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Summary For many years the United States employed a prescriptive regulatory system for the offshore oil and gas industry in which operators were required to demonstrate conformance with established regulations. In the aftermath of the April 2010 Macondo well blowout and explo - sion, the federal government and the offshore oil and gas industry have been undergoing major changes, including the issuance of regulations requiring operators of offshore oil and gas facilities to adopt and imple- ment comprehensive Safety and Environmental Management Systems (SEMS) programs. SEMS is a safety management system (SMS) aimed at shifting from a completely prescriptive regulatory approach to one that is proactive, risk based, and goal oriented in an attempt to improve safety and reduce the likelihood that events similar to the Macondo incident will reoccur. Although the new regulations had been voluntary for many years and a subset of these components had been proposed in rulemaking before the Macondo well accident, it was not until this major accident that comprehensive changes were made. The Committee on the Effectiveness of Safety and Environmental Management Systems for Outer Continental Shelf Oil and Gas Operations (the committee), which conducted the present study, was charged with recommending a method of assessing the effectiveness of operators’ SEMS programs on any given offshore drilling or production facility. Safety professionals have understood for decades that to increase safety in complex industrial installations, organizations must manage safety with the same principles of planning, organization, implementation, and investigation that they use to carry out any other business function. In 1992 the federal government promulgated a process safety management 1
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2 Evaluating the Effectiveness of Offshore Safety and Environmental Management Systems (PSM) regulatory approach for installations that handle highly hazardous chemicals. PSM specified the elements that must be included in a plan to manage safety. A similar risk management approach was mandated for facilities handling certain chemicals regulated under the Clean Air Act Amendments of 1996. In parallel, the American Petroleum Institute (API) developed Recommended Practice (RP) 75, Recommended Practice for Development of a Safety and Environmental Management Program for Offshore Operations and Facilities (API 1993, 2004). The federal government initially encouraged the offshore oil and gas industry to adopt API RP 75 voluntarily and from 1994 to 1998 used a self-report survey to monitor the level of adoption of each element. After reviewing the analysis and comments received in response to a 2006 advance notice of proposed rulemaking to make portions of API RP 75 mandatory, the Minerals Management Service (MMS) proposed to require each offshore lessee–operator to develop, implement, maintain, and operate a SEMS program that contained four elements of API RP 75: hazards analysis, management of change, operating procedures, and mechanical integrity. The Offshore Operators Committee and others recommended, however, that if a SEMS rule were to become mandatory, it should include all of the elements of a safety and environmental management program (SEMP) discussed in API RP 75, and not just the four listed for the proposed rule. MMS was preparing a rule to require the implementation of all of the SEMP elements in API RP 75 when the occurrence of the Macondo well blowout delayed publication of the new rule. The final SEMS rule was promulgated in the Federal Register on October 15, 2010 (BOEMRE 2010) and became effective on November 15, 2011 (30 CFR 250, Subpart S). Mandating SEMS programs and ensuring their effectiveness is a step toward improving governmental oversight of the offshore oil and gas industry and industry implementation of reforms to reduce the risk of accidents and to improve safety, which is needed according to some of the investigations of the Macondo well blowout (e.g., NAE-NRC 2011; National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling 2011). The committee agrees with these conclusions. The 1990 Marine Board study Alternatives for Inspecting Outer Con- tinental Shelf Operations made the crucial point that the emphasis that
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Summary 3 regulators and the industry had placed on compliance with very spe- cific regulations and rigid checklists to ensure compliance was not the best way to change attitudes toward safety (NRC 1990). In enterprises that are subject to checklist-style compliance inspections by government authorities, passing the inspection comes to be seen as equaling safety. This compliance mentality does not necessarily correlate with an increase in the level of safety attitudes and actions on the part of the companies and individuals involved in the actual operations. Instillation of an appropriate culture of safety in an operation requires mechanisms that • Establish structure and control by specifying what is needed for safe operation and checking to see that these specifications are being followed, and • Build competency by developing individual knowledge and skill. In addition to these mechanisms, there must be actions that establish norms and motivations that encourage those who are making deci- sions to constantly want to think about safety and behave in ways that maximize safety. Thus, whereas having an adequately functioning SEMS-type program is necessary to develop an appropriate culture of safety, SEMS by itself is not sufficient. To be successful, the tenets of SEMS must be fully acknowledged and accepted by workers, motivated from the top, and supported throughout the organization and must drive workers’ actions; only then can an effective culture of safety be established and grow. The committee believes that the approach ultimately taken by the Bureau of Safety and Environmental Enforcement (BSEE) to evaluate the effectiveness of SEMS can have a positive impact on norms and motivations and move both BSEE and the industry away from a compli- ance mentality to one that encourages an ever-evolving and -improving culture of safety in offshore operations. To encourage a culture of safety in which individuals know the safety aspects of their actions and are motivated to think about safety, the agency will need to adopt and evolve an evaluation system for SEMS that emphasizes the assessment of attitudes and actions rather than documentation and paperwork. All of the elements of SEMS must be addressed, but it is more important that
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4 Evaluating the Effectiveness of Offshore Safety and Environmental Management Systems those who are actually doing the work understand and practice these elements than that these elements be documented. BSEE should look beyond its predecessor agencies’ historical role of assuring compliance with prescriptive regulations and seize the current opportunity to redefine its role, at least partially, to one of encouraging an atmosphere that helps the industry migrate from a compliance mentality to a culture of safety that includes compliance. Furthermore, an organization’s SEMS program must incorporate a dynamic process that evolves with time; thus, to be effective, the procedures, inspections, and audits employed by BSEE to verify the effectiveness of an operator’s SEMS program should also be dynamic. Likewise, inspection and audit criteria will need to be dynamic so that they do not become outdated as new technologies are employed and new environments explored. The purpose of this report is to define the broad outlines of a holistic approach BSEE can take to evaluate the effectiveness of operators’ SEMS programs. It is not possible, however, for a regulator to create a culture of safety in an organization by inspection or audit; that culture needs to come from within the organization. The regulator’s role is to regulate in a manner that helps the organization be safe. SEMS, by definition, is a program for managing the overall safety and environmental aspects of an offshore oil and gas operation. Unfortunately, no single, existing set of statistics can measure the effectiveness of SEMS on an offshore installation. Certainly there are statistics such as fatality rates, injury rates, and lost-time incidents that correlate with the level of what is often referred to as “personal safety” or “worker safety” incidents. It is much harder, if not impossible, to identify similar statistics that cor- relate with what the Occupational Safety and Health Administration calls “process safety” and what the National Academy of Engineering and National Research Council Committee for the Analysis of Causes of the Deepwater Horizon Explosion, Fire, and Oil Spill to Identify Measures to Prevent Similar Accidents in the Future (NAE-NRC 2011) calls “system safety” (i.e., the possibility of the occurrence of a very low-probability, very high-consequence event such as the Macondo well blowout). Ensuring the effectiveness of SEMS for both worker safety and system safety will depend on a thorough commitment by industry and government application of best practices applied by other effective regulators.
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Summary 5 In recommending a holistic approach to evaluating the effectiveness of SEMS programs, the committee discussed in detail SEMS’ role in helping to develop a culture of safety, looked at the pros and cons of various methods of assessing the effectiveness of a SEMS program, and investigated existing approaches for assessing the SMS programs of various U.S. and international regulatory agencies whose safety mandates are similar to that of BSEE. The committee received presentations from, and conducted follow-up inquiries with, the Occupational Safety and Health Administration and the Mine Safety and Health Administration of the U.S. Department of Labor, the U.S. Coast Guard, and the California State Lands Commission (CSLC) as well as with the United Kingdom Health and Safety Executive and Petroleum Safety Authority (PSA) Norway. It seems clear from the experiences of other regulatory agencies, especially CSLC and PSA Norway, that other organizations with many years of experience in overseeing SEMS-like programs have migrated toward a system that • Audits operations with a qualified team of auditors, • Assesses through discussions with personnel at different levels of the operation the way in which the elements of the SMS are actually being used, • Feeds the results back to the top management of the operating com- panies, and • Expects continuous improvement and monitors for it. These agencies have found that engagement with the industry is more productive than punishment, although they maintain the threat of punishment if needed. Recommended AppRoAch On the basis of the information obtained from presentations to the committee, site visits, published regulations, notices of proposed rule- making, API-recommended practices, and previously published reports, the committee recommends that BSee take a holistic approach to evaluating the effectiveness of SemS programs. This approach should, at a minimum, include inspections, audits (operator and BSee), key performance indicators, and a whistleblower program.
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6 Evaluating the Effectiveness of Offshore Safety and Environmental Management Systems Inspections BSEE should continue its current program of ensuring compliance with specific regulations. The routine presence of competent BSEE inspectors on an offshore operator’s facility should be used to verify that the industry is generally complying with SEMS. Without proper training, however, BSEE inspectors will have a tendency to issue incidents of noncompliance (INCs) for deviations of documentation from a checklist, and such deviations may or may not be important in meeting the intent of SEMS. In turn, the issuing of INCs may focus operator attention on compliance in the way documentation is written rather than on establishing a culture that actually promotes safety. Therefore, BSEE should train inspectors to employ other options in addition to issuing citations. BSEE inspectors should look beyond the written regulation to identify operators in marginal compliance and guide them into a more complete state of compliance. In doing so, BSEE inspectors could help focus BSEE-initiated SEMS audits (see below). Making judgments about organizational safety culture and SEMS compliance will require training inspectors and scheduling of inspections to allow inspectors to spend more time offshore interacting with operat- ing staff and observing day-to-day operations. The necessary resources could come from other sources, including the use of operator-provided transportation and accommodations or from an increase in inspection fees. Other regulatory organizations use operator-furnished transporta- tion and accommodations with no adverse effect on the integrity of the process. BSEE should consider doing the same to increase the quality of its inspections and to reduce expenditures. In addition to providing a financial benefit, the use of operator-furnished transportation and accommodations will help achieve the goal of greater informal interaction between inspectors and operating staff and will aid inspectors in making a better evaluation of the level of safety that exists. Audits Operator Audits It is critical that SEMS programs be audited. The frequency of the audits should be risk based. Annual audits may be necessary for very large
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Summary 7 installations, while other, noncritical installations may not require specific audits beyond normal inspection observations. Audits should be carried out by the operator’s internal qualified, independent team wherever possible. Operator responsibility for audits will help prevent the devel- opment of a compliance mentality. Smaller operations that may find it necessary to use third-party auditors should include on the audit team at least one operator employee who is not directly involved in the day- to-day operations of the installation being audited. In cases in which meeting this requirement is not possible (e.g., very small operators with only a handful of employees) it may be necessary for the chief executive officer of the company to participate as a member of the audit team. Nevertheless, BSEE should approve all audit plans to ensure adequate frequency of auditing and the quality of the proposed audit team. BSEE should also receive a copy of each audit and follow-up report. A truly independent internal audit team is preferred to an external, third-party team. Use of a well-documented internal team would help to ensure a quality audit that also encourages an appropriate culture of safety. BSEE, in consultation with the industry and, potentially, the Center for Offshore Safety, should develop an approach to certify auditors, develop audit standards, and establish the process by which audits themselves are conducted. BSEE Audits BSEE should perform complete or partial audits of SEMS programs when justified by reports from inspectors, reviews of operators’ audit reports, incidents, or events. BSEE is responsible for verifying that quality audits are carried out and acted on appropriately. Because of the compre- hensive nature of the SEMS requirements, BSEE’s oversight of internal and third-party audits needs to include a range of techniques, each of which focuses on a different aspect of an operation’s safety system. BSEE can use reports from its compliance inspectors and its reviews of audit reports to identify the need for specific BSEE-conducted targeted or spot audits, or complete audits, to determine whether an operator’s SEMS program is improving safety. Interviews, demonstrations, and observa- tions, rather than checklists, are necessary to make such a determination. To perform these audits and review operator audit plans and internal
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8 Evaluating the Effectiveness of Offshore Safety and Environmental Management Systems audits, BSEE needs a cadre of trained auditors who will be able to spend sufficient time on location to conduct the appropriate audits. Hiring and training additional personnel will most likely be necessary. Key performance Indicators Over time and in consultation with other national and international regulatory bodies that collect similar data, BSEE should also develop key performance indicators or other indicators that could be useful in providing a measure of the effectiveness of an operator’s or offshore installation’s SEMS program and culture of safety. BSEE can collect and evaluate data from operations within and across platforms to identify specific problems and trends in operations at a particular facility and across the industry. This information is also needed to evaluate the SEMS audit approach and to identify opportunities for improvement. Because BSEE will review all audit and follow-up reports in addition to having access to inspections and its own audits, the agency will be in the best position to disseminate findings and best practices of a general interest. Whistleblower program BSEE should establish a whistleblower program to help monitor the culture of safety that actually exists at each installation and to help uncover any improprieties in its own operations. Workers must have a way to anonymously report not only dangerous deviations in norms and motivations that may not be obvious to BSEE inspectors or even to internal auditors, but also unprofessional conduct by BSEE’s own staff. Care should be taken in devising this program to make sure that it does not become a tool for disgruntled employees seeking to punish perceived wrongs. concludIng commenTS In the immediate aftermath of the Deepwater Horizon blowout, the U.S. Department of the Interior initiated a major restructuring (and separation of conflicting responsibilities) of the former MMS, as well as sweeping reforms in regulatory oversight of the offshore oil and gas
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Summary 9 industry. These changes have begun to change the industry’s approach to safety management and will, it is believed, reduce risk and result in positive changes in the industry’s culture of safety. The committee examined the new regulations that were promulgated in October 2010 and went into effect November 15, 2011. By early September 2011, during the writing of this report, BSEE published in the Federal Register a notice of proposed changes in SEMS (BOEMRE 2011). All but one of these proposed changes are consistent with the findings of this report. The one change that is not requires that SEMS audits be performed by independent third parties. This committee concludes that complete, or even heavy, reliance on third-party auditors may have the effect of contributing to a compliance mentality and be counter- productive to establishing a culture of safety. The comment period for the notice of proposed rulemaking was closed on November 14, 2011. Because the committee’s report was not completed by that date and a final rule had not been issued as of the date of issuance of this report, the committee did not specifically address the proposed rule in detail in this report and did not make a formal comment to the proposed rule during the comment period. RefeRenceS Abbreviations API American Petroleum Institute BOEMRE Bureau of Ocean Energy Management, Regulation, and Enforcement NAE-NRC National Academy of Engineering–National Research Council NRC National Research Council API. 1993. Recommended Practice for Development of a Safety and Environmental Management Program for Offshore Operations and Facilities, 1st ed. API RP 75. API, Washington, D.C. API. 2004. Recommended Practice for Development of a Safety and Environmental Management Program for Offshore Operations and Facilities, 3rd ed. API RP 75. API, Washington, D.C. BOEMRE. 2010. Oil and Gas and Sulphur Operations in the Outer Continental Shelf— Safety and Environmental Management Systems. Federal Register, Vol. 75, No. 199, Fri., Oct. 15, 2010, pp. 63610–63654.
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10 Evaluating the Effectiveness of Offshore Safety and Environmental Management Systems BOEMRE. 2011. Oil and Gas and Sulphur Operations in the Outer Continental Shelf— Revisions to Safety and Environmental Management Systems. Federal Register, Vol. 76, No. 178, Wed., Sept. 14, 2011, pp. 56683–56694. NAE-NRC. 2011. Macondo Well–Deepwater Horizon Blowout: Lessons for Improving Offshore Drilling Safety. National Academies Press, Washington, D.C. National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. 2011. Deep Water: The Gulf Oil Disaster and the Future of Offshore Drilling. Report to the President. http://www.oilspillcommission.gov/sites/default/files/documents/ DEEPWATER_ReporttothePresident_FINAL.pdf. NRC. 1990. Alternatives for Inspecting Outer Continental Shelf Operations. National Academies Press, Washington, D.C.