Spill panel: More government, industry reforms needed

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Jan. 11 -- Government and industry reforms beyond those that already have begun will be necessary to address questions raised by the Macondo well accident on Apr. 20, 2010, which killed 11 people and destroyed the Deepwater Horizon semisubmersible rig, and the subsequent massive oil spill, US President Barack Obama’s independent investigative commission concluded in its final report.

The commission said fundamental reforms will be needed in the structure of government regulatory oversight and its internal decision-making process to ensure its political autonomy, technical expertise, and full consideration of environmental protection concerns.

“Because regulatory oversight alone will not be sufficient to ensure adequate safety, the oil and gas industry will need to take its own, unilateral steps to increase dramatically safety throughout the industry, including self-policing mechanisms that supplement governmental enforcement,” the report added.

It noted that the technology, regulations, and practices for containing, responding to, and cleaning up offshore spills lag behind the real risks associated with drilling into large, high-pressure oil and gas reservoirs far offshore and thousands of feet below the ocean’s surface. “Government must close the gap, and industry must support, rather than resist, that effort,” it said.

“Scientific understanding of environmental conditions in sensitive environments in deep gulf waters, along the region’s coastal habitats, and in areas proposed for more drilling, such as the Arctic, is inadequate,” the final report suggested. “The same is true of the human and natural impacts of oil spills.”

‘Unbending commitment’
It noted that based on the commission’s investigation, the central lesson is that “no less than an overhauling of both current industry practices and government oversight is now required.” It said, “The changes necessary will be transformative in their depth and breadth, requiring an unbending commitment to safety by government and industry to transform a culture of complacency.”

It emphasized, “Drilling in deepwater does not have to be abandoned. It can be done safely. That is one of the central messages of this report,” adding, “The reforms proposed herein are intended to do for this industry what new policies and practices have done for other high-risk industries after their disasters.”

The report conceded that offshore oil and gas will continue to be an important part of US energy supplies for many decades. It noted that the US Outer Continental Shelf contains an estimate 85 billion bbl of technically recoverable crude, more than all onshore resources and offshore resources in shallower state waters combined.

“The future of domestic oil production will rely to a substantial extent on current [OCS] sources and further development of deposits there—in progressively deeper, more distant waters, and perhaps in such challenging environs as the Alaskan Arctic,” it said. “Whether we explore for and produce oil and gas from those prospective reserves, and if so, under what conditions, depends crucially on taking to heart the lessons we learn from the Deepwater Horizon disaster and the energy policies we put in place.”

The future of US energy policy was the main issue the accident and spill raised, commission co-chairman Bob Graham, a former Florida governor and US senator, said during a press conference as the final report was released on Jan. 11. “At the current level of proven reserves, and at our annual consumption of petroleum, if America were to go to a drill-baby-drill approach, we would exhaust our reserves by 2031. If we stuck to current levels, we would extend that to 2068,” he told reporters.

‘Cannot be sustained’
“I think that suggests we need to hold back certain areas to potentially serve future generations, and also accelerate efforts to reduce America’s insatiable appetite for petroleum. America represents 22% of the world’s total oil consumption, and that appetite cannot be sustained indefinitely,” Graham declared.

The report said important decisions about whether, when, where, and how to drill for oil and gas offshore cannot be made wisely if they occur in a vacuum. “Policies about offshore drilling should be powerfully shaped by economic, security, pace of technology, safety, and environmental concerns,” it indicated. “Offshore drilling will certainly be an important part of any national energy policy. But it is only a part of the picture, and its relative importance today will not, and should not, be the same a half-century from now.”

The report’s release brought an immediate response from National Ocean Industries Association Pres. Randall B. Luthi, who said the report itself will become required reading for oil and gas and other offshore industries for years to come. “However, the report is not an indictment of offshore oil and gas production,” he said, adding, “While many opposed to offshore exploration will undoubtedly use the report to bolster their calls to stop offshore oil and gas development, even the commission members themselves recognize the importance of moving ahead with additional development.”

Luthi, who was US Minerals Management Service director from July 2007 to January 2009, said the report’s many salient points included its conclusion that the accident was caused by human error and was not a statistical inevitability. He said the report’s insistence that a systemic problem exists throughout the offshore oil and gas industry is not supported by more than 43,000 wells having been drilled in the gulf, including 14,000 in deep water, without an accident similar to that at the Macondo well. “This is not because the industry has been lucky, nor does this disaster-free record show a culture of complacency,” he said, adding, “The Apr. 20 accident cannot be taken lightly, but it should not be used as a dam to halt efforts for energy security and reliability.”

Luthi also expressed concern over the commission’s recommendation that the National Oceanic and Atmospheric Administration become formally involved in the US Department of the Interior’s 5-year OCS program planning process. “This is certainly a case where too many cooks spoil the broth,” he suggested.

NOAA and other government agencies already are involved during the almost 2 years DOI and its Bureau of Offshore Energy Management, Regulation, and Enforcement, MMS’s successor agency, spend developing each 5-year plan, Luthi said.

“To increase the actual decision-making role of these partnering agencies means confusing the end goal (a workable leasing plan for safe and environmentally sound development of the nation’s energy resources) and will result in delay,” said Luthi, adding, “We may very well end up with a 5-year process to develop a 5-year plan.”

Contact Nick Snow at nicks@pennwell.com.

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