1

Introduction

The first offshore wells were drilled along the California coast at the beginning of the 20th century. Land drilling rigs constructed on piers stretching out from the beach into water a few tens of feet deep were used. Since then, the oil and gas industry has greatly extended its operating envelope as it pursues profitable accumulations of hydrocarbons. While the onshore oil and gas business garners most media attention today, as companies large and small develop new resources in shale formations, the offshore industry presses ahead, drilling deeper wells, in deeper water, with new multibillion-dollar development projects announced each year. A recently released study by Wood McKenzie estimates1 that over the next decade, deepwater activity alone will grow by a compound rate of 9 percent per year, with worldwide spending in 2022 estimated at $114 billion, up from $43 billion in 2012.

To ensure that oil and gas development efforts in federal waters are conducted in a safe manner, Congress has authorized the Department of the Interior to regulate such activities. The Outer Continental Shelf Lands Act (OCSLA) was originally enacted in 1953 and virtually rewritten by the OCSLA Amendments of 1978.2 Much has transpired since then in exploration technologies and development of oil and gas resources, as well as in the regulatory mechanisms used to control such activities. Nonetheless, many of the challenges associated with implementing the requirement to use the best available and safest technologies (BAST) in such activities remain unchanged after 35 years. A committee of the Marine Board of the National Research Council (1979) first examined the issues associated with the implementation of BAST. In its report, the 1979 committee gave highest priority to government development of “the technological capability to assess and evaluate OCS [outer continental shelf] technologies.” It further noted that “the government will require additional expertise for the implementation of

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1http://www.ogj.com/articles/2013/06/wood-mackenzie-study-sees-deepwater-surge.html?cmpid=EnlEDJune272013. Accessed September 25, 2013.

2Public Law 95-372, as amended on September 18, 1978.



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1 Introduction The first offshore wells were drilled along the California coast at the be- ginning of the 20th century. Land drilling rigs constructed on piers stretching out from the beach into water a few tens of feet deep were used. Since then, the oil and gas industry has greatly extended its operating envelope as it pursues profitable accumulations of hydrocarbons. While the onshore oil and gas busi- ness garners most media attention today, as companies large and small develop new resources in shale formations, the offshore industry presses ahead, drilling deeper wells, in deeper water, with new multibillion-dollar development projects announced each year. A recently released study by Wood McKenzie estimates1 that over the next decade, deepwater activity alone will grow by a compound rate of 9 percent per year, with worldwide spending in 2022 estimated at $114 billion, up from $43 billion in 2012. To ensure that oil and gas development efforts in federal waters are con- ducted in a safe manner, Congress has authorized the Department of the Interior to regulate such activities. The Outer Continental Shelf Lands Act (OCSLA) was originally enacted in 1953 and virtually rewritten by the OCSLA Amendments of 1978.2 Much has transpired since then in exploration technologies and develop- ment of oil and gas resources, as well as in the regulatory mechanisms used to control such activities. Nonetheless, many of the challenges associated with im- plementing the requirement to use the best available and safest technologies (BAST) in such activities remain unchanged after 35 years. A committee of the Marine Board of the National Research Council (1979) first examined the issues associated with the implementation of BAST. In its report, the 1979 committee gave highest priority to government development of “the technological capability to assess and evaluate OCS [outer continental shelf] technologies.” It further noted that “the government will require additional expertise for the implementation of 1 http://www.ogj.com/articles/2013/06/wood-mackenzie-study-sees-deepwater-surge.htm l?cmpid=EnlEDJune272013. Accessed September 25, 2013. 2 Public Law 95-372, as amended on September 18, 1978. 11

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12 Best Available & Safest Technologies for Offshore Oil & Gas Operations the BAST requirement” (NRC 1979, 37). This was at a time when the deepest production platform in U.S. waters was around 1,000 feet and exploration drilling was being conducted by early versions of floating drilling vessels, a far cry from the technology embodied in dynamically positioned rigs such as the Deepwater Horizon, capable of drilling in waters up to 8,000 feet deep.3 It is therefore not surprising that the Ocean Energy Safety Advisory Com- mittee, a federal advisory group, recommended establishment of an Ocean Energy Safety Institute (OESI), whose functions would include providing support to the Bureau of Safety and Environmental Enforcement (BSEE) in carrying out tech- nology assessment and facilitating BAST implementation.4 BSEE has, subse- quently, initiated a solicitation for the operation and maintenance of an OESI.5 This committee concurs with the observations and recommendation of the 1979 committee concerning the critical need to augment the regulator’s technical capa- bilities for implementing BAST. Furthermore, this committee notes the difficulty of hiring personnel with both the required expertise in the technologies utilized in the industry and experience in their application offshore. This difficulty becomes particularly acute when the hiring process is constrained by government compen- sation limits.6 Therefore, the committee considered the need for BSEE to utilize an outside resource, such as OESI, to assist in implementing BAST successfully, and it supports BSEE’s movement in that direction (see Chapter 3). After the committee began its work, BSEE indicated that OESI would be the primary vehicle for improving BAST implementation.7 The committee sub- sequently focused its efforts on assessing the current challenges in implementing BAST and on identifying alternative approaches that may be utilized by BSEE, with the assistance of OESI, in achieving the statutorily required objectives. The committee also assessed the implications for OESI’s structure and necessary capabilities. To support the deliberations and guide the development of its recommen- dations, the committee made certain interpretations of the wording in Section 21(b) of OCSLA (see Preface) to ensure that the intent of Congress was met, notwithstanding the material changes in the nature of offshore operations since 3 http://www.deepwater.com/fw/main/Deepwater-Nautilus-58C15.html?LayoutID=17. The Deepwater Horizon was similar to the Deepwater Nautilus. Accessed September 25, 2013. 4 http://www.bsee.gov/uploadedFiles/BSEE/About_BSEE/Public_Engagement/Ocean_ Energy_Safety_Advisory_Committee/OESC%20Recommendations%20January%202013 %20Meeting%20Chairman%20Letter%20to%20BSEE%20012513.pdf. Accessed Septem- ber 25, 2013. 5 http://www.grants.gov/search/search.do?oppId=235604&mode=VIEW. Accessed Sep- tember 25, 2013. 6 http://www.opm.gov/policy-data-oversight/pay-leave/pay-administration/fact-sheets/ma ximum-gs-pay-limitations/. Accessed September 25, 2013. 7 Joseph Levine, BSEE, briefing to the committee, March 11, 2013.

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Introduction 13 the act was passed. The following are among the key definitions and assump- tions made by the committee:  “Safest” technology is interpreted as technology that can reduce the risks to workers, the public, and the environment to a point that is consistent with the principle of ALARP (as low as reasonably practicable).8  In this context, the committee took a total system perspective on safety, encompassing occupational safety, process safety, and the safety of supporting elements such as marine systems, in recognition that emphasis should be afforded to aspects of offshore operations that are unique to the industry.  Noting that the majority of the lives lost in the offshore industry were not due to process safety failures,9 the committee interpreted “technology” broadly. In the committee’s view, the term encompasses not only equipment directly involved in drilling and operating wells but also support systems (e.g., marine systems), safety systems (e.g., explosive gas detectors and blind shear rams), control and display systems (e.g., real-time operations centers), and the human factors consid- erations that are often central to the causes of major disasters such as the Macondo well blowout.10 The safe functioning of offshore operations depends on the culture of the organizations involved, which includes interactions among human, organi- zational, and technological components.  Practicability is interpreted as encompassing the concepts of technolo- gy availability and economic feasibility. OCSLA recognizes the importance of economic factors but fails to give any guidelines for cost–benefit determinations. OCSLA simply states that the Secretary of the Interior shall require the use of BAST “except where the Secre- tary determines that the incremental benefits are clearly insufficient to justify the incremental costs of utilizing such technologies.”11 In Chapter 3 the committee discusses the considerations to be included in such cost determinations: the ex- penses associated with both the acquisition and the sustainment (operations and maintenance) of candidate technologies and potential disruptions to drilling op- erations caused by the introduction of new technologies that can have significant cost implications. The challenge of implementing BAST is further complicated by the diver- sity of drilling and production operations within BSEE’s purview. The diversity of operations includes deepwater exploration and development as well as the 8 The ALARP principle is becoming generally recognized worldwide. See, for exam- ple, http://www.hse.gov.uk/risk/theory/alarpglance.htm. Accessed September 25, 2013. 9 http://www.oilrigdisasters.co.uk/; http://www.cdc.gov/mmwr/preview/mmwrhtml/mm6 216a2.htm. Accessed September 25, 2013. 10 http://www.nap.edu/openbook.php?record_id=13273&page=3. Accessed September 25, 2013. 11 OCSLA Section 21(b).

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14 Best Available & Safest Technologies for Offshore Oil & Gas Operations collection and treatment of oil and gas obtained from wells located in shallower water of the outer continental shelf. To provide the desired risk reduction bene- fit, the candidate technologies must be “fit for purpose”—that is, they must be suitable for the specific intended application.12 The technologies that are univer- sally applicable as “best available and safest” are likely to be limited. Chapter 2 addresses various processes BSEE might use for identifying BAST candidate technologies. Chapter 3 provides options for evaluating and de- veloping candidate technologies and discusses economic considerations. Chapter 4 discusses the implications these functions would have for the requisite capabilities of both OESI and BSEE. Finally, Chapter 4 addresses the potential roles for both industry and the public in the BAST process. 12 The term refers to one of the criteria used by industry to evaluate technology. For example, see Richard Mercier, Offshore Technology Research Center, presentation to the committee, May 30, 2013.