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6
Regulatory Reform
Offshore oil and gas exploration and production are inherently hazardous
activities requiring the coordinated utilization of many complex systems by
hundreds of people working for dozens of companies. Hazards associated with
offshore drilling operations arise from a variety of activities and factors. As in-
dicated in Chapter 5, some hazards can lead to accidents on the scale of individ-
ual workers and are in the realm of occupational safety. In contrast, system
safety1 refers to offshore drilling hazards that can lead to accidents on a much
larger scale, involving multiple fatalities, substantial property loss, and extensive
environmental damage. Given the charge to the committee, this chapter focuses
on regulatory reform related to improving system safety.
The Minerals Management Service (MMS) of the U.S. Department of the
Interior (DOI) was the federal agency primarily responsible for regulating the
safety of offshore drilling at the time of the Macondo well–Deepwater Horizon
incident. After the incident, the newly formed Bureau of Ocean Energy Man-
agement, Regulation, and Enforcement (BOEMRE)2 was assigned responsibility
for regulating the safety of offshore drilling operations previously assigned to
MMS. As reorganizations continued within DOI, BOEMRE split into two enti-
ties on October 1, 2011. Currently, the Bureau of Safety and Environmental En-
forcement (BSEE) is the federal entity responsible for safety and environmental
oversight of offshore oil and gas operations. Several other agencies, such as the
U.S. Coast Guard, also play important regulatory roles. The regulatory authori-
ties sometimes overlap, and specific agreements between agencies are used in
some cases to define regulatory jurisdictions.
Since the Macondo well–Deepwater Horizon incident, DOI has under-
taken several actions to improve the safety of and reduce risks associated with
offshore oil and gas activities. This chapter considers efforts intended to shift the
1
In some industries (e.g., chemical) the term process safety is also used.
2
On May 19, 2010, Interior Secretary Salazar issued Secretarial Order No. 3299,
which restructured MMS by reassigning its responsibilities to two newly formed bureaus.
The bureau eventually named the Bureau of Ocean Energy Management, Regulation, and
Enforcement was assigned responsibility for regulating the safety of offshore drilling
operations.
111
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112 Macondo Well Deepwater Horizon Blowout
regulatory system for deepwater drilling from reliance on mainly prescriptive
regulations to performance-based regulations that specify safety goals to be
achieved by the regulated organizations, as discussed below. The chapter also
provides recommendations for enhancing the regulatory reform that is now un-
der way. The recommendations were developed to address needs identified dur-
ing presentations to the committee, in previously published reports (such as
Presidential Commission 2011), and the committee’s evaluation of regulatory
systems for offshore drilling in the Gulf of Mexico and other locations (e.g., the
North Sea).
REGULATION OF U.S. OFFSHORE DRILLING BEFORE
THE MACONDO WELL BLOWOUT
MMS had relied on a primarily prescriptive approach for regulation of off-
shore drilling. Under that approach, specific requirements for equipment and
operations were developed, and then compliance with the regulations was moni-
tored through auditing. Prescriptive regulations are often developed through a
multiyear process in response to events or observed trends. As a result, the regu-
lations invariably are neither timely nor complete and lag behind the develop-
ment of new technologies.3
Over the past few decades, exploration and production companies within
the oil and gas industry developed advanced technology that led to a marked
increase in deepwater drilling in the Gulf of Mexico. During that period, the
predominantly prescriptive regulatory system for deepwater drilling used by
MMS did not keep up with these technological advances. It became more prob-
lematic because its level of funding and technical staffing remained static or
decreased as industry’s offshore drilling activity increased. Furthermore, the
distribution of those limited resources among MMS regions was not aligned
with the relative amounts of offshore industrial activity in the regions. The Pa-
cific region, with about one MMS inspector for every five offshore facilities,
was more fully staffed and equipped than were the Gulf of Mexico regions,
which employed about one inspector for every 54 facilities (DOI 2010b).
As discussed previously in this report, the Macondo well blowout was
precipitated by multiple flawed decisions involving the operator, drilling con-
tractor, and service companies as they moved toward temporary abandonment of
the well despite indications of increasing hazard. The net effect of these deci-
sions made by the rig personnel was to reduce the available margins of safety
that take into account complexities of the hydrocarbon reservoirs and well geol-
ogy discovered through drilling and the subsequent changes in the execution of
the well plan. Critical aspects of drilling operations were left to industry to de-
3
A general discussion of federal regulation of offshore drilling in the United States
with a focus on regulatory oversight of deepwater drilling in the Gulf of Mexico is pro-
vided by Presidential Commission (2011).
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Regulatory Reform
cide without MMS review of the effects of the changes on the overall risk with
regard to the temporary abandonment procedures. For example, no person in
authority from a regulatory agency was required to review critical test data from
Macondo, such as the results of the negative pressure test. Had this been a re-
quirement before operations could continue, it is possible that the test data
would have exposed the fact that the hydrocarbon-producing formations had not
been adequately isolated and were in communication with the well (see Chapter
2). Also, prior to the Macondo well blowout, there were numerous warnings to
both the industry and regulators about potential failures of blowout preventer
(BOP) systems widely in use. While the inadequacies were identified and docu-
mented in various reports over the years, it appears that there was a misplaced
trust by both industry and responsible government authorities in the ability of
the BOP to act as a fail-safe mechanism (see Chapter 3).
The National Commission on the BP Deepwater Horizon Oil Spill and
Offshore Drilling found that MMS regulations were inadequate to address the
risks of deepwater drilling and did not assess the full set of risks presented by
the temporary abandonment procedure used at the Macondo well. The commis-
sion’s report also noted that MMS lacked sufficient personnel with the expertise
and training needed to enforce those regulations effectively and to supplement
the regulations by appropriately assessing the procedure’s safety (Presidential
Commission 2011). In its report concerning the causes of the Deepwater Hori-
zon–Macondo well incident, BOEMRE concluded that at the time of the blow-
out, MMS did not have a comprehensive set of regulations specifically address-
ing deepwater technology, drilling, or well design. Had improved regulations
been in effect at the time, they may have decreased the likelihood of the
Macondo blowout (BOEMRE 2011).4,5
On the basis of its review of the regulatory scheme in place at the time of
the Macondo well blowout and the chronology of events leading up to the inci-
dent, the committee presents the following observations:
Summary Observation 6.1: The regulatory regime was ineffective in
addressing the risks of the Macondo well. The actions of the regula-
tors did not display an awareness of the risks or the very narrow
margins of safety.
Summary Observation 6.2: The extent of training of key personnel and
decision makers in regulatory agencies has been inconsistent with the
complexities and risks of deepwater drilling.
4
The BOEMRE report describes various regulatory approvals provided by MMS prior
to the blowout.
5
The BOEMRE report also indicates that the BOEMRE panel found evidence that par-
ties involved in drilling the Macondo well violated federal regulations in place at the time
of the blowout.
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114 Macondo Well Deepwater Horizon Blowout
Summary Observation 6.3: Overall, the regulatory community has not
made effective use of real-time data analysis, information on precur-
sor incidents or near misses, or lessons learned in the Gulf of Mexico
and worldwide to adjust practices and standards appropriately.
For example, MMS last produced an analysis of offshore incidents for cal-
endar year 2000 (Presidential Commission 2011).
DOI’S SAFETY AND ENVIRONMENTAL MANAGEMENT SYSTEMS
The Deepwater Horizon–Macondo well incident, like major offshore acci-
dents in other countries, demonstrated the need for a proactive systems safety
approach integrating all aspects of drilling operations that could affect occupa-
tional and system safety. In this regard, the committee commends DOI for insti-
tuting Safety and Environmental Management Systems (SEMS) in 30 CFR 250
(Federal Register, Vol. 75, No. 199, Oct. 15, 2010). Implementation of SEMS
began on November 15, 2011.
SEMS is a proactive, goal-oriented risk management system similar in
many ways to the systems used in the North Sea by the United Kingdom and
Norway and on the outer continental shelves of Canada and Australia. SEMS
requires companies to develop, implement, and manage a safety and environ-
mental management system in accordance with the American Petroleum Insti-
tute’s (API’s) Recommended Practice 75 for Development of a Safety and Envi-
ronmental Management Program for Offshore Operations and Facilities. The
committee sees this development as an important step toward achieving com-
prehensive reform of the regulatory processes governing offshore drilling activi-
ties in U.S. waters.
The following are advantages of goal-setting risk management systems
over prescriptive regulatory systems:
Putting the focus on achieving clearly stated health, safety, and envi-
ronmental objectives;
Requiring operators, drilling contractors, and service companies to
document their approach to safety, in contrast to basing safety on compliance
with prescriptive regulations;
Requiring operators, drilling contractors, and service companies to
work together to meet safety objectives;
Formalizing and documenting the risk management procedures and
responsibilities of all parties;
Providing a context for effective communication on health, safety,
and environmental issues as they arise;
Providing for checks and balances for well planning and operations,
especially with regard to management of change;
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Allowing for the health, safety, and environmental procedures and
policies of all participating companies to be incorporated into a unified health,
safety, and environmental plan;
Providing the opportunity for independent assessment of well plan-
ning, drilling, and related operations and overall conformance to stated goals for
health, safety, and environmental protection;
Providing a cost–effective approach to regulating the evolving tech-
nology employed by the offshore oil and gas industry, enabling a reduction in
prescriptive regulations, and
Potentially reducing the cost of compliance for companies already
familiar with similar approaches used elsewhere in the world.
While the committee strongly endorses the actions of DOI in establishing
the SEMS requirements, it sees this as a first step in a long process toward
achieving the capabilities required of an appropriate regulatory system for off-
shore drilling in the United States. An appropriate regulatory system should
have the following characteristics:
Be effective in regulating both high-risk, high-consequence wells,
such as those in deep water or those likely to encounter very high pore pressures,
and relatively low-risk wells, such as infill wells in relatively shallow water.6
Provide a mechanism allowing the government to assess the risks (and the
measures proposed for managing those risks) associated with the proposed well
plan and a way for the government to assess the competence of the companies
and individuals to be involved in carrying out the proposed drilling activities.
Incorporate a formal management of change process that would allow
well plans and procedures to adapt to uncertainties in geology and pore pressure,
to changing weather conditions, and to other factors, while keeping parties in-
formed of ongoing changes.
Work effectively with the structure of the U.S. offshore oil and gas
industry. Encourage the development and integration of a strong safety culture
and safety management systems among operating companies (and joint venture
partner companies), drilling contractors, and service companies.
Ensure that all drilling activities are conducted with risks reduced as
low as reasonably practical.
Motivate industry to invest in technologies and processes that will
further minimize risk.
No regulatory system will, by itself, ensure safe drilling operations. What
is most important is that every company involved—including operators and
6
Infill wells are new wells that are drilled within the original well pattern of a devel-
opment area. Because a number of wells have already been drilled in the area, a great
deal is known about optimal drilling procedures.
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partner companies, drilling contractors, and equipment and service providers—
develop, promote, and operate in a system safety culture embraced by top man-
agement and implemented in every phase of drilling operations. No matter what
regulatory system is used, safe operations ultimately depend on the commitment
to system safety by the people involved at all levels within the organization.
GOAL-ORIENTED RISK MANAGEMENT REGULATORY SYSTEMS
Until recently, the United States depended on a primarily prescriptive
regulatory system in which operators were required to demonstrate conformance
with established regulations. Other countries used similar prescriptive regulatory
systems until a series of accidents indicated the need to adopt a proactive, goal-
oriented risk management system similar to the one recommended here. The
precipitating events for a major change of the Norwegian regulatory system
were several serious accidents over an 11-year period. Among them were the
blowout on the Bravo platform in the Ekofisk field in 1977 and the capsizing of
the Alexander L. Kielland, a ship used as a floating hotel for Ekofisk workers, in
1980 (killing 123 of 212 people on board). Similarly, the United Kingdom and
Canada were led to abandon their prescriptive regulatory approach and adopt a
more proactive, goal-oriented approach to system safety by, respectively, the
explosions and fire aboard the Piper Alpha production platform off Scotland in
1988 (killing 167 workers) and the sinking of the Ocean Ranger semisubmersi-
ble drilling platform off Newfoundland in 1982 (killing all 84 crew members).
An important attribute of goal-oriented risk management systems is that they
provide a greater opportunity for the adoption of new technology as it becomes
available. For example, both in U.S. waters and abroad, several of the operating
companies are using shore-based real-time operations centers to monitor off-
shore drilling operations continuously, although there is no explicit requirement
to do so.
Goal-oriented risk-management systems require that companies responsi-
ble for compliance demonstrate to regulators that procedures for health, safety,
and environmental protection are in place to achieve explicitly stated safety
goals to prevent and respond effectively to all conceivable accidents. Considera-
tion is given to elements such as redundant barriers (designed to minimize the
likelihood of accidents) and controls (designed to provide detailed plans, proce-
dures, and facilities for responding to accidents should they occur). In addition,
industry demonstrates that its management system ensures that its personnel
always have the qualifications and training necessary for performing their duties
in a safe manner.
Three fundamental strategies are employed in goal-oriented risk manage-
ment systems to deal with drilling and safety systems: reduce the likelihood of
malfunctions in system components, reduce the effects of malfunctions should
they occur, and increase the detection and correction of malfunctions in system
components. Different methods can be employed in the context of these three
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strategies to enable the designated “acceptable risks” (the explicit goals) to be
realized.
Implementation Aspects of a Goal-Oriented Risk Management System
Consideration of some specifics will help in understanding how goal-
oriented risk management systems work. First, instead of listing explicit regula-
tions, such systems principally rely on meeting functional safety requirements
through utilization of equipment and procedures that conform with explicit stan-
dards, guidelines, and best practice documents. In Norway, the Petroleum Safety
Authority (PSA) retains a limited number of explicit regulations but primarily
relies on guidelines associated with international codes and standards (including
some specific to the European Union) and specially developed national
(NORSOK) standards to define best practices as applied to different systems.
For example, NORSOK D-010 lists standards for well integrity, BOP testing,
cementing, and so forth, whereas NORSOK 001 applies to drilling equipment.
In addition, the drilling contractor must obtain an “acknowledgment of compli-
ance” (AoC) covering its equipment, personnel, and safety management systems.
In Norway these codes and standards are considered “living documents” with
frequent reviews and updates resulting from consultation between industry and
regulators.
Finally, while a fundamental aspect of the Norwegian regulatory system is
a high degree of dialogue, consensus, and trust between operating companies
and regulators, PSA carries out drop-in audits of offshore operations utilizing its
own personnel, experts from SINTEF (Stiftelsen for Industriell og Teknisk
Forskning, an independent research organization), and other outside experts. If it
determines that the company does not have sufficient expertise to carry out the
proposed drilling plan, PSA withholds consent for an operator’s plan. Drilling
operations are not allowed to proceed until PSA consents. The regulatory ap-
proaches used by the United Kingdom and Norway in the North Sea have been
tailored to the structure of their governments, local industry, and labor. Applying
the concept of goal-oriented risk management to the Gulf of Mexico will require
similar tailoring. However, many of the concepts and documents used for the
North Sea can provide valuable templates for a system structured for the United
States. In addition, both the United Kingdom (HSE 2011) and Norway (PSA
2011a) have extensive, long-term R&D efforts that help industry and govern-
ment regulators advance technology, management, and governance to meet cur-
rent operational requirements.
Tools for Clarifying the Roles Among Companies Within a
Goal-Oriented Risk Management System
The basic planning documents of a goal-oriented risk management system
are the risk management plans of the drilling contractor, operator, and service
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companies. The committee supports the concept of a project-specific bridging
document for use in the United States that integrates the risk management plans
of all parties involved in a given project. API and the International Association
of Drilling Contractors are developing a Well Construction Interface Document
that could be a model for such a bridging document. Several advantages of using
a bridging document as part of a goal-oriented risk management system are that
it could help
Unify the risk management systems of the operator, drilling contrac-
tor, and service companies in a way that clearly defines the roles and responsi-
bilities of all parties for health, safety, and environmental protection;
Provide detailed project-specific information to be shared by key per-
sonnel regardless of whether they are employed by the operator, the drilling con-
tractor, or a service company; and
Facilitate the management of change process and serve as a mecha-
nism to communicate the implications of program changes to all key personnel.
Offshore drilling in U.S. waters is frequently done by a group of partner
companies, who jointly own the lease. Through a joint operating agreement, the
partner companies stipulate who the operating company will be (usually this is
the company with majority interest) and the financial terms and responsibilities
that govern the partnership. The operating company is recognized to have the
principal responsibility for compliance with rules and regulations governing
offshore operations, but the partner companies (as co-lease holders) should have
a “see to” responsibility to ensure that the operator conducts activities in such a
manner that risk is as low as reasonably practicable, which has a legislative and
legal base and provides the strength for regulatory–governance enforcement.
Such shared responsibilities should be clearly spelled out in the oil and gas lease
agreements administered by DOI as well as in the joint operating agreement
among the partner companies.
A Hybrid Goal-Oriented Risk Management System
Well construction and abandonment operations include safety-critical
points at which faulty decisions would likely result in a substantial increase in
hazard. Examples are casing and cementing operations (which would encompass
reviewing cement bond logs and formation integrity tests) and the establishment
and testing of multiple barriers to flow before temporary or permanent well
abandonment. A hybrid regulatory approach—expanding on the SEMS goal-
oriented safety system with requirements for explicit regulatory review and ap-
proval of the safety-critical points before operations can proceed—would help
guard against faulty decisions being made. This expansion of SEMS is analo-
gous to adding the inspection and sign-off process associated with routine con-
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struction projects and is the standard practice of the Bureau of Land Manage-
ment during its regulation of onshore drilling for oil and gas on federal lands.
Similarly, when operating conditions are hazardous, regulatory approval
for operations to proceed should be required. This could occur, for example
when the difference between the equivalent circulating density and the fracture
gradient is not greater than a predefined minimum value either during drilling or
cementing.
Offshore drilling operations will face increasing complexity as they move
into ever-greater water depths and more challenging environments. In some
cases, complex operations may require a process of continual problem-solving.
For operations to proceed safely and efficiently in challenging environments, it
is essential for private industry and BSEE to collaborate in developing a list of
safety-critical points and in establishing safe operating limits. It is also critical
that BSEE have knowledgeable personnel in place to provide meaningful re-
views. The requirements for regulatory review and approval should not deter
operating companies from developing comprehensive risk assessment systems
with clearly stated goals.
Barriers to Implementation
A number of the companies operating in the Gulf of Mexico use proactive
risk management systems in foreign countries where they have been operating
for many years. These systems address operational safety through the full life
cycle of drilling and well completion activities. Some oil and gas companies
already use risk management systems similar to SEMS when they carry out
deepwater drilling in the Gulf of Mexico for internal project management. How-
ever, the committee recognizes that use of a new regulatory system for offshore
drilling risk management will place new demands on both private industry and
BSEE. In the long term the costs of compliance under the system would likely
be less than those of complying with increasing amounts of prescriptive regula-
tions. More important, an effective regulatory system has the potential to reduce
the extraordinary costs associated with catastrophic accidents such as those as-
sociated with the Macondo well. Given that the disaster might have been
avoided had improved regulations been in place, the potential benefits of an ef-
fective regulatory system are self-evident.
Offshore drilling in U.S. waters has a unique history, culture, and suite of
business practices. SEMS will require new ways of thinking (and a new mode of
interaction) between the oil and gas industry companies, contractors, and service
companies on the one hand and BSEE and other U.S. regulatory agencies on the
other. SEMS will require companies to adopt both a top-down and a bottom-up
safety culture. Safe drilling operations cannot be achieved solely through regula-
tions, inspections, or mandates. They will only be realized when there is a full
commitment to system safety, from the board room to the rig floor, and through
recognition that a focus only on occupational safety will not ensure system
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safety. Compliance with either prescriptive regulations or standards related to
achieving specific safety goals need to be considered a minimum requirement
and not necessarily a way to meet duty of care obligations.
The use of SEMS will require increased competence of everyone involved
in offshore drilling operations—from the engineers developing technical plans
and the workers and technicians carrying them out to the regulators overseeing
such operations. As discussed in Chapter 5, there is a need for a better-educated
and better-trained work force in the United States to avoid catastrophic system
failures and meet the challenges of the future. This need includes a better-
educated and better-trained regulatory workforce.
RECOMMENDATIONS
Regulatory Development and Implementation
Summary Recommendation 6.1: The United States should fully imple-
ment a hybrid regulatory system that incorporates a limited number
of prescriptive elements into a proactive, goal-oriented risk manage-
ment system for health, safety, and the environment.
Recommendation 6.2: BSEE should continue to work closely with pri-
vate industry and other agencies in adopting and developing compre-
hensive goals and standards to govern the many processes and sys-
tems involved in offshore drilling.
The emphasis of these goals and standards should not be to develop new
regulations and requirements. Instead, they should provide a foundation for im-
plementation of a proactive, interactive, and reactive risk management system
by BSEE for drilling in U.S. waters.
Recommendation 6.3: BSEE should make effective use of existing in-
dustry standards, well-established international standards, and best
practice guidelines used by other countries, but it should recognize
that standards need to be updated and revised continually.
The standards should be forward looking and not only incorporate the
many lessons learned from the Macondo well–Deepwater Horizon accident but
also strive to identify potential problems in future drilling projects.
Recommendation 6.4: As the SEMS program moves forward in the
United States, BSEE should incorporate the steps already taken by
private industry (and industry associations and consortia) to improve
offshore drilling safety after the Deepwater Horizon accident.
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As discussed in Chapter 5, these steps include the development of several
well containment corporations to enable member companies to access a wide
array of equipment and personnel to minimize the environmental impact of drill-
ing-related accidents and oil spills, should they occur. Another industry-led ad-
vance has been the Center for Offshore Safety. This center has the potential to
engage the CEOs of oil and gas companies, drilling contractors, and service
companies in risk management; set standards for training and certification; de-
velop accreditation systems for industry training programs; and facilitate indus-
try participation in safety audits and inspections. Ideally, the center should rep-
resent a collaboration of industry and government.
Recommendation 6.5: Quantitative risk analysis should be an essential
part of goal-oriented risk management systems.
This formalism achieves several purposes. First, it provides a check that
the risk (defined in quantitative terms) is tolerable. If the risk cannot be toler-
ated, it will define the adoption of measures, in the right order of priorities, to
lower the risk. Second, it can be used to support decisions based on risk man-
agement models that individual companies currently use. Several oil companies
already have sophistication in this area; quantitative risk analysis is used in ex-
ploration, portfolio management, and well design. It also important to ensure
that caution and expert judgment are exercised to guard against the use of
flawed data. In addition, those who perform the analyses should be able to
communicate the results effectively for operational and management implemen-
tation.
Summary Recommendation 6.6: BSEE and other regulators should
identify and enforce safety-critical points during well construction
and abandonment that warrant explicit regulatory review and ap-
proval before operations can proceed.
Recommendation 6.7: To augment SEMS, BSEE should work closely
with private industry to develop a list of safety-critical points during
well construction and abandonment that will require explicit regula-
tory review and approval before operations can proceed.
Examples are casing and cementing operations (which would encompass
reviewing cement bond logs and formation integrity tests) and the establishment
and testing of multiple barriers to flow before temporary or permanent well
abandonment.
Recommendation 6.8: As part of a hybrid risk management system,
BSEE should establish safe operating limits, which, when exceeded,
would require regulatory approval for operations to proceed.
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Operating limits and checks should be established as part of the operator’s
management program, which will be reviewed and audited by the regulator. Ex-
amples of safe operating limits are the functionality of safety-critical systems
such as the BOP (see Chapter 3) and the difference between the equivalent cir-
culating density and the fracture gradient not being greater than a certain mini-
mum (either during drilling or cementing) (see Chapter 2). These operating lim-
its should be established in collaboration with industry.
Recommendation 6.9: BSEE should incorporate requirements for ap-
proval and certification of key steps during well construction into
codes and standards.
Recommendation 6.10: BSEE should review existing codes and stan-
dards to determine which should be improved regarding require-
ments for (a) use of state-of-the-art technologies, especially in areas
related to well construction, cementing, BOP functionality, and alarm
and evacuation systems, among others, and (b) approval and certifica-
tion incumbent to management of changes in original plans for well
construction.
Recommendation 6.11: The manner in which the above-mentioned
codes and standards will be enforced should be specified by BSEE in
the well plan submitted by operating companies for approval.
Recommendation 6.12: BSEE should adopt a system of precertification
of operators, contractors, and service companies before granting a
drilling permit for especially challenging projects.
The precertification process would evaluate the technical sophistication
and capabilities of both equipment and personnel tasked with carrying out drill-
ing-related activities in the severe conditions of the deepwater environment.
Specific criteria should be developed for conducting the evaluation.
Recommendation 6.13: BSEE should consider the use of independent
well examiners to help in reviewing well plans and in regularly moni-
toring ongoing activities during drilling, completion, and abandon-
ment.
Independent well examiners are currently used in the United Kingdom
(HSE 2008) and can play a productive role in reviewing the design of the well
and in regularly monitoring ongoing activities during drilling, completion, and
abandonment. Independent well examiners and third-party classification socie-
ties, working under contract to BSEE, could be especially helpful in conducting
independent audits. Ideally, the independent well examiners or classification
societies should be involved in a given project from its inception, including re-
view of the well plan, through final well completion or abandonment activities.
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In using these entities, BSEE should take care not to abrogate its primary ulti-
mate responsibility for regulation of offshore drilling. In the United Kingdom,
the regulator periodically audits the well examination arrangements. In addition,
BSEE should develop requirements for determining the competence of examin-
ers and their independence from the operating company. BSEE should also iden-
tify responsibilities for developing well examination schemes, ensuring scheme
effectiveness, and ensuring that appropriate actions are taken on recommenda-
tions made by the well examiner.
Near-Miss Reporting
Summary Recommendation 6.14: Industry, BSEE, and other regula-
tors should improve corporate and industrywide systems for report-
ing safety-related incidents. Reporting should be facilitated by ena-
bling anonymous or “safety privileged” inputs. Corporations should
investigate all such reports and disseminate their lessons-learned find-
ings in a timely manner to all their operating and decision-making
personnel and to the industry as a whole. A comprehensive lessons-
learned repository should be maintained for industrywide use. This
information can be used for training in accident prevention and con-
tinually improving standards.7
As part of this process, near misses and accident precursors should be
tracked as a way of supporting a proactive risk management system. Such a da-
tabase would be invaluable in enabling regulators, companies, and employees to
learn from these occurrences.
Integration of Regulatory Approaches
Summary Recommendation 6.15: A single U.S. government agency
should be designated with responsibility for ensuring an integrated
approach for system safety for all offshore drilling activities.
Recommendation 6.16: As a first step, DOI should work with other
departments and agencies with jurisdiction over some aspect of off-
shore drilling activities to simplify and streamline the regulatory
process for drilling on the U.S. outer continental shelf.
Offshore drilling operations are currently governed by a number of agen-
cies with complementary and in some cases overlapping areas of statutory re-
sponsibility. Table 6-1 lists a number of the principal agencies that have juris-
diction over regulating various potential hazards related to offshore drilling.
7
This recommendation is also presented in Chapter 5 as Recommendation 5.4.
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As part of the process of regulatory reform that led Norway to change
from a prescriptive to a risk management system (and that separated PSA from
the Norwegian Petroleum Directorate), a concerted effort was made to stream-
line, simplify, and centralize regulatory authority. Modifying the regulatory
system governing drilling operations will be most effective as part of an inte-
grated system of reforms that involve many of the hazards and agencies shown
in Table 6-1.
TABLE 6-1 Offshore Drilling Operations and Relevant Federal Agencies
Agencies exercising some jurisdiction
over preventive control measuresa
Hazard
Attack or terrorist activity FAA, FBI, FS, TSA, USCG
Blowout (loss of well control) EPA, BOEMRE, USCG
Explosion FS, BOEMRE, USCG
Events from adjacent installations BOEMRE
Epidemic or pandemic CDC, USCG
Fire FS, BOEMRE, USCG
Diving operations BOEMRE, USCG
Dropped objects FS, BOEMRE, USCG
Helicopter crash FAA, USCG
Loss of stability FS, USCG
Major mechanical failure FS, USCG
Mooring or station keeping failure FS, BOEMRE, USCG
Seismic activity FS, BOEMRE, USCG
Ship collision FS, USCG
Structural failure FS, BOEMRE, USCG
Toxic release EPA, FAA, FS, BOEMRE, USCG
Weather and storms FS, BOEMRE, NOAA, USCG
a
Does not include possible jurisdiction to conduct an investigation following incident.
Abbreviations: CDC, Centers for Disease Control and Prevention; EPA, Environmental
Protection Agency; FAA, Federal Aviation Administration; FBI, Federal Bureau of In-
vestigation; FS, Flag-State maritime authority; BOEMRE, Bureau of Ocean Energy Man-
agement, Regulation, and Enforcement; NOAA, National Oceanic and Atmospheric Ad-
ministration; TSA, Transportation Security Administration; USCG, United States Coast
Guard.
NOTE: As a result of the recent reorganization of BOEMRE, the Bureau of Safety and
Environmental Enforcement is the successor organization with responsibility for enforc-
ing safety and environmental regulations.
Source: International Association of Drilling Contractors (IADC)8. Reprinted with per-
mission, IADC.
8
Responses of IADC to questions from the committee, March 2011.
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Regulatory Reform
Recommendation 6.17: BSEE should work with other federal agencies
to delegate supporting regulatory responsibilities and accountabilities
for ensuring system safety, integrating all aspects of system safety for
the parts of offshore drilling operations in which a particular agency
is involved (Table 6-1). BSEE should strive to involve the domain ex-
pertise and core competencies of the other relevant agencies. BSEE
should have purview over integrating regulation, inspection, and
monitoring enforcement for all aspects of system safety for offshore
drilling operations.
Recommendation 6.18: BSEE should work with other federal agencies
to develop efficient and effective mechanisms for investigating future
accidents and incidents.
Net Assessment of Risk
Recommendation 6.19: DOI should require BSEE to provide the Sec-
retary of the Interior with a net assessment of the risks of future drill-
ing activities so that such risks can be factored into decisions with re-
gard to new leases. Focusing on system safety, the assessment should
be a formal probabilistic risk analysis that evaluates risks associated
with all operations having the potential for significant harm to indi-
viduals, environmental damage, or economic loss. The operations ad-
dressed by the assessment should include drilling and well construc-
tion, temporary well abandonment, oil and gas production, and
eventual well abandonment.
Responsibility and Accountability
Summary Recommendation 6.20: Operating companies should have ul-
timate responsibility and accountability for well integrity, because
only they are in a position to have visibility into all its aspects. Operat-
ing companies should be held responsible and accountable for well de-
sign, well construction, and the suitability of the rig and associated
safety equipment. Notwithstanding the above, the drilling contractor
should be held responsible and accountable for the operation and
safety of the offshore equipment (see Chapter 5).9
Recommendation 6.21: In carrying out its regulatory responsibilities,
BSEE should view operating companies as taking full responsibility
for the safety of offshore equipment and its use.
9
This recommendation is also presented in Chapter 5 as Recommendation 5.1.
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126 Macondo Well Deepwater Horizon Blowout
This responsibility also encompasses the subsea equipment, including the
BOP, used as critical control barriers. As part of the proactive risk management
system recommended here, BSEE should ensure that drilling contractors are
required to obtain an AoC covering their equipment, personnel, and safety man-
agement system. The AoC process is used by Norway’s PSA to decide whether
the agency has confidence that drilling activities can be carried out by using a
particular mobile offshore drilling unit within the framework of the regulations
(PSA, 2011b).
Recommendation 6.22: While the operating company is recognized to
have the principal responsibility for compliance with rules and regu-
lations governing offshore operations, BSEE should require the part-
ner companies (as co-lease holders) to have a “see to” responsibility to
ensure that the operator conducts activities in such a manner that risk
is as low as reasonably practicable.
Regulatory Personnel
Summary Recommendation 6.23: BSEE and other regulators should
undertake efforts to expand significantly the formal education and
training of regulatory personnel engaged in offshore drilling roles to
support proper implementation of system safety.
Recommendation 6.24: BSEE should exert every effort to recruit, de-
velop, and retain experienced and capable technical experts with criti-
cal domain competencies.
This is especially important in the context of the recently enacted SEMS
risk management system and the recognition that drilling on the outer continen-
tal shelf will grow in complexity. BSEE should strive to increase its technical
competencies across the wide spectrum of expertise involved in offshore oil and
gas exploration, including areas such as well design, cementing, BOPs, and re-
motely operated underwater vehicles.
Safety Culture
Summary Recommendation 6.25: BSEE and other regulators should
foster an effective safety culture through consistent training, adher-
ence to principles of human factors, system safety, and continued
measurement through leading indicators.10
10
As discussed in Chapter 5, leading indicators provide ongoing assurance that risks
are being adequately controlled.
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Regulatory Reform
Recommendation 6.26: As a regulator, BSEE should enhance its inter-
nal safety culture to provide a positive example to the drilling indus-
try through its own actions and the priorities it establishes.
