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Preface Although relatively few significant incidents have occurred on oil and gas installations worldwide in recent years, those that have occurred (especially the Macondo Well incident in April 2010) have underscored the need to enhance the effectiveness of inspection programs for offshore installations. From its inception in 1982 until October 2010, the Minerals Management Service (MMS) of the U.S. Department of the Interior was the responsible regulatory authority for the offshore oil and gas industry in U.S. waters; during this period its role continued to develop as technolo- gies, expectations, and guidelines for safe and environmentally friendly operations evolved. In the late 1980s, MMS approached the Marine Board of the National Research Council (NRC) “to develop inspection strategies to improve safety and the effectiveness of the inspection process” (NRC 1990, vi). The committee that was formed was tasked with reviewing the cur- rent inspection program for the Outer Continental Shelf (OCS), appraising inspection practices elsewhere, developing alternatives for conducting inspection programs and assessing their advantages and disadvantages, and recommending alternative inspection procedures that might be more effective and efficient. Following the release of that report, the industry was encouraged to adopt safety and environmental management programs voluntarily. At the same time, MMS began examining its regulatory oversight and, in mid-2009, proposed a rule that would have required offshore operators1 An operator is defined as “The individual, partnership, firm, or corporation having control or 1 management of operations on the leased area or a portion thereof. The operator may be a lessee, designated agent of the lessee(s), or holder of operating rights under an approved operating agreement” (API 2004, Appendix D). vii

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Evaluating the Effectiveness of Offshore Safety and Environmental Management Systems viii to adopt four of the 12 elements of American Petroleum Institute (API) Recommended Practice (RP) 75 (API 2004). In April 2009, MMS again approached the Marine Board to request that a study be conducted to review the MMS inspection program for offshore facilities to assess its effectiveness in protecting human safety and the environment. The Committee on Offshore Oil and Gas Facilities Inspection Program of the MMS (which was later renamed the Committee on the Effectiveness of Safety and Environmental Manage- ment Systems for Outer Continental Shelf Oil and Gas Operations) was tasked with • Examining changes in the inspection program and process since the 1990 Marine Board study; • Reviewing available trend data on inspections, safety, and environ- mental damage; • Examining analogous safety inspection programs in other regulatory agencies and other nations for lessons that could be applied to MMS inspections; • Considering both the changes in the industry’s safety management practices since the 1990 Marine Board report and the implications of these changes for MMS inspection practices; • Considering the effects of the current inspection program on offshore safety and environmental protection; and • Recommending changes, as appropriate, to the inspection program to enhance effectiveness. The committee includes members, practitioners, and academicians who bring a broad spectrum of expertise that includes the areas of safety management, human factors, risk assessment, organizational management and management systems, offshore engineering, offshore platform design and construction, offshore operations, and policy as well as the areas of safety regulations and inspections in related industries. It was appointed in November 2009, held its first meeting the following month, and conducted site visits in March 2010 to the Pacific OCS region and to the California State Lands Commission. The committee also scheduled offshore site visits in May of that same year to the MMS Gulf of Mexico region. Those visits, however, were overtaken by the unfolding events

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ix Preface of the April 2010 Deepwater Horizon–Macondo well blowout, at which time MMS officials requested that this project be put on hold while the agency reevaluated its approach to safety. Immediately after the Macondo well blowout, many investigations and inquiries were launched and far-reaching changes in the U.S. off- shore oil and gas industry were initiated. The Department of the Interior undertook a major reorganization of MMS that initially separated the agency’s revenue management functions from its nonfiscal responsi- bilities (e.g., oversight and regulatory enforcement functions) and later separated the ocean energy management functions from the safety and environmental enforcement functions. In addition, the industry itself began discussing plans to develop an independent organization to work with both industry and the regulators to enhance the effectiveness of safety and environmental regulations and programs. In October 2010, the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) (formerly MMS) issued a final rule, Safety and Environmental Management Systems (SEMS) (BOEMRE 2010), which required adoption of API RP 75. In the SEMS rule, BOEMRE recognized that its inspection program was too focused on mechanical failures and that such failures represent a small minority of incidents. With the issuance of the final rule, BOEMRE expanded its approach to safety and environmental protection to encompass not only reliance on inspection of hardware-oriented items related to potential incidents of noncompliance, but also safety management. Operators were required to specify how they would manage safety holistically to avoid injury and spills. In October 2011, BOEMRE was replaced by the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environ- mental Enforcement (BSEE). BSEE has broad regulatory authority over energy operations on the OCS, including oversight responsibility with respect to the offshore installations involved in drilling and production of oil and natural gas. Included in BSEE’s oversight authority is the responsibility for conducting inspections and audits. It is expected that the audit process will encourage owners and operators to develop a safe and environmentally friendly operational process on offshore facilities and that, if there are potential problems, these will be identified during the

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Evaluating the Effectiveness of Offshore Safety and Environmental Management Systems x audit process and subsequently addressed, thereby reducing the likelihood of a major incident. Following the restructuring of MMS and issuance of the final rule in late 2010, BOEMRE requested that the scope of the present study be changed from a review of the agency’s prior offshore facility safety and environmental inspection program to one that provided guidance on how the agency should evaluate and ensure the effectiveness of the implementation of the new SEMS practices that were to be required of offshore operators as of November 15, 2011. As a consequence, this project was refocused, and the committee resumed its work in late January 2011. Under the new agreement with BOEMRE, the Committee on the Effectiveness of Safety and Environmental Management Systems for Outer Continental Shelf Oil and Gas Operations was tasked with prepar- ing an interim report that would identify potential methods for assessing the effectiveness of a company’s SEMS program and describe the pros and cons of each method as they were known to that point. After the committee resumed its activities, it met four times in 2011: March 3 and 4, August 31 and September 1, October 19 and 20, and December 1. A subgroup of the committee also attended the BOEMRE-sponsored Public Workshop on Offshore Energy Regulations on March 15, 2011, to keep abreast of interpretation and proposed implementation of the SEMS regulation (30 CFR 250, Subpart S). The committee released its interim report on June 28, 2011 (TRB 2011). After the October committee meeting, another subgroup of the committee visited offshore facilities in the Gulf of Mexico region to complete the data-gathering process. This final report describes the various methods that BSEE may employ to evaluate the effectiveness of an operator’s SEMS program, recommends a holistic method that the committee believes should be adopted, and provides guidance on how this goal can be accomplished. The committee would like to note that some of the efforts that BSEE and the industry have already undertaken in the aftermath of the Macondo well incident are supported and reinforced by the recommendations in this report. These are steps in the right direction that need to be built on in a timely manner to ensure that operational and environmental risks are reduced.

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xi Preface ACKNOWLEDGMENTS The work of the committee was greatly facilitated by the thoughtful advice and background information provided by all of the presenters at its meet- ings, other individuals with relevant technical expertise, and government and industry officials who were consulted during the course of the study. The committee also gratefully acknowledges the contributions of time and information provided by the sponsor liaisons: Elmer Danenberger (ret.), Douglas Slitor (ret.), David Nedorostek, and Staci King. To obtain a better understanding of alternative regulatory approaches, the committee also received presentations and briefings from Mike Marshall, Process Safety Management Coordinator, U.S. Department of Labor–Occupational Safety and Health Administration Directorate of Enforcement Programs; Linda Zeiler, Acting Director, Technical Support, Mine Safety and Health Administration; Magne Ognedal, Director General, Petroleum Safety Authority Norway; Chet Miller, Inspector, California District, Pacific OCS Region, BSEE; James Munro, Operations Manager, Hazardous Installations Directorate, Offshore Division, United Kingdom Health and Safety Executive; Jeff Scott, SempCheck Services; Ian Sutton, Process Risk Management, AMEC Paragon; Anton du Preez, SempCheck Services; Jack Toellner, Senior Technical Advisor—Safety, ExxonMobil Development Company; Allen J. Verret, Executive Director, Offshore Operators Committee; Charlie Williams, Well Delivery Manager and Chief Scientist, Upstream Americas, Shell; Kyle Wingate, Principal Human Factors Consultant, Scandpower, Inc., Lloyd’s Register Group; Peter Masters, Product Manager, Lloyd’s Register Group Services Limited; and Luiz Feijo, Manager, Project Development, ABS. In addition, the committee thanks the many industry, trade association, and state and local government representatives and other individuals who provided input for this study. In particular, the committee would like to thank the staff at the MMS (now BSEE) Pacific OCS regional office— Phillip Schroeder, District Manager, California District; Rishi Tyagi, Regional Supervisor, Office of Field Operations; Ralph Vasquez, Super- visory Inspector; Chet A. Miller, Inspector; and Ellen Aronson, Regional Directorate—and at the U.S. Coast Guard, Santa Barbara—Lt. Chad J. Robuck, Supervisor, Marine Safety Detachment; and CWO4 J. P. Giles, Senior Marine Inspector. The committee also appreciates having had the

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Evaluating the Effectiveness of Offshore Safety and Environmental Management Systems xii opportunity to meet with staff at the Mineral Resources Management Division, California State Lands Commission: Mark Steinhilber, Senior Process Safety Engineer; David Rodriguez, Associate Process Safety Engineer; Peter V. Johnson, Operations Manager; and Jack L. Smith, Senior Mineral Resources Engineer. The committee also thanks the crew of Platform Gail off the coast of California—especially Tony Martinez, Operations Foreman; and Chris, Facilities Engineer—and the crew of Genesis Platform in the Gulf of Mexico—especially Eric Farmer, Safety Management Systems Medic; Mervin Broussard, Chevron Field Coordinator; and Joe St. Ann, Offshore Installation Manager—who welcomed committee members onboard their installations, as well as those who arranged these offshore visits, particularly David Dykes, Douglas Slitor, and Ralph Vasquez. This study was performed under the overall supervision of Stephen R. Godwin, Director of Studies and Special Programs, Transportation Research Board (TRB). The committee gratefully acknowledges the work and support of Beverly Huey, who served as project director and under whose guidance this study was initiated and undertaken. The committee also acknowledges the work and support of Suzanne Schneider, Associate Executive Director of TRB, who managed the review process; Janet M. McNaughton, who edited the report and handled the editorial produc- tion; Juanita Green, who managed the production; Jennifer J. Weeks, who prepared the manuscript for prepublication web posting; and Javy Awan, Director of Publications, under whose supervision the report was prepared for publication. Claudia Sauls, Amelia Mathis, and Mai Q. Le arranged meetings and provided administrative support to the committee. This report was reviewed in draft form by individuals chosen for their diverse perspectives and technical expertise, in accordance with procedures approved by the NRC Report Review Committee. The purpose of this independent review is to provide candid and critical comments that will assist the institution in making its published report as sound as possible and to ensure that the report meets institutional standards for objectivity, evidence, and responsiveness to the study charge. The review comments and draft manuscript remain confidential to protect the integrity of the deliberative process.

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xiii Preface The committee thanks the following individuals for their review of this report: Richard Hartley, B&W Pantex, Amarillo, Texas; Morgan L. Jones, PetroSkills, Tulsa, Oklahoma; Najmedin Meshkati, Univer- sity of Southern California, Los Angeles; Ali Mosleh, University of Maryland, College Park; Walt Rosenbusch, International Association of Geophysical Contractors, Houston, Texas; Mark Steinhilber, California State Lands Commission, Long Beach, California; Stanley C. Suboleski, Virginia Polytechnic Institute and State University (ret.), Blacksburg; and Allen J. Verret, Offshore Operators Committee, Metairie, Louisiana. Although these reviewers provided many constructive comments and suggestions, they were not asked to endorse the committee’s conclu- sions or recommendations, nor did they see the final draft of the report before its release. The review of this report was overseen by Hyla S. Napadensky, Grand Marais, Minnesota, and C. Michael Walton, University of Texas at Austin. Appointed by NRC, they were responsible for making certain that an independent examination of this report was carried out in accor- dance with institutional procedures and that all review comments were carefully considered. Responsibility for the final content of this report rests entirely with the authoring committee and the institution. Kenneth E. Arnold, Chair Committee on the Effectiveness of Safety and Environmental Management Systems for Outer Continental Shelf Oil and Gas Operations REFERENCES Abbreviations API American Petroleum Institute BOEMRE Bureau of Ocean Energy Management, Regulation, and Enforcement NRC National Research Council TRB Transportation Research Board 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.

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Evaluating the Effectiveness of Offshore Safety and Environmental Management Systems xiv 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. NRC. 1990. Alternatives for Inspecting Outer Continental Shelf Operations. National Academies Press, Washington, D.C. TRB. 2011. Interim Report on the Effectiveness of Safety and Environmental Management Systems for Outer Continental Shelf Oil and Gas Operations. http://onlinepubs.trb.org/ onlinepubs/sr/srSEMSInterimReport.pdf.