the long history of drilling in the Gulf.
    But in reality, isn't it true that the vast majority of the 
oil and gas industry's offshore drilling in the Gulf has been 
in shallow water where drilling is much less complicated than 
in the ultra-deep water where the Deepwater Horizon was 
operating? So, basically, as we go farther out--and certainly 
my understanding is that the Atlantic is strictly deep water, 
not in shallow water--the danger is greater, and that is even 
one more reason why the recommendations that you put forth are 
crucial. I am asking either of you if you could answer that 
question.
    Mr. Graham. Well, the answer is clearly there is a 
relationship between the danger and risk the deeper you go. And 
it is also true that up until about 1990, virtually all of the 
drilling that had ever taken place in the Gulf of Mexico was in 
waters of less than 1,000 feet, which is the definition of 
shallow drilling, so that the circumstances have dramatically 
changed. And at the same time that the industry was developing 
a technology that can, frankly, only be analogized to the 
technology of the space program and its sophistication, there 
was an enormous burst of the offensive capability to drill in 
deeper areas. There was not a commensurate increase in the 
defensive capability to respond should there be an accident and 
to create the safety environment that would reduce the 
prospects, not to zero but to the degree possible, that there 
would not be accidents.
    In the materials that have been distributed, there is a 
chart, which is called ``MMS Budget and Gulf of Mexico Crude 
Oil Production, 1984 to 2009.'' It is on page 73 of our report. 
And you can see the degree to which the production in the Gulf 
of Mexico has gone from being shallow water production now not 
only to deep water, but the greatest increase has been in what 
is described as ultra-deep water, where the risks are even more 
significant.
    Mr. Pallone. Mr. Reilly, did you want to respond?
    Mr. Reilly. No. just to reenforce what Senator Graham said, 
the formations are deeper in the deepwater. That is, they are 
well under even very often--certainly in the case of Macondo--
they were down at 18,000 feet, which is 13,000 feet below the 
mud level. The formations are under much greater pressure, 
something up in the range of 30,000 pounds per square inch, 
which means all sorts of things in terms of the complexity of 
dealing with a well situation that also involves, of course, 
robots, which are the only way you can actually monitor and 
maintain and improve or repair technology down at that level.
    So, for all of these reasons, it is a much more challenging 
enterprise. And that is why the industry in our view needs to 
improve its capacity, recognize that they are in a different 
era from the one that characterized shallow water drilling and 
establish the kind of safety institute we recommend.
    Mr. Pallone. Thank you, gentlemen.
    The Chairman. I thank the gentleman.
    Mr. Lamborn from Colorado.
    Mr. Lamborn. Thank you, Mr. Chairman.
    I want to the thank both of the distinguished witnesses for 
being here today and giving your testimony.
    You said earlier that you do not know why the blowout 
preventer did not work, and I am very concerned that you didn't 
even wait until you knew what the cause of it not working was 
before issuing your report.
    Why didn't you wait until we knew why that blowout 
preventer didn't even work? Because that is a key element in 
this whole chain of events.
    Mr. Reilly. Yes, sir. This was clear from the start, when 
the President created us with an executive order, he gave us a 
timetable of 6 months. In our early conversation with him, we 
made clear to him we didn't expect the blowout preventer to be 
pulled out before late August, which is about I think when it 
was taken up, and still hasn't been forensically analyzed. So 
it was always understood that the blowout preventer would not 
be a part of our report; we would not have access to it and not 
be able to make any judgments about it.
    But the failure of the blowout preventer to work is itself 
known; as to specifically why it didn't work, that remains to 
be seen. I think all other aspects of this spill, though, were 
subject to our investigatory analysis, and we were able to make 
the judgments that give us confidence that we know what 
happened.
    Mr. Lamborn. Thanks for that answer. I think you or the 
President should have had the patience to know why it didn't 
work, and your report would have been much more significant in 
my opinion had we had that information.
    Mr. Reilly. As commissioners, we, sir, didn't have that 
option.
    Mr. Lamborn. Second, in a Wall Street Journal editorial 
from two weeks ago, it states that not a single member of your 
Commission was a drilling engineer or an expert in oil 
exploration technology or practices. Don't you think that the 
Commission would have been improved had you had people with 
that kind of expert background on your board?
    Mr. Graham. Frankly, I think that was a relevant question 
to ask in the summer of 2010. Today, we have submitted an 
almost 400-page report. We would like our competence to be 
judged on this report.
    And if there are areas that you think demonstrate a lack of 
capacity to make the judgments that we did, we would be pleased 
to know what those are, and we would attempt to provide a 
response or an admission of our naivety.
    I would say that I believe even if you took the most 
extreme explanation of why the blowout preventer failed to 
function, that doesn't trump the other nine factors that we 
have identified that were contributing causes to this.
    So while I am curious to know what the BOP did, I don't 
think it would change the findings or the recommendations that 
we have made.
    We certainly wouldn't withdraw our recommendations that the 
oil and gas industry should adopt, as the nuclear power 
industry has, some form of internal capability to assess 
safety.
    We would not change our position that we need to have an 
effective, competent Federal agency that can oversee the 
industry.
    We would not change our recommendation that that agency 
should be protected by independents within the Department of 
the Interior.
    Those are our key safety recommendations, and I don't think 
there is any evidence that is going to come from the forensic 
examination that is currently going on at a NASA facility in 
New Orleans of the blowout preventer that would alter those 
recommendations.
    Mr. Lamborn. Well, I will move on to my next question here.
    In its undertaking of the investigation of the Deepwater 
Horizon incident, the National Academy of Engineering and the 
National Research Council announced that they would not be 
issuing their final report until it has been peer-reviewed, 
which is their standard practice for reports issued by the 
National Academies. Has your report been submitted for peer 
review to any other kind of body or experts or--
    Mr. Graham. It is a public document, so it is not just 
submitted to peers, it is submitted to the American people for 
their comment and evaluation.
    Mr. Reilly. I would just say that it has been pretty well 
reviewed and pretty well received and commented on by experts 
in the field.
    And I also want to note that we say in our formal testimony 
that our senior technology and science advisor on this 
enterprise was Richard Sears, who has 33 years of experience, 
senior experience with Shell Oil, and he was present through 
all of our deliberations on technology.
    And I would also like to acknowledge publicly, we had 
strong cooperation from industry, from three companies in 
particular that spent several hours with us--Chevron, Shell, 
and ExxonMobil--and cooperation, obviously, from the 
Departments of the government, from BOEMRE and Director 
Bromwich, and Secretary Salazar.
    So I think we had a full range of input and plenty of 
opportunity on the part also of the scientific agencies, NOAA, 
the Coast Guard, to ensure that what we say is grounded in good 
science and respectable technology.
    And I must say we have become a little impatient, Bob and 
I, with the criticisms of our competence, or the credentials of 
our Commissioners, which maybe was OK to raise 6 months ago, 
but the proof is here. If there is something wrong or if there 
are people who have objections to the findings or think they 
are wrong or to the recommendations, we would be very happy to 
debate on that point.
    But it seems to me now a little churlish to refer back to 
the credentials without saying in some way how they are 
connected to the inadequacies in the report, which nobody seems 
to be doing.
    Mr. Lamborn. Thank you.
    The Chairman. Thank you.
    Mr. Grijalva from Arizona.
    Mr. Grijalva. Thank you, Mr. Chairman.
    Gentlemen, if the current offshore policy is based on some 
similar assumptions, as I understand it, one was the blowout 
preventers actually worked. That was an assumption. The 
assumption was that the industry had the ability to contain 
spills. The assumptions were that spills offshore won't ever 
hit onshore. There was an assumption based that rigs are 
operated as safely as possible.
    And I read through your report that brought into question 
those assumptions. So, as a result, just for both of you 
gentlemen, don't we have to rewrite our offshore policy based 
on the fact that we don't have assumptions we can make right 
now? Senator?
    Mr. Graham. Well, I think some of the assumptions are that 
drilling in the offshore is going to be a continuing and 
increasing part of America's energy supply; number two, that 
its acceptability to the American people will be closely 
aligned with its safety.
    You may recall that when Three Mile Island blew, almost 25 
percent of America's electricity was coming from nuclear power, 
and there was an expectation that that percentage was going to 
grow, maybe even to where France is, which is over 70 percent. 
But that one incident so chilled the public toward nuclear 
power, that we have had effectively a 30-year hiatus of any 
expansion. And therefore, the percentage of electricity from 
nuclear power is dramatically less than it was 30 years ago.
    Now, whether the continued activities in the Gulf, more 
Macondos, could have the same effect as Three Mile Island, as a 
singular event had on the nuclear power industry, we can all 
speculate. But I think it is in everybody's interest that we 
conduct this industry to the highest standards.
    Would anyone answer the question, why should drilling for 
offshore oil in the Gulf of Mexico be at a lower standard of 
safety and environmental protection than it is in the North 
Sea? If there is some explanation as a matter of public policy, 
why we should accept a lower standard, then I think we could 
have a very good debate. No one has come forward making that 
assertion.
    Mr. Grijalva. The other point I think you called the 
liability cap arbitrary in the report. The question is, lifting 
the cap entirely as a means to assure that the taxpayer doesn't 
get stuck with any bill beyond the cap; and two, as incentive 
to meet the highest standards that the Senator just mentioned 
for drilling, any reactions to no cap at all on liability?
    Mr. Graham. We have recommended that the cap be lifted. We 
did not go beyond that. Clearly the $75 million cap, which is 
now 21-years old, just this year the change in the value of 
money as a result of inflation over 21 years would cause you to 
believe that 75 million was not adequate. Second, as Bill 
pointed out, when that cap was established, virtually all of 
our offshore drilling was in known, comparatively safe, low-
pressure areas. And today the largest share of our drilling is 
in much riskier, deeper water.
    Now, I am now going beyond what the Commission recommended 
and just saying my own feeling is that if we have liability 
caps, the rationale is to maintain a competitive marketplace in 
the Gulf of Mexico, that we don't want only the largest oil 
companies in the world to be able to drill, but we also don't 
want to have financially incapable companies causing enormous 
consequences.
    So that would lead me to feel that the Congress might be 
able to fashion a policy built around liability limits in 
relationship to risk. It is one thing to have a liability limit 
for 100 feet of water than 18,000 feet of water. Today, the law 
applies the same standard to both of those two cases.
    Mr. Reilly. I would just add if I might, Congressman, that 
the establishment of some kind of liability cap that both 
ensures a continuing capacity of independence to operate in the 
Gulf, that doesn't just restrict to leasing or bidding to a few 
majors, but also protects the public against being handed a 
bill for major damages caused is something that is going to 
take more time than we had in the 6 months and probably more 
involvement of the insurance industry, since I assume an 
insurance consortium of some sort would be necessary to address 
this.
    I also would note that the liability cap in Canada is $35 
million. I think it is 50 million pounds in Britain. And it 
does strike me, too, that particularly with respect to those 
resources, such as the Gulf and the Arctic, where other 
countries' activities are also involved, there might be some 
merit in trying to work out a uniform system of liability which 
applies systematically to all oil and gas development in these 
areas.
    Mr. Grijalva. Thank you, Mr. Chairman.
    The Chairman. Mr. Fleming from Louisiana.
    Dr. Fleming. Thank you, Mr. Chairman.
    And thank you, panel members, for being here today and your 
service. This was, no question about it, a disaster. And like 
any disaster, even though we don't know the precise cause of 
the blowout, we do know some things happened that are typical 
of disasters.
    Because this is a high-risk operation, much like many other 
things we do, travel in space, flying in airplanes, rarely is 
one thing the cause of the disaster. It is usually a number of 
different situations and occurrences and bad decisions that 
align themselves which probably over time have occurred, but 
because of some backup or redundancy, the disaster was 
prevented. And that can sometimes be a bad thing because what 
happens is we become, in your words complacent. If I make a 
mistake, there is a backup system that will solve that problem 
for me. And obviously that is something that on the industry 
side and on the government side we need to bear in mind going 
forward.
    But it was a disaster to Louisiana, my home State, in two 
ways: One, to our ecology, no question about it; but maybe even 
worse and longer term in jobs. Louisiana has now lost tens of 
thousands of jobs. Because these rigs are so expensive, they 
have left our shores in some cases, and more will come, to go 
to Brazil and Africa and other places.
    And you know what is interesting is that they are going to 
other parts of the world that have less standards than we do. 
So I think that is a real issue we need to look at.
    Now, the President lifted the moratorium, and I have been 
researching this. I cannot find one single permit for deepwater 
drilling that has been issued since the lifting of the 
moratorium, and we don't know when they ever will.
    So what I am concerned about and I would like to have your 
reaction to this, I see recommendations for more legislation, 
but I think we need to be careful about just moving the chairs 
on the deck. For one thing, we are asking NOAA to sign off on 
things, and that is a good thing. But is that going to make the 
permit process even slower and more difficult?
    So I would love to have the reaction from both you 
gentlemen. Is this really going to get us where we need to be, 
and how is this going to affect the jobs, which are so 
desperately needed, and, finally, the price of gasoline and oil 
that is going up because of the loss in supply?
    Mr. Reilly. I would say two things. I would agree with you 
completely to the degree that we restrict our own domestic 
production, we are essentially, given our demand on supply, 
intending to get more oil and gas from risky places, like the 
Niger Delta or Venezuela. That is a given. And I think we have 
to take an international perspective on the whole issue and 
also recognize that the environment in those places counts, 
too, and it has been very badly abused, particularly in the 
Niger Delta; some 2,500 accidents over the last 10 years. That 
is a perfectly fair point, and I think it is one that ought to 
underlie our approach to many of these questions.
    With respect to the moratorium itself, Senator Graham and I 
were pretty specific early on. We did not understand it, 
thought that it was excessive and considered that a more 
selective approach that did not penalize those companies with 
good records, particularly after they had once been inspected, 
as they all were in the weeks following the Macondo disaster. 
Once those few infractions that were found were corrected for, 
it struck us that it would have been reasonable to resume 
drilling at that time. But that has not happened.
    I would say that going forward, to the degree that we 
continue to under-staff, under-prepare, under-reform, and 
under-finance the regulatory agency, we probably are going to 
find that it is more reluctant to issue permits, less confident 
about signing a name to a permit, and less able to get us back 
into business.
    Mr. Fleming. Senator, do you have a response?
    Mr. Graham. I would just add that what Bill said at the end 
happens to be the position of the major petroleum companies in 
Great Britain, that they actually affirmatively support a 
strong, well-financed, competent regulator as a key part of 
their ability to do their business. I believe they are right, 
and I hope that we will come to the same conclusion as to the 
industry here in the United States.
    Mr. Fleming. Can I get a commitment from you gentlemen--and 
Mr. Reilly has already suggested that the President not only 
lift the official moratorium, but actually allow permits--
should we do away with what we have now, which is a de facto 
moratorium? Would you both agree that the President should move 
forward and begin to allow the issuance of permits?
    Mr. Graham. As I understand it, there is a news story today 
that states the reason--or at least a primary reason for the 
delay in issuing permits for those rigs that have met the 
individual standards, rig by rig--is that the industry has not 
demonstrated that it has the capability to respond and contain 
such an event or, if it does, those standards have not yet been 
incorporated in the permit applications.
    If that is the case, that actually, in my judgment, is a 
positive signal that we are now down to essentially one issue. 
And there also is some indication that the ability to meet that 
standard of adequate response and containment is near an end.
    The Chairman. I thank the gentleman. Mr. Boren of Oklahoma.
    Mr. Boren. Thank you, Mr. Chairman. I want to thank the 
members of the Commission for being here today and for your 
work. Thank you, Mr. Reilly, Senator Graham. It was mentioned 
earlier that there was some question about the qualifications 
of the Commission. I want to say that I have a high regard for 
the members of the Commission. Senator Graham--Chairman Graham 
of the Intelligence Committee, you and my father were chair of 
the Intelligence Committee about the same time, and we have a 
warm regard for you and your work. So I want to thank you for 
your service. I want to touch on a couple of things that were, 
you know, in this book that we have here before us. I think a 
vast majority of the recommendations--actually, a lot of the 
industry would say that they don't really have a problem with. 
You know, you are listening to someone who is a big supporter 
of the oil and gas industry coming from Oklahoma.
    But some of the verbiage, sometimes even just the words, 
just to pick out of the report, I kind of have some concerns 
about. One was the use of the term ``systemic,'' that there are 
these systemic problems in the industry. And if you look at the 
30-year history, you know, over the last 30 years, the history 
of offshore oil and gas production, there have been some 
incidents but I think a major incident is very rare. And if you 
compare it with, you know, the airline industry or the commuter 
train industry or any other industry, the oil and gas industry 
has done quite a good job. The last few years, we have seen 
documentaries like ``Gasland'' on hydraulic fracturing. A lot 
of this that is out there is driven by a motion. It really 
isn't driven by facts or science. And so I am really concerned. 
The rhetoric, even the State of the Union last night, about, 
oh, these oil and gas companies are making all this money. 
Let's throw some more taxes on them. There are a lot of good 
quality jobs that are created in States like Oklahoma, 
Louisiana, all across this country, and they want to do the 
right thing. They want to do the right thing for the 
environment, as do most Americans.
    I do have one question about the CLEAR Act legislation that 
was brought out earlier about the cap on liability. And I have 
a lot of independent oil and gas producers in Oklahoma that 
have this question. We have been talking quite a bit about 
this. But given such liability requirements, did your staff or 
the Commission ask the insurance industry if any independent 
operators would be able to obtain an insurance policy under 
such guidelines or circumstances? And the reason why I ask that 
question is, I am worried--and you kind of touched on this 
earlier with Mr. Grijalva. If we only have one or two 
companies, U.S. companies that do the drilling, we are going to 
have the Chinese be the only folks that can drill these wells. 
I would like to see--I am not talking about a mom and pop 
company.
    I am talking about, you know, Devon Energy is a huge 
company in Oklahoma, but it is not as large as some of the big 
majors. These are thousands of employees. They are very well 
capitalized. These are types of companies that could do this 
drilling without any problem. Are you all worried about that? 
And did you talk to the insurance industry about whether or not 
these smaller companies could, in fact, do this?
    Mr. Reilly. We are worried about it, and it is why we did 
not select a number with respect to an increase. We said it 
should be increased but we didn't say how much. And we knew 
that it would require insurance company consultation and advice 
and help and didn't, frankly, have time to get it. So we did 
not meet with the insurance industry on the liability cap. But 
for all the reasons you mention, and our own sense that it is a 
valued contribution that independent operators make to the 
economy, to the culture, to the industry in the Gulf, we did 
not want to make an irresponsible choice without adequate 
information that might, in any way, inhibit their activities, 
or possibly even cause them to move to other jurisdictions 
where their liability cap is lower even than it is in the 
United States.
    Mr. Boren. Senator, do you have the same opinion?
    Mr. Graham. I would agree with that statement. We tried to 
operate within our areas of confidence. So the specific 
recommendations we made, we are prepared to defend them. Where 
an issue was outside of what we thought was our regional 
component, such as the role of insurance companies in 
determining the liability cap and how the role of insurance 
companies might be a means of giving some assurance that we 
would not be limited to just a handful of companies. We didn't 
feel competent to comment on that. We did feel that on its 
face, the $75 million liability cap across the board for 
activities that are as divergently risky as shallow and ultra-
deep water needed to be lifted and re-examined.
    We also were aware that the Congress is going to make that 
ultimate decision, and we did not feel that we had anything 
additional to add to your consideration of that.
    Mr. Reilly. Mr. Boren, if I could add, I knew your dad too. 
I served in the EL Corporation with him for 6 years. And I know 
your district some. I serve on the board of an oil company who, 
half of which used to be based, headquartered in Bartlesville. 
And the senior executives there--
    Mr. Boren. ConocoPhillips?
    Mr. Reilly. Yes, sir.
    Mr. Boren. OK. Great.
    Mr. Reilly. --are stung by the use of the term 
``systemic,'' and yet are perfectly willing to acknowledge they 
didn't see this coming and weren't prepared for it, didn't 
think it could happen, and had a response plan which the 
Chairman acknowledged was embarrassing to him because it had 
the same characteristics as the other response plans.
    So I would just say, we do not by any means intend to 
disparage the safety or environmental standards of some of our 
leading iconic oil and gas companies, whether the majors or the 
independents. But the facts, I think, speak for themselves with 
respect to this particular disaster. And they led us to report 
all we did.
    The Chairman. Thank you, Mr. Chairman. Mr. McClintock, 
California.
    Mr. McClintock. Gentlemen, thank you for being here today. 
When the Challenger exploded, we knew only one thing for sure 
after the accident. We knew that the launch vehicle had failed 
catastrophically. The Rogers Commission was impaneled. It was 
filled with technical experts. It painstakingly recovered the 
wreckage from underneath the ocean. It reassembled that 
wreckage. It then determined the precise cause of the disaster, 
and it then recommended changes so that the space program could 
move forward.
    The one thing we know for sure in this disaster was that 
the blowout preventer failed. Let me ask you quite directly, 
did you determine why the blowout preventer failed?
    Mr. Graham. The answer is ``no'' for the reasons that we 
have given.
    Mr. McClintock. Did you look?
    Mr. Graham. Can I finish answering the question?
    Mr. McClintock. It is a yes-or-no question. It is my time, 
Senator. It is limited. So please. Did you even look at the 
blowout preventer?
    Mr. Graham. No.
    Mr. Reilly. Most of the time we were at work, we would have 
taken a robot to go down and get us there.
    Mr. McClintock. Well, let me read you The Wall Street 
Journal that took you apart for ideological bias, for a lack of 
expertise, credibility, lack of thoroughness. And this is what 
they said, Unable to name what definitely caused the well 
failure, the Commission resorts to a hodgepodge of speculation. 
Adding to the confusion, it acknowledges it could find no 
evidence that BP or its contractors consciously chose a riskier 
alternative. And so forth.
    The Commission didn't even wait to get an autopsy of the 
failed blowout preventer--and again, this is coming directly 
from The Wall Street Journal--which is rusting on a Louisiana 
dock. Why should we take your report seriously if you have not 
even made that modicum of effort to determine the actual cause 
of the disaster?
    Mr. Graham. Well, as Mr. Reilly said to an earlier 
question, we had a Presidential 6-month charter. We knew early 
on that that charter was going to run out before the forensic 
examination of the--
    Mr. McClintock. Did you ask for an extension of your 
deadline?
    Mr. Graham. We did not.
    Mr. McClintock. So you just participated in a rush to 
judgment without even looking at the cause of the failure that 
created this entire disaster?
    Mr. Graham. Well, I would just direct your attention to 
page 125 of our report which lists the nine steps that we 
assessed that contributed and cascaded.
    Mr. McClintock. I understand that. But that would be like 
the Rogers Commission issuing its report without looking at any 
of the wreckage--
    Mr. Reilly. Congress, the cementing failed. The cement job 
failed to contain the well free from hydrocarbons. We said 
that. Is that not enough?
    Mr. McClintock. Let me get to the question of ideological 
bias because this is also an indictment in The Wall Street 
Journal editorial. They said, The conclusions in your report 
were, ``all too predictable given the political history of 
Commission members. Former Democratic Senator Bob Graham fought 
drilling off Florida. William Reilly is the former head of the 
anti-drilling World Wildlife Fund, and Frances Beinecke ran the 
Natural Resources Defense Council, which is opposed to carbon 
fuels. Not a single member was a drilling engineer or expert in 
oil exploration technology or practices.'' Why should we take 
you seriously?
    Mr. Reilly. Congressman, I would just say the use of the 
word ``predictable'' is surprising to me because what was 
predictable in the view of The Wall Street Journal when they 
wrote their first critical editorial was that we would 
recommend against future offshore oil and gas development, 
which we very definitively did not.
    Mr. McClintock. You are recommending a whole new level of 
bureaucracy on top of an obviously already failed bureaucracy 
with the obvious aim of indefinitely delaying of the production 
of our Nation's energy reserves. What is the economic damage 
caused by this disaster? Do we have a figure on that yet?
    Mr. Reilly. We know it is in the tens of billions.
    Mr. McClintock. I have an estimate here of a worst-case and 
base-case analysis of the economic damage caused by the 
moratorium, and it runs from $279 billion all the way up to 
$341 billion.
    Mr. Reilly. Billion?
    Mr. McClintock. Billion, I believe.
    Mr. Reilly. I haven't seen those numbers before, sir.
    Mr. Graham. Could we have an opportunity to evaluate those 
numbers?
    Mr. McClintock. Absolutely. Absolutely.
    Mr. Reilly. I would only say, with respect to the 
bureaucracy question, I made clear in my opening statement, I 
think that--and certainly the report goes into detail on this--
that the reorganization of the Interior Department should be 
cost-free. We do want to segregate the leasing, the revenue 
generating, and managing functions from the environment and 
safety regulation. That is a matter of straightforward 
reorganization.
    Second, the degree to which we add anything is intended to 
provide more capability, more expertise, more professionalism 
in an agency that then I would fully expect, based on my own 
history at the Environmental Protection Agency, of facilitating 
more confident permitting and a better regulatory oversight of 
the industry. I don't think that it would work to delay. I 
think it would work to improve and create more efficiency in 
the relationship between the regulator and the industry.
    The Chairman. Mr. Lujan from New Mexico.
    Mr. Lujn. Mr. Chairman, thank you very much. And I know 
this important hearing is going to outlie the recommendations 
to prevent another Deepwater Horizon disaster from happening 
again, which is why I think we are here. It is not to debate 
whether one supports or opposes offshore drilling. It is to 
make sure that we don't let this happen again, and that we all 
understand the roles that we have to play to get there.
    And I want to thank the Commission for the work that they 
did because this was a tough job, and you have a tough set of 
circumstances with many critics. Many of us being those critics 
as well. And I hope that we truly listen closely to your 
recommendations and that we see what we can do to find common 
ground to be able to get to that point.
    By the time this Committee had convened last year to hear 
testimony from BP executives, it had already become clear what 
led to the Deepwater Horizon explosion was the culmination of 
systemic failures. It was the failure of companies who 
knowingly refused to implement the necessary safeguards to 
prevent this disaster, and it was a failure of governmental 
policies and regulators that did not apply the proper oversight 
to minimize the risk of the disaster. BP has shown itself to be 
negligent in safety violations and environmental protections.
    We should not forget what happened in 2005 with the 
explosion in Texas and the lives that were lost, 15 people. 
200,000 gallons of crude oil and a pipeline that ruptured in 
northern Alaska. These are real incidents.
    But what is most significant about the Commission's report 
is that it reveals the culture of undermining safety standards. 
It is not just an issue for BP, but an epidemic failure facing 
the entire offshore drilling industry. Quoting directly from 
the report, ``The blowout was not the product of decisions made 
by a rogue industry or government officials. Rather, the root 
causes are systemic, and absent significant reform in both 
industry practices and government policies, might well recur.
    The Bipartisan Commissions report only confirms that 
Congress must take action, do our part to prevent the disasters 
like this from happening again. During the 111th Congress, this 
Committee put in a lot of work to develop safeguards that would 
modernize safety and environmental protections for Federal 
offshore leasing programs in the CLEAR Act. Many expressed an 
interest to see the report before we moved forward.
    We now have that report. And as we hear from witnesses of 
the Bipartisan Commission today, we have to ask ourselves, What 
are we going to do? What is our role as Congress to make sure 
this never happens again? Are we going to sit back and allow a 
failed system to continue? We cannot turn a blind eye on this 
issue. The Commission's report clearly outlines that Congress 
needs to act quickly to protect the safety of people, the 
welfare and livelihoods of communities, and the habitat of 
fragile wildlife.
    Only 7 months ago, we saw the horrific images of the 
explosion that killed workers, the plumes of oil that 
devastated marine life, local seafood industries, vulnerable 
wetlands, and the waters of the Gulf. Over 205 million gallons 
of oil were spilled in the Gulf because of the Deepwater 
Horizon spill. Let us never forget the people who were impacted 
and the families who lost so many of their loved ones.
    It is in everyone's best interest, including industry, to 
not let this happen again, and to truly understand the 
responsibility that we all have to do our part to prevent that.
    The first question I have is a yes-or-no question. We also 
learned during the spill how woefully under-prepared the 
Federal Government was to estimate the actual flow rate of oil 
spewing from the well. In fact, the Federal response was 
initially entirely dependent on misleading flow rate estimates 
provided by BP, which had every reason to low-ball them because 
we knew that the liability was tied to the calculations on a 
per-barrel basis.
    The legislation Democrats introduced today creates a 
permanent scientific group which includes scientists from the 
National Laboratories in the Department of Energy that will 
maintain expertise needed to estimate flow rates. Is this 
consistent with your recommendation?
    Mr. Reilly. It is consistent. Yes, it is. We determined 
that one consequence of the structure of our laws is that the 
responsible party takes the lead in overseeing response, and we 
want to keep liability fixed there. But one part of it which 
government should have independent capability to carry out is 
determination of the flow rate and the USGS Director, Marcia 
McNutt, has now said that will not be an issue next time.
    Mr. Lujn. And one last question, Mr. Chairman, to get on 
the record and we can get this answered later is, the report 
reveals that the cause of the spill was corporate 
mismanagement, inadequate government regulation, and a lack of 
political will to ensure proper oversight of the offshore oil 
industry as they pushed offshore drilling into deeper waters. 
You describe in the report that this problem is pervasive 
across the entire offshore drilling industry. So my question 
is: What will be the consequences if reforms fail to be 
prioritized, including the passage of proper legislation to 
minimize the chances of a disaster like this from ever 
happening again.
    And Mr. Chairman, I know we are going to run out of time. I 
want to be respectful of the other members. So we could ask the 
witnesses, Senator, to maybe send those back to us because I 
think that there is a very thoughtful answer that we need as a 
part of that. Thank you, sir. Thank you, Mr. Chairman. I yield 
back.
    The Chairman. I thank the gentleman. Mr. Fleischmann of 
Tennessee.
    Mr. Fleischmann. Thank you, Mr. Chairman. Gentlemen, thank 
you for being here today. It is a privilege. In addition to 
serving on this distinguished Committee, I also serve on the 
Small Business Committee. And my first question to you all in 
this group is in this regard.
    Gentlemen, what would you all say to the owners of the 
small businesses in this region struggling to survive until 
operations are restored in the Gulf? These people have lost 
most of their revenue streams, if not all of their revenue 
streams. They have made extraordinary personal and professional 
sacrifices to retain their employees and to preserve their 
businesses. But they cannot hold on indefinitely. I would like 
you all to address that, please.
    Mr. Graham. Well, of course, what you just described 
describes a number of the industries that are dependent on the 
Gulf. There were thousands of fishermen who lost their ability 
to acquire their income and there was a degradation of the 
brand of Gulf seafood, a 20 percent to 30 percent drop almost 
overnight in the consumption of Gulf seafood which has not yet 
been overcome. We make some specific recommendations on that 
subject. The tourism industry, which depends upon people's 
feeling that they are going to go to a place that is clean and 
healthy and enjoyable.
    It also suffered tremendous damage. So the consequences of 
an event like this have rippling effects. Mr. Reilly has 
described the fact that we believe that there needs to be a 
safe industry, that there can be a safe industry but that there 
needs to be an offshore oil industry in order to meet the 
energy requirements of the United States. And we sympathize 
with all the small business, whether they be fishermen, 
restaurant owners, or suppliers to the oil and gas industry. 
And we hope that we can get back in business as rapidly as 
possible with the safety measures that will protect all of 
those interests.
    Mr. Fleischmann. Thank you. Mr. Reilly.
    Mr. Reilly. Congressman, I don't know if you have had this 
experience. But I ordered some oysters in New York some time in 
September, I think, and asked whether they were from the Gulf, 
and was reassured very confidently by the waitress, no, we 
would not serve any seafood from the Gulf. That problem 
persisted through the fall. I understand it has not entirely 
disappeared now. People continue, the seafood processors, the 
fishermen to suffer because of that. I remember talking to the 
Governor just around Memorial Day, the Governor of Mississippi, 
who told me that there wasn't any oil within 60 miles of the 
beaches of Mississippi but there was 30 percent occupancy in 
what is usually the most important vacation tourism weekend of 
the year in Mississippi. Those stories and the Europeans 
canceling trips to Key West where the oil never approached are 
very poignant stories. The Vietnamese fishermen I think 
impressed me more than those of any other in my experience when 
I was in the Gulf. And we had hearings. Our first hearing was 
in New Orleans. We became very familiar with the problems you 
describe, and they are as serious as you say.
    Mr. Fleischmann. Thank you, gentlemen. I have a follow-up 
question. In a lot of the additional fees and proposed taxes on 
industry, what would the total government take-away be, 
including royalties, severance taxes, property taxes, income 
taxes, lease bonuses, and the proposed additional fees and 
taxes mentioned in the report?
    Mr. Reilly. I don't think we have costed those numbers in 
total. The only thing I would say is that it is really 
important to keep in perspective the amount of revenues the 
government takes in from offshore oil and gas development, 
anywhere from $6 billion to $8 billion in one year up to, I 
think, $18 billion in 2008. It is the second largest revenue 
generator after the IRS, and we can afford to spend some very 
small proportion of that which would be in dollar numbers 
reasonably significant, ensuring that it is better done and 
that it has been done by the government.
    Mr. Graham. According to the chart which appears on page 73 
of our report, in the year 1984, the budget of the MMS was 
approximately $250 million. And in the year 2009, it was 
something south of 200. At the same time, the industry, as the 
same chart displays, has moved from being a relatively well-
known shallow water industry to increasingly a deepwater, high-
risk industry. You would have thought that the lines of cost of 
effective regulation would have coincided with the increased 
risk. So I can't tell you exactly what the number is, but it 
would be hard to justify what appears to be about a $60 million 
to $70 million a year reduction in the capability of the 
regulatory agencies at the time the industry is going into more 
risky areas.
    Mr. Fleischmann. Thank you, Senator.
    The Chairman. Dr. Christensen.
    Mrs. Christensen. Thank you, Mr. Chairman. And I want to 
thank our panelists for being here. I too want to commend you 
and the broad array of contributors to this very comprehensive 
report. And among the many areas of concern, I too have to say 
that I could never understand why the U.S. permitting standards 
were lower than other countries and specifically lower than the 
U.K., if I remember correctly, where BP is actually based.
    Ours should be the highest in the world. And I also want to 
support, before I get to my question, Senator Graham's response 
on the moratorium. Because according to my reports, the 
Department of the Interior, since June of last year, has 
approved 28 permits to drill offshore in shallow water of 500 
feet or less, and there are only four or five shallow water 
permits currently pending. On deepwater drilling, the 
moratorium was lifted on October 12, and gas operators have to 
comply with new regulations to show that they have a strategy 
in place to actually contain a bailout. According to the 
Interior Department, thus far, no one has been able to 
demonstrate that actually, although I know that they are 
working on it, and that is the holdup--not the Department, but 
the fact that the companies are not able to respond adequately 
at this time. The good news though is that according to the 
Department, some companies are getting close, as you said, to 
being able to demonstrate that ability, and I do share the 
majority's hope that this can happen as quickly as possible.
    My first question, if I can get to it, I wanted to follow 
up on Mr. Boren's question. In saying that a systemic failure 
occurred, did you mean systemic in this case, of the three 
companies in their management of the Deepwater Horizon drilling 
and MMS? Or did you mean to apply it to the entire industry and 
say that the entire industry has been complacent? So I just 
want to understand what you meant by systemic?
    Mr. Graham. Well, we did not mean parity, that is that all 
companies were equally subjected to this culture of 
complacency. In fact, there are some companies that have a very 
strong record. What we meant to say was that there was evidence 
that the industry had not responded to the recognition that 
there were some outlier companies that needed to be sanctioned. 
You are a medical physician. If there were a physician in the 
U.S. Virgin Islands who was known by the other physicians to be 
performing at a rate that put people's lives at risk, I would 
assume it would be your professional responsibility to bring 
that to the attention of someone in authority. Well, we do not 
feel that the industry carried out its obligation for self-
policing and, thus, in part, the recommendation for the INPO-
type organization.
    Second, the example of response. Response is an industry-
wide obligation. We don't expect every company to have all the 
equipment that is necessary to respond, but we expect the 
industry at large to have the capacity to respond, and it was 
clear that not only was there not that capacity, but that there 
had been relatively little investment in the technology or 
research and development, the understanding of the environment 
that would have put them in a position to have produced a 
response.
    Mr. Reilly. I will just comment on your point about the 
U.K. experience. We have discovered--and, of course, in our 
research that companies and industries get serious about 
reforming practices and improving them when they have their 
catastrophe. The U.K. had a very serious catastrophe. It cost 
187 lives in 1989, Piper Alpha. Our chief counsel was 
intimately involved in investigating that accident. It was 
after that that the regulator separated revenues from 
regulation, just as we are proposing here. And it was after 
that that they developed a different mode of regulation which 
is known as the Safety Case where the particular risks that are 
likely to be entailed in a particular well situation--that is, 
with acknowledgement of the formation, the depth, the pressures 
and all the rest, be explained by the company and the way in 
which the company proposes to address those risks, he made 
clear to the regulator. That is their system now.
    Norway has a similar system and they came to it after their 
catastrophe. Australia today, dealing with a blowout that 
occurred last year, has had a commission of inquiry, and they 
are reforming their own practices.
    Mrs. Christensen. Are you seeing that happening now?
    Mr. Reilly. We know that the industry is very seriously 
examining the possibility and the practical challenges to 
creating the safety institute of the sort we recommend. We very 
much look forward to having the results of those inquiries, and 
we very much hope that they will do something along the lines 
that we have recommended. We think that it is very possible 
that they will. We certainly know that several CEOs of major 
companies take it seriously.
    Mrs. Christensen. Thank you.
    The Chairman. I thank the gentlelady. Mr. Coffman of 
Colorado.
    Mr. Coffman. Thank you, Mr. Chairman. First of all, thank 
you so much for your work and what you have accomplished. I 
think you mentioned some things that need to be done from your 
perspective, some kind of international agreement so there are 
uniform standards. I think you talked about responsibility to a 
spill or an accident if it occurs, having a better definition 
of that. And perhaps some insurance requirements for viewing 
that, liability issues. And I think what I am hearing from you 
is that in terms of prevention--so the two aspects. One is 
responding and the other one is prevention.
    So in terms of prevention, I guess my question to you is, 
did adequate regulations exist? But was it merely the 
enforcement of the regulations that was a problem? Because 
certainly we know that MMS had very significant problems. I 
think there was an IG report in 2008 that talks about how 
dysfunctional MMS was, and I think that we heard in this 
situation here how the inspection simply didn't occur in the 
manner that they were prescribed and were supposed to occur.
    So sometimes we have problems I think where we actually 
have laws on the books, regulations on the books but they are 
simply not being enforced. So I think that when we look at what 
is now the Bureau of Ocean and Energy Management, Regulation 
and Enforcement that, Mr. Reilly, you know, it is reported that 
you yourself said that personnel working for this agency are 
``often badly trained.''
    Secretary Salazar has said that he has already considered 
and executed some of the suggestions that your report has 
highlighted. Hopefully effective training and a cultural shift 
at his organization were implemented as well.
    Do you believe that these reforms, among the others that 
Secretary Salazar has said to have made, would have been 
sufficient to correct the missteps that were made by MMS prior 
to enduring the cleanup of the Deepwater Horizon spill? Let's 
just go into the prevention. I mean, if, in fact, we had a 
functional regulatory organization that was enforcing the 
existing rules, would that have been adequate to prevent the 
incident that occurred?
    Mr. Reilly. Let me say, I think that the recommendations in 
the new policies for scripted regulations that the Secretary 
and the BOEMRE's Director Bromwich have imposed are very 
desirable and likely to be effective. Negative pressure tests 
are now prescribed. They were not before. There are a whole 
range of new requirements that appear to us to make sense. But 
the reality is that the existing personnel complement entails 
an inspector for every 55 rigs. In California, it is one for 
every six. The answers given to a series of interrogatories of 
questions posed by the Interior Department, and the Coast Guard 
in their investigations make clear that basic petrochemical 
technologies, oil and gas technologies, like cementing and 
centralizing negative pressure tests, are not really 
understood, are not mastered by many of the inspectors who have 
said, frankly, that they take industry's lead on those 
technologies, that they have been evolving over time.
    And we simply have to provide better formation, better 
training, and I think better compensation for the people who 
are conducting that work. So even if today the regulations are 
sufficient to guard against the repetition of this set of 
problems, I worry that in a fast evolving industry in 3 to 5 
years, they may be outdated. And in order to keep them up to 
date, I think we are going to have to bring up the game among 
the professionals at the agency.
    Mr. Coffman. Senator Graham.
    Mr. Graham. Yes. I would agree with that. And I believe 
that our recommendations, such as the independence of the 
safety function within the Department of the Interior, are as 
important as the decisions that Congress made a number of years 
ago to make the FBI a quasi-independent agency within the 
Department of Justice. Just like the FBI, the safety function 
within the Department of the Interior is susceptible to 
political interference. And in fact, in the case of MMS, it was 
rampant interference. And we think that it is a combination of 
good regulations, competent capacity, adequate capacity, and 
then insulation from inappropriate external influences that are 
all part of what is necessary to get us up to world-class 
standards of safety in this industry.
    Mr. Coffman. Thank you, Mr. Chairman. I yield back.
    The Chairman. The time of the gentleman has expired. Mr. 
Sarbanes of Maryland.
    Mr. Sarbanes. Thank you very much, Mr. Chairman. Thank you 
all for being here. I know it has been a long day.
    I first wanted to commend you on the report. I haven't had 
a chance to read it from beginning to end, but I did look at a 
summary. And I think your recommendations based on the findings 
you have made are very, very helpful and will be for a lot of 
us going forward.
    My understanding, you have gotten some criticism about 
whether you had everything in front of you, whether you had the 
blowout preventer and so forth. But as I look at the 
recommendations, they seem to me all to be confined to a kind 
that you could make with a lot of confidence without having 
that extra piece of information at your disposal. It doesn't 
strike me that anything about your recommendations will be 
changed in any kind of significant way based on other 
information that comes forward because you have really derived 
it from what you saw before you.
    There was also a comment about your recommending layering 
another bureaucracy on top of a failed bureaucracy. But as I, 
again, read your recommendations, I think what you are doing is 
suggesting a reasonable set of regulatory oversight which in 
many ways will substitute for what has been a failed 
bureaucracy.
    On the issue of bureaucracy, I will ask you to respond to a 
proposal. This is something I suggested in earlier iterations 
of legislation suggesting the oil spill. It was a provision 
that we tried to include in the CLEAR Act. And this would be a 
requirement that the CEO of these corporations, these companies 
would certify--personally certify with the potential for 
liability to the adequacy and safety of the response plan, for 
example. You talked about, and many have alluded to how these 
response plans that were developed really across industry. It 
was highlighted in BP's particular oil spill response plan but 
were wholly inadequate.
    So I would like you to speak to whether you think we ought 
to give meaningful consideration, as I would like to see, to a 
requirement on the part of the corporate CEO to certify that 
these plans are, in fact, good plans and that they have done 
due diligence in creating those plans. And you could do more in 
terms of changing the culture of those companies with that one 
sort of piece of leverage than a whole new bureaucracy could 
do. So if you could speak to that, I would appreciate it.
    Mr. Reilly. My own sense is that the way such 
certifications would occur practically is the head of offshore 
or North America would sign a certification. The chief 
financial officer might sign a certification. The chief safety 
and environment vice president would sign a certification. And 
if all of those signatures were present, then the CEO would 
sign. And I don't know that it would enhance the liability 
assignment that you would like to see.
    It might, from a personal point of view, more closely 
involve, more intimately include a CEO in a decision that is 
made; but as Mr. Hayward said, he didn't know anything about 
the problems that characterized that well situation. He did not 
know that it had been a troublesome well. He hadn't been 
particularly involved in making decisions for it or apparently 
didn't even know that it was coming in late. It is a very large 
company. So I am not confident myself, based on my own 
experience with boards of directors, that that would contribute 
that much positively to safety, frankly.
    Mr. Sarbanes. Do you think he would have bothered to know 
more if he had been required to personally certify the safety 
and adequacy of these plans?
    Mr. Reilly. Well, he would have probably have had to sign 
scores and scores of certifications without any individual 
personal knowledge of the degree to which the characteristics 
of the well situations were familiar to him. And so, I have 
reservations about that particular recommendation. I had a 
conversation with Mr. Waxman about it. I know that it was 
strongly supported on the part of the Committee. But from my 
point of view--it is not that common in other high-risk 
industries either to try to fix the responsibility at the very 
top. It is there anyway if the company encounters a $10 to $20 
to $30 billion expense, obviously. And now I think everybody's 
attention is very focused on liability. And to my knowledge, 
every company has stood down to examine their own 
vulnerability, their own risk and get their practices improved. 
But that is my personal judgment. I actually consulted our 
senior technology adviser on that particular issue, and we gave 
it some consideration within the Commission and did not go 
forward with it.
    Mr. Sarbanes. Mr. Chairman, can I get the Senator's answer 
to that question?
    The Chairman. If the Senator can do it in 15 seconds, which 
is a test.
    Mr. Graham. Your question was, would this be something 
worthy of exploring. I think the answer to that question is, 
yes. My colleague has done some of that exploring and has come 
to the conclusion that he has but I think it is an issue. And 
frankly, your father has given us the opportunity to move this 
from being a theory to reality, and that it hasn't changed the 
behavior of corporate executives, that under his legislation, 
they now are required for public companies to sign personally 
as to the accuracy of their financial statements. It would be 
interesting to do some oversight and see what effect that has 
been. And then you might be in a better position to evaluate 
the potential applicability of offshore oil drilling.
    The Chairman. You didn't quite do it, Senator. But
    nice try.
    Mr. Graham. Well, I got a little bit off.
    The Chairman. Well, that is all right. You were talking to 
the son of a Senator. I can understand why that happened there.
    Mr. Duncan from South Carolina.
    Mr. Duncan of South Carolina. Thank you, Mr. Chairman. And 
gentlemen, thank you for being here. I sat by this graph all 
afternoon and I have studied it. And I want to comment on it.
    Mr. Reilly. You are the only one who can read it.
    Mr. Duncan of South Carolina. You have referenced it 
several times today, and you have come to some conclusions that 
I think are flawed and here is why. I spent some time on the 
MMS OCS 5-year planning subcommittee where we looked at oil and 
natural gas leases and came up with recommendations for the 
next 5-year plan on where those leases would be granted. And it 
struck me during the time that the only areas that we could 
even talk about within that committee was deepwater western 
Gulf of Mexico and deepwater Alaska. And nearshore--the 1,000 
foot and shallower areas on that grid--were off-limits for us 
to even talk about for the next 5-year period.
    So when you see an increase in activity in deepwater 
exploration and production, I think it is directly attributable 
to the fact that policies of the U.S. Government have pushed 
oil exploration and production away from the shore, away from 
the marshes and the rivers and other things to deep water.
    So I think some of the conclusions you have come to based 
on that chart that your graphics were flawed. So I want to make 
those comments. Mr. Chairman, I hope that us on the Energy and 
Minerals Subcommittee or this Committee will continue to look 
at the policies that are in place that pushed it to deep water 
and continue to look at nearshore, onshore, and other resources 
going forward.
    A couple of questions for you based on your report that are 
on a whole different line of thinking, so bear with me. In your 
report, you provide a short review of the fire-fighting efforts 
and response to the disaster. And I want to commend the guys 
that went out there on the rescue effort with our Coast Guard 
and others. And this line of questioning has no bearing on 
their efforts. But the lack of attention to this critical part 
of the disaster has left many of us confused.
    In the report, you state that others are going to study in 
issue more completely. Can you tell me first--and there are 
going to be three questions here--can you tell me first, in 
your opinion, if you believe the fire-fighting efforts were 
properly coordinated? That is number one. The second thing many 
believe that fire fighting contributed to the sinking of the 
rig and was there a possibility of saving the rig? And would 
the rig not sinking have permitted the sub-sea blowout that we 
saw? Was there a possibility to let the oil continue burning 
and work on shutting off the flow of oil that was contributing, 
that was the source of fuel for the fire? Or was the structural 
integrity of that rig in jeopardy anyway? So if you could 
answer those. And either one.
    Mr. Graham. Well, I said that one of the lessons learned 
was that we were very ill-prepared to respond, particularly in 
the critical first hours and days of this. And I would suggest 
that that included our ability to restrain fire under these 
circumstances. If I could, I would like to go back to your 
first comments. I think you have to also look at the issue of 
depletion. We have been heavily mining for oil and gas in 
shallow waters since 1938 and continue to do so today.
    I believe that these charts are as much a function of the 
reality that most of where the oil is today--the so-called 
elephants of offshore oil--are not at 1,000 feet. They are more 
likely to be at 5,000 or 10,000 feet, and that is why that is 
where the industry is moving. But that might be a question that 
your subcommittee could examine as to what are the factors that 
have gone into----
    Mr. Duncan of South Carolina. We will pursue that at a 
later time. Let's get back to the fire-fighting efforts and 
what may have attributed. Because there are a lot of questions 
in my district and around South Carolina and across the land 
that I have heard. Do you think the fire-fighting efforts were 
coordinated? Do you think that the rig could have sat there and 
burned until we shut off the flow of oil underwater? And the 
structural integrity of the rig, was it in jeopardy? Do you 
have any input on that?
    Mr. Reilly. The only thing I would say without wanting to 
characterize a lot of activities that occurred in the chaos of 
the fire and the response is that there were moments at various 
times when well control could still possibly have been 
established, when even the gases that were rising in the drill 
pipe could have been diverted over the side and perhaps not 
come into contact with the ignition source and not caught fire, 
but that once the fire began, when we looked at transcripts of 
reports of what it was like on that rig and how it seemed like 
a jet airplane or a fast-moving train had just come out of the 
drill pipe, I am not sure that there was a great deal that 
could have been done that would have averted the disaster that 
did occur.
    It does occur to us, however, that the degree to which the 
response to the emergency immediately was characterized by a 
lot of chaos of one of the rescue boats leaving a number of 
people still on the rig who then jumped into the water and did, 
in fact, survive, people who made that choice and then 
discovered those who were in the evacuation boat that they 
couldn't get away from the rig, as it looked like it was going 
to topple on them. And they discovered it was because they were 
tethered by a rope and no one was allowed to have a knife on 
the rig. So they had to look for a means of severing the rope. 
It didn't appear to us--and I think the documentation supports 
this--that there had been the kind of drills, simulations, 
practices that would have been appropriate and I think probably 
will be insisted upon in the industry in the future. And that 
is one more change that needs to occur that we have really 
learned a lesson from.
    Mr. Duncan of South Carolina. Do you think the rig would 
have continued burning.
    The Chairman. The time of the gentleman has expired. Mr. 
Landry of Louisiana.
    Mr. Landry. Thank you, Mr. Chairman. Just for the record, I 
did raise the Commission's credentials on my campaign to get 
here. Maybe they weren't raising it here in June, but I sure 
was in Louisiana.
    Considering the industry's performance record in the Gulf 
of Mexico, where over 42,000 wells have been drilled in 
addition to 2,500 deepwater wells without any significant 
incidents, in my opinion, reflects a successful risk 
management, were these safety factors--and these are yes or no 
questions--were these facts the success and history of all of 
these wells that had been drilled out in the Gulf of Mexico, 
were they taken into account when you did this report?
    Mr. Reilly. Yes, sir.
    Mr. Graham. Yes.
    Mr. Landry. OK. Was there any economical analysis done 
during the course of this report in terms of the impact on not 
only the Gulf economy, but on the national economy as well? Was 
that taken into account?
    Mr. Graham. We know that tens of billions of dollars of 
damage was done to the environment and the economy primarily of 
the Gulf as a result of this spill.
    Mr. Landry. So you say yes?
    Mr. Graham. The answer is yes.
    Mr. Landry. The President charged his Commission to 
determine the cause of the disaster to improve the country's 
ability to respond to spills and recommend reforms that make 
offshore energy production safer. Prior to the accident, there 
existed multiple layers of environmental reviews, including 
multiple EISs at all of the different phases that DOI uses, 
NEAs, environmental impact statements and environmental 
assessments. These included an EIS during the development of 
the 5-year review, and again, prior to the lease sales. Where 
does the Commission receive both the authority and conclusion 
that the need for review warrants any additional changes as I 
find that no conclusion that had contributed to the accident or 
to the impact of the cleanup?
    Mr. Graham. Well, I think that the increasing emphasis on 
NOAA, the Coast Guard, other agencies that represent the best 
science in government, and our proposal to use best science 
from outside the government all go to our interest in enhanced 
safety, including understanding what are the risks at the 
individual sites that are being suggested and what are the 
potential adverse effects on the safety of those who will be 
operating in that area and the environmental quality of the 
Gulf. So the answer to your question is yes, we took those into 
account as part of our overall assessment. We are aware of the 
fact that the industry, and particularly certain companies 
within the industry, have had a very strong safety record.
    We are not saying that everybody was the same. But we are 
saying that we think that the overall record in the Gulf is 
stunningly below what is in the standard of the world. If our 
aviation industry had a record by a 3-to-5-to-1 ratio, we were 
killing more people in airplanes than, for instance, Great 
Britain was, we would be pretty upset about why this was 
happening. That happens to be about the case in this industry 
between Norway and Great Britain and the U.S. We believe it is 
in the spirit of America to want to be the best.
    Mr. Landry. I am glad you brought that up, Senator.
    Mr. Graham. And these recommendations will move us.
    Mr. Landry. I am also confused that you would make the 
suggestion of underreporting incidents in the U.S. because the 
numbers are low. Are you aware that the industry, as a whole, 
regards the European standards of reporting incidents much less 
reliable than the U.S. standards?
    Mr. Graham. I am not aware of the assessment of that by the 
U.S. industry. I am familiar with the fact that our fatality 
accident ratio is significantly different than it is in the 
North Sea, which raises questions as to whether we are 
capturing all of the accidents that, in fact, are occurring. I 
am unaware of any evidence that would indicate that there 
should be such a significant differential between the 
fatalities and accidents in the Gulf and in the North Sea.
    Mr. Landry. I will be supplementing some questions to you 
all.
    Mr. Reilly. If I could just add, we are aware that there 
are very different ways of categorizing incidents, accidents, 
fatalities, days lost and so forth, total recordables in the 
North Sea versus the Gulf, different jurisdictions even between 
the U.K. and Norway.
    So some of those data need to be very closely scrutinized 
to determine that you are dealing with oranges and oranges and 
not apples and oranges.
    Mr. Landry. On both sides you would agree, though?
    Mr. Reilly. Yes, I would.
    Mr. Landry. I want to make sure that it is not just a one-
way street.
    Mr. Reilly. But the less disputable number is the fatality 
number. It is a little harder to hide the bodies. So I think we 
are confident that those numbers are as we found and that they 
are disturbing.
    The Chairman. The time of the gentleman has expired. Mr. 
Flores from Texas.
    Mr. Flores. Mr. Chairman, thank you for holding today's 
hearing. And Chairman Reilly, Chairman Graham, thank you for 
joining us today. I know you have put in a lot of work on your 
report and study and we appreciate you being here today. I have 
an opening statement that I would like to give to the Chairman 
for the record. I will dispense with that for now.
    [The prepared statement of Mr. Flores follows:]

                Statement of The Honorable Bill Flores, 
          a Representative in Congress from the State of Texas

    Mr. Chairman, thank you for holding today's hearing, and let me 
also take this opportunity to thank Chairman Reilly and Chairman Graham 
for appearing before us today.
    It has been nine months since the Macondo Well tragedy, and we all 
grieve for the families who lost loved ones and for the environmental 
and economic impacts along the Gulf coast. We can all agree that both 
industry and the federal government need to examine all the facts 
surrounding this incident and take the appropriate steps to ensure that 
we continue to produce American energy with safe, environmentally sound 
practices. Please know that I also lost a brother in an oilfield 
accident, so I want the oil and gas industry to operate in a safe and 
responsible manner. At the same time we should make sure that we 
facilitate a robust oil and gas industry to fuel our economy and jobs.
    For the past year and a half, the top concern that I've heard from 
all Americans is jobs, economic growth, and balancing the federal 
budget. We all know that our economic health is dependent on the energy 
sector, especially as we see gas prices rising to more than $3.00 per 
gallon. That being said, I'm afraid that the Obama Administration is 
taking us in the wrong direction--locking away our own energy resources 
and making us more dependent on foreign energy from unstable parts of 
the world. Even our Treasury is taking a direct hit. With production in 
the Gulf down due to the Obama Administration's moratorium, it is 
costing them at least $3.7 million each day in lost revenue.
    I look forward to hearing from our witnesses today and to working 
with my colleagues on the committee to take what we've learned from the 
Macondo Well incident and ensure that we have a robust domestic energy 
sector that contributes to our economic recovery.
                                 ______
                                 
    Mr. Flores. It has been 9 months since the Macondo well 
accident and we all grieve for the 11 families that lost loved 
ones and for those that were injured and for the impact on the 
families along the Gulf Coast. I want you to know from a 
personal standpoint that I lost a brother in the oil drilling 
business, so I have as much interest in conducting this 
industry as safely as possible as anybody in this room. But 
that said, I want to make sure that we facilitate a robust oil 
and gas industry because it is integral to our economic 
security and our military security. And as a person who is 
actively involved in the offshore energy business for over 30 
years, I am keenly concerned about the recommendations in the 
Commission's report.
    I think it is interesting that you use the Three Mile 
Island analogy because, as you pointed out, after Three Mile 
Island, we have not started and completed the construction of a 
nuclear power plant in 30 years. It appears we are headed down 
the same road today with offshore drilling. We have a permit 
moratorium, a de facto moratorium in deep water, and we have an 
incredible slowdown in shallow water drilling.
    Mr. Flores. And we are already seeing that show up in 
higher oil prices, higher gasoline prices, and reduced economic 
activity along the Gulf Coast.
    Here is the issue. Congress has passed legislation. You 
want Congress to consider legislation. The Department of the 
Interior has issued new regulations. Lease sales have been 
canceled. Other areas of potential offshore activity have been 
put off-limits again. And it is all based on a report that 
doesn't provide a full postmortem of what happened.
    And here is the key phrase that is used that causes the 
concern. You keep referring to systemic industrywide failure. 
In chapter 4 of the report dated January 6th, you have 
following key finding: The well blew out because a number of 
separate risk factors, oversights, and outright mistakes 
combined to overwhelm the safeguards meant to prevent just such 
a happening.
    But most of the mistakes and oversights in Macondo can be 
traced back to a single overarching failure: a failure of 
management. Better management by BP, Halliburton, and 
Transocean would almost have certainly prevented the blowout by 
improving the ability of individuals involved to identify the 
risk they faced and to properly evaluate, communicate, and 
address them.
    So how can you reconcile between what has happened in the 
offshore energy business today to calling a systemic failure--a 
systemic industrywide failure to report, which really just gets 
down to three companies. And we put the entire Nation's economy 
in peril by doing this.
    Let me give you an example. What if we find out after we 
get the blowout preventer fully evaluated, it takes a $10 bolt 
that could cure the problem 99.999 percent of the time, and 
then this accident would essentially never happen. And that is 
about the ratio of accidents to wells drilled that we have in 
deep water. So, you know, we have gone overboard.
    So why did we use those words, systemic industrywide 
failure? Because that is what has caused the paranoia here.
    Mr. Reilly. In 1963, Congressman, it was a single weld, as 
I understand it, that sank the Thresher submarine. And the 
SUBSAFE system was developed, and we have not lost a SUBSAFE 
submarine since. We lost one every third year, on average, in 
peacetime before that.
    The reason that we concluded it is systemic--and I didn't 
come in believing it was a systemic problem. I thought it was a 
single company that had blundered fatally because of the very 
large presence of those three companies throughout the oil and 
gas industry in the deepwater and in the shallow water 
throughout the world, BP is, I think, the largest explorer of 
offshore oil and gas development. Transocean is the largest rig 
operator. And Halliburton is the largest supplier of resource 
help, such as cementing.
    It is no longer possible for most companies to test the 
cement, for example, that they are provided by Halliburton. 
They no longer have the research capacity. Chevron does. Maybe 
one or two more do. But most decided in the 1980s and 1990s to 
contract that out. So the cement that is provided is the cement 
that gets used. And the cement that was provided by the test 
that Halliburton itself conducted and our commission had 
conducted was faulty.
    It is simply inconceivable to us that this was a problem so 
exclusive, so specially circumstantial with respect to one rig, 
especially since we know in Australia the cementing failed in 
the Montara well, just a year and a half or so ago, also.
    This is something that caused us to believe--and, again, 
most of the people on that rig were Transocean employees, the 
people who were responsible for responding to the emergency, as 
I just described. That is the largest rig operator and owner in 
the world. It operates for everybody. Everybody hires 
Transocean. They also are implicated in this, in significantly 
failing to detect gas rising in the drill pipe.
    We concluded from that that all companies are at risk if 
they are using these two contractors, or BP, itself, is 
probably at risk in other places.
    Now, we did hear--and we asked the Norwegian regulators, 
are you taking any actions against BP? The answer was somewhat 
surprising: ``No, we are not because we do not see issues in 
the North Sea with respect to BP operations. And, therefore, we 
have taken no action to discourage their continued operation.''
    That posed the question to us, well, what is it about the 
North Sea and the Gulf that has our companies operating safely 
and protectively in the North Sea, subject to a different set 
of regulators, and not in the Gulf? And that caused us to look 
very closely at the degree of oversight, the quality of 
regulation, and the capacity of the regulators, which we also 
fault.
    The Chairman. The time of the gentleman has expired. I 
wanted to let that response come because that, I know, is very 
important to the gentleman from Texas.
    Mr. Rivera from Florida.
    Mr. Rivera. Thank you, Mr. Chairman.
    Thank you, gentlemen, for being here today.
    Commissioner Graham, Senator Graham, as a Floridian and, I 
believe, as my neighbor, are you still living in the Lakes, are 
you still in Miami Lakes?
    Mr. Graham. I am, yes.
    Mr. Rivera. West of the Palmetto?
    Mr. Graham. Yes.
    Mr. Rivera. Well, I am right there with you, in Doral, 
right down the road. So, as my distinguished constituent--as my 
distinguished constituent and fellow Floridian, I know we share 
a great concern for the economy and the environment of our 
State of Florida.
    One of the recommendations that you make in your report 
addresses the need for greater international scrutiny, 
international standards. As a representative from south 
Florida, I am deeply concerned about the ongoing development 
off the coast of Florida, ongoing oil development off the cost 
of Florida, off the coast of Cuba in particular.
    As you know, as we speak, there are a number of companies, 
including Repsol, interested in drilling in the waters off of 
Cuba. And I wanted to ask you, do you believe that this Cuban 
drilling between the coast of Florida and Cuba will be done 
safely? And what could the U.S. do to ensure that any lax Cuban 
oversight doesn't threaten Florida and the Southeastern United 
States?
    Mr. Graham. I am concerned about the safety, the relative 
lack of experience of the Cubans, in terms of being able to 
oversee this activity. The record of some of the companies that 
are being brought in to do this work is not comforting.
    I believe that something analogous to what Mr. Reilly has 
said, that we feed to have a Gulf of Mexico-wide set of safety 
standards that would apply to any country touching the Gulf, is 
the best assurance that the United States has against 
inappropriate, unsafe practices in our backyard.
    And I believe that there is sufficient interest, at least 
between the United States and Mexico, to move forward in that 
direction. And, as Mr. Reilly has indicated, the Mexicans have 
suggested, at least, that they might be the interlocutory to 
Cuba, to get it involved.
    To me, it also underscores the importance of the United 
States having the highest standards. If you go into a 
negotiation and you are urging the other parties to take their 
game up a notch and you have not already done that, your 
persuasiveness is limited. To me, for our own protection and 
for our ability to raise the standards in the Gulf, we need to 
adopt policies such as those we have suggested.
    Mr. Rivera. Well, to that end, following through on that, 
do you believe that responsible domestic development in the 
eastern Gulf of Mexico would result in additional oil spill 
response capabilities being staged in Florida that could be 
used to respond to a potential spill off of Florida from the 
Cuban dictatorship's oil-drilling efforts?
    Mr. Graham. You say in the eastern Gulf. Do you mean in the 
U.S. waters or the Cuban waters?
    Mr. Rivera. No, U.S. waters.
    Mr. Graham. I don't know what the ultimate treaty might 
say, but I would be surprised if it did not make it the 
sovereign responsibility of each of the countries to provide 
that kind of capability for those wells within their own area.
    And I certainly don't think the United States ought to be 
depending upon Mexico, providing them the containment and 
response capability. We ought to do that. The Mexicans ought to 
do it. And if the Cubans proceed with their plan, they ought to 
do it.
    So the answer would be no.
    Mr. Rivera. Thank you.
    The Chairman. The time of the gentleman has expired.
    Another gentleman from Florida, Mr. Southerland.
    Mr. Southerland. Thank you very much, Mr. Chairman.
    And thank you for your report. Thank you for appearing 
before us today.
    I am from Panama City, Florida. My district is the 2nd 
District of Florida. I took my baby steps on the beaches of 
Panama City. And I love our environment. And a day with my 
family, with my children on Shell Island is a little piece of 
heaven for me.
    I will tell you, my community, dear friends of mine, were 
deeply affected by this disaster. I just wanted to ask some 
brief questions.
    Number one, how much responsibility, in light of this 
disaster, how much responsibility do you believe that the 
government bears after having cited 790 violations? How much 
responsibility do they bear?
    Also, by refusing to waive the Jones Act and bringing in 
oil ships that had the ability to clean up that oil, OK, by oil 
leaders around the world that had produced those ships, how 
much responsibility should be beared by this government?
    Mr. Reilly. We did inquire into the application of the 
Jones Act and the allegations that have been made, particularly 
by the Europeans and a couple of commissioners of the European 
Union, that we were keeping out Belgian and Dutch response 
capability. And the response we received from the Coast Guard 
is that their offers of help were looked at, largely not taken 
into account, I guess mostly not taken into account, because 
they were not considered necessary at the time or useful for 
the particular task.
    But I know that, in Mississippi, there were from France a 
series of skimmers, six or eight skimmers or something, that 
were brought in and were used. So it was possible, in other 
words, to get out help from other countries.
    My sense, frankly is that the Coast Guard was sufficiently 
preoccupied with its own response, that vetting applications 
from other companies and countries and other technologies was 
probably something that in realtime they didn't have an awful 
lot of time to give.
    Mr. Graham. If I can just say, I think this goes back to a 
theme of today, and that is, you don't do basic research while 
fire is out of control. If you haven't done it before the fire, 
it is not likely to be very effective. So I think that things 
like the----
    Mr. Southerland. I understand, Senator. But when you have a 
neighbor that is willing to bring a boatload of hoses, you 
accept those hoses, and you say, you know what? My first 
priority is to put out the fire. OK?
    And I have to tell you, I get angered when I think of the 
pain that we have experienced along that Gulf Coast, and I 
think of my dear friends who are no longer in business. It 
angers me. And yet today we want to talk about the 
responsibility of BP and how they should self-regulate their 
industry. When 790 violations were noted, that is incompetent. 
And yet, you know, we have the idea that we are going to have 
CEOs stand up and sign a letter of certification certifying 
liability. I want Secretary of the Interior and regulatory 
department heads to sign those same documents. OK?
    The American people are tired of sending their money to 
Washington, D.C., and Washington be the problem. I am angered 
by the response of this government in light of this disaster. I 
am angered by the same government that failed in its response 
to Katrina.
    And until we start looking inward and take personal 
responsibility for the lives we are destroying instead of 
assessing blame, it has to be somebody else's fault. The 
responsibility is here. The buck stops here.
    And I am bothered that this commission--Qdecisions, there 
should be 10 down here. In the bottom, I wrote, ``government's 
decision to aid and abet.'' Was there a less likely alternative 
available? Yes. Less time than alternative? Yes, they save 
time--decisionmakers--the Federal Government--onshore.
    And I am bothered, OK, that we are just going to add to the 
bureaucracy when the bureaucracy was the problem, in many ways.
    Mr. Reilly. May I answer that question, Mr. Chairman?
    The Chairman. You sure can.
    Mr. Reilly. You raise an important question that we address 
with respect to safety and personal safety, occupational safety 
and health on the rigs themselves. Presently, when a rig is 
under sail or in motion, it is the responsibility of the Coast 
Guard to ensure safety.
    We recommend that BOEMRE has the full responsibility on the 
rig for safety personnel and that it understand and have the 
capability to enforce that, so that there is not a division of 
responsibility or a confusion about whether this is a delegated 
responsibility from OSHA to the Coast Guard and the role of MMS 
in all of this, that it be amalgamated in one agency.
    On the Jones Act, the key issue, in my view, is to have 
procedures in place ahead of time so that the extensive 
permitting reviews and approvals by the State Department are 
not necessary once the catastrophe may have occurred.
    Mr. Graham. And that was what I was going to say, is that 
you need to anticipate. And I would suggest that this Committee 
could make a significant contribution in doing some serious 
thinking about what are the questions, what are the resources, 
what are the potential impediments when we have the next 
disaster. It won't be exactly like this one, but we will have 
more disasters. And how can we, by anticipating, take actions 
that will avoid the hoses not being delivered.
    Mr. Southerland. Yeah.
    The Chairman. The time of the gentleman has expired.
    The gentleman from Pennsylvania, Mr. Thompson.
    Mr. Thompson. Thank you, Mr. Chairman.
    Gentlemen, thank you for your testimony.
    Someone had offered an airline analogy earlier. And as I 
have looked at and read through and tried to synthesize this 
commission's recommendations, if I applied the Commission's 
recommendations to the airline industry, essentially, with one 
airplane crash, we would shut down all airplanes and, frankly, 
all airports.
    I apologize for being late. I was in a workforce hearing, 
and I had an opportunity to question Governor McDonnell from 
Virginia. And, specifically, my questions were about the impact 
of the Administration's response and shutting down offshore as 
a result of this.
    Here are some of the statistics. And I will be quick with 
this, and then I have my questions. He indicated that, you 
know, this industry would create more than 1,900 new jobs just 
in Virginia, increase the State's gross domestic product by 
$365 million annually, and generate approximately $19.48 
billion in Federal, State, and local revenues.
    Senator Graham, Secretary Reilly, page 2 of your testimony 
states, quote, ``But most of the mistakes and oversights of 
Macondo can be traced back to a single overarching failure--a 
failure of management by BP, Halliburton, and Transocean,'' end 
quote.
    And under the key facts, you also stated that the 
investigation team identified several human errors, engineering 
mistakes, and management failures.
    You know, based on those statements, a logical person would 
conclude that it wasn't the lack of adequate science and 
engineering but the proper application of science and 
engineering by those on the rig that resulted in the Deepwater 
Horizon Macondo tragedy.
    Basically yes or no, do you agree with that conclusion?
    Mr. Graham. Well, I think part of the responsibility of 
effective management is to understand the risk and take steps 
to mitigate the risk. The fact is that there was no effective 
plan in place or capability to implement a plan before this 
accident occurred.
    Mr. Thompson. So it sounds that you agree, it was 
management.
    Mr. Graham. I think that is a failure of management to do 
effective risk analysis and take steps to mitigate the risk.
    Mr. Thompson. Great. Thank you.
    Secretary, any thoughts?
    Mr. Reilly. I would support that. Yes, sir.
    Mr. Thompson. OK. Thank you.
    On page 7 of your testimony, you state, under the headline 
of ``Reforming Industry Safety Practices,'' quote, ``Government 
oversight must be accompanied by the oil and gas industry's 
internal reinvention, sweeping reforms that accomplish no less 
than a fundamental transformation of its safety culture,'' end 
quote.
    Internal reinventions, sweeping reforms, and fundamental 
transformation, you know, frankly, of an entire industry is 
what the implications are of the result of these 
recommendations, frankly are words of alarm and cast a very 
wide net. I assume they are based on a thorough review of the 
hundreds of companies involved in U.S. energy production and 
not just three companies, despite how large they are, that were 
mentioned in the report.
    Did the Commission conduct such a review?
    Mr. Reilly. We conducted a review of the incident itself, 
of accident data----
    Mr. Thompson. So your review----
    Mr. Reilly.--through the industry.
    Mr. Thompson. I think if you answer my question, your 
review was of three companies out of perhaps thousands.
    Mr. Reilly. Well, it is of 79 losses of well control in the 
last, whatever, 20 years or so, affecting a very large number 
of companies operating in the Gulf.
    Mr. Thompson. No, I understand. So the review--frankly, 
there are 3,500--the number I looked at--3,500 rigs in offshore 
production and thousands of companies engaged in production, 
but the conclusion was really based on looking at three 
companies?
    Mr. Reilly. Well, the inferences drawn for the likelihood 
of entailed risk with those three companies largely rest upon 
what we learned from the experience of those three companies. 
But we had significant data about many other companies and 
their experiences that caused us to use the term ``systemic.''
    Mr. Thompson. And I appreciate, you know, that you are 
taking that inference from there, but, essentially, the 
inference is drawn from three companies but, frankly, casting a 
pretty wide net with your recommendations, impacting thousands 
of companies.
    Mr. Graham. But if I could add to that, you made the 
allusion to, and I had suggested, if the United States had a 
four-fatalities-to-one ratio in airline accidents versus, let's 
say, Norway or the United Kingdom, I believe the American 
public would be outraged. That is the situation between the 
North Sea and the Gulf of Mexico. And I don't think that one 
company----
    Mr. Thompson. If I can reclaim my time, because I know I am 
going to get gaveled out here--I am new on the Committee.
    I think the American people would also be pretty irate--
they would be saddened with the loss of one life in an airplane 
accident, no doubt about it, and they would be concerned with 
that airplane crash. But they would also be irate if the 
Federal Government essentially shut down the entire airplane 
industry, as opposed to really focusing on drilling down, no 
pun intended, and systematically determining the root cause of 
that airplane crash.
    And I, obviously, am out of time.
    Mr. Reilly. Congressman, neither Senator Graham nor I nor 
our commission are here to defend the moratorium, not for a 
minute.
    Mr. Thompson. Very good.
    The Chairman. The time of the gentleman has expired.
    That completes the first round, but several Members have 
expressed an interest to follow up on their first questions.
    And, Senator Graham, while I didn't ask you, I asked Mr. 
Reilly, and he says, ``I have all the time in the world.'' So 
he is going to have to answer to you if that is--you know, 
however you want to work that.
    Let me start--Mr. Grijalva had a follow-up, so let me 
recognize Mr. Grijalva for 5 minutes.
    Mr. Grijalva. Thank you very much.
    And let me, at the outset, thank the gentlemen for your 
presence here and for a compelling report.
    The only question, I think--page 142 to 143 in your report, 
you deal with the issue of the Jones Act that came up, that it 
was not, indeed, an impediment to getting foreign assistance or 
outside assistance to come to the aid of that spill. Also, 
there are comments there, after the Governor insisted on those 
berms, that they probably created more problems than they 
solved.
    But the question, I think, has to deal with the word that 
some of my good friends found offensive, and that is the issue 
of ``systemic.'' We have here--and I think your report is 
compelling because it deals with the role of government and the 
lack of oversight on the part of the Federal Government as a 
contributing factor to the laxness that we found. And it deals 
very directly with systemic issues that occur within the 
management and the operation of the industry.
    I think the report is compelling insofar as something needs 
to be done. And if we want to raise the standard of oil 
production offshore, where it is safe, both for life and for 
the environment, then this report needs to be responded to.
    The recommendations that you made for legislative action 
are sound. I don't agree with all of your recommendations, nor 
do I assume every Member agrees with everything in there. It is 
a sound framework. There are principles in there that we must 
deal with. I want to thank you for that, for the time that you 
took and for, I would assume, the seriousness in which we are 
going to take this report.
    So thank you for your time, and thank you for the report. 
As I said, compelling, necessary, and timely.
    Thank you.
    Mr. Reilly. Thank you, sir.
    Mr. Graham. Thank you.
    The Chairman. OK. I thank the gentleman.
    Let me go to Mr. Landry of Louisiana.
    Mr. Landry?
    Mr. Landry. Thank you, Mr. Chairman.
    I am having trouble understanding how you all can come to 
the conclusion that there are these systemic failures by using 
those three companies and claiming that because those three 
companies do such a large percentage of the work in the Gulf of 
Mexico, that every time they go on a job they are using the 
same protocols in engineering for the different customers that 
they are doing business with.
    That simply is not true. There are different well designs 
that are in place by different oil and gas companies. Some of 
those well designs, I might add, have been around since the 
inception of deepwater drilling.
    And so I don't understand how you came to this decision of 
a systemic failure. Why not look at those oil and gas companies 
who have drilled successfully, without incident, looking at the 
well design and saying, this type of well design seems to be 
the safest? In my opinion, it certainly would save the 
taxpayers a lot of bureaucracy if you all took a look at those 
different designs.
    Did you all take a look at the different well designs? And 
did you take in mind that they did not--that when those 
contractors work for different oil and gas companies, they 
don't follow the same protocols and engineering specs?
    Mr. Reilly. We did look at the design of this particular 
well, and at least two companies made clear to us that they 
would not have chosen the design that BP did for that formation 
in that place.
    Mr. Landry. But, Mr. Reilly--and I apologize for cutting 
you off, but you told me earlier that you all took into account 
the 2,500 wells that were drilled in deep water. You told me 
you took into account their history and their success. But yet, 
now you are telling me you only took into account the well 
design on BP, on BP's Macondo well.
    Mr. Reilly. Well, the conclusion that the well design that 
was used by BP at Macondo was not an appropriate one or is one 
that created more risks than were necessary in the eyes of at 
least two companies is based upon a judgment about alternative 
well designs of the sort that you suggest.
    Mr. Landry. Well, I am trying to clarify your answer. I 
mean, did you look at the other well designs and take into 
account that, when you issued your report telling us that there 
is a systemic failure in the industry and that we have to 
create these additional levels of bureaucracy, costing the 
taxpayers hundreds of millions of dollars, when you made that 
recommendation, did you or did you not look at the history of 
the other deepwater wells, the 2,500 or so, that have been 
drilled in the Gulf of Mexico when you took into account 
issuing this report?
    Mr. Reilly. Yes. Yes, sir, we did.
    And let me say, from the point of view of someone who 
considers 1 in 2,500 not so impressive, frankly, if it is going 
to cost $40 billion or $50 billion to the economy of the area 
and to the company involved, I think we are drawing a different 
conclusion from the success rate.
    I regulated at the Environmental Protection Agency, with 
respect to a number of issues, one in a million, which was the 
maximum acceptable impact or fatality, mortality, premature 
death associated with a certain kind of decision, a pesticide 
decision, for example. So 1 in 2,500 doesn't impress me as a 
very positive record, frankly.
    Mr. Landry. Well, I certainly would like you to look in the 
eyes of the people who are losing their jobs down in Louisiana, 
who have built this industry, who have basically been drilling 
since 1947 off of that coast, and tell them that. I can tell 
you, from living down there, that safety is number one. It has 
been for a very, very long time.
    Mr. Reilly. Congressman, the decision to deny them their 
jobs and to shut down every rig in the deepwater area, every 
exploration rig, is one that I think is highly contentious, 
excessive, and hard to justify. And I have made that clear, as 
has Senator Graham, from the outset.
    We would have approached this in a more selective fashion 
so as not to penalize those companies that had not been 
specifically implicated in the disaster after some short period 
of review and inspection which did, in fact, take place, and 
they were cleared.
    So we are not here to defend the denial of jobs or against 
the resumption of activity in the Gulf. Very much we want to 
see it resume, but we want to see it resume safely and 
effectively.
    Mr. Landry. And may I put your name in as a recommendation 
to take Ms. Browner's place then?
    Mr. Graham. Congressman, I have to take some exception to 
the statement that you made about that we are recommending 
hundreds of millions of dollars of additional regulation. Yes, 
we are recommending that there be an adequate, competent, 
politically insulated safety function within the U.S. 
Department of the Interior. I don't think those are radical 
suggestions.
    Number two, we are recommending that the industry, as other 
high-risk industries have done, assume more responsibility for 
their own evaluation of safety. That is no cost to the U.S. 
Government and, I think, is a very prudent suggestion to the 
industry and one which will contribute to the industry's long-
term viability.
    So I would just--if you see something in our report that 
you think is hundreds of billions of dollars, or millions of 
dollars, of additional expense and an excessive addition to 
bureaucracy, I would like to be directed toward that, because 
that was not our intention.
    The Chairman. The time of the gentleman has expired.
    Mr. Flores?
    Mr. Flores. Thank you, Mr. Chairman.
    With the backdrop that I introduced earlier today, and that 
is that we have lease sales that have been canceled, offshore 
areas that have been taken off the availability list to be 
drilled on in the future, higher gas prices, lower domestic oil 
production, lost jobs, a hurt economy, with that--and a lot of 
that is because this report is being relied upon to continue 
moratoria, either de facto or regulatory or however they want 
to be described. And it goes back to this ``systemic, 
industrywide failures'' comment.
    Co-Chairman William Reilly stated, in your January 6th 
release, on chapter 4's release, ``My observation of the oil 
industry indicates that there are several companies with 
exemplary safety and environmental records. So a key question 
posed from the outset of this tragedy is, do we have a single 
company''--that being BP--``that blundered with fatal 
consequences, or a more pervasive problem of a complacent 
industry? Given the documented failings of both Transocean and 
Halliburton, both of which served the offshore industry in 
virtually every ocean, I reluctantly conclude that we have a 
systemwide problem.'' That is your quote.
    Now, Mr. Reilly, based on what I see of the internal 
inconsistency and the weight which this report is being given 
and the energy future of this country, I would respectfully ask 
the Commission if they will amend the report to remove the 
words ``systemwide industry failure.'' Will you do that?
    Mr. Graham. Congressman, how would you defend the presence 
of walrus protection and polar bears in a response plan? Or how 
would you defend Mr. Hayward's telling me there is no subsea 
containment capability? Or the inadequacy of the response 
technology and the failure to invest in it over the last 20 
years after we experienced the disaster in Prince William 
Sound? I think these speak for themselves.
    And the response plans were not confined to the three 
companies. All the majors that we looked at had literally the 
same response plans and the same concern for walruses and the 
dead expert and all the other things we know. And several CEOs 
have said they found it embarrassing and were humiliated by it. 
And that had a lot to do with their decision to create the 
Marine Well Containment Corporation, which is a very 
significant and positive step on the part of the industry.
    So I don't think that you can infer anything other than, 
``Well, it sure looked like complacency.'' And when people say, 
``We never thought it could happen''--and I include myself in 
that--we were complacent. I think the government was, the 
industry was, I was.
    Mr. Flores. Well, again, the application for permits that 
are filed are based on pretty much cookie-cutter requirements 
that the MMS--or what was formally called MMS used to issue.
    Mr. Reilly. And I don't exempt them from the criticism.
    Mr. Flores. OK. And so, maybe there was a regulatory 
failure----
    Mr. Reilly. Uh-huh.
    Mr. Flores.--as part of it. I think we all agree that there 
was. And we all agree that BP had an integral part to play in 
this failure.
    But, unfortunately, what has been condemned here is the 
entire industry, as well as the energy security of this 
country, going forward. And I think it goes back to those 
words, ``industrywide, systemic failure.''
    And I just--I would respectfully disagree with you. I don't 
think that we have that type of a failure. And I would like to 
state for the record, I think those words ought to be struck 
from the report.
    Mr. Reilly. Well, let me just say that our report is 11 
days old, and the degree to which there has been a delay in 
issuing permits or a de facto moratorium that has been referred 
to, I don't think has anything to do with this report. And we 
certainly don't expect or didn't intend that we would 
contribute to that.
    We, in fact, were assuming that a number of these 
recommendations could be implemented coterminously with the 
resumption of activity on the part of the companies that 
weren't in any way involved in the Macondo disaster.
    Mr. Flores. Thank you.
    I yield back.
    Mr. McClintock. [presiding.] The gentleman yields back.
    Congressman Thompson?
    Mr. Thompson. Thank you, Chairman.
    Just one additional question. On page 6 of your testimony, 
under the heading ``Environmental Review,'' you state that the 
Commission recommends, quote, ``a more robust and more formal 
interagency consultation process in which NOAA, in particular, 
is provided a heightened role, but ultimate decision-making 
authority is retained by the Department of the Interior,'' end 
quote.
    And my question--and I wanted to get your rationale behind 
it. Obviously, you know, the role of NOAA was of great concern 
to the Commission. My question actually is, shouldn't the 
Departments of Energy and Commerce have an equal, if not 
greater, voice in NOAA in the formulation of rules and 
regulations that certainly have a great influence on our 
domestic energy production?
    Mr. Graham. Well, just let me clarify. NOAA is part of the 
Department of Commerce. So, I assume, through NOAA----
    Mr. Thompson. Commerce was involved. How about Energy?
    Mr. Graham. Yeah, Department of Commerce would be involved.
    What we were focusing on there, I mentioned it in my 
opening statement. A key fact to understand is that the 
relationship of the U.S. Government to the offshore oil 
industry is not just as a regulator. It is not like the 
relationship of the Department of Transportation to the bus 
industry of America. It is also the relationship of the owner 
of the property. All of that property out there in the Gulf of 
Mexico, beyond the State limits, belongs to the people of the 
United States of America.
    We have made a decision that we will lease portions of that 
to oil companies under certain conditions to evaluate and, if 
found, extract oil and gas. We have the same interests that, if 
you owned a small shopping center, you don't want to have a 
tenant in your center who is trashing it and is going to make 
it impossible for other tenants to have a profitable 
enterprise.
    So I think we need to put ourselves in the position of, 
what should we be doing to assure that our children and 
grandchildren will have a Gulf of Mexico that is of a quality 
that we would be proud to hand over to them as our inheritance.
    I think these recommendations, and particularly the 
recommendations of bringing the best science--and we think the 
Department of Commerce and NOAA represents the best science in 
this area--to bear, in terms of what should be the conditions 
of our proposed tenant to lease our property, is not an 
imprudent thing to do.
    Mr. Thompson. OK.
    Well, one of the--as I came to Congress 2 years ago, one of 
the things that just appalled me--and, you know, this is over 
different administrations, different parties--is the absolute 
lack of a national energy plan in this country. And when we are 
talking about the Outer Continental Shelf and offshore 
resources or onshore resources, you know, frankly, the Energy 
Department was formed for that very purpose, to achieve energy 
independence, I guess, in the 1980s when it happened. It has 
failed miserably. But I think one of the proper steps, 
obviously, would be involved in this type of a process.
    Mr. Graham. I am completely in agreement with that. In 
fact, it was my position, and I think this is reflected in the 
report, that you can't answer the question, ``What is the 
future of the offshore industry?'' without answering the larger 
question, ``What is our energy policy in the United States?''
    I was telling Bill, and he had already seen it, that in 
yesterday's newspapers there were some articles about the fact 
that the RAND Corporation had raised questions about whether 
the U.S. military could convert to a less fossil-dependent 
Navy, Air Force, Army. And they raised serious doubts about 
whether that could be done, which, to me, just underscores the 
importance of this industry for our fundamental national 
security.
    Mr. Thompson. Great. Well, thank you.
    Thank you, gentlemen, for your testimony. I have additional 
questions, but we will forward those along. Thanks.
    Mr. McClintock. Thank you.
    Mr. Grijalva?
    Mr. Grijalva. Thank you.
    And this, gentlemen, I swear, are the last questions. We 
all need to be outside, enjoying the blizzard that is 
happening.
    Mr. McClintock. Why not stay here? There is no place else 
to go.
    Mr. Grijalva. Gentlemen, both of you have said that the 
resumption and full production of offshore drilling, in terms 
of energy production, is something that you want to see and 
that could be occurring as we make the other kinds of 
adjustments that we have to make to make this industry safer 
and our role as a government stronger.
    And one of the key recommendations that the Commission made 
is that the Federal oil and gas regulators that have been 
underfunded--I think they are getting less now than they did 20 
years ago--that we create a dedicated funding stream for oil 
and gas fees to fund this, so it is well-trained, professional, 
a level of--an insulation of independence.
    And yet, as we are talking about this and the critical need 
to deal with the production issue that has come up consistently 
here by my colleagues, we are also talking about reductions to 
2006 levels, to 2008 levels, based on the resolutions that we 
are dealing with on the Floor.
    So, at some point, this full production restoration idea 
and concept that you support as commissioners, with the 
backdrop of not ever meeting the Commission report in terms of 
providing a robust oversight regulatory function for government 
that is independent, how do you reconcile that one opinion with 
the lack of resources on the other end?
    Any comment would be fine.
    Mr. Graham. Well, it is our recommendation that, like is 
the case with most other industries, industries who don't have 
this additional characteristic of being our tenants, we expect 
the airline industry, the telecommunications industry, across 
the board virtually, to pay for their own regulation. They are 
self-funded regulation. We did not see any compelling reason 
why that should not be true of this industry. So that would be 
our basic recommendation.
    That would take action by the Congress if, for instance, 
there were--as there is now for the oil liability fund--a fee 
attached to each barrel of oil. I believe that is for both 
imported as well as domestically produced, which goes into that 
fund. Maybe we need to have a supplemental stream to go into a 
fund for the regulation of the industry so that we can assure 
to the industry that we will have a competent, sustained 
ability to assure safety and----
    Mr. Grijalva. Well, Senator, on my question, if I may, you 
see a linkage and not an either/or proposition?
    I21Mr. Graham. I mean, either/or----
    Mr. Grijalva. Either you have the regulatory capacity and 
the resources to deal with the demand for full production, and 
if that linkage doesn't occur, is it an either/or proposition?
    Mr. Graham. No, my----
    Mr. Grijalva. Can you have one without the other?
    Mr. Graham. Well, the answer is, I don't think it is in the 
interest of the American people not to have adequate standards, 
again, in part, because we have just seen what the consequences 
are to a lot of very innocent people, and we have seen what the 
consequences are to an important piece of real estate that 
belongs to all of the people of America.
    Mr. Grijalva. Yeah, I think the question is, reducing 
Interior's levels to 2006-2008 that directly impact your 
recommendation, in terms of building up the resource capacity 
and the overall capacity of regulators and oversight, that, I 
think, does not help the safety demands for offshore drilling 
that is also a part of the recommendations.
    Mr. Reilly. We are quite clear that the quality of 
regulation has been insufficient; that an industry which did 
not used to be a high-risk industry, as it has proceeded so 
heavily into deep water, has become that. The industry, itself, 
needs to take the steps that are suggested by this catastrophe, 
but so does government.
    Other governments have done so after their own 
catastrophes. We have mentioned the United Kingdom and Norway, 
which responded to very severe accidents that they had by 
separating the revenue-generating function from the regulatory 
function and significantly improving the quality of their 
regulator.
    Senator Graham mentioned that, in the United Kingdom, the 
oil and gas industry lobbies for more appropriations for the 
regulator, because they recognize that quality in the 
regulator--as did Mr. Tillerson, the Chairman of ExxonMobil, in 
his testimony before us, and Mr. Odum, the President of Shell 
USA. Both of them mentioned the quality of regulation as 
essential to the quality of industrial activity.
    That is all we are really suggesting. So, to try to save 
money at BOEMRE, at this point, having seen that budget go down 
20 percent over the last 20 years as the oil and gas production 
in the Gulf went up 300 percent, is really penny-wise and 
pound-foolish.
    Mr. Grijalva. Thank you, sir.
    The Chairman. [Presiding.] The time of the gentleman has 
expired.
    Mr. McClintock of California?
    Mr. McClintock. Thank you, Mr. Chairman.
    First, I would like to ask unanimous consent to insert into 
the record the Wood-MacKenzie report commissioned by the 
American Petroleum Institute, entitled, ``The Impact of Gulf of 
Mexico-Deepwater Permit Delays on U.S. Oil and Natural Gas 
Production, Investment, and Government Revenue,'' dated 
December 2010, which I cited earlier. And I have souvenir 
copies for our lucky panelists.
    The Chairman. Without objection, so ordered.
    Mr. McClintock. Thank you.
    [NOTE: The report entitled, ``The Impact of Gulf of Mexico-
Deepwater Permit Delays on U.S. Oil and Natural Gas Production, 
Investment, and Government Revenue'' has been retained in the 
Committee's official files.]
    Mr. McClintock. I would also like to ask unanimous consent 
to include the Wall Street Journal editorial which I 
referenced.
    The Chairman. Without objection, so ordered.
    [The Wall Street Journal editorial follows:]

                          Gulf Political Spill

Wall Street Journal
Editorial dated January 13, 2011
    President Obama's drilling commission released its 398-page report 
on the causes of the Gulf oil spill this week, and talk about a lost 
opportunity. After six months of hearings and interviews, the 
commission still doesn't know what caused the accident but does think 
it knows enough to condemn all and sundry.
    The disaster, we are told, was primarily the result of 
``overarching failure of management'' \1\ by BP, Transocean and 
Halliburton--which is hardly news to anyone who's been paying 
attention. Yet the commission didn't stop with the companies that 
managed the Macondo well, going on to blame the highly unusual blowout 
on a ``system-wide problem'' of failed regulation and a complacent 
industry that requires ``significant reform.''
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    \1\ Page 90 of the full Obama Spill Commission Report
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    These sweeping conclusions are remarkable from a commission that 
admits to knowing so little. The report cites several questionable 
decisions made by Macondo drillers as the ``immediate causes'' of the 
blowout, only to acknowledge it can't say which, if any, were the 
cause:
      ``It is not clear whether the decision to use a long 
string well design contributed directly to the blowout.'' \2\
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    \2\ Page 115
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      ``The evidence to date does not unequivocally establish 
whether the failure to use 15 additional centralizers was a direct 
cause of the blowout.'' \3\
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    \3\ Page 115
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      ``Whether ... `unconverted' float valves contributed to 
the eventual blowout, has not yet been, and may never be, established 
with certainty.'' \4\
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    \4\ Page 116
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    Unable to name what definitely caused the well failure, the 
commission resorts to a hodgepodge of speculations. Adding to the 
confusion, it acknowledges it could find no evidence that BP or its 
contractors ``consciously chose a riskier alternative because it would 
cost the company less money.'' The commission didn't even wait to get 
an autopsy of the failed blowout preventer, which is rusting on a 
Louisiana dock.
    The report's one firm conclusion boils down to this: In the hours 
preceding the explosion, crew members missed ``critical signs'' that 
something was wrong. ``The crew could have prevented the blowout--or at 
least significantly reduced its impact--if they had reacted in a timely 
and appropriate manner.'' \5\ This is called human error, in this case 
with tragic consequences to those who erred.
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    \5\ Page 120
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    Yet it's hardly evidence that the entire drilling industry is an 
accident waiting to happen, as the commission insists. Its section 
``The Root Causes: Failures in Industry and Government'' \6\ uses 
questionable decisions made by the Macondo players to suggest, with no 
evidence, that such behavior is the industry norm.
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    \6\ Page 122
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    The report fails to reconcile this indictment with the industry's 
prior safety record, or with the fact that many countries have modeled 
their drilling technology and practices on those of the Gulf. For a 
better account of how unusual the Macondo practices were, we recommend 
the June 11, 2010 letter to the editor in this newspaper from Terry 
Barr, the president of Samson Oil and Gas.
    The commission nonetheless offers an array of recommendations, most 
of which would severely restrict oil and gas drilling. Despite 
President Obama's promises that the new Bureau of Ocean Management 
(formerly the Minerals and Management Service) is now a shipshape 
regulator, the commission recommends that Congress create another 
agency to supervise drilling. Now, there's a new idea--another layer of 
bureaucracy to supervise the bureaucracy that failed.
    The report also advocates toughening the National Environmental 
Policy Act to make it harder for companies to obtain drilling leases. 
Another section doubts it is possible ever to drill safely in Alaska or 
the Arctic--a hardy perennial of the anti-oil lobby.
    This was all too predictable given the political history of 
commission members. Former Democratic Senator Bob Graham fought 
drilling off Florida, William Reilly is the former head of the 
antidrilling World Wildlife Fund, and Frances Beinecke ran the Natural 
Resources Defense Council, which is opposed to carbon fuels. Not a 
single member was a drilling engineer or expert in oil exploration 
technology or practices.
    Compare this to the Rogers Commission, which investigated the 
Challenger space shuttle disaster of 1986. Led by former Secretary of 
State William P. Rogers, that group included theoretical and solar 
physicists, engineers and aeronautics specialists. The commission 
located the exact cause of the disaster (failed O-rings) and prescribed 
precise safety changes. The preface of the Rogers report states that 
the only way to deal with such a failure is to investigate, correct and 
``continue the program with renewed confidence and determination.''
    The unbalanced, tendentious nature of the commission report 
vindicates those who suspected from the start that this was all a 
political exercise. The White House has been pounded on the left for 
agreeing to ease drilling restrictions before the spill, and now it is 
looking for support to walk that back. Though the Administration 
officially lifted its Gulf drilling moratorium and issued new safety 
rules two months ago, it has refused to permit a single new well.
    U.S. gasoline prices are now above $3 a gallon, and the decline in 
Gulf drilling will not help supply. Forecasters predict domestic 
production will fall at least 13% this year due in part to the Gulf 
lockdown. Meanwhile, last week the British Parliament rejected a 
drilling moratorium in U.K. waters on grounds it would cause 
``expertise to migrate,'' decrease ``security of supply'' and harm the 
British economy.
    The BP spill was a tragedy that should be diagnosed with a goal of 
preventing a repeat, not in order to all but shut down an industry that 
is vital to U.S. energy supplies and the livelihood of millions on the 
Gulf Coast.
                                 ______
                                 
    Mr. McClintock. Mr. Chairman, if I were to summarize what 
we have learned today, it is this: We faced an engineering 
issue. A blowout preventer failed, and it failed 
catastrophically. It caused enormous environmental and economic 
devastation.
    Before this commission was empaneled, we did not know why 
that blowout preventer failed. After the Commission concluded 
its work and issued this report, we still don't know why that 
blowout preventer failed. We don't know why it failed because 
the Commission never even bothered to look at the blowout 
preventer, which, according to the Wall Street Journal, is 
rusting on a dock in Louisiana.
    We have never had a blowout failure like this one. Until we 
find out why it failed, it could happen again. It could happen 
at any time. And the Commission has not advanced our 
understanding of how to prevent it one bit.
    The contrast between this commission's work and the Rogers 
Commission after the Challenger disaster is staggering. If the 
Rogers Commission had operated in the same manner, we would 
still have no idea what caused the Challenger to explode or how 
to prevent it in the future.
    We have before us a report offering bureaucratic 
prescriptions to an engineering problem, authored by 
bureaucrats, rather than an engineering prescription authored 
by engineers.
    I don't know exactly how the Committee would advance the 
issue from here. I certainly seek the Chairman's guidance. But 
I would recommend that we take whatever action is necessary to 
empanel a panel of engineering experts to go down to that dock 
in Louisiana, retrieve that blowout preventer, tear it apart 
piece by piece, find out what caused it to fail, and do so 
before it happens again.
    Mr. Reilly. Would the gentleman yield? I would just respond 
to that, if I might.
    Sir, I think that you can draw an analogy between the 
blowout preventer and a seatbelt in an automobile accident. It 
is obviously important to the survival of someone that the 
seatbelt wasn't fastened, but it doesn't really explain why the 
accident occurred.
    We explained why the accident occurred. We fingered and 
identified, I think, all of the major contributors, the 
decisions, and their technological consequences, their 
engineering consequences that led to the disaster.
    Examining the blowout preventer is not going to cause those 
other facts that we uncovered to go away. They are there. They 
are distressing. They do have implications for policy, and we 
tried to draw them.
    The Chairman. Well, I want to thank both of your witnesses 
for being here today. I know you had a long day. You started at 
10 o'clock in the Senate. And I very, very much appreciate your 
willingness to stay here so some of our Members could have 
another explanation or a clarification of what is going on.
    I know that there will be some other questions that 
Members, probably on both sides, would like to ask you. And if 
you would agree to respond in writing to those questions, we 
would very much appreciate that.
    Mr. Reilly. We will do that, Mr. Chairman. We have a staff 
I think for another 5 weeks, 4 weeks.
    The Chairman. OK, great.
    Mr. Reilly. And we will use them to the very end, to the 
extent they allow that.
    I would just like to say, we very much appreciate the 
attentiveness, the interest of this Committee, the thoroughness 
of the kinds of questions that we received, and understand the 
seriousness of different kinds of concerns about our report and 
about the conclusions that we drew.
    We hope it is helpful to the deliberations of the Committee 
and that the relatively modest proposals we have made are 
looked at seriously and perhaps implemented. As I mentioned, I 
think they are modest in terms of cost and bureaucracy 
disruption.
    The Chairman. Well, I thank you for that.
    And let me just mention and, again, reiterate what I said 
at the start of this, at the start of when the BP well broke, 
that we had to find out what went wrong. We will continue to do 
that. And, as I mentioned in my opening statement, there are 
two more reports out. We will look at what they have to say and 
draw, hopefully, some conclusions from that.
    But I also will reiterate what I also said in my opening 
response. What we do here will send a very, very strong signal 
into what I think is very, very critical long term. And long 
term is the energy security of our country. You alluded to 
that. So the balance we have to make is make sure that we 
continue to have a robust industry, especially in a down 
economy.
    So, with that, I want to thank all of the Members again for 
being here, and especially for the two of you to stay for this 
long time.
    And, with that, if there is no further business, the 
hearing stands adjourned.
    [Whereupon, at 5:16 p.m., the Committee was adjourned.]

    [Additional material submitted for the record follows:]

    [The prepared statement of Mr. Holt follows:]

               Statement of The Honorable Rush D. Holt, 
       a Representative in Congress from the State of New Jersey

    Thank you Chairman Hastings and Ranking Member Markey for holding 
this hearing today on the final report of the National Commission on 
the BP Deepwater Horizon Oil Spill and Offshore Drilling. I look 
forward to hearing from the distinguished co-chairs of the Commission; 
Senator Graham and Mr. Reilly on the findings of the Report.
    Although the oil has stopped gushing into the Gulf, the crisis is 
far from over. The Report to the President from the Commission made one 
point all too clear. The BP Deepwater Horizon Spill is not an isolated 
incident. As long as we continue to drill for gas and oil off our 
shores it is not a question of if, but when the next oil spill is going 
to happen.
    Our existing regulatory system is inefficient, plagued with loop-
holes for big oil companies, and all too often lets polluters off the 
hook while exposing taxpayers to economic harm.
    One of the issues that I am pleased that the Commission addressed 
in the Report is that of liability limits for oil and gas companies as 
the result of an oil spill. Since the spill began I have been concerned 
about the fisherman, the hotel owner, the tourism operator and those 
whose livelihoods depend on the Gulf. Under the Oil Pollution Act (OPA) 
of 1990, oil companies are required to cover the full costs of 
``removal.'' However the law set a $75 million cap for economic and 
natural resources damages.
    Many of us breathed a sigh of relief when BP established a $20 
billion escrow account to compensate individuals and businesses for the 
damages inflicted by the spill. So far they have paid over $2.5 billion 
in economic damages from the spill, demonstrating that the current $75 
million liability cap remains a laughable amount.
    When the next spill occurs--and it's a matter of when, not if--
there is no guarantee that the next oil company can or will cover all 
damages. We shouldn't wait for that spill to occur to make the 
necessary legal changes to ensure that companies like BP pay for every 
last cent of the mess they made.
    This is why today I, along with 17 of our colleagues, introduced 
the Big Oil Bailout Prevention Act which would eliminate the liability 
cap for economic and natural resources damages.
    The report reinforces the need for this legislation, finding that 
the current liability cap ``limits liability well below levels that 
might actually be incurred'' and that the ``cap distorts the incentives 
of industry participants to adopt cost-effective safety precautions.''
    The liability cap is just one of the issues that need to be 
addressed by Congress in the wake of this report. The Commission's 
Report states that without Congressional action, we cannot ensure that 
the Department of Interior will have the tools necessary to protect 
America's coastal communities economic and environmental interests, or 
guarantee the safety of our nation's oil and gas rigs for workers. I am 
proud to be a cosponsor of legislation introduced by Ranking Member 
Markey today that would implement all of the much needed reforms cited 
in the Report. I look forward to hearing from our distinguished 
speakers today and to work with my colleagues to implement these much 
needed reforms.
                                 ______
                                 
    [The prepared statement of Mr. Landry follows:]

             Statement of The Honorable Jeffrey M. Landry, 
        a Representative in Congress from the State of Louisiana

    Thank you, Chairman Hastings, for calling this hearing and for 
starting this Congress off on the right foot with responsible and 
meaningful oversight. I can think of no better way to start a new 
tradition of oversight than reviewing the BP Deepwater Horizon Oil 
Spill Commission Report.
    Many thanks to the Chairman for also giving me time to express the 
views of many of my constituents who have not had an opportunity to 
make known their grievances with the recommendations of the Commission.
    I would also like to thank Senator Bob Graham and the Honorable 
William Reilly for coming before this committee to answer, what I 
believe will be tough but fair and very important questions.
    Let me state that the tragic accident of April 20, 2010 cannot be 
ignored nor minimized. This disaster killed eleven workers and 
generated one of the largest oil spills in United States history. Many 
Louisianans were affected by the explosion on the Gulf and the 
subsequent waves of oil that blanketed our coastline.
    While this accident cannot be ignored, it can also not be employed 
as justification for debasing the entire offshore drilling industry.
    My first priority is always the safety and economic well-being of 
my constituents in Coastal Louisiana. After analyzing and evaluating 
the Commission's broad range of recommendations, I have some concerns 
that I would like for our witnesses to address today.
    First, I would like to express my concerns with the Commission's 
recommendation of continued overlapping of new and existing regulatory 
agencies within the Department of Interior. I believe that more 
agencies at the Department of Interior and at the Bureau of Ocean 
Energy Management, Regulation and Enforcement (BOEMRE) will ultimately 
create more red tape without improving human or environmental safety.
    Moreover, the proposed regulations will delay offshore oil 
production and will prolong Louisiana's high unemployment rate. Thus, 
the Commission's recommendations are diametrically opposed to the 
Administration's own stated goals of reducing unemployment and 
lessening our dependence on foreign oil.
    Furthermore, I am disappointed that the Commission does not address 
the economic and labor impacts of actually implementing all the 
Commission's recommendations.
    A scant eight days ago, President Obama signed an Executive Order 
stating that government regulations should ``take into account benefits 
and costs'' and ``further economic growth, innovation, competitiveness 
and job creation.'' Again, the Commission's report runs directly 
counter to the Administration's own stated goals.
    Specifically, I am frustrated that the Commission failed to address 
the economic factors of the President's offshore drilling moratorium--
including the number of lost jobs, wages and oil revenue to the United 
States Treasury. The moratorium has already reduced United States oil 
production and has cost numerous Louisiana jobs. I believe these facts 
needed to be fully addressed in the report.
    Finally, I believe we need to make sure that effective, efficient 
reforms are made to improve safety while still allowing drilling to be 
conducted in the Gulf of Mexico. Rest assured, I will continue to work 
with my fellow like-minded colleagues on the Natural Resources 
Committee to create and keep jobs in the offshore energy sector.
                                 ______
                                 
    [The prepared statement of Mr. Wittman follows:]

             Statement of The Honorable Robert J. Wittman, 
        a Representative in Congress from the State of Virginia

    Chairman Hastings, thank you for holding this important oversight 
hearing. Senator Graham and Administrator Reilly thank you for your 
presence here today and for your efforts leading the President's 
National Commission on the BP Deepwater Horizon Oil Spill and Offshore 
Drilling.
    The fire, sinking and loss of the 11 crewmembers of the Deepwater 
Horizon drilling rig was a true tragedy. The Gulf region is still 
recovering from the economic and ecological impact of the oil spill.
    We must make every effort to ensure that federal agencies are 
effectively structured to regulate offshore drilling, while protecting 
the environment and meeting our nation's energy demands.
    Since the oil spill significant steps have already been taken to 
improve safety standards for the oil and gas industry. Structural 
reforms at the Department of Interior by Secretary Ken Salazar have 
fundamentally altered the regulatory body responsible for offshore 
drilling. These new regulations and structure address many of the key 
government oversight failures that led to the Gulf oil spill. 
Additionally, the oil and gas industry has taken steps to develop 
advanced technology that would lessen the likelihood of similar 
catastrophic blowouts. These and other steps have already made the 
offshore industry safer.
    It is appropriate to carefully review and ensure that offshore 
energy production is appropriately regulated and conducted in a safe 
and environmentally sensitive manner. However, it is also critical that 
we promote responsible American made energy, including oil, natural 
gas, nuclear, coal, and renewable energy. Unfortunately, the 
Commission's report on balance includes proposals that would ultimately 
restrict domestic energy production with little measurable increases in 
safety. Of particular concern is the Commission's implicit support for 
the Administration's ongoing moratorium on energy development in the 
Atlantic Ocean.
    Virginia has the opportunity to develop offshore energy in an 
environmentally friendly manner and lead the nation in improving our 
energy security and creating thousands of jobs. The economy of Virginia 
will benefit tremendously from the demand for goods and services 
created by offshore development.
    Promoting offshore oil and gas development is one tool in an ``all 
of the above'' energy strategy that is necessary to meet our nation's 
growing needs. In addition to oil and gas, Virginia has the potential 
to develop offshore windmills and other types of renewable energy. All 
of these forms of energy are necessary to meet the challenges of the 
21st Century.
    I look forward to continuing to move Virginia towards energy 
independence, offshore energy development and job creation.
                                 ______
                                 
    [The response to questions submitted for the record by Mr. 
Reilly and Senator Graham follows:]

    Response to questions submitted for the record by the National 
 Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling

Chairman Doc Hastings (WA-R)--Questions
 Question: Acknowledging that the U.S. will have less domestic 
        production from the OCS in the foreseeable future; does the 
        Commission have any recommendations as to where Congress should 
        promote domestic oil and gas development to offset those 
        losses?
    Response: The Commission does not foresee that any of its 
recommendations will lead to less domestic production from the OCS in 
the foreseeable future. The Commission instead concluded that the 
Macondo well blowout was fully preventable and that deepwater drilling 
in the Gulf can be done safely in the future with appropriate 
safeguards, all of which are readily achievable. The only threat to 
domestic production from the OCS would be the failure of industry and 
government to take those necessary steps to restore safe drilling to 
the Gulf.
 Question: The Commission dealt primarily with offshore production, 
        would the Commission encourage greater onshore oil and gas 
        production from federal lands where an oil spill would be less 
        complex to clean up and mitigate?
    Response: The Commission did not consider the comparative safety of 
onshore and offshore drilling because the President's charge to the 
Commission was limited to the viability of offshore drilling, 
especially in deep waters. Because, moreover, the Commission concluded 
that deep water drilling in the Gulf can be done safely and those deep 
waters are where significant oil and gas resources exists, the 
Commission never had occasion to determine whether onshore production 
was needed as a substitute for offshore drilling.
 Question: According to press reports, after the Commission released 
        some of its findings, companies came forward with information 
        that rebutted specific statements in the Commission's report.
 Since the Commission doesn't appear to have incorporated the new 
        information provided after the press leak in the final report, 
        how will that new information be utilized and made available to 
        the public?
    Response: The Commission has received no information from companies 
since the release of the Commission's final report that has refuted any 
of the Commission's findings and conclusions concerning the causes of 
the Macondo well blowout and the resulting Deepwater Horizon rig 
explosion. Chapter 4 of the Commission's final report summarized those 
findings and conclusions. As promised by that report, moreover, the 
Commission's Chief Counsel has since released a detailed and full 
account of those same findings and conclusions in a 350 page technical 
report. That Chief Counsel's Report describes in exhaustive detail all 
the engineering and management mistakes made by the three companies 
that resulted in the well blowout and rig explosion.
    The Chief Counsel, the Commission's Chief Scientist, and the Chief 
Counsel's investigation team met repeatedly with representatives of the 
three companies principally involved in the blowout--BP, Halliburton, 
and Transocean--and other oil and gas companies. Indeed, for much of 
the investigation, those companies were all extremely cooperative and 
provided invaluable information. The Chief Counsel asked BP, 
Halliburton, and Transocean to review his draft final report to the 
Commission prior to its publication to give them the opportunity to 
correct misstatements and provide additional information. The Chief 
Counsel took that same precaution in late October 2010, immediately 
prior to holding a public hearing in which he detailed for the 
Commission his preliminary findings and conclusions. Each of the three 
companies was provided a preview of that presentation, again, in order 
to allow them to correct misstatements and provide additional 
information.
    In short, the Commission's Chief Counsel gave the companies 
extraordinary opportunities to comment on the Chief Counsel's findings 
and conclusions prior to their release because the Chief Counsel was 
determined to provide the Commission and the American public with the 
most comprehensive and accurate accounting of the causes of the Gulf 
oil spill disaster. The Commission's investigation has never been aimed 
at determining legal responsibility or allocating blame for the 
blowout. The companies involved may nevertheless believe that the Chief 
Counsel's and Commission's findings could be relevant to the outcome of 
other proceedings. It is therefore understandable that they would 
advocate factual positions that would, if accepted, minimize their 
potential liability.
 Question: Did any controversial findings require corroboration?
    Response: The Commission does not view its findings as 
controversial or in any manner as unsupported. The Commission's 
exhaustive investigation identified precisely the mistakes made that 
caused the well blowout and rig explosion. Both the Commission's final 
report and the Chief Counsel's report to the Commission provide 
detailed corroboration for each of the Commission's findings and 
conclusions regarding the causes of the blowout and explosion. The 
Commission's final report provides that description and corroboration 
in a more summary fashion as part of the Commission's overall report, 
and the Chief Counsel's report to the Commission sets it forth in 
greater detail, in over 350 pages of text, figures, and footnotes. That 
accounting properly identifies areas where there is unavoidable 
uncertainty. Any remaining uncertainty, however, has no bearing on the 
strength of the Commission's ultimate recommendations for changes in 
government and industry practices, which are more than amply supported 
by what the Commission concluded with certainty.
 Question: What record of proof was considered sufficient to support a 
        particular finding?
    Response: The Commission did not assume the role of a judge or 
jury, applying a strict legal standard of proof, such as the 
``preponderance of evidence test'' applied in civil liability lawsuits 
or the ``beyond reasonable doubt'' standard applied in criminal 
prosecutions. The President's Executive Order to the Commission 
expressly instructed the Commission not to apply formal legal standards 
that might intrude upon potential civil litigation or criminal 
prosecution. For that reason, the Commission instead applied a standard 
of reasonable certainty, meaning whether the evidence allowed the 
Commission to conclude with reasonable certainty what had happened and 
whether the action taken was either an engineering mistake or failure 
in management.
 Question: How did Commission staff resolve conflicts between witness 
        accounts?
    Response: As a practical matter, by the time the Commission staff 
had completed its investigation, there were very few witness accounts 
of facts that differed in ways that affected the Commission's ultimate 
findings and conclusions regarding the causes of the well blowout. The 
Commission's investigation instead found striking common ground 
regarding the basic facts and the Commission consulted its own Chief 
Scientist and a team of expert engineers and scientists, many of whom 
work with industry, to evaluate those facts in identifying the mistakes 
made by the three companies.
    When the Chief Counsel discovered an important factual or 
analytical dispute that was central to the Commission's investigation, 
he took the steps to resolve the dispute. For instance, after BP called 
into question the stability of the Halliburton cement slurry, and 
Halliburton refuted those claims, the Chief Counsel obtained from 
Halliburton the cement recipe used at Macondo as well as materials for 
testing the recipe. The Chief Counsel then obtained the services of 
Chevron, one of the world's leading experts on cement, to test the 
stability of that formula. Those tests revealed that Halliburton's 
cement, based on that formula, was in fact unstable. This was a major 
fact finding achieved by the Commission.
    Finally, to the extent that the Commission concluded that the facts 
were uncertain, the Commission expressly acknowledged that uncertainty 
and explained to what extent, if any, that uncertainty affected the 
Commission's finding and conclusions. Such candor was consistent with 
the Commission's charge: to provide the American people with a full and 
comprehensive accounting of the blowout. Such an accounting invariably 
includes acknowledgement of remaining uncertainties.
 Question: What standards did the staff apply to determine whether a 
        particular statement was credible or not? For example, was 
        hearsay considered reliable?
    Response: The Commission staff considered the full context of any 
statement in determining its reliability, including but not limited to 
the credibility of the person making the statement, his or her relative 
expertise, and corroborating documentary evidence. As a general matter, 
the Commission sought to rely primarily on statements of facts offered 
by those with firsthand knowledge of factual assertions being made. 
And, for that same reason, hearsay as a general matter was discounted. 
In some instances, however, the Commission staff had no choice but to 
rely on hearsay, for example, to investigate the statements and actions 
of several men who died on the rig. In such circumstances, hearsay is 
the only available evidence. When such hearsay was the basis of the 
Commission's findings, the Commission sought, as fact finders 
traditionally do in such circumstances, corroboration of those 
statements by more than one source. In addition, the Commission always 
made clear in its report the full basis of its factual finding so 
others could weigh it accordingly.
    As described in response to an earlier question, however, as a 
practical matter, factual disputes were not a major problem for the 
Commission staff investigation. The Commission's factual investigation 
resulted in a factual accounting regarding the drilling of the Macondo 
well and the response and containment efforts about which there is very 
little meaningful dispute about what happened.
    On occasion, there were disputes regarding the engineering or 
scientific significance of certain facts and data. In some instances, 
representatives of the companies principally involved disputed the 
importance of certain data or undisputed facts. In cases of analytic 
disputes, the Chief Counsel's staff consulted an extensive array of 
industry and academic experts before reaching conclusions, and noted in 
the Chief Counsel's report any meaningful differences between our 
findings and those of others.
 Question: How did the staff conduct its deliberations?
    Response: There were no formal deliberations by staff. Staff met 
frequently and informally to discuss facts, analyses, and written work 
products. In addition, they prepared draft written work products, which 
were reviewed by staff team leaders and ultimately by the Executive 
Director and/or Chief Counsel prior to submission to all the 
Commissioners. The Commissioners, by contrast, did deliberate and, as 
required by the Federal Advisory Committee Act, Commissioner 
deliberations took place in public.
 Question: Who was present?
    Response: There were no formal meetings in which staff deliberated. 
Of course, there were informal conversations between staff on a 
consistent basis over the course of their research and investigation.
 Question: Were they confidential?
    Response: There were no staff deliberations. Internal staff 
discussions that occurred regularly on an informal basis during staff 
research and investigation were not open to the public. As discussed 
above, staff frequently invited technical experts from the companies 
involved in the blowout to discuss and explain facts and data.
 Question: If they were not confidential, will you make the 
        deliberations public?
    Response: Because there were no formal staff deliberations, there 
is no information to be made public. There are no minutes or written 
account of the myriad informal conversations that staff had with each 
other during staff research and investigation. The work product that 
resulted from staff research and investigation were draft staff working 
papers, draft staff findings and recommendations, and draft staff 
chapters, all of which were submitted to the Commissioners. Draft staff 
working papers submitted to Commissioners were published on the 
Commission website. Draft staff findings and recommendations were 
presented to the Commissioners at a hearing open to the public at a 
December deliberative meeting. And, finally both the Commission's final 
report, which was based on the Commission's written work and the final 
staff working papers have all been released to the public, as has the 
Chief Counsel's Report to the Commission.
 Question: Some individuals have raised concerns about the 
        investigative techniques practiced by the staff working on the 
        Commission's report. In order to better understand the reasons 
        behind the investigative techniques employed by the staff, 
        please answer the following questions:
 Why did the staff conduct ``group interviews,'' that is, interview 
        more than one person at a time, thus allowing the perspective 
        of one person to influence that of another?
    Response: The Commission staff conducted interviews both on an 
individual basis and on a group basis. Both types of interviews can be 
effective in fact finding. At the November hearing, the Chief Counsel 
engaged in some group interviews because that was an effective means of 
resolving and highlighting for the Commissioners and the American 
public significant differences in viewpoints expressed by witnesses. 
Staff also conducted several group interviews with teams of technical 
experts (as opposed to fact witnesses) to facilitate a robust 
discussion of technical issues.
 Question: Why did the staff announce preliminary findings publicly, 
        thus allowing witnesses and subjects of the investigation to 
        adjust their rendition of events prior to the final findings 
        being published?
    Response: The purpose of announcing preliminary findings when the 
Commission staff did so was to ensure the accuracy of the staff's final 
proposed findings for submission to the Commissioners. Such a procedure 
allowed, and the Commission staff encouraged, anyone with information 
relevant to the preliminary findings to submit that information prior 
to the issuance of any final staff proposed findings. Like any fact 
finder, the staff can discount the persuasiveness as appropriate of 
efforts by witnesses and subject to investigation to adjust their 
rendition of facts in light of those preliminary staff findings.
 Question: Why did the Chief Counsel paraphrase and summarize testimony 
        during the Commission's public hearings instead of quoting 
        witness statements as a means of ensuring an accurate record?
    Response: The transcript of the hearing already provided a verbatim 
record of what witnesses said. The purpose of the Chief Counsel's 
paraphrasing and summarizing was to provide the full Commission with 
the benefit of the Chief Counsel's considered judgment concerning what 
had been learned from the two days of testimony the Commissioners had 
heard. The Commission has publicly posted all transcripts of witness 
testimony on its website for public review.
 Question: The Commission's recommendations state that pollution 
        prevention standards should be developed in consultation with 
        international regulatory peers. Are you familiar with the joint 
        work of the International Oil Spill Conference? Is that an 
        adequate international working group?
    Response: The Commission is aware of the International Oil Spill 
Conference and Commission staff had occasion in their research to 
review some of the papers and abstracts presented at every 
International Oil Spill Conference from 1969 to 2008. The Commission 
has taken no view on whether that particular organization would be 
sufficient for the development of the necessary standards.
 Question: The Commission has made it clear that all of industry has 
        the same ``safety culture'' that was practiced on board the 
        Deepwater Horizon and that the failure of the ``safety 
        culture'' as evidenced by the explosion and subsequent oil 
        spill are systemic and overarching.
 How many drilling contractors operate in the Gulf and what percentage 
        of those operators did the Commission interview and which of 
        these operators safety records and cultures did the Commission 
        analyze?
    Response: The question is based on an incorrect premise. The 
Commission made no such statement regarding the safety culture of the 
offshore oil and gas industry. The Commission's final report instead 
makes clear that many companies have exemplary safety records. And the 
Commission further expressly praised those companies not only in the 
Commission's final report but in public hearings held this past 
November.
    The basis for the Commission's conclusion that the offshore 
drilling industry suffered from a ``systemic'' problem was very 
different, as the Commission's report makes clear. That conclusion was 
based on the nature of the mistakes that the Commission found were the 
cause of the Macondo well blowout and rig explosion as well as the 
identity of those making the mistakes. The Commission did not discover 
one or two isolated mistakes but a pattern of repeated mistakes in well 
drilling operations that revealed a fundamental failure of risk 
management and safe drilling practices. In addition, those making the 
mistakes were not just three insignificant companies. They included the 
largest operator of deepwater drills in the Gulf (BP); the largest 
supplier of cement for all deepwater wells, not just to BP but to all 
operations in the Gulf (Halliburton); and the largest operator of 
deepwater drilling rigs in the Gulf that services not just BP but all 
major operators (Transocean). In addition, the Commission staff 
investigation revealed that BP was not the only company that had failed 
to plan for a possible deepwater well blowout;BP did not maintain 
resources adequate to contain and respond to such a blowout, as 
promised by the oil spill response plans BP had submitted to the 
government. None of the other oil companies was prepared for such a 
blowout, notwithstanding their formal and repeated claims to the 
government that they were prepared. Indeed, all of their oil spill 
response plans were riddled with inaccuracies and false promises. It 
was on this firm basis that the Commission concluded that the offshore 
industry as a whole suffered from a culture of complacency that had 
assumed away, rather than effectively planned for a possible deepwater 
well blowout.
 Question: The report includes a ``loss of well control graph'' showing 
        79 accidents in the Gulf of Mexico between 1996 and 2009.
 How many wells were drilled during that time period?
    Response: According to the Bureau of Ocean Energy Management, 
Regulation and Enforcement, operators drilled 13, 359 wells in the Gulf 
between January 1, 1996 and December 31, 2009.
 Question: What does the Commission believe constitutes a safe 
        industrial record?
    Response: A loss of well control does not, by itself, indicate that 
an operator was engaging in unsafe drilling practices. Some risk is 
inevitable in offshore drilling, especially in deep water. The purpose 
of the chart in the report describing the 79 incidents of loss of well 
control is not to suggest that each of those incidents demonstrates 
unsafe drilling practices. It is instead simply to document the 
inherent risks of offshore drilling and the reason why it is so 
essential that industry always be on guard to ensure that such 
incidents do not result in the kind of major disaster that occurred 
with the Macondo well blowout.
 Question: Does the Commission believe it is possible to eliminate 
        human error from the disaster equation?
    Response: No, it does not. Safe drilling practices, however, 
require anticipating the potential for such human error and building in 
safeguards both to minimize its occurrence and its consequences. The 
human error that caused the Macondo well blowout was entirely 
preventable and was not the result of unavoidable human error.
 Question: Since taking office one of Secretary Salazar's primary 
        efforts has been to ensure that oil and gas companies ``use or 
        lose'' their leases. This effort has included changes in rental 
        payments, reducing the length of leases, and greater regulatory 
        attention to the speed of the development of leases. You have 
        highlighted in your report that many of the steps taken by BP 
        in the development of this well were done to save time.
 Considering the Department's pressure to speed development, does the 
        Commission believe that BP felt obligated to use these time 
        saving measures to meet the Department's demands?
    Response: The Commission has insufficient information upon which to 
form a belief concerning BP's motivations for saving time and whether 
they might have been related to Department of the Interior policies.
 Question: Does the Commission believe that we should consider 
        extending the length of leases to allow companies and 
        regulators additional time to conduct environmental and safety 
        studies?
    Response: The Commission did not consider that issue and neither a 
decision to extend or a decision not to extend the length of leases 
would, accordingly, be inconsistent with the Commission's 
recommendations.
 Question: UCSD Economics Professor James Hamilton has written that 
        ``nine out of ten of the U.S. recessions since World War II 
        were preceded by a spike up in oil prices.'' In fact, he has 
        recently written that it was high oil prices that caused a 
        significant decline in personal spending and new car purchases 
        that contributed to our current recession.
 Did the Commission look at the impact of reduced domestic oil and gas 
        production on gasoline prices, the GDP, or the Nation's balance 
        of trade?
 If high gasoline prices and oil price spikes are known to do 
        significant harm to the U.S. economy, should the U.S. ensure 
        that adequate domestic production is available to prevent 
        significant price spikes and declines?
 Did the Commission conduct an analysis on the economic impacts of 
        higher gasoline prices and declining domestic production on the 
        lower income brackets of the U.S. population?
    Response: The Commission did not undertake a detailed analysis of 
the relationship of the nation's economy to oil and gas prices because 
such an inquiry was outside the Commission's charge, as described by 
the President's Executive Order creating the Commission. Consistent 
with that Executive Order, the Commission identified the root causes of 
the oil spill and made recommendations concerning how to prevent future 
spills and mitigate their consequences.
 Question: Did the Commission at any time receive direction on policies 
        to consider or recommendations that should be made from:
        a.  Ms. Carol Browner, Special Assistant to the President?
        b.  Mr. Steve Black, Counselor to the Secretary of the 
        Department of the Interior?
        c.  The Honorable Ken Salazar, Secretary of the Department of 
        the Interior?
        d.  Mr. Michael Bromwich, Director, Bureau of Ocean Energy 
        Management
        e.  The Honorable Steven Chu, Secretary Department of Energy?
        f.  Would the Commission please provide any directions or 
        instructions from these individuals that were provided to the 
        Commission to the Committee? (These requests include emails, 
        letters, phone logs, and other communications)
    Response: The only direction or instruction that the Commission 
received from anyone outside the Commission itself concerning the 
proper scope of the policies and recommendations for the Commission's 
consideration was contained in the President's Executive Order 
establishing the Commission. That Executive Order defined the scope, 
purpose, structure, and timetable for the Commission's work. The 
Commission neither received nor entertained any other instructions or 
directions concerning what the Commission should consider or recommend. 
No one, including any of the listed individuals, purported to direct or 
instruct the Commission on policies or recommendations or otherwise to 
exercise supervisory or managerial authority over the substantive 
nature of the Commission's work. Any such assertion, moreover, of 
supervisory or managerial authority would have been antithetical to the 
independence of the Commission's investigation and recommendations and 
for that reason rejected by the Commission. Because the Commission 
received no ``instructions'' or ``directions'' of this kind, the 
Commission has no related documents to provide.
Congressman and Ranking Member Edward J. Markey (MA-D)--Questions
 Question: During the hearing, it was asserted that the Commission 
        should not have issued its final report until it knew 
        definitively why the blowout preventer (BOP) failed to function 
        as it should have. How can you say you did a thorough review of 
        the accident and determined the causes if you weren't able to 
        inspect the BOP?
    Response: The Commission could do so for the straightforward 
reason, explained in the Commission's Final Report and further 
elaborated upon in the Chief Counsel's Report to the Commission, that 
even if the blowout preventer did fail, that failure did not cause the 
explosion that killed 11 men on April 20th. As the Commission report 
and Chief Counsel's Report explain, the rig crew realized too late what 
was happening and thus activated the BOP too late to have prevented an 
explosion. By the time the crew tried to activate the BOP, gas had 
already flowed above the BOP and was rocketing up the riser. That gas 
is what ignited on April 20th.
    By contrast, as the Commission report and Chief Counsel' Report 
further explain, if the crew had heeded warning signs earlier in the 
day, they could easily have prevented the explosion from happening. 
These included misinterpreting the negative pressure test used to check 
the integrity of the cement job. In the hour or so before the 
explosion, there were several other odd and unexpected pressure 
readings that the crew should have realized were signs of a problem, 
but unfortunately did not. If they had properly recognized these signs, 
they could easily have closed in the well.
    To be sure, any blowout preventer failure may potentially have 
played a part in the severity of the oil spill, but the disaster as a 
whole was due to a rather staggering series of errors by the three 
companies, all of which our investigation has documented. These errors 
can be addressed through better regulation, better training for 
workers, and a strong commitment to safety by both the companies and 
the regulators. Examples of key mistakes by BP, Halliburton, and 
Transocean as identified by the Commission's investigation include:
          Failure to get a good cement job
          Failure to understand that the negative pressure test 
        indicated that the cement was instable
          Problems with BP's temporary abandonment procedures, 
        in particular, its decision to displace mud from the riser 
        before setting additional barriers to back up the cement at the 
        bottom of the well. This left the faulty cement at the bottom 
        of the well as the only physical barrier that could prevent the 
        flow of hydrocarbons into the well
          Failure to understand that a kick was occurring, even 
        though there were several odd and unexpected pressure readings 
        in the hour or so leading up to the explosion that the crew 
        should have realized signaled a problem
          Failure to respond appropriately once mud and gas 
        began spewing onto the rig floor. The crew should have diverted 
        the gas overboard instead of diverting it through the mud-gas 
        separator. While it is not entirely clear this would have 
        prevented the explosion, it could have at least limited its 
        impact.
    For these reasons, the blowout preventer analysis, while important, 
will not change the Commission's conclusions that a failure of 
management led to numerous risky and unnecessary decisions made by the 
companies involved, each of which led to the occurrence of the blowout. 
The blowout preventer can, like a seatbelt, reduce the amount of harm 
that is caused, but in the circumstances of the Macondo well, even a 
properly functioning blowout preventer was not a root cause of the 
accident and its immediate tragic consequences for those on the rig on 
the night of April 20th. The BOP's relationship to an oil or gas well 
is the same as the relationship of an airbag to a car--it is not 
intended as a means to prevent an accident, but to mitigate its 
effects.
 Question: Can you briefly list all the errors or other problems 
        encountered in the weeks, days and hours leading up to the 
        blowout at the Deepwater Horizon well that caused the accident 
        to occur in the first place?
    Response: A brief and necessarily under inclusive list of errors 
and other problems follows. Chapter 4 of the Commission's overall 
report provides a summary of the engineering, process, and management 
decisions that led to the blowout. The Chief Counsel's report explains 
these mistakes and others in greater detail.
        1.  BP and the rig crew experienced difficulties drilling the 
        well. When combined with earlier design decisions, these 
        problems required them to plan a ``finesse'' cement job.
        2.  The cement slurry that BP and Halliburton used was very 
        likely unstable.
        3.  BP and Halliburton did not adequately test the cement or 
        review test results prior to pumping the cement.
        4.  BP's temporary abandonment procedures called for the crew 
        to unnecessarily underbalance the well and stress the cement 
        without first installing additional static barriers.
        5.  BP provided inadequately detailed procedures to the crew 
        for temporary abandonment and negative testing, and provided 
        them late, causing confusion.
        6.  BP's well site leaders, in consultation with the Transocean 
        rig crew, misinterpreted data from the negative pressure test.
        7.  The rig crew and mudloggers missed several signs of the 
        ``kick'' that became the blowout in the last hour before the 
        blowout occurred.
        8.  Once the blowout began, the rig crew did not immediately 
        divert mud flow overboard and instead attempted to route flow 
        through the mud-gas separator.
 Question: Can you also describe any delays, errors or other problems 
        associated with efforts to activate the BOP once it became 
        clear that this was necessary (please only describe any 
        problems that are separate and apart from BOP malfunctions)? 
        Could any of these have impacted the likelihood of using the 
        BOP to stop the explosion(s) on the Deepwater Horizon even if 
        it had properly functioned?
    Response: The Chief Counsel concluded that the crew first activated 
an annular preventer in the BOP at best only moments before drilling 
mud erupted onto the rig floor. By this time, gaseous and liquid 
hydrocarbons had already passed the BOP rams and were in the riser. 
Once those materials were in the riser, there was nothing the crew 
could have done to prevent them from flowing to the surface. As gaseous 
hydrocarbons flowed up through the mile of riser pipe, they expanded, 
further increasing the speed and force of the blowout as they rose. 
Accordingly, the Chief Counsel concluded that even if the BOP had 
functioned flawlessly, the explosion would have occurred and eleven men 
would have died. Put another way, the main problem associated with 
activating the BOP was timeliness--the rig crew recognized signs of a 
kick too late to use the BOP to prevent a blowout and an explosion.
 Question: The Commission report concluded that safety problems in the 
        oil and gas drilling sector are ``systemic'' in nature and not 
        just associated with one company or group of companies.
 Could you please provide me with some specific justifications for this 
        conclusion?
    Response: The Commissioner's conclusion concerning the systemic 
nature of the problem was based on the nature of the mistakes that the 
Commission found were the cause of the Macondo well blowout and rig 
explosion as well as the identity of those making the mistakes. The 
Commission did not discover one or two isolated mistakes but a pattern 
of repeated mistakes in well drilling operations that revealed a 
fundamental failure of risk management and safe drilling practices. 
They included the largest operator of deepwater drills in the Gulf 
(BP); the largest supplier of cement for all deepwater wells, not just 
to BP but to all operations in the Gulf (Halliburton); and the largest 
operator of deepwater drilling rigs in the Gulf that services not just 
BP but all major operators (Transocean). In addition, the Commission 
staff investigation revealed that BP was not the only company that had 
failed to plan for a possible deepwater well blowout. BP did not 
maintain resources adequate to contain and respond to such a blowout, 
as promised by the oil spill response plans BP had submitted to the 
government. None of the other oil companies was prepared for such a 
blowout, notwithstanding their formal and repeated claims to the 
government that they were prepared. Indeed, all of their oil spill 
response plans were riddled with inaccuracies and false promises. It 
was on this firm basis that the Commission concluded that the offshore 
industry as a whole suffered from a culture of complacency that had 
assumed away, rather than effectively planned for a possible deepwater 
well blowout. Finally, the Commission concluded that the nature of the 
problem was of such a nature that a ``systemic'' solution was needed to 
ensure achievement by industry of safety in offshore drilling 
operations.
 Question: Did your meetings with foreign regulators or other entities 
        that are familiar with safety or safety culture in other 
        countries highlight differences between the safety of offshore 
        drilling operations in the United States compared with other 
        countries? If so, can you describe the key elements of what you 
        were told that informed your views?
    Response: Two key factors in particular influenced the Commission's 
views. The first was that the same operators that were drilling in U.S. 
waters were operating more safely in their drilling operations offshore 
of other nations. They were successfully complying with pro-active risk 
management approaches in other nations. The costs were not exorbitant 
and better safety was apparently being achieved elsewhere. Second, the 
Commission learned that other nations had prescriptive technical 
standards for drilling safety not reflected in U.S standards. The 
Commission saw no excuse for U.S. standards not to be at least as 
demanding as what other nations applied and what the same companies 
were already doing in those other nations to achieve regulatory 
compliance.
 Question: In arguing against the need for reform, the oil and gas 
        industry and some Members of the Committee have asserted that 
        the BP Deepwater Horizon disaster was an outlier and point to 
        the long history of drilling offshore in the Gulf of Mexico.
 Does the industry's record of drilling tens of thousands of wells 
        offshore in the Gulf of Mexico mean that this was an isolated 
        incident? Why or why not?
    Response: The offshore drilling industry certainly deserves praise 
for the lack of any major well blowout in the Gulf of Mexico in U.S 
waters during the past several decades of exploration and production 
there. As the Macondo well blowout demonstrates, however, one cannot 
rely on a past record of safety when, as has occurred offshore in 
recent years, the industry is moving to wells located in ever deeper 
waters where the potential for recovery of increased volumes of oil and 
gas is accompanied by significant increases in associated risk.
 Question: What differences exist between drilling or responding to a 
        blowout in shallow water verses in ultra-deep water where the 
        Deepwater Horizon was operating? Please detail any added 
        technical challenges and difficulties presented by deepwater 
        drilling.
    Response: Added water depth itself creates complications and risk 
because of the lower temperatures and higher pressures exerted on 
wellhead equipment and BOPs at those greater depths. For example:
          In deeper water, rigs need to be larger with greater 
        lifting capacity to manage heavy tubular (casing, riser, drill 
        pipe).
          Deeper water requires a longer riser pipe, which 
        makes it more difficult to manage mud pressures and also makes 
        it more dangerous when gas enters the riser.
          Hydrates are also a more common problem in deepwater 
        due to the seabed pressure-temperature relationships. This 
        poses challenges in development and production, but also in 
        well control.
          Deepwater oil and gas reservoirs can have 
        exceptionally high porosity and permeability. These 
        characteristics promote productivity but also make well control 
        more difficult and means that ``kicks'' (influx of oil and gas 
        into the well bore) can be significant
          In deepwater, the margins between pore pressure and 
        fracture gradient are typically less than in shallow water. 
        This leads to greater risks of taking a ``kick'' not just 
        during drilling, but also during topping (pulling out of the 
        hole).
          Because the water is so deep, gas expansion of any 
        kick is mostly in the riser and therefore above the BOP. This 
        means that drillers must be attuned to subtle signs of an 
        influx and shut in the well before hydrocarbons enter the 
        riser. In shallow water, the expansion is mostly below the BOP.
          Added water depth also increases the complexity of 
        efforts to stop a blowout that is already in progress. For 
        instance, BOP stacks are often on the surface in shallow wells, 
        which means that repairs can be done above water. By contrast, 
        BOPs in deep water wells can be a mile or more below the 
        surface, meaning that all work must be done by Remote Operated 
        Vehicles (ROVs). On the other hand, rigs and equipment can 
        station themselves directly over a deepwater blowout, which has 
        operational advantages, and cannot as readily do so in shallow 
        waters because of the presence of hydrocarbons at the surface.
          Deepwater wells tend to contain significantly larger 
        volumes of oil and gas and consequently can be more productive, 
        which also means that spills resulting from deepwater blowouts 
        may potentially be larger. Good shallow wells produce at rates 
        of a few thousand barrels of oil a day. By contrast, deepwater 
        wells commonly produce more than 10,000 barrels per day.
    For much of the nation's history offshore drilling occurred 
exclusively in shallower waters, where the risks were generally lower. 
During the last two decades, however, offshore drilling has 
increasingly occurred in ever-deeper water, beginning with ``deep 
waters'' (approximately 1,000-5000 feet) and now even ``ultra-deep 
waters'' (more than 5,000 feet), where the amount of oil and gas can be 
greater still. The Deepwater Horizon was operating at depths of 
approximately 4,992 feet of water.
    Chapter 2 of the Chief Counsel's report addresses these issues in 
greater detail.
 Question: On January 26th, I, along with several other House Members, 
        introduced legislation, H.R. 501, to implement the 
        recommendations of the National Commission on the BP Deepwater 
        Horizon Oil Spill and Offshore Drilling. The legislation we 
        introduced contains provisions designed to be consistent with 
        the recommendations of the Commission. For each of the 
        following provisions, please describe whether the legislation 
        appears to be generally consistent with the recommendations the 
        Commission has made to improve the safety of offshore drilling:
        a.  Our legislation would reorganize the regulatory structure 
        of the Department of the Interior to separate the offshore 
        leasing, revenue collection, and environmental and safety 
        review and enforcement functions. The legislation would also 
        make the head of the safety agency a fixed-term appointee.
        b.  The legislation would create a dedicated funding stream 
        from oil and gas fees to fund the agencies responsible for 
        regulating and overseeing the industry.
        c.  The legislation would require the federal government to use 
        sound science to properly estimate the potential worst-case 
        spill scenarios and then requires industry's oil spill response 
        plans to incorporate those worst-case scenarios into a 
        realistic analysis of what could happen in the event of a 
        catastrophic blowout.
        d.  The legislation would establish a permanent scientific 
        group to ensure that the government develops and maintains the 
        extensive expertise needed to estimate the flow rate of oil 
        from a spill.
        e.  The legislation would dedicate 80 percent of the Clean 
        Water Act fines and penalties to Gulf Coast restoration.
        f.  The legislation would ensure that the National Oceanic and 
        Atmospheric Administration (NOAA) has a formal consultative 
        role in the decision making process for where and how new 
        drilling can occur so that the best possible science can be 
        incorporated into the decision-making process. The Department 
        of the Interior would have to respond in writing if it chose 
        not to accept NOAA's recommendations.
        g.  The legislation would create a dedicated funding stream 
        from oil and gas fees to fund oil spill response research and 
        development.
        h.  The legislation would increase the per incident payout from 
        the oil spill liability trust fund.
        i.  The legislation would require strong new standards for 
        blowout preventers, cementing and well-design.
        j.  The legislation would require extensive study on the 
        potential effects of dispersants on the marine environment.
        k.  The legislation would protect whistleblowers from being 
        retaliated against for reporting violations of oil and gas 
        drilling safety laws and regulations.
    Response: All of the above legislative proposals, if enacted, would 
be consistent with the Commission's final report and recommendations.
 Question: One of the Commission's findings is that federal oil and gas 
        regulators have historically been underfunded and the 
        Commission recommends creating a dedicated funding stream from 
        increased oil and gas fees to fund the agencies responsible for 
        overseeing and regulating the industry.
 However, some have indicated a desire to reduce federal non-security 
        spending levels across the board. In your opinion, would 
        reducing rather than increasing funding for federal oil and gas 
        regulators help or hurt our ability to ensure that offshore oil 
        and gas drilling operations are safe?
    Response: The Commission believes that increasing funding for oil 
and gas regulators is essential to ensuring drilling safety and is 
necessary to get the oil and gas industry fully back in operation in 
the Gulf as expeditiously as possible.
 Question: The Commission's recommendations note that historically most 
        applications of the Natural Resource Damage Assessment process 
        have focused on coastal restoration, as opposed to restoration 
        in water column or on the sea floor. Would focusing primarily 
        on coastal restoration be appropriate in this case? What 
        suggestions do you offer for how to address the damage 
        offshore, which the Commission notes is ``unprecedented and 
        unknown''?
    Response: The Commission recommends that restoration not be limited 
to coastal restoration but also encompass the full marine environment 
damaged by the Gulf spill, including the water column. To address this 
need, the Commission recommends, among other things, longer term study 
of those non-coastal adverse impacts and broader efforts at 
implementing the Gulf Hypoxia Action Plan, utilizing marine spatial 
planning, and providing for marine protected areas to conserve marine 
biodiversity and to enhance the resilience of fish stocks.
 Question: What are some of the challenges that would be associated 
        with responding to an oil spill offshore in the Arctic, 
        especially at certain times of the year when sea ice is 
        present? Would effectively responding to a spill in the Arctic 
        present greater challenges than responding to a spill in the 
        Gulf of Mexico?
    Response: As described in Chapter 10 of the Commission's final 
report, three of the greatest challenges presented by the Arctic in 
particular include: (1) the current lack of significant Coast Guard 
resources in the Arctic or readily deployable there; (2) the presence 
of ice during significant parts of the year, which would complicate 
significantly and potentially delay effective containment and oil spill 
response efforts; and (3) the absence of daylight during significant 
parts of the year, which would hinder both containment and oil spill 
response efforts. In at those three respects, the challenges would be 
greater in the Arctic than in the Gulf. As described in Chapter 10, in 
some respects there are fewer challenges. For instance, many of the 
areas now under consideration for exploration and production in the 
Arctic are located in shallow rather than deep or ultra deep waters as 
in the Gulf.
 Question: During the hearing, questions were raised regarding the 
        expertise of the Commission members and its staff. Could you 
        please describe a) the expertise and experience possessed by 
        those responsible for conducting the Commission's technical 
        work and writing those aspects of its report and b) the range 
        of experts consulted by the Commission or its staff as it 
        sought to develop its findings and recommendations?
    Response: The Commission established a team of staff to investigate 
the root causes of the Macondo well blowout with enormous technical and 
legal expertise. That team was led by the Commission's Chief Counsel, 
Fred Bartlit, and by the Commission's Chief Scientist, Richard Sears. 
Bartlit is not only one of the nation's most highly regarded trial 
lawyers, with deep professional roots with industry and a degree in 
civil engineering from West Point, but he led for industry the 
investigation of the Piper Alpha rig explosion in 1988, in which 167 
people died in the North Sea. Bartlit is widely credited by industry 
and government alike for the rigor and fairness of that investigation, 
which successfully identified the root causes of the explosion. Richard 
Sears is a petroleum engineer with over three decades of experience 
with the oil and gas industry, having recently retired from Shell Oil. 
Bartlit and Sears put together not only an in-house team within the 
Commission staff, but also worked closely with experts in the oil and 
gas industry itself, who were enormously cooperative in assisting the 
Commission's work. The Commission's investigative team consulted with 
industry and academic experts on virtually every aspect of deepwater 
well drilling and fully vetted the investigation's findings with those 
same experts. The best proof of the depth, scope, rigor, balance, and 
fairness of that staff work is the recently-released Chief Counsel 
Report to the Commission, which describes in exhaustive detail in 350 
pages the engineering and management mistakes made that caused the well 
blowout and rig explosion.
Congressman Dale Kildee (MI-D)--Questions
 Question: Your comments today and the findings of your report 
        highlight the vital importance of the Gulf Coast ecosystem. Can 
        you briefly tell us, in terms of natural, economic, and other 
        resources, why this area and its fragile ecology are so 
        significant to the region and to the nation at large?
    Response: Chapter 6 of the Commission's final report best describes 
the significance of the Gulf to the Gulf economy and environment, as 
well as to the nation as a whole. In addition to the oil and gas 
industry, the Gulf hosts the nation's largest seafood industry as well 
as an enormously important and vital tourism and recreation industry. 
As witnessed last summer, both those critical economies were devastated 
by the spill and it is still unclear, almost eleven months later, the 
extent to which they will have recovered this coming summer. Those who 
live along the coast were especially hard struck, including many 
vulnerable communities, not only in their livelihoods but in terms of 
their mental and physical heath, by the spill. More than 650 miles of 
Gulf coastal habitats--salt marsh, mudflat, mangroves, and sand 
beaches--were oiled. Tidal mudflats are especially sensitive to oil 
pollution and the Louisiana delta and the estuarine bays of Mississippi 
and Alabama have large expanses of tidal mudflats, and support dense 
populations of species. Salt marsh and mangroves are likewise both 
highly productive and sensitive habitats highly vulnerable to oil 
pollution.
 Question: What would you say to the average American who sees the 
        prices at the gas pump going up each week and may be reluctant 
        for the government to apply additional regulations to gas and 
        oil drilling companies?
    Response: None of the Commission's recommendations should have a 
significant impact on the price of gasoline. The primary factor in the 
price of gasoline is the price of crude oil, which is set by the global 
market. U.S. crude oil production currently accounts for roughly 10% of 
total global production, and it is unlikely that small changes in U.S. 
crude oil production could affect global prices. More importantly, our 
recommendations are aimed at moving us forward to allow for the full 
recovery of offshore operations in the Gulf. Improved drilling safety 
could impose some upfront costs on oil and gas companies, but these 
costs are small compared to the cost to industry of another major 
blowout.
 Question: Your report calls for the dedication of a significant 
        portion of Clean Water Act penalties for restoration of the 
        Gulf Coast's threatened ecosystem. Can you tell us more about 
        the relationship between resiliency of the Gulf Coast ecosystem 
        and your proposed use of these incident-specific spill-related 
        funds?
    Response: The Gulf is presently especially vulnerable to oil spills 
because of the elimination of natural barriers, loss of land, 
destruction of wetlands, and high concentrations of nutrients otherwise 
threatening the viability of marine life within the Gulf. As a result 
of these accumulating threats to the Gulf ecosystem, the harm caused by 
a catastrophic oil spill can be much greater because, combined with 
existing harm, the Gulf may lack the strength needed for recovery. It 
is for this reason, that mitigation of the harm of future spills 
warrants not just eliminating the incremental harm caused by the 
Macondo well blowout, but building back the strength of the Gulf 
ecosystem so as to be able to withstand future spills.
 Question: Given that your report sites that ``since 2001, the Gulf of 
        Mexico workforce--35,000 people, working on 90 big drilling 
        rigs and 3,500 production platforms--has suffered 1,550 
        injuries, 60 deaths, and 948 fires and explosions.'' Do you 
        believe that the oil and gas industry is capable of regulating 
        itself without additional government oversight?
    Response: We think that safe drilling operations will require both 
effective government and industry oversight. Neither can do it alone. 
That is why the Commission recommends the creation of an independent 
safety authority within the Department of the Interior. And that is why 
the Commission further recommends that industry establish its own 
independent, self-policing entity to oversee offshore drilling 
operations, akin to what the nuclear power industry did in 1979 in the 
immediate aftermath of the Three Mile Island Accident when industry 
established the Institute of Nuclear Power Operations.
 Question: Some experts have suggested that the Commission has drawn 
        overly broad conclusions about the oil and gas industry's 
        commitment to safety, based on the decisions on a single rig. 
        How would you respond to this criticism?
    Response: The Commissioner's conclusion concerning the systemic 
nature of the problem was based on the nature of the mistakes that the 
Commission found were the cause of the Macondo well blowout and rig 
explosion and the identify of those making those mistakes. The 
Commission did not discover one or two isolated mistakes but a pattern 
of repeated mistakes in well drilling operations that revealed a 
fundamental failure of risk management and safe drilling practices. In 
addition, those making the mistakes were not just three insignificant 
companies. They included the largest operator of deepwater drills in 
the Gulf (BP); the largest supplier of cement for all deepwater wells, 
not just to BP but to all operations in the Gulf (Halliburton); and the 
largest operator of deepwater drilling rigs in the Gulf that services 
not just BP but all major operators (Transocean). In addition, the 
Commission staff investigation revealed that BP was not the only 
company that had failed to plan for a possible deepwater well blowout; 
BP did not maintain resources adequate to contain and respond to such a 
blowout, as promised by the oil spill response plans BP had submitted 
to the government. None of the other oil companies was prepared for 
such a blowout, notwithstanding their formal and repeated claims to the 
government that they were prepared. Indeed, all of their oil spill 
response plans were riddled with inaccuracies and false promises. It 
was on this firm basis that the Commission concluded that the offshore 
industry as a whole suffered from a culture of complacency that had 
assumed away, rather than effectively planned for a possible deepwater 
well blowout. Finally, the Commission concluded that the nature of the 
problem was of such a nature that a ``systemic'' solution was needed to 
ensure achievement by industry of safety in offshore drilling 
operations.
 Question: I appreciate the fiscal logic of your recommendation that 
        Clean Water Act penalty dollars be returned to revive the 
        natural and economic resources of the Gulf Coast's wetlands. 
        Can you summarize for us the reasons why that kind of funding 
        is needed here, and what you expect it to accomplish?
    Response: As described in Chapter 7 of the Commission's Final 
Report, many have studied the current problems affecting the Gulf's 
ecosystem and the central role it plays in the nation's economy and 
there is no lack of understanding concerning the kind of steps now 
needed to address those problems. The problem has not been lack of 
understanding but lack of sufficient resources to commit to the 
necessary measures. The estimated costs of such a restoration effort, 
however, roughly mirror estimates of the amount of monies potentially 
recoverable in Clean Water Act penalties from those private companies 
responsible for the Gulf oil spill. Those penalties, accordingly, 
provide an extraordinary opportunity for the Gulf and the nation to 
undertake restorative measures of enormous value to the Gulf, the 
nation, and current and future generations of Americans.
 Question: In last night's SOTU address, the President talked about the 
        need for investments in critical infrastructure for America's 
        long-term economic health. Would your proposal to invest Clean 
        Water Act penalties in Gulf Coast restoration offer this kind 
        of necessary economic security?
    Response: Yes, it would. The Gulf's ecosystem supports some of the 
nation's most important economies.
 Question: Recognizing the importance of the Gulf Coast ecosystem, many 
        of us are hopeful that the Natural Resource Damages Assessment 
        process will result in an aggressive response to some of the 
        worst effects of the spill. How would your proposal for Clean 
        Water penalties go beyond this NRDA response?
    Response: It would go beyond because the NRDA is more limited in 
its ability to extend beyond the immediate effects of the spill itself 
and address the longer term and broader need to restore the overall 
health of the Gulf's ecosystem, which has been threatened by many 
activities in recent decades, including the Gulf's ability to withstand 
future oil spills.
Congresswoman Betty Sutton (OH-D)--Questions
Question #1 (Questions on Culture of Worker Safety):
        1.  In your report you suggested that the oil and gas industry 
        should work to establish a ``Safety Institute'' similar to 
        organizations in other high risk industries like the nuclear 
        industry. By your recommendation, this would be an industry 
        sponsored entity aimed at improving safety and operation 
        standards in the offshore drilling industry.
        2.  At the same time, you hint at the lack of a ``safety 
        culture'' in this industry. You make some great 
        recommendations, but there is a concern that industry will be 
        slow to self-regulate and change long standing practices.
        3.  Have you found the industry receptive in any way to your 
        suggestions for forming a safety group?
        4.  What obstacles exist to creating a culture of safety in the 
        oil and gas industry?
        5.  What are some of the concerns you've encountered or what 
        might be done to encourage the establishment of a safety 
        culture?
    Response: The Commission has been encouraged in many private 
conversations with leading industry officials that they are receptive 
and ready to create such an industry self-policing entity and that many 
recognize its value and importance. The greatest obstacle right now, 
however, is that there still seem to be significant voices in industry 
that have not reached that conclusion and seem open instead to seeing 
if the current demands for safer drilling will naturally subside 
without industry taking significant steps to reform drilling practices. 
The Commission's related concern is that there appears to be a tendency 
within the oil and gas industry, promoted by the American Petroleum 
Institute, to be reflexively opposed to enhanced oversight measures and 
a willingness to defer to ``average'' business practices rather than to 
demand ``best'' drilling practices. It is not yet clear to the 
Commission that those industry leaders who made clear that they share 
the Commission's view of the existing problem and the need for industry 
reform will be successful in moving the industry as a whole.
Question #2 (Conflicts within Agencies Dealing with Drilling):
        1.  In your report you hit on one of the major issues leading 
        up to the oil spill, the conflicting mission of the Minerals 
        Management Service. The report suggested the creation of an 
        independent agency to oversee aspects of offshore drilling.
        2.  Secretary Salazar recently announced two new independent 
        agencies to carry on functions once assigned to MMS, one agency 
        to deal with leasing and one agency to deal with safety issues.
        3.  But even under these two new agencies the Bureau of Safety 
        will still operate under the same assistant secretary who 
        oversees leasing duties.
        4.  How do these agencies line up with your recommendations?
    Response: Much of what the Secretary is doing is fully consistent 
with the Commission's recommendations. The Commission does, however, 
believe that more is needed, including not having the two new agencies 
operating under the same Assistant Secretary. In addition, the 
Commission recommends a series of other steps to enhance the 
independence of a new safety authority within Interior, including 
having the head of that authority possess special engineering 
credentials and experience and be appointed to a fixed term.
        5.  What consequences do you foresee with the way Interior has 
        moved forward in forming these new agencies?
    Response: The risk of not making the new agency as autonomous as 
the Commission recommends is that the new agency, especially after 
there is less political attention paid over time to the risks of well 
blowouts, will, as in the past, place greater weight on revenue 
collection to the detriment of ensuring safe drilling operations.
Congressman Jeff Landry (LA-R)--Questions
 Question: Do you propose these recommendations from the report for 
        both deep and shallow water drilling operations?
    Response: The Commission's recommendations are not limited to 
deepwater drilling. As a practical matter, however, the challenges and 
associated risks of drilling are greater for deep water than they are 
for shallower water, so the practical impact of the recommendations are 
commensurately great for operations in deep water.
 Question: Can you discuss what the economic impacts are on the nation 
        as a whole in light of your recommendations in the report and 
        the Obama Administration's response to permitting post-spill? 
        Specifically, can you discuss what the International Energy 
        Agency meant by it's anticipation of the U.S. needing an 
        additional 300,000 barrels per day of imports by 2015 based on 
        the ongoing permitorium and Interior Department actions?
 What about the U.S.'s own Energy Information Administration's 
        announcement that production in the Gulf would be down 220,000 
        barrels per day in 2011 and 400,000 barrels per day by 2012 due 
        to the permitorium. Can you please discuss those numbers, 
        including what they mean for the Gulf economy, the U.S. 
        economy, and our national security?
    Response: The Commission is aware of the Energy Information 
Administration and International Energy Agency analyses of the adverse 
impact of the moratorium and permitting delays in the Gulf of Mexico on 
U.S oil production. Indeed, precisely because the Commission was aware 
of the significant associated costs of such delays on the nation's 
energy supply and the national economy, the Commission made a series of 
recommendations for the purpose of reducing permitting delays. Most 
important, the Commission concluded that a significant cause of current 
and potential future delays was a lack of sufficient funding for the 
government agency, the Bureau of Ocean Energy Management, Regulation 
and Enforcement (the successor to the Minerals Management Service). 
Absent the necessary resources, BOEMRE cannot process permit 
applications as expeditiously as possible while ensuring drilling 
safety and the impact on the nation's energy resources and economy may 
well be even worse than projected by these two forecasts.
    In particular, the Commission found that Congress had persistently 
and increasingly underfunded the Minerals Management Service to meet 
the challenges of the expanded activity in the Gulf. As offshore 
activity dramatically increased during the 1990s, the Minerals 
Management Service had increasingly-stretched budget resources 
available and its ability to maintain the capacity necessary for safety 
management and permitting suffered. The Commission, accordingly, 
identified the need for new hiring authority to compete with other 
employers for technical expertise as well as the budget certainty to 
enable the agency to make the hiring and training commitments necessary 
to accommodate the industry's permitting needs. Neither of these has 
yet been provided. Until Congress provides those resources, the absence 
of necessary government oversight will likely be the greatest source of 
continuing permit delays.
 Question: Other countries have determined that there was no need to 
        shut down offshore production. In fact, African and South 
        American countries are actively pursuing long-term contracts 
        for rigs to move out of the Gulf. Including rigs from energy 
        companies from the likes of Murphy Oil, BP, Anadarko and 
        Statioil. How come the commission report did not discuss the 
        loss of rigs in the Gulf and economic impacts long-term?
    Response: The Commission report did not discuss the loss of rigs 
and the economic impacts long term because the Commission concluded 
that deepwater drilling could be done safely and economically in the 
Gulf and sought to propose recommendations that would allow such 
drilling to occur in a safe and expedited manner. The Commission, 
accordingly, did not foresee a reason to assume that there would be a 
long term loss of rigs in the Gulf.
 Question: Due to a 2008 Bureau of Labor Statistics Report on Work 
        Place injuries 89 percent of working Americans work in 
        industries with higher injury rates than oil and gas 
        extraction. So please explain why only commercial banking, 
        insurance carriers and certified public accountants fare better 
        and why child day-care services were twice as high as oil and 
        gas extraction?
 This BLS report goes on to state that a total of 120 fatal work 
        injuries occurred in the oil and gas extraction industry in 
        2008. The three most frequent fatal events in 2008 were 
        transportation incidents (41 percent), contact with objects and 
        equipment (25 percent), and fires and explosions (15 percent). 
        The number of fatal work injuries associated with fires and 
        explosions over the past five years ranged from 10 fatalities 
        in 2007 to 21 fatalities in 2006. In 2008, there were 18 
        fatalities. Why would the extraction portion of the industry be 
        labeled by the Commission ``a systematic breakdown of safety 
        and engineering practices'' when in 2008 41% of fatal work 
        injuries happened in the Transportation sector of the industry?
 Do you or don't you agree that without any further regulations the 
        Offshore Oil and Gas industry is safer today then it was prior 
        to the accident?
    Response: In the immediate aftermath of an accident, it is 
reasonable to assume that the offshore industry has on its own 
initiative taken some measures to enhance safety by learning from the 
specific mistakes made at the Macondo well and on the Deepwater Horizon 
rig. The Commission's recommendations, however, seek to promote safety 
far more by identifying the root causes, and thereby not just prevent a 
repetition of the precise, same mistakes, and to create an 
institutional structure for safety oversight within both government and 
industry that will endure over the longer term, long after memories of 
the BP Deepwater Horizon Gulf Spill begin inevitably to dim.
 Question: The President charged this commission to determine the 
        causes of the disaster, to improve the country's ability to 
        respond to spills, and recommend reforms that make offshore 
        energy production safer. Prior to the accident, there existed 
        multiple layers of environmental reviews, including multiple 
        EIS and EA's. These included EIS's during the development of 
        the 5 year review and again prior to the lease sale. Where does 
        the Commission receive both the authority and the conclusion 
        that the NEPA review warrants any additional changes, as I find 
        no conclusion that it contributed to the accident or to the 
        impact of the clean up?
    Response: Under the Executive Order that established the Oil Spill 
Commission, the President specifically tasked the Commission with 
suggesting improvements to Federal laws and regulations applicable to 
offshore drilling that would prevent future spills and mitigate their 
impact. Investigating the Department of the Interior and the Mineral 
Management Service's application of NEPA for offshore oil and gas 
development was an important part of this review because such NEPA 
review is designed to ensure, among other things, that agency decision-
making considers potential adverse environmental consequences, 
including those resulting from oil spills conducted on federal 
properties and supervised by federal agencies.
Congressman Jeff Denham (CA-R)--Questions
 Question: The report recommends that there needs to be the creation of 
        a new government bureaucracy. How is it that the functions of 
        this new agency can't be performed by the current massive [over 
        sized] federal structure?
        1.  Why can't the need for planning, coordination, execution, 
        and clean up after a disaster fall under the jurisdiction of 
        the Federal Emergency Management Agency (FEMA)?
        2.  With better and more efficient government action couldn't 
        the damages from an emergency be lessened?
        3.  Isn't it necessary to reduce the bureaucratic red tape that 
        prevents an overseeing agency, such as FEMA, from being allowed 
        to take the lead role and manage the necessary actions 
        following an incident?
        4.  Wouldn't having one agency allowed to take the lead and 
        coordinate eliminate the communication breakdown and resolve a 
        need for an expansion of expensive and inefficient government?
    Response: The Commission does not recommend the creation of a new 
federal bureaucracy to plan, coordinate, or execute the response to an 
offshore oil spill. Rather, the Commission recommends maintaining the 
existing command structure, in which the Coast Guard takes the lead 
role in responding to an offshore spill of oil or other hazardous 
substances. The National Contingency Plan properly assigns this lead 
role to the Coast Guard because of its expertise in the offshore and 
marine environment. Reassigning that role to FEMA would ignore the 
Coast Guard's decades of experience in oil spill response and planning, 
and would require a significant and inefficient expansion of FEMA to 
duplicate functions and expertise that already exist within the federal 
government (indeed, within the same cabinet department).
    The Commission agrees that ``better and more efficient government 
action'' could lessen the damage caused by a major oil spill. As set 
forth in the Commission's report, the response to the Deepwater Horizon 
disaster revealed a series of deficiencies in government planning and 
execution. Accordingly, the Commission recommends a series of steps 
that the federal government could take, consistent with the existing 
command structure, to better address the demands created by a spill of 
national significance.

                                 
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