In this chapter, the implications of the necessary capabilities of the Bureau of Safety and Environmental Enforcement (BSEE) for the development and evaluation of best available and safest technologies (BAST) are discussed. The roles of industry and the public in the BAST process are addressed.
The legal authority for implementing the federal offshore law, the Outer Continental Shelf Lands Act (OCSLA), including the BAST requirement, resides with the Secretary of the Interior, who, in turn, has delegated much of the authority for promoting safety and environmental enforcement to BSEE. Within that bureau, the Office of Offshore Regulatory Programs develops and maintains up-to-date regulations, policies, standards, and guidelines for BAST practices that govern industry’s offshore operations nationwide. It oversees BSEE’s compliance activities and ensures appropriate and effective enforcement actions.1 The current organization chart of BSEE is shown in Figure 4-1.
Since BSEE and the Bureau of Ocean Energy Management (BOEM) are charged with overseeing the industry’s energy exploration and production in the OCS, they must grasp emerging technologies for exploration, development, and production. In the committee’s view, BSEE needs an agent that is competent and trusted (i.e., free of conflict) and that has the resources to assess new exploration technologies and their system applications. The agent would have the responsibility of evaluating design, test protocols, and test results on behalf of BSEE to certify new BAST items having health, safety, and environment ramifications. The Ocean Energy Safety Institute (OESI) could augment BSEE in this regard.
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1BSEE Leadership. http://www.bsee.gov/About-BSEE/BSEE-Leadership/Index.aspx. Accessed September 25, 2013.
FIGURE 4-1 Organization of BSEE. (ADIR = Assistant Director for Information Resources; CFO= Chief Financial Officer; DASHO = Designated Agency Safety and Health Official.) Source: www.bsee.gov/About-BSEE/index.aspx. Accessed September 27, 2013.
Ocean Energy Safety Institute
In May 2013, BSEE announced a competitive request-for-proposal process to establish an independent OESI to support BSEE by enhancing safe and responsible operations across the offshore oil and gas industry, thus fulfilling a major recommendation of the Ocean Energy Safety Advisory Committee.2 BSEE announced that it would seek proposals “for the establishment of an Institute that will facilitate research and development, training of federal workers on identification and verification of Best Available and Safest Technology (BAST), and implementation of operational improvements in the areas of offshore drilling safety and environmental protection, blowout containment and oil spill response. OESI will be a collaborative initiative involving government, academia and scientific experts. The recipient institution(s) receiving the award will be responsible for managing OESI, providing input on yearly objectives, conducting certain work to further the attainment of those objectives, and being a focal point for collaboration on issues within the OESI mandate.”3
As identified in the program announcement by BSEE, “the primary mission of the OESI is to provide a forum for dialogue, shared learning, and cooperative research among academia, government, industry and other non-governmental organizations, in offshore energy-related technologies and activities that ensure safe and environmentally responsible offshore operations” (BSEE and BOEM 2013, 2). In the committee’s view, one of the major challenges for OESI will be to provide knowledgeable independent assessments concerning technology maturity, suitability (fitness for purpose), and cost. In addition, OESI will face key challenges that are typical at the start-up of this type of organization, such as hiring the initial staff and receiving sustained funding to allow it to mature.
Up to $5 million (over 5 years) will be made available to launch OESI. “This funding is intended to pay for the startup costs of the OESI, which will include the salaries of up to three staff, workshops and forums, and research and related activities” (BSEE and BOEM 2013, 3). The project is intended for state and county government agencies and for public and state-controlled institutions of higher education. Federal entities are allowed as partners (BSEE and BOEM 2013, 6).
A key question is whether the substantial expectations for OESI can be met with the proposed funding level. In examining the OESI concept, the committee discussed options for alternative structures, lessons learned from similar organizations, and the importance of the location of the institute.
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2http://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 September 25, 2013.
3http://www.grants.gov/search/search.do?mode=VIEW&oppId=235604. Accessed September 25, 2013.
However it is organized, OESI should serve BSEE as a technical center that captures and preserves knowledge and experience to improve offshore operations. It should become the knowledge repository and “corporate memory” that BSEE can use as offshore operations expand and technologies are developed and introduced. In this context, the staff and organization of OESI must be reasonably stable over the decades-long periods that characterize offshore operations and facility lifetimes. The committee believes that this should be taken into account if hosting and management of OESI are recompeted on a regular basis.4
Options for Alternative Structures
The committee supports BSEE’s formation of OESI and offers the following comments concerning structure and governance options and potential impact on the intent and capabilities of OESI.
Three organization options that have been used at the federal level to perform functions not dissimilar to OESI are the federally funded research and development center (FFRDC), the university-affiliated research center (UARC), and grants. The committee did not consider the option of a government-owned or government-operated (GO/GO) laboratory because of BSEE’s expressed preference in its request for proposal for a third party to establish an independent OESI. GO/GO laboratories are predominantly staffed by federal employees.
Federally Funded Research and Development Center
An FFRDC is sponsored and funded by a government agency such as the Department of Defense, the Department of Transportation, or the Department of Energy (DOE). Its purpose is to fulfill special long-term research and development needs that are not met effectively by in-house staff or a project-specific contractor. The primary focus areas for existing FFRDCs are (a) systems engineering and integration centers, (b) study and analysis centers, and (c) research and development centers (including national laboratories).
The agency sponsoring agreement is spelled out in Federal Acquisition Regulation 35.017-1. The agreement identifies the purpose and mission of an FFRDC. It provides for the orderly termination or nonrenewal of the agreement. It directs how any retained earnings may be used, and it prohibits an FFRDC from competing against any non-FFRDC (except to operate an FFRDC). The agreement also determines whether the FFRDC can accept work from organizations other than the sponsor.
There are approximately 40 FFRDCs today. Examples include the Aerospace Corporation, Rand Corporation, and Sandia National Laboratories. The government agency’s annual funding for each of these FFRDCs can range from
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4Presentation, Joseph Levine, BSEE, March 11, 2013.
a few million dollars to over $2 billion, depending on the size and scope of the agreements. Specifically, Sandia’s budget on behalf of DOE exceeds $2 billion.
In general, FFRDCs are stand-alone entities with their own personnel pay and benefits packages. However, the senior management structure for the operation may be changed periodically by the sponsoring agency via a competitive process. There are several advantages for an agency in sponsoring an FFRDC. The FFRDC will develop a comprehensive knowledge of the sponsor’s needs. It can adapt its resources to current needs and can respond quickly when conditions change. It is required by federal regulation to be free of organizational conflicts of interest and therefore can maintain its objectivity (GAO 2008). An FFRDC is not bound by the federal government’s personnel hiring and compensation practices. Therefore, it can recruit personnel whose skills and commensurate market value place them out of reach of the civil service pay structure (Howieson et al. 2013, 13).
The ability to provide long-term technical continuity for the agency is also important. In general, FFRDCs have broad access to both government and commercial proprietary information to supplement their own inherent capabilities. The primary disadvantage for the sponsoring agency is that it must provide a degree of annual funding stability to maintain and effectively use these advantages.
University-Affiliated Research Center
A UARC is a government research center that is affiliated with a university. It operates similarly to an FFRDC, but education is an important part of its charter. The management structure is provided by the university.
A UARC’s advantages are essentially the same as those of an FFRDC. Its most significant disadvantage is that the focus on the sponsoring government agency can be constrained by university interests. Specifically, the focus on education can affect the type of work that the UARC can undertake and complicate issues such as acquiring proprietary technology.
There are approximately 15 UARCs today sponsored by the Department of Defense and the National Aeronautics and Space Administration (NASA). Examples include the Georgia Tech Research Institute and the Johns Hopkins University Applied Physics Laboratory. Federal funding for UARCs varies in amount. The UARC at the University of California, Santa Cruz, funded by NASA Ames, has an annual budget of about $23 million.5
Grants
Grants provide a means for an organization to have requested services performed over a set period. Grantees are usually selected on the basis of a compet-
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5http://uarc.ucsc.edu/about/. Accessed September 25, 2013.
itive proposal bidding process in response to a grantor’s request-for-proposal solicitation. Universities, nonprofit organizations, and commercial entities can receive grants, as can state and local governments. Grants can take the form of research grants, education grants, training grants, or facilities grants. Grantees must follow the terms and conditions of the grant agreement and periodically provide progress and financial reports.
For government agencies, grants provide capabilities and expertise needed to support agency programs. They also provide a major source of funding for educational institutions and nonprofit organizations. One disadvantage is that grant funding availability is limited and not of long duration, so bidders are not motivated to make long-term investments in personnel or equipment. The recent BSEE announcement seeking proposals from qualified organizations or institutions to enter into a cooperative agreement for 5 years with funding of up to $5 million for the operation of OESI (BSEE and BOEM 2013) is an example of a potential grantor’s request-for-proposal solicitation.
The committee supports the initial formation of OESI through a grant process. However, BSEE should consider expanding OESI’s charter to allow it to evolve into an FFRDC or a UARC, since such a structure would provide a more stable approach and foundation for long-term operation (Recommendation 4-1). As mentioned previously, one of the challenges for OESI will be to provide knowledgeable independent assessments with regard to technology maturity, suitability (fitness for purpose), and cost.
Regardless of the structure or governance model selected for OESI, extensive study of similar organizations reveals that their success hinges most critically on “high-quality technical expertise and a trusting relationship between laboratory leaders and their sponsor agencies” (Howieson et al. 2013, 14), which ultimately reflects the quality of the governing board rather than the specific model chosen.
Lessons from Other Organizations
The way in which private organizations that support regulators are structured and function can provide valuable lessons and examples to BSEE. Classification societies provide classification and statutory services to the maritime industry and regulatory bodies with regard to maritime safety and pollution prevention. The life-cycle process of classification (i.e., design evaluation, construction, and in-service evaluation and monitoring throughout service life) are applicable to critical equipment such as blowout preventers as well as other equipment or systems related to BAST.
SINTEF (Stiftelsen for Industriell og Teknisk Forskning, the Foundation for Scientific and Industrial Research) is the largest independent, noncommercial research organization in Scandinavia. Its proximity to a university environment enables SINTEF to have joint use of university laboratories and equipment and to have access to university research and faculty personnel, including those
who are retired. See Appendix B for additional discussion of classification societies and SINTEF.
The committee did not consider classification societies or SINTEF as possible models for OESI because the U.S. government is limited in its ability to create private enterprises such as these. FFRDCs and UARCs are the most similar types of organization in the U.S. system. Some FFRDCs and UARCs have evolved into broader, private nonprofit enterprises, but only after they were formed by using the prescribed mechanisms for U.S. government investment.
Governance
Under any of the options for structuring OESI, a governance board will likely be not only desirable but necessary, and its quality will likely determine the organization’s effectiveness.
The governance structure of OESI should be consistent with its mission. According to the program announcement, “this project will be a collaborative venture with the Recipient, including substantial involvement of the BSEE and BOEM. OESI will be a collaborative initiative involving government, academia and scientific experts. The recipient institution(s) receiving the award will be responsible for managing OESI, providing input on yearly objectives, conducting certain work to further the attainment of those objectives, and being a focal point for collaboration on issues within the OESI mandate” (BSEE and BOEM 2013, 2). As noted above, the initial funding of OESI is intended for qualified county or state agencies and public or state-controlled institutions of higher education, which will have implications for its governance.
BSEE could view the initial grant as “seed money” that will enable the institute to evolve into a more robust organization with the involvement of industry participants as well. This is anticipated in the program announcement, which requires the recipient’s proposal to “include a strategy that will allow the institute to continue to fulfill its mission and should consider industry participation as well as any other potential opportunities for funding” (BSEE and BOEM 2013, 5). In addition, administration of OESI by a governance body that monitors the focus, quality, and value of the institute’s work would be consistent with the governance practices of an FFRDC or a UARC.
The committee envisions that the staff of OESI will include members from the recipient’s organization and from BSEE. In addition, the institute may be able to leverage the technical expertise and experience of industry by involving secondees from industry who would support the research and development activities of the personnel of the institute. Secondees would be expected to rotate back to industry after an engagement with the institute for periods ranging from several weeks to more than a year. Such industry involvement is important in ensuring that OESI is able to prioritize and focus on the key technological and regulatory gaps as well as risks and challenges related to offshore oil and gas exploration and production technology. Industry involvement would also ensure that OESI remains current with the evolving technology.
BSEE should consider establishing two governing committees to provide oversight and guidance for (a) coordination of OESI in terms of its overall policy and direction and (b) a guarantee of the quality of the academic and scientific research programs that it pursues (Recommendation 4-2). The first might be termed a governance board or a board of advisers. It would include representatives from the primary stakeholders associated with the institute: BSEE and BOEM (the federal agencies), industry, academia, and standards organizations. The governance board would be responsible for identifying opportunities for testing and research and for setting priorities and recommending funding levels associated with the activities of the institute.
The second committee might be called the research committee, engineering committee, or science advisory board. It would be chaired by the lead scientist or engineer of the institute. Such a committee, which would be separate from the governing board, could be important in steering the technical resources of OESI and maintaining relationships with industry and other government agencies. Its membership would include team leaders of research activities related to such areas as innovations in drilling and production equipment, safety systems, oil spill response, and the identification and verification of BAST. The committee would provide technical oversight of the conduct of engineering and research projects and ensure the relevance and the quality of these efforts in supporting deepwater and Arctic exploration and development.
OESI should give high priority to developing its relationships with operating and service companies, equipment manufacturers, academia, other federal departments, and national laboratories that may be the source of technology or resources (Recommendation 4-3). The oil and gas industry maintains facilities and laboratories that can be of great value to OESI.
Location
A body of knowledge and experience is available to a nascent OESI, but it is largely developed within the oil and gas industry and nurtured within the technical departments of operators, service companies, and equipment manufacturers. The committee believes that consideration should be given to locating OESI in an area near offshore drilling and exploration activities, such as the Gulf States region. This would facilitate attracting retirees and others with industry experience and assist in the ongoing dialogue with industry.
The geographic center of this industry is in the greater Houston area along the Texas Gulf Coast. BSEE should consider locating OESI in that area to encourage the free flow of technology from industry to the institute and to afford access to the large pool of industry retirees, who could form a cadre of institute employees and consultants (Recommendation 4-4). This would also facilitate the temporary assignment of industry personnel to OESI (and vice versa) for the purposes of technology transfer and the growth of broad
OESI capabilities, including those necessary for aiding BSEE in the identification, maturation, and implementation of BAST.
The location of other government-sponsored technology efforts close to industry has proved to be successful (e.g., NASA’s Jet Propulsion Laboratory in Pasadena, California). The movement of staff between the institute and industry also follows successful past models; similar movements between the oil industry and government agencies occur in Great Britain.
Industry skills and expertise are developed and grown in the operating companies, service companies, and equipment manufacturers, as is evidenced by the level of spending by industry in offshore exploration and production. BSEE has embarked on an aggressive hiring and training campaign in the past 2 years, but it cannot realistically be expected to match industry in technical depth or breadth. However, as it continues with its recruiting program to attract new science, geoscience, and engineering graduates into government service, there are many ways in which BSEE can take advantage of the expertise built by industry:
• Develop and grow its new-hire training program and take advantage of industry training to ensure that its staff is as technically comparable with industry peers as possible.
• Pursue involvement of industry retirees, who represent a robust technical resource. Many retirees immediately go back to work for other companies, but some are looking for a career change and should be pursued by both BSEE and OESI. Developing ongoing and active relationships with companies and professional organizations will expose BSEE and OESI to this resource and will provide these industry retirees with new opportunities.
• Consider models for cross-postings of BSEE and OESI technical staff to and from industry. Cross-postings are carried out successfully in other federal agencies with safety oversight responsibilities in technically demanding fields. The Federal Aviation Administration is one example.6 This can be effective in striving for technical parity with industry and in developing mutual respect between BSEE, OESI, and industry. Regulators in Europe have used this method successfully.
• Develop models for recognizing long-term exemplary safety contributions by individuals. For example, working with the professional organizations, BSEE or OESI could establish criteria for recognizing “safety fellows” within industry, government, and academia. Such an award, if treated as a significant accomplishment by BSEE and industry, would emphasize the importance of individual contributions to offshore system safety.
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6http://www.faa.gov/about/plans_reports/media/2013/AVS_FY2013_Business-Plan_12-12-10.pdf. Accessed September 25, 2013.
Given the competitive nature of the oil and gas industry and industry staffing needs, BSEE may be limited in its ability to attract and retain technical staff. Federal resourcing criteria will make it difficult to compete with industry for the best graduates and experienced staff; therefore, BSEE needs to be open to new resourcing models. Flexibility afforded through OESI could be valuable in creating these new models, and OESI could provide the “home” for many technical staff, cross-posted industry staff, and consultants.
Complementary to the establishment of OESI, BSEE should consider hiring a highly reputable chief engineer or chief scientist with technical expertise in offshore drilling, exploration, and production to work within the bureau (Recommendation 4-5). BSEE currently has limited technical staff separate from those with technical degrees but with regulatory and oversight responsibilities. BSEE needs a small number of technical staff, supervised by a trained and experienced engineer of the caliber of the chief engineer within an operating or service company, who can interface with a (remote) OESI, understand technologies and their applications, interface with his or her counterparts within industry, and provide critical judgment concerning industry plans and activities to senior and management staff within BSEE and the Department of the Interior. A BSEE chief engineer should have qualifications and a résumé comparable with those of a chief engineer or discipline chief within a major oil or service company. In addition, BSEE would benefit from an in-house capability of providing the director with an assessment of technical issues such as BAST that is independent of oversight and regulatory responsibilities. Such capability could be achieved, for example, by creating the position of chief scientist or chief engineer and filling it with a highly reputable expert who could communicate effectively with industry, OESI, and the director.
Role of Stakeholders
As indicated above, BSEE will be the prime agent in defining how the industry and other interest groups engage in the implementation of the safety and environmental provisions of the OCSLA, including the application of BAST.
In the definition and implementation of BAST, BSEE has the opportunity to engage the expertise of industry in the shared goal of delivering safe and economic energy to the nation.7
In addition, technology-focused input from a variety of other stakeholders would add a dimension and a perspective that could be beneficial to BSEE in establishing a clear, balanced, effective, and meaningful BAST standard.
All interested parties understand that, in the aftermath of the Macondo well blowout, BSEE has engaged in reviewing, revising, and strengthening its
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7http://www.bsee.gov/uploadedFiles/BSEE/BSEE_Newsroom/Speeches/2013/BSEE-and-USCG-OTC-Presentation-2013.pdf. Accessed September 25, 2013.
safety and environmental regulations, particularly those affecting deepwater exploration and production.8 In the implementation of BAST, there will be many challenges in creating the structures and conditions that will reliably bring the best technologies to the attention of both operators and the regulator and that will allow the regulator to assess the net benefits of applying these technologies in offshore operations. To make fully informed decisions, it is important for BSEE to understand the concerns of a range of organizations and individuals who have an interest in the decisions being made. The establishment of OESI opens an opportunity for cooperative efforts among BSEE, industry, and other stakeholders on technology development initiatives. BSEE should foster the meaningful involvement of all stakeholders, including industry, environmental organizations, and members of the general public, in providing input to OESI management on long- and short-term areas of focus of its initiatives (Recommendation 4-6). A recent example of broad involvement of all stakeholders in an agency–industry conference was shown in the June 2013 National Energy Board of Canada Safety Forum.9
Suggested Mechanism for BSEE to Obtain Input and Guidance
In the implementation of BAST, BSEE has an opportunity to redefine the relationship between it and industry more as a partnership—one that recognizes that the final authority remains with the federal agency but in which the agency acknowledges that industry has much technological expertise to offer. The committee believes that a proper arms-length relationship between the regulator and the regulated is consistent with a well-managed joint endeavor. It should be a professional relationship based on a clear understanding of the roles and drivers that benefit both the government (safety and environment) and the offshore industry. BSEE’s unique position as regulator and permit issuer gives it an opportunity to set the stage for mutually beneficial interactions with, and within, industry and other interested and engaged entities. In addition to the formal processes suggested below, BSEE is encouraged to initiate a regular cycle of discovery, including visits to involved companies of all types to meet with engineers, product leaders, and those deploying technology in situ.
BSEE, either directly or through OESI, should consider the following interactions primarily with industry; other stakeholders would be engaged as appropriate:
• Forums would consider and evaluate best practices in a system safety context. They reflect what an operator or other members of industry consider to
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8http://www.bsee.gov/uploadedFiles/BSEE/BSEE_Newsroom/Speeches/2012/Speech-OTC%20Breakfast%20Keynote-05-01-2012.pdf. Accessed September 25, 2013.
9http://www.neb-one.gc.ca/clf-nsi/rsftyndthnvrnmnt/sfty/nbsftyfrm2013/prgrm-eng.html. Accessed September 25, 2013.
be best practice and will aid in the overall understanding of the development and implementation of BAST.
• Workshops would evaluate technology readiness in given areas of current and future needs. They could help in accelerating efforts to adopt candidate technologies.10
• Low-likelihood, high-consequence scenario planning should receive consideration. The question of what should be done in the extremely rare event with high consequence deserves the attention and leadership of BSEE, with the support of technical leaders from industry. Such planning should not exclude the assessment of likelihood of occurrence, but neither should it become an esoteric exercise in competing risk assessment approaches, such as quantitative risk assessment, probabilistic risk assessments, and risk matrices.
• Cold-eye assessment is a concept under which those with expertise are brought in to evaluate a situation. In this application, BSEE could empanel experts to aid in its reviews of topics for which its internal expertise is not sufficient. A deepwater operation plan with new and unusual technology features might be an example of such a situation. Other examples could be related to longer-term evaluations of specific or general technology assessments.
• Industry, through its many associations and joint industry projects, has ongoing suites of programs to evaluate current technology status and future needs. Recognizing that budget funds are limited, BSEE should evaluate options and explore opportunities to join selected studies as full paying members or, as sometimes is offered, as an observer.
Having considered options for the establishment and evaluation of BAST, the committee recognizes that there will be many challenges in creating the structures and environment that will reliably bring the best technologies to the attention of both operating companies and the regulator and that will allow the regulator to assess fully the net benefits of applying these technologies in offshore operations.
OESI, as currently proposed by BSEE, is the beginning of a process that could provide BSEE with the tools and expertise to evaluate systems and technologies and identify those materially improving safety in offshore operations.
While the direction proposed in the BSEE announcement of OESI is good, the scale and structure of the institute will need to expand to address the challenges posed in the offshore environment. More than 3 years since Macondo, industry activity has increased to the point where approximately 70 drilling rigs were active in the U.S. Gulf of Mexico in July 2013, and a steady stream of large development projects are ongoing or planned.11 With industry spending
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10BSEE, 1st Domestic and International Standards Workshop, November 14-15, 2012.
11http://www.rigzone.com/data/utilization_region.asp. Accessed September 25, 2013.
several billion dollars per year on drilling and development activities (see Chapter 1), technology moves ahead constantly, and OESI will be important in enabling BSEE and the regulatory environment to keep up.
However, to be effective, the scale of OESI will need to be much greater than that described in the initial announcement. OESI will need to be located where it can readily access experienced staff and interact with industry. BSEE should consider OESI structures that facilitate the retention of knowledge and experience (Recommendation 4-7).
The committee believes that the funding level proposed in the BSEE announcement is not adequate for achieving these ends. As discussed earlier in this chapter, various structures can be used in building OESI. However, examination of similar efforts in technology identification and assessment undertaken in the past indicates that the funding commitment to OESI will need to be consistently in the range of several million dollars per year to attract and grow the skills and competencies required, to monitor and keep pace with industry technology developments, and to shape and support the research programs to assess and mature beneficial technologies.
The committee is also concerned that OESI, as initially described, does not allow for the development of the institutional knowledge and memory that will be required to steer and promote the necessary technology development for BAST. A technical core within OESI that follows industry developments over many years and is able to recognize and respond to trends and developments in a timely manner will be needed. The regular recompeting of OESI could make this difficult, particularly at the budgetary level announced, because growth and retention of a stable core of technical and managerial expertise that will be necessary over the decades-long time scales that are common in the offshore industry will not be possible. Complementary to the establishment of OESI, BSEE would benefit from having its own in-house highly reputable chief engineer or chief scientist with technical expertise in offshore drilling and exploration.
In sum, the committee believes that for the effective implementation of BAST, the technical expertise and resources in BSEE and OESI need to evolve along the lines indicated by the body of recommendations in this report.
