[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
Available via the World Wide Web: http://www.gpoaccess.gov/congress/
index.html
or
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.