Offshore safety in the wake of the Macondo disaster: the role of the regulator.

• Author: Weaver, Jacqueline L.
• Position: Part 2 - III. The Role of the Regulator: Best Practices through C. The U.S. Safety Regime Today 3. The Tools Today: SEMS Auditing b. The "SEMS I World" of Auditing, p. 379-420

1. INTRODUCTION Part (1) II. THREE CHANGES TO BUSINESS AS USUAL Part One III. THE ROLE OF THE REGULATOR: BEST PRACTICES A. Introduction: the Pre-Macondo Regulator B. The Model of a Good Regulator. C. The U.S. Safety Regime Today IV. WHERE THE GAPS ARE: MEET OESAC. V. CONCLUSIONS, RECOMMENDATIONS AND FINAL OBSERVATIONS. A. Conclusion: BSEE Is Not (Yet) a Nimble and Competent Regulator B. The "New Governance": Regulation by Third-Party Certification C. Recommendations to Help BSEE Become a Competent and Nimble Regulator. D. Final Observations APPENDIX A III. THE ROLE OF THE REGULATOR: BEST PRACTICES

1. Introduction: the Pre-Macondo Regulator

   "[The Macondo incident] challenged 40 years of generally accepted belief that offshore operations could occur safely under existing regulation and oversight."

   --Mary Kendall

   Acting Inspector General, Department of Interior (2)

   From 2004 to 2009, fatalities in offshore oil and gas operations in U.S. waters were more than four times higher per person-hours worked than in European waters. (3) After citing this data, the National Commission Report on the BP-Deepwater Horizon oil spill noted that differing regulatory systems seemed most likely to explain the gap. (4) Part One of this Article discussed how a mandatory safety and environmental management system (SEMS) for regulating offshore operations appeared in the Gulf of Mexico in the wake of the Macondo disaster. This Part Two of the Article addresses the role of the regulator in this new regime. How does the government safety agency fit into the newly adopted SEMS regime which is to mimic many of the principles of the Safety Case regimes used in the North Sea? The purpose of both systems is to hold individual companies accountable for identifying and minimizing all major safety hazards in order to maintain a safe workplace. How does the regulator enforce operators' compliance with required SEMS programs and with other rules governing offshore safety equipment and processes? Part One concluded with Professor Hopkins' assessment that serious weaknesses still exist in the U.S. regime. This Part Two takes up his assertion and provides a detailed analysis of the current state of offshore safety in the Gulf of Mexico and a road map to improvements needed.

   Several reports on the Macondo disaster have pointed to "government failure" as an important contributing cause. The National DWH Commission Report, for one, recited the same failures of the U.S. regulatory system that had contributed to the Exxon Valdez spill twenty years earlier: An under-resourced regulator, subject to the political winds of Congressional and Executive funding and oversight, could not prevail against a pro-industry ideology that treated additional regulation as a nuisance, especially when no large oil spills had occurred since tanker shipments had started moving Alaskan crude to market. (5)

   The National DWH Commission Report presents a doleful history of the impediments to better offshore safety regulation over a twenty-year period before Macondo. (6) From 1989 on, the MMS took fitful steps to strengthen its inspection processes and to move to a limited adoption of some elements of a SEMS regime, but the agency's efforts were "repeatedly revisited, refined, delayed, and blocked alternatively by industry or skeptical political appointees." (7) Just as deepwater drilling began to surge in the 1990s, the MMS budget went into a steep decline. (8) Training of MMS inspectors was nothing short of "abysmal," (9) and MMS personnel reviewing applications to drill were not competent to assess safety-critical technology or procedures. (10) In short, MMS personnel were not professionally capable of either regulating or enforcing safety in offshore waters..

   To its credit, the MMS realized two decades before the Macondo blowout that it had a significant problem enforcing safety offshore and asked the National Research Council's Marine Board to assess how the MMS could be more effective. (11) The resulting 1990 report by the Marine Board examined alternatives for effective inspection of OCS operations and bluntly concluded that more inspections using the current MMS checklist would yield no improvements in safety. (12) The checklist focused on compliance with hardware, yet most accident events on the OCS related to operational procedures or human error. The inspections did not provide a means of assessing an operator's attention to or attitude towards safety.

   The Marine Board recommended that that MMS improve its data collection and safety analyses, develop a program to systematically upgrade safety requirements, conduct risk-based inspections of selected facilities, and provide training so that MMS inspectors could better assess safety procedures and behaviors rather than mere hardware compliance. The report strongly recommended against third-party inspections by private contractors because this would increase the tendency of operators to abdicate safety responsibility to the regulator. Yet reliance on self-inspection by the operator was not a tenable recommendation because the MMS would then be charged with having abdicated its responsibility. The presence of MMS inspectors was important to convey "a sense of oversight" and to provide "impetus to marginal and inexperienced operators to meet federal safety standards." (13) This last statement by the Marine Board shows how little the MMS inspection system then accomplished or was expected to accomplish.

   In short, the 1990 Marine Board report concluded with no good solution for an agency so under-resourced. The best alternative was a form of enhanced inspection of only certain facilities (based on a formal sampling process), including a "high visibility" program of frequent and comprehensive inspections of drilling and workover operations where serious safety problems most often arose. The report strongly recommended that the MMS focus on detecting potential accident events and collecting information on near misses. (14)

   Twenty years later in 2010, MMS oversight of OCS safety had not advanced beyond its 1990 status, despite the move to deepwater frontiers and the large increase in activity. In May 2010 (a month after the Macondo blowout), the Office of Inspector General of the Department of Interior was requested by Secretary Salazar to determine "whether specific deficiencies exist in Minerals Management Service (MMS) performance" of its regulatory mandate to assure that operations on the OCS were conducted safely. (15) The resulting December 2010 report is even more doleful reading: MMS engineers, lacking access to computer systems that displayed the history of an operator's well operations, approved departures from safety requirements without proper justification, especially in deepwater; (16) chronic staff shortages and back-logged work did not allow engineers to attend training sessions; (17) some operators "shopped around" to find an MMS engineer that would approve its request or waited until the MMS inspector left the facility to perform an operation that might be subject to an INC (an incident of noncompliance); (18) operators signed certificates that indicated they had corrected noncompliance violations on a form without a perjury oath swearing that the information was accurate; only 50 of the 2,298 INCs issued in 2009 had documented follow-up inspections to ensure compliance had been done; (19) the MMS relied on operators to report serious events such as fires, fatalities and lack of well control, but the operator-submitted information required to assess the severity of an accident and the need for an MMS investigation was woefully inadequate; (20) MMS had no accountability system to follow up recommendations based on accident investigations, meaning that the lessons learned from understanding the causes of accidents were either not communicated through safety alerts or, if communicated, were not tracked to see if operators implemented them; (21) and MMS did not have the capacity to effectively review all API-issued industry standards or to identify the best and safest technologies required to be used offshore. (22)

   Post-Macondo, the National Research Council was again asked to assess the effectiveness of OCS safety regulation by the MMS. An interim report from the National Academy of Engineering released in November 2010 found that the agency did not regulate offshore safety in any meaningful way. For example, the MMS had adopted offshore regulations that incorporated by reference about 80 of the industry's 240 recommended standards, but it was not clear that the MMS had the expertise to independently evaluate the adequacy of these industry standards. (23) The standards and recommended practices were developed by the technical arm of the American Petroleum Institute (API), an institution that plays a critical role in offshore safety, but is best known to Americans as a powerful lobbyist, whose media campaigns and spokesmen actively promote industry causes such as low taxes, less regulation, and continued oil industry subsidies. (24)

   As to the API's role, the National DWH Commission report bluntly noted that "API's ability to serve as a reliable standard-setter for drilling safety is compromised by its role as the industry's principal lobbyist." (25) The API regularly resisted agency rulemaking that the MMS believed would have led to greater safety, but which might cost more. More troubling, API's technical standards increasingly failed to meet best practice; rather, they reflected the lowest common denominator that almost all operators could achieve. (26) Because the MMS relied on the API standards in developing its own regulations, the API's shortcomings "undermined the entire federal regulatory system" (27) and was one of the reasons that the National DWH Commission determined that the industry as a whole had "systemic" failures beyond BP's individual shortfalls.

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