Deepwater Horizon Study GroupWorking Paper – January 2011 Preventing Accidents in Offshore Oil and Gas Operations: ...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Co...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contras...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contras...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contras...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contras...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contr...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contras...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contras...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contra...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contr...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contr...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contra...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contra...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contra...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contras...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contras...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contras...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contras...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contras...
Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast...
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Preventing accidents in-offshoreoil-and-gasoperations-mb-dhsg-jan2011

Published on: Mar 4, 2016
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Transcripts - Preventing accidents in-offshoreoil-and-gasoperations-mb-dhsg-jan2011

  • 1. Deepwater Horizon Study GroupWorking Paper – January 2011 Preventing Accidents in Offshore Oil and Gas Operations: the US Approach and Some Contrasting Features of the Norwegian Approach Michael BaramiAbstract This paper presents an analysis of the legal framework and regulatory approach of the UnitedStates (US) for preventing accidents in the development of the oil and gas resources of its outercontinental shelf (OCS). Discussion is focused on prevention of major accidents which harmworkers and the offshore and coastal environments, but also deals with some aspects of emergencyresponse. References are made to Norwegian laws and regulations governing oil and gas operationsin the Norwegian sector of the North Sea and illuminate a proven alternative approach forpreventing OCS accidents. Michael Baram, 2010.iii Professor Emeritus, Boston University Law School. mbaram@bu.edu, September 2010.ii Prof. Baram developed this paper for the Norwegian Research Council project on Robust Regulation in the PetroleumSector, directed by Prof. Preben Lindoe of the University of Stavanger, and it has been posted on that projects websiteat http://www.uis.no/category.php?categoryID=6833. (Additional sections are being developed to complete theworking paper.) 1
  • 2. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian ApproachTable of Contents 1. Introduction ....................................................................................................................................... 3 2. Social and Political Context for OCS Operations ........................................................................ 3 3. Risks of OCS Operations ................................................................................................................. 5 4. Legal Framework ............................................................................................................................... 9 5. Regulation .........................................................................................................................................14 6. Notes .................................................................................................................................................20Acronyms Acronym Definition API American Petroleum Institute BSEE Bureau of Safety and Environmental Enforcement CBA Cost-Benefit Analysis DOI Department of Interior GOM Gulf of Mexico MMS Minerals Management Service NEPA National Environmental Policy Act NPD Norwegian Petroleum Directorate OCS Outer Continental Shelf OCSLA Outer Continental Shelf Lands Act OMB Office of Management and Budget OSH Occupational Safety and Health, Norway OSHA Occupational Safety and Health Act PINC Potential Incidents of Non-Compliance PSA Petroleum Safety Authority, Norway SEMS Safety and Environmental Management System US United States WSJ Wall Street Journal 2
  • 3. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approach1. Introduction This paper presents an analysis of the legal framework and regulatory approach of the UnitedStates (US) for preventing accidents in the development of the oil and gas resources of its outercontinental shelf (OCS). It encompasses the legal and regulatory regime prior to the blowout inApril 2010 at the Deepwater Horizon drilling rig operated by BPiii and developments following thisworst case accident. The purpose of this paper is to determine how the legal framework influences safety regulationand the safety management practices of companies carrying out exploration and productionoperations on the OCS. Discussion is focused on prevention of major accidents which harmworkers and the offshore and coastal environments, but also deals with some aspects of emergencyresponse. The analysis does not attempt to assign fault or blame for the BP accident to BP or its industrialpartners and contractors, nor to exonerate any of these parties, because these issues are currentlybeing investigated by special commissions, the Congress, and several courts. Finally, references are made to Norwegian laws and regulations governing oil and gas operationsin the Norwegian sector of the North Sea. Norway, with 40 years of OCS experience, is the world‟slargest offshore oil producer and second largest offshore natural gas producer, and has achieved ahigh level of safety. The references therefore illuminate a proven alternative approach for preventingOCS accidents.2. Social and Political Context for OCS Operations The US claims more seabed of the OCS than any other nation. For several decades, it has leasedportions of this seabed, mainly in the Gulf of Mexico (GOM) and off the south coast of Alaska, tocompanies for exploration and production of oil and gas resources, and regulated these operationsto prevent accidents and harms to workers and the environment. Most of the other regions of theUS OCS have been closed to exploitation activities by moratoria enacted by Congress which werestimulated by the 1969 blowout and oil spill at an Amoco platform off the California coast and the1988 Exxon Valdez tanker accident and spill in Alaska‟s Prince William Sound. Since the 1940‟s, federal agencies have issued numerous leases and permits to companies forexploration and production activities in regions not covered by the moratoria. According to theMinerals Management Service (MMS), the lead offshore agency since 1982, more than 50,000 wellshave been drilled in the federal portion of the GOM since 1947, and in early 2010, there were anestimated 7,000 active leases and 3,600 structures in the GOM providing 97% of all US offshore oiland gas production.1 MMS also reports that since the mid-1990s, several factors have encouraged major expansion ofdeepwater ventures (variously defined as projects conducted in more than 500 or 1,000 feet ofseawater). These include the depletion of shallow water resources, laws authorizing royalty relief fordeepwater leases, studies showing significant resource potential in deepwater regions, andiii BP derives from the initials of one of the company‟s former legal names, British Petroleum. 3
  • 4. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approachtechnological advances such as semi-submersible mobile drilling rigs and positioning software. As aresult, deepwater OCS oil production surpassed shallow water oil production in 2001, and by 2009,nearly 4,000 deepwater wells had been drilled in seawater depths exceeding 1,000 feet, including 700in water depths exceeding 5,000 feet. Overall, by 2009, wells in OCS depths exceeding 1,000 feetaccounted for 80% of US oil production and 45% of gas production offshore. These activities provide substantial benefits to the US economy. In 2009, companies working inshallow water and deepwater paid the federal government $6 billion, and provided 150,000 jobs.Expansion of deepwater operations would provide more of these benefits. According to a 2006 study by the US Department of the Interior (DOI), 15 billion barrels ofdeepwater oil and 60 trillion cubic feet of deepwater gas have been discovered and are available forproduction, with high potential for discovering another 86 billion barrels of deepwater oil and 420trillion cubic feet of deepwater natural gas. DOI concluded that at current rates of consumption,these actual and prospective amounts would be sufficient to replace all oil imports into the US foralmost 25 years and provide for all US gas consumption for more than 20 years. Of these amounts,an estimated 45 billion barrels of oil remain to be discovered in the GOM, 92% of which is indeepwater regions.2 Additional benefits from expanding deepwater operations have been claimed, particularly thecapture of natural gas hydrates (which are expected to be commercially accessible in the near future),estimated at close to 320,000 trillion cubic feet in deepwater regions of the federal OCS, includingmore than 7,000 trillion cubic feet in deepwater sediment in the GOM. A former federal officialestimates that production of 1% of this resource would generate payments to the federalgovernment of approximately $7.5 trillion, and when added to $4.5 trillion in prospective paymentsfrom exploiting the estimated deepwater oil and gas noted above, the total amount “almostcompletely pays off the current national debt without raising taxes.” 3 Proponents of expanding deepwater activities claim that in addition to increasing payments andjobs, the operations would provide fuels at low prices, meet growing consumer demand and nationalenergy needs, lead to “energy independence” from unreliable or hostile foreign sources, capture thelimited number of deepwater drilling rigs available from global sources, and ensure national security. Over the last decade, political and public support has grown considerably as prices for oil andgas increased, causing Congress in 1995 and 2005 to enact laws which provide financial incentivesfor deepwater projects, including suspension of company obligations to pay royalties onproduction.4 In 2008, governors of several coastal states and some environmentalists dropped theiropposition to offshore drilling, and President Bush ended the long-standing Presidential ban on newOCS leases and urged Congress to end the moratoria which had closed parts of the OCS off theAtlantic coast and the eastern section of the GOM.5 Although opponents continued to raiseconcerns about risks in lawsuits and Congressional hearings, a July 2008 poll showed that 74% ofthe public supported more offshore drilling.6 Indications that deepwater activities posed new technical problems, such as those experiencedby Chevron at its "Tahiti" site in 4,000 feet of GOM seawater, were countered with many assurancesof safety: e.g., that drilling within 200 miles of the US coast “had a 99% safety record,” “only0.001% of the oil produced had been spilled,” and that more oil contamination of the oceans comesfrom natural seeping, shipping, and runoff from land than from oil spills.7 4
  • 5. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approach Despite some committed opponents, political and public complacency about the risks had set in.On March 31, 2010, President Obama announced a new leasing plan for previously closed regionsof the GOM, the Atlantic OCS, and the Chukchi and Beaufort Seas off the northern Alaska coast. 8 Three weeks later, on April 20, 2010, the devastating accident and uncontrollable spill occurredat the BP drilling rig operating in 5,000 feet of water at the Macondo site in the GOM. This tragicevent has caused public outrage, numerous investigations and lawsuits, doubts about industrialability to safely conduct deepwater operations, and many initiatives to reform the legal andregulatory regime for OCS operations.93. Risks of OCS Operations Deepwater and shallow water projects alike pose risks of blowouts, explosions, fires, harms toworkers, spills and contamination of ocean and coastal environments, disruption of socio-economicactivities, and destruction of corporate facilities and other assets. Spills and environmentalcontamination have been of most concern to the public because of the Amoco blowout in 1969 andthe Exxon Valdez accident in 1989. The BP blowout and spill, a true worst case scenario, now dominates the public discourse onOCS policy, and has prompted an intense search for risk information for two related purposes: toevaluate the performance of regulatory agencies, operators and contractors prior to the BP accident,and to guide the development of new legislation and regulatory reforms to ensure that future OCSoperations will be more safely conducted. Ongoing investigation of the BP accident itself is a continual source of much useful riskinformation. The blowout caused an explosion and fire which killed 11 workers on the DeepwaterHorizon drilling rig, destroyed the semi-submersible mobile drilling rig leased by BP fromTransocean which operated the rig under BP supervision, and ruptured the exploratory well casingat several points. As a result, the uncontrolled release of oil and gas followed, and efforts to stop therelease by several methods failed. The release continued at a rate estimated at 40,000 barrels of oileach day for 87 days before a temporary cap on the main release point proved to be successful.Other measures including two relief wells are being advanced at this time to ensure more permanentcontrol. The spill has contaminated a large region of the GOM and the coastal areas of several states,with severe impacts on wildlife and social and economic activities such as tourism and commercialfishing. Depending on ocean currents and weather, the spill may eventually reach the Mexican coastand parts of the Atlantic coast of the US. Use of chemical dispersants and various means ofskimming and containing the spill were of limited value, and the dispersants and oil are creatingchemical exposure problems for workers involved in emergency response and mitigation efforts. 10 Numerous lawsuits are being brought by persons who suffered personal injury, propertydamage, and economic loss, and state and federal governments are in the process of imposingpenalties and other sanctions on BP. Investigations are underway and criminal prosecutions mayfollow. 5
  • 6. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approach Because of this disaster and the scale of its consequences, much attention is now being given togathering information on OCS risks and the harms that accrued to workers and the environmentprior to the BP accident as well as any analyses of the information by regulatory agencies. Thisinformation is needed to develop effective changes in legislation and regulation. Thus far, such information is fragmented and incomplete, and indicates that the two agencieswith responsibilities for ensuring safety, MMS and the Coast Guard (CG), had not proritized thesystematic collection, evaluation, and use of information on near misses, accidents, and other aspectsof operating experience in the years preceding the BP accident. Doing so would have enabled themto engage with industry in learning processes and continuous improvement of operational safetybefore the BP accident At least two reasons for this failure are discussed subsequently in this paper,one being the “regulatory disarray” that has characterized the relationship between MMS and theCoast Guard (CG) on safety matters, the other being their wholesale delegation of safety initiative-taking to industrial organizations such as the American Petroleum Institute (API) without followingup on industrial performance. A month after the BP accident, the Department of Interior, of which MMS is a regulatory unit,presented a brief summary of risk information regarding blowouts and spills that occurred prior tothe BP accident: e.g., that during the expansion of deepwater drilling since 1996, the blowout rateper well had not increased but the number of spills had increased; spills in the GOM were “notmajor” and those due to blowouts from 1971 to 2010 amounted to some 1800 barrels, with 425 ofthese being attributable to hurricane damage; and since 1964, only 30.3 barrels were spilled permillion barrels produced on the OCS. It concluded simply that the rate of spills increased since themid-1990‟s as deepwater activities increased, indicating “significant challenges” in preventing ablowout in deepwater. No reference to international experience is made other than mention thatmajor deepwater spills occurred at Ixtoc I off the Yucatan coast in 1979 and Montara in the TimorSea in 2009.11 No risk information has been provided by the Coast Guard. Additional risk information derived from operating experience before the BP accident has alsobeen presented by MMS in announcing its proposed Safety and Environmental Management System(SEMS) rule on June 18, 2010.12 Its intention to enact this “safety and environmental managementsystem” rule was first announced back in May 2006 by a published notice seeking comments.Comments were received but MMS took no further action until prompted by the BP accident fouryears later. In proposing SEMS, MMS presented risk information derived from its investigations ofaccidents and operator non-compliance, performance reviews, and reports on 33 OCS accidentsbetween 2000 and 2007. For the 33 accidents, MMS found that 16 resulted in 14 fatalities and 7injuries, that one or more of “four functions” were implicated in each accident, along with several“contributing causes.” The functions were hazard analysis, management of change, written operatingprocedures, and mechanical integrity; and the contributing causes were lack of communicationbetween the operator and contractors, absence of job hazard analyses or written procedures,supervisor failure to enforce procedures, lack of safe work procedural guidelines, failure to carry outrecommended maintenance, and failure to identify or correct workplace hazards. MMS also presented data on another 1,443 OCS incidents that occurred over the same years.These involved 41 fatalities, 302 injuries, 10 losses of well control, 11 collisions, 476 fires, 356“pollution events”, and 224 crane and hoist mishaps. It states that the majority of these incidents 6
  • 7. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approachwere related to operational and maintenance procedures or human error, were not related to MMSinspections for hardware compliance, and only 25 were due to safety device failure. It also states thatoperating procedures and mechanical integrity accounted for the greatest number of spills, withoutany discernible trend of industrial improvement over the seven year period despite its issuance ofsome 150 findings of non-compliance per year regarding production and drilling operations. Furtherdiscussion of SEMS is presented later in this paper. Notably missing from its documentation of risk information is any data or insight from theCoast Guard, which shares inspection and other OCS regulatory responsibilities with MMS, or fromthe American Petroleum Institute which is the leading private group relied on by MMS and CG forsetting industrial standards. Also missing is risk information from the insurance sector whichprovides coverage for offshore operations on the US OCS and worldwide. A hint of what can beculled from the insurance sector is provided by a recent report of the Insurance InformationInstitute which summarizes data on major OCS accidents and spills around the world.13 Nor has MMS presented any risk information from the OCS operations of other countries. Thisinformation could illuminate differences in injury, accident and spill rates between countries andprovide a basis for investigating possible causes of superior and inferior rates, including theregulatory approach involved as well as various physical, operational, and cultural factors The potential value of having international information is shown by the results of a recent searchby the Wall Street Journal (WSJ) comparing incidents under US and European regulatory regimes.The WSJ found that for each 100 million hours worked during the years 2004-2009, the US incurred4.84 OCS worker fatalities, more than 4 times the European (North Sea) rate of 1.07 fatalities, withthe US injury rate for workers being 23% greater than the European rate. In addition, the USreported 5 major losses of well control in 2007-2008, whereas 5 other major countries (Norway, UK,Australia, Canada, the Netherlands), with about half as much drilling activities, reported no suchincidents.14 The disparities, according to the WSJ, resulted from over-reliance by US agencies on industrialorganizations to develop standards and best practices, the slowness of the industrial response, andthe failure of MMS to follow up on industry. One example is provided: that in 2000, MMS askedindustry to advise on cementing for well control and spill prevention, and that 10 years later in 2010,the leading industrial standards organization, the American Petroleum Institute acknowledged that ithad not yet provided the advice. A footnote to this story should be that a cementing failure isbelieved to be one of the main causes of the BP accident. Congressional research staff have also sought risk information regarding harms to workers, buthave been frustrated because death and injury reporting systems do not distinguish between onshoreand offshore operations. Thus, all that the researchers could report was data for 2009 showing thatGOM incidents involved 4 deaths, that 290 injury-causing incidents occurred, and that 145 fires andexplosions reported to MMS for that year “may or may not have caused fatalities or injuries”. 15 It appears that additional information on OCS risks with potential value for improvingregulation has been gathered from time to time by MMS but lost in its bureaucracy. A good exampleis a 1998 study by an MMS consultant on “The Environmental and Safety Risks of an ExpandingRole for Independents in the Gulf of Mexico.” This study dealt with concerns that an expanded rolefor “smaller independents” (companies with assets less than $500 million) in the GOM would pose 7
  • 8. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approachgreater risks to worker safety and the marine environment because it was assumed they lacked thetechnical or regulatory skills of “the majors” (the largest oil and gas companies such as BP) or the“large independents” (assets of $500 million or more).16 Using data from MMS “events” and platform inspection files, and regression models to examinethe association between accidents and operational and regulatory variables, the study found thatindependents outperformed majors and that MMS inspections and other factors influence theoccurrence of spills. The nominal accident rate per million platform hours was 3.34 for majors, 3.01for large independents and 2.08 for small independents. Similarly, the weighted accident rate whichdistinguished between accidents according to their severity was 8.00 for majors, 5.35 for largeindependents, and 3.85 for small independents. Differences between majors and independentsmeasured in spills were found to be “similar but more extreme,” with rates of 255 barrels spilled permillion platform hours for majors and 24 barrels for independents. The study concluded that large and small independents were less likely to have a workplaceaccident or spill during exploration and production operations than the majors. A cynic may askwhether this MMS-sponsored study was objective or designed to serve an MMS agenda forincreasing OCS operations. In any case, it has not been determined if the study was put to any useby MMS and the CG. Finally, there is another source of risk information, the environmental impact assessmentprocess carried out by MMS and companies seeking OCS leases and permits. This process, withpublic involvement, is required by the National Environmental Policy Act (NEPA) of any agencyintending to take an action which may pose significant threats to the natural and humanenvironments. NEPA requires that full information on the intended action and its possible adverseconsequences be developed and the results provided to other agencies and the public for feedbackon their concerns and thereby enable the proposing agency to consider the concerns and determineif it should modify its intended action to lessen its impacts or withdraw its intended action.17 Foractions which would permit OCS operations, MMS has also had the opportunity to use the NEPAstudies to determine if project design and contingency plans are sufficient to deal with or avoid theimpacts and if not, to stipulate conditions it believes necessary. However, MMS performance hasbeen seriously flawed, as discussed later in this paper.iv Although robust implementation of NEPA can generate useful information for mitigating thepotential impacts of a specific project, it usually does not provide technical or operationalinformation that can be used by an agency such as MMS to improve accident prevention. NEPA isdirected at the estimation of possible environmental consequences of the agency action that couldarise under routine and reasonably foreseeable accidental circumstances, and does not require thatworker safety and management systems for accident prevention be addressed. Thus, NEPA doesnot provide the quality information needed for improving worker safety and accident prevention inOCS operations.iv Opponents of agency actions often file lawsuits in federal courts claiming that NEPA studies are substantivelydeficient. If successful, the result is a court order that requires the agency do a more thorough study to fulfill the NEPArequirement, thereby delaying the agency action until a more complete study or a modified action proves to beacceptable to the opponents or the courts. 8
  • 9. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approach To sum up, at this time risk information on worker safety and accident prevention in the OCScontext is very incomplete. Nevertheless, many proposals for new legislation and changes inregulation are being advanced by Congress, DOI and the media, and courts are dealing with severalhundred lawsuits. Thus, the context for regulatory reform is highly charged and politicized.4. Legal Framework The legal framework governing activities on the US OCS is comprised of an uncoordinatedcollection of numerous laws enacted by Congress over more than 200 years. For example, there arelaws which establish jurisdiction over the OCS and federal ownership of its mineral resources, divideauthority between the states and federal government over coastal waters and submerged land, andgovern harbors, navigation, vessels, pipelines, and fishing, Additional laws protect national securityinterests, the rights of native American peoples, marine mammals, endangered species, prevent airand water pollution and disposal of toxic waste, require environmental impact studies, and authorizeliability for personal injury, property damage, and harms to natural resources. Within this framework, the law authorizing OCS oil and gas operations is the Outer ContinentalShelf Lands Act (OCSLA).18 This law, frequently amended since its enactment in 1953, authorizesthe federal Department of the Interior and its MMS unit to conduct OCS leasing programs, issuepermits to companies for exploration and production, and carry out a regulatory program to ensurethat these activities are safely conducted.. It also authorizes regulation of workplace safety on theOCS by the Coast Guard. Because Congress has not fully integrated the many laws applicable to the OCS, the frameworkis not coherent or harmonized. In addition, some of these other laws are implemented by regulatoryprograms with detailed rules, procedures and decision-making criteria, resulting in a multitude oflegally-enforceable requirements that apply to offshore activities. This has made MMSimplementation of OCSLA extremely complex. Even more complexity is created by judicial decisions. Under OCSLA and other laws, agencyrules, standards, lease and permit decisions and other final actions can be appealed to a federal courtby individuals, companies and other private parties whose interests are impacted. The subsequentjudicial review will either affirm the action in question or find it invalid on grounds that it is“arbitrary,” lacks a sufficient factual basis, violates procedural requirements, or conflicts with aConstitutional doctrine. Because agency actions are frequently appealed, the courts play a major rolein shaping the application of laws and regulations to OCS activities and to OCSLA implementationin particular. ******* In contrast, Norway, the world’s largest offshore oil producer and second largest natural gas producer [SOGM], has been working for many years at developing a more coherent, integrated and less complex legal framework for regulating health, safety and environment in the conduct of OCS oil and gas operations. Following a Royal Decree in 2001,19 a comprehensive Framework Regulation [Framework] was enacted and became effective in 2002, and several Ministries developed conforming “common regulations” that year.20 The Petroleum Safety Authority (PSA) was then created in 2004 to supervise coordinated implementation of the regulations, and a revised 9
  • 10. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approach and even more integrated version of the Framework Regulation will become effective in January 2011.21 Facilitating this integration process is the tendency in Norway to resolve conflicts by means other than recourse to the courts, such as by mediation or appeal to higher administrative authority instead.22 Another difference between the Norwegian and US regulatory regimes is that Norway has allocated leasing and regulatory responsibilities to separate agencies to ensure that regulatory activities are not compromised by leasing programs and goals. Since 2004, the Norwegian Petroleum Directorate (NPD) carries out leasing activities and its prior regulatory function has become the responsibility of an independent agency, the PSA.23 As noted above, OCSLA vests both responsibilities in the DOI and its MMS unit. But since the BP accident, DOI and Congress are taking steps to separate these responsibilities and allocate them to different newly created agencies, following the Norwegian approach. ******* To return to further examination of OCSLA, this law stipulates that leases and permits areconditional upon company compliance with MMS regulations, other applicable federal regulations,and state laws which are “not inconsistent” with federal law. It also authorizes MMS to suspendactivities when health, wildlife or the environment are threatened, and to cancel any lease or permitwhen such threat is more likely, more serious, and outweighs the advantages of continuation.However, under certain circumstances, cancellation „shall entitle the lessee to compensation”.24 With regard to regulating safety, MMS is charged with the duty to “require on all new drillingand production operations, and whenever practicable, on existing operations, the use of the bestavailable and safest technologies which [it] determines to be economically feasible, whenever failureof equipment would have a significant effect on safety, health or the environment, except where [it]determines that the incremental benefits are clearly insufficient to justify the incremental costs…” 25 This reference to a cost-benefit template for deciding whether to require best “available andsafest technologies” is a legal requirement which MMS must adhere to, and if it fails to do so whensetting a standard or taking other action requiring a safer technology, it is highly likely that theaffected operators would seek judicial review and also very likely that the reviewing court wouldreject the MMS action because it did not meet the statutory requirement. The OCSLA cost-benefit test for a new regulatory action is reinforced by Presidential directive.Since Reagan, Presidents have directed agencies to justify new regulations by presenting an analysisto the President‟s Office of Management and Budget (OMB) which shows that benefits (e.g., fewerdeaths and injuries) would exceed costs (e.g., costs of compliance by the regulated industry, costs toconsumers, etc.). Although monetizing benefits and discounting future costs and benefits is anarbitrary process, and environmental and safety advocates has strongly opposed such Presidentialdirectives because they restrain agencies from robust regulatory initiatives, agencies like MMS aresubject to Presidential management directives and routinely comply. At this time, the prior directivecontinues in effect because it has not been rescinded by President Obama.26 OCSLA further provides that any company holding a lease or permit is required to protect thehealth and safety of workers and contractor employees by complying with occupational safety andhealth standards, the “general duty” to maintain workplaces free from “recognized hazards,”applicable regulations on health, safety and the environment of other agencies, and additional 10
  • 11. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approachsafeguards required in MMS-approved work plans. Companies are also required to allow agencyinspectors access to work sites and relevant records.27 Penalties are set forth for non-compliance with lease or permit terms or regulations, for willfuland knowing violations, for fraud and falsification.28 In addition, the law authorizes several types ofprivate lawsuits. Individuals may bring private enforcement actions in federal court against acompany or DOI to compel compliance with OCSLA under specified circumstances. Residents ofthe US may seek compensation for injuries caused by failure of an operator to comply with aregulation. And any aggrieved party may seek judicial review of agency decisions on leases andpermits.29 OCSLA assigns regulatory and enforcement functions to MMS and the Coast Guard, andspecifically provides that OCS workplace safety regulations are to be enforced by the CG. The CGis also directed to conduct scheduled inspection of safety equipment, periodic unscheduledinspections without prior notice, and investigations of incidents causing death, serious injury, fires,and “major” oil spills (exceeding 200 barrels in a 30 day period).30 In doing so, the statute ignores the Occupational Safety and Health Administration, which is theworkplace safety regulator of onshore oil and gas operations and most other industrial sectors.OSHA has therefore refrained from regulating safety in OCS exploration, production and servicingoperations because of the CG role defined by OCSLA and also because the law which empowersOSHA, the Occupational Safety and Health Act of 197031 precludes it from regulating “workingconditions of employees with respect to which other Federal agencies…exercise statutory authorityto prescribe or enforce standards or regulations affecting occupational safety or health.” 32 For these reasons, OSHA officially ceded worker safety regulation and enforcement to the CGin several interagency memoranda of agreement years ago,33 and recently confirmed theirunwillingness to get involved in OCS operations, during Congressional hearings that were held inthe aftermath of the BP accident.34 As a result, OSHA expertise and regulations which have beenvery useful in promoting safety in onshore oil and gas operations, such as its rule on “process safetymanagement,” 35 have not been applied to OCS operations.36 In addition, OCSLA does not authorize or even mention worker involvement in thedevelopment of safety regulations, industrial standards, inspections, and safety management,providing only that “the Coast Guard…may review any allegation from any person of…a violationof a safety regulation…” 37As a result, there has been regulatory disregard for safeguarding workerson the OCS, a problem further discussed later in this paper. ******* The Norwegian approach, set forth in the Framework and four “common regulations” of its integrated regulatoryregime, addresses many of the same risk issues as OCSLA. However, there are significant differences between the tworegimes with regard to the assignment and scope of responsibilities and how they are to be implemented. Norwegian laws and regulations focus on promoting self-regulation by operators by directly requiring each operatorto develop and apply an “internal control” system for reducing risks and preventing and responding to accidents, asystem which reflects “a sound health, environment and safety culture.” 38 In contrast, the US approach in OCSLAfocuses on assigning regulatory responsibilities to several agencies and discusses operators mainly with regard to their 11
  • 12. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approachduties to comply with the regulations of several agencies and the sanctions they would incur for non-compliance, asdiscussed previously. Another distinction is that the Framework sets forth in very broad terms the functions that operators shouldperform for internal control, with accompanying non-binding Guidelines, but without prescriptive details.39 However, itrecognizes that a performance-based, internal control system necessarily leads to operator adoption of industrialstandards and compliance with certification requisites of various technical and international organizations. 40 Becausethis could compromise safety and lead to “business as usual”, 41 PSA has been assigned the critical roles of supervisingoperator performance of the functions, cooperating with operators and labor unions in problem-solving and addressingnew technologies and circumstances, and determining by a consent process when an operator’s approach is suitable. 42Thus, Norway has created a PSA-managed, non-adversarial approach to building safety systems within eachcompany. In contrast, the OCSLA approach, previously discussed, emphasizes the police function of regulatory agencies,inspections, and the threat of sanctions, thereby creating a legalistic and adversarial relationship between operators andregulators. This is typical of many US laws enacted by Congress with the expectation that agency regulations will be ofa “command and control”, detailed and prescriptive nature, and strictly enforced. However, US experience indicatesthat this approach often leads to low rates of compliance, and agency exemptions and rule-bending to relax overly-detailed prescriptive requirements, as has occurred to some extent under OCSLA.43 Thus, it is claimed that the Norwegian approach enables operators to quickly adapt internal controls to thedynamics of OCS exploitation, such as technological advance, new site-specific circumstances, and new knowledge aboutaccident prevention without the need for an agency to formally enact new regulations,44 which would be required underthe US approach. This allegedly more agile Norwegian approach also produces operator-specific internal controls ratherthan the generic, “one size fits all” regulations enacted by MMS and other US agencies, a cumbersome, time-consuming process which often leads to judicial review and further delay. However, the US approach is more transparent and publicly-accountable, and is supplemented by the threats ofenforcement and sanctions and private lawsuits previously discussed. In addition, operator-specific restrictions can beimposed by MMS and the CG based on their reviews of each operator’s project design and proposed operation, andsubsequent inspections. Also, the OCSLA mandate, which does not explicitly call for functional or performance-basedregulations nor acknowledge acceptability of industrial standards because of traditional public mistrust and demand forprescriptive rules, essentially forces agencies to publicly provide legal and factual justification for taking such approaches. And in contrast to Norwegian reluctance to threaten operators with enforcement and sanctions for non-compliancewith functional requirements, the US approach, at least in theory, uses fear of punitive action as a deterrent againstoperator violation of rules and standards. Thus, the Norwegian approach relies greatly on trust and PSA supervisionand expertise, whereas the US approach reflects mistrust and relies on fear of sanctions and liability. Another fundamental difference involves the regard shown for workers and labor union involvement in addressingsafety issues. Norwegian culture, laws such as the Working Environment Act, and the Framework emphasize atripartite approach to safety which involves labor, industry and government as equal participants in developingregulations, problem-solving and the application of internal controls.45 This “Nordic OSH regime” in the OCS context is implemented by several collaborative structures withincompanies: a working environment committee for managers and employees to discuss safety and related issues, electionby workers of a safety representative at each worksite, and having occupational safety and health experts on call asconsultants to help resolve disputes and provide services to the internal control system.46 12
  • 13. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approach Worker safety representatives play a pivotal role in that they represent employees in safety discussions with agenciesand operators, and actively use their authority to halt dangerous work in oil and gas operations and activities, much asthey do in other Norwegian industrial sectors. Recent studies find that they are rarely contested by management, forceproblem-solving, and have a “positive effect” on employee health and safety except with regard to” subcontractoremployees who move constantly” between projects.47 The range of union concerns now extends beyond worker safety and labor issues. The Norwegian Federation ofTrade Unions has recently decided to expand the scope of its interests and advocacy beyond worker safety to encompassenvironmental and sustainability issues in negotiating collective agreements with industrial groups, topics it hadpreviously neglected.48 There is continuing concern expressed by labor unions and safety advocates that the Nordic OSH model for OCSoperations will be undermined by several developments: operator adoption of industrial standards for internal control,an increase in operators from countries that show less regard for workers and unions, market forces which leadoperators to increase hiring of temporary workers, and management application of behavior-based approaches to theworkforce.49 Of special concern to unions is operator use of methods for changing worker behavior, which many in industryinstinctively turn to as a means of reducing injuries and accidents instead of making more costly improvements infacilities and operation.. The union view is that this approach, now being promoted in the “Step Change” project in theUnited Kingdom OCS, is based on discredited studies by DuPont, insurers, and others, shifts the burden of safetyfrom management to workers, mistreats and demeans workers, undermines unions, and violates the NorwegianWorking Environment Act.50 Nevertheless, workplace safety and union involvement, although vulnerable to these trends, are fully integrated intothe Norwegian approach to accident prevention and internal control systems. In contrast, the limited presence of unionsin US OCS operations and the US approach under OCSLA, previously discussed, has resulted in a complete failureto provide these features in regulating OCS operations. Finally, there is a subtle difference between Norwegian and US approaches on the matter of adhering to cost-benefit analysis (cba) when determining the level of safety to be provided. As previously discussed, OCSLA andPresidential directives have firmly established cba as the regulatory basis for deciding “how safe is safe enough”, andMMS and the CG have diligently complied. The Norwegian approach is more ambiguous and less doctrinaire. The Framework provides that an operator shallprevent harms in accordance with applicable laws, its own internal control, and PSA acceptance criteria, and “Overand above this level the risk shall be further reduced to the extent possible.” The same provision then modifies “to theextent possible” by adding that “in effectuating risk reduction,” the operator is to choose “solutions” which “offer thebest results, provided the associated costs are not significantly disproportionate to the risk reduction achieved.” 51 In addition, several sections of the “common regulations” deal with risk reduction functions in terms that alsoavoid imposing a strict cba test. For example, the Facilities Regulations provided, in part, that facilities “shall bedesigned so that …b) the major accident risk becomes as low as practically possible…” 52 However, according to anindustry representative, the word “practically” will be officially deleted, a change opposed by industry because theresulting “as low as possible” test for facility safety would be a more stringent requirement.53 13
  • 14. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approach Thus, a strict cost-benefit test is avoided, making operators accountable for reducing risks to the extent they canbe reduced, so long as the costs do not significantly outweigh benefits. Working this out in actual practice poses achallenge for PSA supervision. Nevertheless it affords a more robust approach to safety than the US approach. The Norwegian approach to safety offshore presents a very interesting progressive alternative which asks muchmore of operators than the mechanistic regulatory compliance approach of the US. Prior to enactment of its integratedapproach in 2002, Norway experienced several OCS accidents causing fatalities and spills: e.g., Bravo blowout in1977, West Vanguard gas blowout, Alexander Kjelland capsize and deaths, and Bronneysund transport accidentand deaths. However, since 2002, no such accidents have occurred and the Snorre near miss incident has been studiedto develop improvements in internal control. There are many compelling reasons to reform the US approach. A serious attempt to do this must involvethorough consideration of the Norwegian approach. *******5. Regulation Regulation of OCS oil and gas activities must be done in accordance with the directionsprovided by OCSLA. Most of the directions regarding permits and the safety of operations arebriefly stated in broad terms. Thus, MMS has had considerable discretion in making permitdecisions, designing rules, and setting standards, and the CG has similarly had discretion inregulating workplace safety.54 In the aftermath of the BP accident, MMS has been replaced by a new Bureau of Safety andEnvironmental Enforcement (BSEE).55 BSEE inherits the regulatory program built by MMS over 30years and will undoubtedly modify the MMS program to correct weaknesses. However, it will haveto carry out the same basic regulatory functions mandated by OCSLA. Although OCSLA itself maybe amended by Congress, Congressional, and Presidential proposals thus far have not recommendedchanges to the basic regulatory functions. Thus, it is instructive to consider aspects of MMSperformance that need to be improved upon by BSEE, and to also consider the role played by CG. The basic regulatory functions of the MMS regulatory program include: enacting or incorporating by reference the rules, standards, and practices for governing OCS exploration and production operations, as well as OCS pipelines, to ensure safety and efficiency; conducting several reviews to ensure that proposed operations and facilities will comply with these regulations and then issuing permits;v conducting post-permit inspections to ensure that compliance is being maintained throughout operations; enforcing and imposing sanctions for non-compliance, and v The pre-permit reviews involve environmental, engineering, design and financial responsibility evaluations ofapplications for permits, and include, for example, applying design specifications for blowout prevention and wellcontrol, and other standards for equipment and operational procedures. The agency has also added special requisites asstipulations to permits when necessary for safety and spill control, and required deepwater operations plans andadditional information on mobile platforms for special evaluation. 14
  • 15. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approach participating in CG coordination of activities in response to accidents and spills. The scope of the MMS regulatory program to be inherited by BSEE has therefore encompassedvirtually all aspects of OCS permitting, drilling, production and contingency management. 56 The program has some distinctive features. One is that most of the MMS and CG rules andstandards are prescriptive rather than performance-based. Another is that many of these wereadopted from or incorporate by reference industrial standards and recommended practices originallydeveloped by the American Petroleum Institute and several engineering societies and privatestandards organizations. Another feature is that the inspection function, according to MMS, is conducted “to enforceoperator compliance” with regulations. As described by MMS, this has involved announced andunannounced inspections, reviews of an operator‟s compliance documentation, providing regulatorycompliance training to rig managers, and performing safety inspections “on behalf of the U.S. CoastGuard.” Its summary of what inspectors have looked for consists of checklists for numerous“Potential Incidents of Non-Compliance” (PINC‟s), which for example include 160 PINC‟s for adrilling rig, and other “verifications” that detailed technical requirements are being met. Forworkplace safety, it has conducted, on behalf of the CG, “a general safety walk-through of thefacility looking for general housekeeping hazards related to slips/trips/falls/railings/opengratings.” 57 Several thousand inspections were carried out in 2009 at 331 well sites in the GOM. 58 This type of highly prescriptive, compliance-oriented regulatory program is common in the U.S.It is the cultural construct of a society in which free-market values compete with public demands forsafety and holding companies accountable, where industry and regulators are viewed as adversariesbecause companies are expected to be opportunistic and agencies are expected to prescribe andpolice their behavior, where companies lobby against new “burdensome” regulations and agenciesare under constant pressure from industry, states, Congress, and the President to be accommodatingto business and other economic interests yet somehow prevent harms. The problems that arise fromthis type of regulation are apparent in several regulatory sectors, for example in the regulation offinancial services, auto and air transport, food and drug products, and the extractive industries whichinclude hard and soft (oil and gas) minerals mining. 59 In theory, the regulatory program built by MMS has its merits, but like any regulatory approach,it requires robust implementation for credibility and success. Since the BP accident, implementationof this program has been critically evaluated and there is now ample evidence that agencyperformance over the last decade deteriorated in several respects. The following discussion focuses on someof these deficiencies in order to derive “lessons learned” that may be of value to BSEE, and is not intended toexonerate BP or any other OCS operators and contractors.Assessing and Using Environmental Impact Studies Since enactment of the National Environmental Protection Act in 1969, federal agencies mustconsider the environmental impacts of their intended actions, as previously discussed. The purposeis to have the agencies acquire knowledge of environmental features likely to be adversely affectedand to use this knowledge to modify their actions in ways which will avoid or mitigate the potentialimpacts. MMS has routinely complied with NEPA for its intended lease sales, but developed a“categorical exclusion” policy exempting exploration permits, claiming that the subsequent drilling 15
  • 16. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approachoperations would not incur major spills or cause other significant impacts. By exemptingexploration, MMS avoided the delay and resource commitments involved in conducting,disseminating, reviewing and defending environmental impact studies, and expedited permitting andexploration. By doing so, it willfully gave away the opportunity to acquire information that wouldhave enabled it to stipulate appropriate spill control and emergency response requirements inpermits as precautionary measures.60 Because the BP permit had been categorically excluded, this MMS policy has been attacked as acause of the vast environmental damage that ensued. Although the agency had previously done threeenvironmental studies for its GOM 5 year leasing plan, its combined lease sales in the GOM, and itslease sale to BP, these were broader, less detailed with regard to specific site conditions andoperational features, and thereby less useful in addressing the potential impacts of a BP blowout andmajor spill at the deepwater Macondo site and the adjacent coastal region. MMS apparently allowed its “production” role as lessor and expediter of deepwater drilling, asdefined by OCSLA and promoted by political forces, to overwhelm its environmental protectionrole. As previously discussed, these roles will now be carried out by separate agencies. In addition, itis expected that its successor, the BSEE, will require more thorough compliance with NEPA, moreprecautionary estimates of spill potential and impacts, and restrict use of categorical exclusions fordeepwater permits.61 The generic lesson is that agencies, like companies, have a tendency toemphasize production at the expense of safety in US regulatory culture, even when they have noexplicit legal mandate for production, and that continuing independent oversight is needed to ensuretheir robust performance of safety responsibilities, similar to that exercised by PSA in Norway.Reliance on Industry Standards MMS and CG delegated many of their regulatory responsibilities to industrial and technicalorganizations, especially the American Petroleum Institute, by adopting or incorporating byreference their voluntary standards and recommended practices, or otherwise accepting them asconsensus standards. This was done for the good purpose of drawing on the technical, experience-based safety expertise of these organizations and their research resources. But it was also done forsome less salutary reasons, and over time, this reliance has contributed to the deterioration of in-house expertise at the agencies, which has been highlighted in recent studies of their performance.As a result, the agencies allowed the industry to determine the progress and quality of safetyregulation to a considerable extent. For example, MMS had accumulated data over many years linking most accidents to inadequatecompany performance of four of the 12 safety management functionsvi set forth in API‟sRecommended Practice 75, as previously discussed. RP-75 broadly covers the major features ofsafety and environmental management systems for OCS operations, and is known as API‟s SEMPrule. It was enacted in 1993, and company compliance has been voluntary.62 Even though MMS had such accident data and found no trend towards accident reduction overseveral years, it continued to rely on voluntary compliance with SEMP until the BP accident when ithurriedly proposed its own rule to compel company performance of the four functions. 63 This case vi According to MMS, the 4 functions implicated in most accidents were hazard analysis, management of change,written operational procedures and mechanical integrity, and their inadequate performance was due to poorcommunications, failings in supervision and maintenance of operations, and uncorrected workplace hazards. 16
  • 17. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approachand others illustrate MMS deferral to industry on safety management and its failure to maintainoversight and take the steps needed to prevent continuation of certain accident-causing activities.64 The CG for many years has refrained from enacting its own rules and standards for OCSworkplace safety but has referenced, and claims to enforce, hundreds of industrial and technicalstandards.65 As previously discussed, OCSLA‟s assignment of workplace safety responsibilities to theCG has had the legal effect of precluding the more expert OSHA from this role.66 In an article published shortly before the BP accident, the recently retired chief of CG‟s Officeof Standards Evaluation and Development stated that “our efforts today are guided by OMBCircular A-119” which “directs agencies to use voluntary consensus standards in lieu of government-unique standards, except where inconsistent with law or otherwise impractical” and thereby reducegovernment-unique standards “to a minimum” in order to eliminate costs to the government,encourage economic growth, and promote economic competition. As a result, CG has adoptedsome 450 industrial standards which “saves potentially thousands of pages of federal regulations”and “saves the Coast Guard over $1.5 million annually.” 67 According to a post-BP accident article, CG worked at removing what it considered to bebarriers that impede productivity and commerce. However, interviewed officials acknowledged thattheir oversight of rigs should have been more rigorous, that “the pace of technology has outrun thecurrent regulations,” and that they had inspected BP‟s Deepwater Horizon rig 9 times withoutfinding any “major issues.” 68 In addition, CG also transferred its workplace inspectionresponsibilities to MMS.69 Refraining from developing its own regulations and relying on others todevelop standards and safeguard workers have taken their toll on CG expertise. At Congressional hearings in 2007,70 the CG was depicted by several witnesses as having a semi-military, command and control culture, failing to build in-house expertise because of its policy ofrotating junior level officers throughout several of its missions, and being insensitive to thecircumstances of employees in business organizations. The Gulf Coast Mariners Association, createdby four labor unions, testified that the CG “marginalized” workers by relying exclusively onmanagers for information, has too little experience in civilian marine activities, fails to enforce injuryreporting requirements, and has not regulated workplace safety in a manner comparable to OSHAregulation of other workplaces. The Association recommended transferring CG‟s workplace safetyfunctions to a civilian agency. Reliance on industry standards and practices must be carefully supervised to avoid several typesof problems: to prevent deterioration of the agency‟s technical competence, to prevent industrytakeover of the agency so that it‟s program does no more than accommodate “business as usual”, toensure that the agency‟s mandate for safety is robustly pursued and attentive to the concerns, andinformation of value that can be provided by workers, unions, and environmental organizations. But more than supervision is needed. Steps must be taken to ensure the integrity and objectivityof the industrial and technical organizations that agencies look to for expertise. Consider that API,which has developed some 500 standards and practices, many of which have been adopted by MMSand CG, also spends millions annually to aggressively lobby and coordinate campaigns against newlaws and regulatory initiatives to improve safety because of its members‟ opposition to bureaucracyand additional costs.71 Consider that API and others do not invite the participation of unions and 17
  • 18. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approachworkers who often have intimate knowledge about inadequate safety practices and gaps in safetymanagement which could help reduce accident risks.72 Consider further that API and other industrial organizations which supplied MMS and CG withsub-optimal standards and practices, failed to ensure that voluntary practices were being followed,and in many cases failed to address known risks and new safety measures, remain unaccountable forharmful consequences. These issues need to be addressed in the investigation of agency reliance onindustrial standards which has recently been launched by leaders of the new Bureaus which replacedMMS.73Inspection of Operations According to MMS and CG, the main purpose of their inspection programs has been to ensureand enforce compliance with numerous rules. MMS claims that its inspection program has beencomprehensive and in the GOM in 2009, for example, it conducted some 561 drilling inspections,3678 production inspections, 3342 “personal safety” inspections (many for the CG), and many otherinspections as well.74 As discussed earlier, Inspectors have used a “national checklist” called thePotential Incidents of Noncompliance list which is a compilation of yes/no questions addressingoperator compliance with all applicable regulations. 75 Upon detecting a violation, MMS has notifiedthe operator and if the violation remains uncorrected and is “severe,” has imposed sanctions such as“shut-ins” and monetary penalties. Thus, its approach to inspection reflects an extreme form of procedural focus, i.e., the reductionof the complexities of safety management to a simplistic standardized checklist format for thepurpose of policing operator compliance with many prescriptive rules. This raises the questions ofits efficacy, and whether it deprives the inspection function of a more holistic appraisal of safetymanagement in real time practice, and the agency‟s ability to determine if the behavioral, technical,and organizational aspects of safety management converge to create a healthy safety culture at eachfacility.76 Put another way, has MMS been missing the forest by focusing on each of the trees? As discussed earlier in this paper, MMS has acknowledged that there has been no discernibleimprovement in the reduction of accidents, fatalities, injuries, loss of well control, fires and spillsover a studied seven year period in which it issued each year some 150 findings of non-compliancein GOM operations. In addition, several investigations have found that both MMS and CG have hadproblems in hiring and retaining staff with sufficient technical expertise for overseeing andinspecting sophisticated operations and questioned the technical capacity of the agencies in thisregard.77 Federal investigators have also verified that MMS had been an inconsistent andcompromised performer of inspection and other functions in some cases because members of itsstaff had “inappropriate relationships” with industry personnel, including gift-taking and sexualrelationships, and questioned whether its oversight activities were sufficient to ensure safeoperations offshore.78 Finally, there is the issue of jurisdictional ambiguity. At hearings recently held by a Congressionalcommittee, presentations by Coast Guard, Department of Interior, and OSHA officials were madedefining their regulatory and inspection roles offshore. Considerable confusion arose because theirjurisdictional boundaries were shown to be ambiguous and arbitrarily defined and with someapparent conflicts, causing confusion among the Congressional committee members. For example,the CG claims responsibility for mobile drilling rigs and BSEE (as with its MMS predecessor) claims 18
  • 19. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approachresponsibility for fixed platforms. But CG is also responsible for workplace safety on fixedplatforms with MMS responsible for what occurs below the platforms. OSHA‟s responsibility forwhat is unregulated and unenforced by CG and MMS/BSEE is therefore highly uncertain. Thechairman of the committee called this regulatory disarray a “jurisdictional mishmash” and theabsence of OSHA‟s process safety management rule a critical shortcoming. The hearings willcontinue to explore this state of confusion which obviously impairs the inspection function and itsefficacy for safety.79 Thus, there are lessons to be learned from MMS experience about the conduct of a compliance-oriented inspection program, such as its vulnerability when staffed by under-qualified inspectors,confused by jurisdictional ambiguities, or compromised by ethical lapses. But much larger questionsneed to be considered as BSEE assumes direction of the regulatory program regarding the efficacyof compliance-based inspection of complex industrial activities for accident prevention, and theefficacy of alternative approaches in which the inspector‟s role would involve a more holisticappraisal of activities at a facility and trust-building educative functions.80More Issues to Consider Through the lens of safety science, deeper issues can be discerned and should provide thefoundation for reforming offshore regulation and safety management. The field of safety science isinterdisciplinary and is populated by practitioners in industry and government, consultants, andacademics. Their activities reflect a convergence of behavioral and organizational specialists withtechnical and legal counterparts and produce insights, many of which have eventually beenrecognized and adopted by regulatory and industrial safety programs. One such insight is the concept of “drift”, developed by Jens Rasmussen,81 which provides thatthe efficacy of a regulatory program or safety management system deteriorates as operations moveoutside the envelope of conditions and circumstances it was originally created to deal with. This is acommon occurrence and is often not recognized until a major accident occurs. In the case of theMMS regulatory program, its continuing application to operations moving into deeper waters andusing new facilities (such as mobile, semi-submersible, drilling rigs) has led to the BP accident andother deepwater incidents. Even though MMS added requirements for deepwater and mobile rigs toits permits, these were “add-ons” and not fully integrated into the regulatory program. Another insight that seems relevant to MMS, in retrospect, is the concept of legitimization ornormalization of deviance, as developed by Diane Vaughan.82 This concept provides that many smallbehavioral and technical deviations, e.g., “short cuts” commonly occur over time within a regulatoryprogram or safety management system without being addressed. Eventually, the new norms canundermine the program or system to the point where it is incapable of preventing certain types ofaccidents. In the case of MMS and CG, many deviations regarding their review and inspectionprocedures, as discussed previously, seem to be implicated in the accidents that have ensued inrecent years. It should be noted that when a prescriptive regulatory program deteriorates in this way,it is inevitable that company safety management system will also deteriorate. Finally, there is the Norwegian concept, set forth in its Framework regulation, 83 that regulationshould be directed towards building company self-regulation in the form of internal controls, ratherthan being used as a policing program to enforce non-compliance with many detailed rules. In thecase of MMS and CG, it is becoming apparent that their prescriptive policing approach did not lead 19
  • 20. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approachto a coherently organized and supervised internal control system on the Deepwater Horizon rigleased by BP. Investigations of the BP accident reveal the management disarray on the DeepwaterHorizon that prevailed and contributed to the accident, a disarray between BP, the lessor,Transocean, and the major contractors regarding equipment and pressure testing, cementing, andother matters. The failure of a prescriptive regulatory approach to build coherent, competent, and integratedfacility operations management should be a major consideration as reforms of the MMS program aremade. Dealing with this very critical issue inevitably leads to consideration of the self-regulatoryapproach being pursued by Norwegian authorities and the question of its viability in the U.S. culturaland regulatory context, to be discussed below.6. Notes1. MMS Rpt., Increased Safety Measures for Energy Development on the Outer Continental Shelf, U.S. Dept. Interior (May 27,2010).2. National Assessment Study, U.S. Dept. Interior (2006).3. W.J.Coleman testimony, Hearings on The Risky Business of Big Oil, Senate Committee on Judiciary, U.S. Senate (June 8, 2010).4. Overview of U.S. Legislation and Regulations Affecting Offshore Natural Gas and Oil Activity, U.S. Dept. Energy (2005).5. Bush declaration at www.whitehouse.gov (July 14, 2008).6. “Environmentalists Say Yes to Offshore Drilling”, A.Cline, Wall Street Journal (July 12, 2008).7. Cline at note 6; and “Deepwater Oil Fields are a Final Frontier”, D. Lynch, USA Today (June 23, 2008).8. “Obama Unveils New Offshore Drilling Plan”, Environment Reporter, BNA, 41 ER 724 (April 2, 2010).9. “Deepwater Horizon Oil Spill”, C. Cleveland, Encyclopedia of Earth (at www.eoearth.org).10. Id.11. MMS Rpt., note 1.12. SEMS proposed rule, MMS: 74 Fed. Register 115, pp.28639 et seq (June 17, 2010).13. The Deepwater Horizon Disaster: Insurance Market Impacts, Insurance Information Institute (June 2, 2010).14. “Oil Regulator Ceded Oversight to Drillers”, R. Gold, S. Power, Wall St. Journal (May 7,2010).15. Deepwater Horizon Oil Spill: Selected Issues for Congress, Congressional Research Service (May 27, 2010). Rpt.16. The Environmental and Safety Risks of an Expanding Role for Independents in the Gulf of Mexico, Publication 98-0021, Mineral Management Service (April 1998).17. 42 U.S.Code 4321 et seq.18. 43 U.S. Code 1333 et seq.19. Royal Decree, Norway (August 31, 2001).20. Framework HSE: Regulations relating to Health, Environment and Safety in Petroleum Activities (2002) as amended; and the Common Regulations (2002) on Management, Information and Materials, Facilities, and Activities; Norway. (at PSA website www.ptil.no).21. PSA website (www.ptil.no).22. European Methods of Administrative Law Redress, T. Buck, Dept. for Constitutional Affairs, U.K. (November 2004).23. PSA website (www.ptil.no). 20
  • 21. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approach24. OCSLA s. 1334a.25. OCSLA s.1346b.26. Executive Order 12866 (1993) as amended..27. OCSLA s.1347.28. OCSLA s.1349, etc. .29. OCSLA s.1348..30. OCSLA s.1346c.31. 29 USC 651 et seq.32. Id at s.4b1.33. MOU cites.34. D. Michaels testimony, Hearings on Worker Health and Safety Standards Related to the Oil Industry , Oil Rigs and Drilling, Committee on Education and Labor, U.S. House Representatives (June 13, 2010).35. 29 CFR s.1910.119. Also see “Process Safety Management and the Implications of Organizational Change‟, M. Baram, Ch. 5 in Safety Management: The Challenge of Change, A. Hale, M. Baram, eds. Pergamon (1998).36. OSHA Standard Interpretations, OSHA and the US Coast Guard, US Dept. of Labor (2/2/93).37. OCSLA s.1346e.38. Framework section. PSA website (www.prtil.no).39. Id.40. Id41. Lindoe, Role of Standards in Self Regulation (draft).42. PSA website.43. See generally, Regulating From the Inside, C. Coglianese, J. Nash, eds.,Resouces for the Future (2001).44. PSA website: 12.03.2010.(O.Hansen).45. PSA website. Lindoe paper.46. Karlsen and Lindoe, The Nordic OSH Model at a Turning Point?.47. B. Forseth, et al, Stop in the Name of Safety. J. Hovden, et al, The Safety Representative Under Pressure (presentation).48. B. Sjafjell, The Very Basis of our Existence. Univ. Oslo.49. Karlsen and Lindoe, The Nordic OSH Model at a Turning Point?50. Furre, A Union View on HSE Regulations and Inspections, presentation, Stavanger (May 22, 2008).51. Framework Regulations, section 9.52. Facilities Regulations, section 4b on Design of Facilities.53. A. Drechsler, Challenges Seen from an Industry Viewpoint (presentation). Stavanger (May 22,2008).54. See MMS regulations at 30 CFR 250 and CG safety regulations at 33 CFR 142.55. Order 3299, Secretary of Interior, U.S. Dept. Interior (May 19,2010); and Reorganization of the Minerals Management Service, U.S. Dept. Interior (July 14, 2010).56. MMS & CG regulations at note 54, and MMS website (www.mms.gov).57. Id.58. MMS report. Note 1.59. Gulf Oil Rig Disaster and Mine Explosion Highlight Weak Safety Regulations, Marcus Baram, Huffingtonpost.com (May 7, 2010); and Shadow Elite, L.Keenan, J. Wedell, Huffingtonpost.com (May 13, 2010).60. CRS report. Note 15. 21
  • 22. Deepwater Horizon Study Group – Working Paper Preventing Accidents in Offshore Oil and Gas Operations: U.S. Contrast With Norwegian Approach61. “Interior to Limit Use of Categorical Exclusion in Applying NEPA to Offshore Oil and Gas Work”, Environment Reporter, 41 ER 1893 (2010); and News Release, U.S. Dept. Interior at www.doi.gov (August 16, 2010).62. RP-75: Recommended Practices for Devlopment of a Safety and Environmental Management Program for OCS Operations and Facilities, American Petroleum Institute (1993).63. SEMS proposed rule, MMS. Note 12.64. WSJ article at note 14.65. CG regulations at 33 CFR 142.66. Memorandum of Understanding Concerning Occupational Safety and Health on Artificial Islands, Installations and Other Devices on the OCS of the US, U.S. Coast Guard, Dept. Transportation, and Occupational Safety and Health Administration ( July 17, 2009).67. “The Value of Voluntary Consensus Standards”, H. Hime, Coast Guard Proceedings, v.67, n.1 (Spring 2010).68. “Coast Guard Cedes Marine Safety Regulation to Industry”, Marcus Baram, Huffingtonpost.com (June 16, 2010).69. Douglas Slitor testimony, Hearings on Worker Health and Safety Standards Related to Oil Industry, Oil Rigs, and Drilling, Committee on Education and Labor, U.S. House of Representatives, U. S. Congress (June 23, 2010).70. Hearing on Challenges Facing the Coast Guard‟s Marine Safety Program, Committee on Transportation and Infrastructure, Committee on Transportation and Infrastructure, U.S. House of Representatives (August 2, 2007).71. “API Plans Citizen Rallies in Opposition to Energy, Drilling Reforms”, Environment Reporter. BNA, 41 ER 1900 (August 2, 2010); “Big Oil Fought Off New Safety Rules Before Rig Disaster”, Marcus Baram, Huffingtonpost.com (April 26. 2010); and “Shadow Elite‟ at note 59.72. “Worker Involvement Lowers Risk of Petroleum Disasters”, PETROMAKS at coe.no (July 18, 2010).73. “Bromwich Says Interior Relies Too Much on Industry for Offshore Drilling Standars”, Environment Reporter, BNA, 41 ER 1899 (August 20, 2010).74. MMS report. Note 1.75. Regulatory Compliance: Inspecting Offshore Facilities and Enforcing Federal Regulations, MMS; and National Office Potential Incidents of Noncompliance List; both at www.mms.gov76. Safety Culture and Behavioral Change at the Workplace, M. Baram, M. Schoebel, eds.,Safety Science Journal, v.45,n.6 (July 2007).77. Oil and Gas Management: Key Elements to Consider for Providing Assurance of Effective Independent Oversight, GAO-10-852T, U.S. General Accountability Office (June 17, 2010); Hearings, at note 70; and Report on Coast Guard Personnel Problems, GAO-10-268R, General Accountability Office (January 29, 2010).78. GAO-10-852T at note 77.79. “Coast Guard Says it Oversees Offshore Oil Rig Safety, Lawmakers Cite Regulatory Disarray”, Occupational Safety and Health Reporter, 40 OSHR 537 (June 24, 2010); and Hearings, Committee on Education and Labor at note 69.80. “Complex Roles and Mixed Norms: A Dilemma for Safety Inspections, P. Lindoe (draft paper (2010).81. Proactive Risk Management in a Dynamic Society, J. Rasmussen, I. Svedung. Swedish Rescue Services Agency (2000). and “Risk management in a dynamic society: A modeling problem,” Safety Science, Vol. 27, No. 2/3, Elsevier Science Ltd., pp. 183-213 (1997).82. The Challenger Launch Decision, D. Vaughan, U. Chicago Press ((1996).83. Framework at note 20. 22

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