Session 1: What have we learned since Macondo?

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Session 1 What have we learned since
Macondo? Regulations, Regulators and
Responders Michael R. Bromwich, Managing
Principal, The Bromwich Group 900 - 920 AM
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In conjunction with
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Securing a Safer Future
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An unprecedented tragedy
Deepwater Horizon
Blowout of the Macondo well Sinking of the
Deepwater Horizon  drilling rig
Tragic deaths of 11 workers Spill of 4.9
million barrels of oil into the Gulf of Mexico

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Changes Were Long Overdue

• Deepwater Horizon cast a harsh light on the
  complacency that had come to surround deepwater
  drilling
• The enormous and immediate impact served as a
  wake-up call for industry, government and the
  public
• The reaction from government and industry focused
  on the need to take a comprehensive, disciplined
  look at existing safety technologies, practices
  and regulations and make immediate and lasting
  improvements

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Regulatory Reform

• The Deepwater Horizon tragedy led to the
• development and implementation of
• the most aggressive and comprehensive reforms
• of offshore oil and gas regulation and oversight
  in
• U.S. history
• Investigation into causes of the accident
• Development of new regulations for
• offshore exploration
• Overhaul of offshore regulatory agency

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Regulatory Reform

• Substantive regulatory reforms were based on
  insights from industry and government, as well as
  lessons learned from Macondo
• Department of the Interior launched aggressive
  reforms to strengthen standards in the
  exploration and development stages, for
• Equipment (specifically blowout preventers)
• Safety practices
• Environmental protection

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Regulatory Reform

• Prescriptive regulations
• Drilling Safety Rule
• Permit applications must meet new standards for
  well-design, casing and cementing
• New requirements for BOP capability, testing and
  documentation obligations

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Regulatory Reform

•  Performance-based regulations
• Workplace Safety Rule
• Offshore operators must develop and maintain
  comprehensive safety and environmental programs
  (Safety and Environmental Management System, or
  SEMS) that includes including equipment, safety
  practices, environmental safeguards, and
  management oversight of operations and
  contractors. 

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Regulatory Reform

• Guidance to enforce existing regulations
•  
• NTL-6
• Operators must demonstrate that they are prepared
  to deal with the potential for a blowout and
  worst-case discharge 
• NTL-10
• Permit applications must include a corporate
  compliance statement and a review of subsea
  blowout containment resources for deepwater
  drilling activities

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Reorganization of the former MMS

• The former Minerals Management Service (MMS)
  with its conflicting missions of promoting
  resource development, enforcing safety
  regulations, and maximizing revenues from
  offshore operations could not keep pace with
  the challenges of overseeing industry operating
  in U.S. waters.
•  
• In place of MMS, three independent agencies were
  created to remove those conflicts by clarifying
  and separating missions across the new agencies

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Reorganization of the former MMS

• The Bureau of Ocean Energy Management (BOEM) is
  responsible for managing development of the
  nations offshore resources in an environmentally
  and economically responsible way
• (launched October 2011)

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Reorganization of the former MMS

• The Office of Natural Resources Revenue (ONRR)
  resides in DOIs Office of Policy, Management and
  Budget. ONRR is responsible for ensuring a fair
  return to the taxpayer from offshore royalty and
  revenue collection and disbursement activities
  (launched October 2010)

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Reorganization of the former MMS

• What did the reorganization accomplish?
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• Revenue collection no longer drives resource
  management decisions
• Resource management decisions no longer drive
  regulatory and enforcement decisions
• Regulatory and enforcement capabilities can be
  appropriately developed and focused
• Environmental effects of proposed operations are
  given appropriate weight during resource
  management decisions
• Role of environmental review and analysis has
  been strengthened, including
• Creation of first-ever Chief Environmental
  Officer in BOEM
• Separation of environmental reviews from leasing
  decisions in BOEM
• Development of a new environmental compliance and
  enforcement functions in BSEE
• Prominent role for Oil Spill Response Plan review
  and enforcement in BSEE

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Improvements to Offshore Regulation

• In addition to completing the reorganization,
  internal reforms were implemented at BOEM and
  BSEE to further strengthen federal oversight
• New environmental protections
• Federal personnel now conduct more extensive
  analysis through site-specific Environmental
  Assessments for deepwater exploration plans as
  the government reviews its previous use of
  categorical exclusions
• New investigative capability
• A new Investigations and Review Unit was
  established to root out any problems within the
  regulatory agencies and target companies that aim
  to game the system 
• Enhanced inspection tools
• Offshore inspection strategies now includes
  multiple-person inspection teams for offshore oil
  and gas inspections, which will allow teams to
  inspect multiple operations simultaneously and
  thoroughly, and enhance the quality of
  inspections on larger facilities  

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Politics of Offshore Drilling

• The 2010 deepwater moratorium was as necessary
  and appropriate as it was unpopular
• Critical reforms including the Drilling Safety
  Rule had not been implemented
• There was no containment system to deal with
  subsea blowouts
• All available spill response resources were being
  used to
• deal with the tragedy
• It would have been a stunning response to proceed
  as if
• Nothing had happened
• But the moratorium provided an opportunity for
• criticism and played into 2010 election politics

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Politics of Offshore Drilling

• Some Members of Congress and Gulf Coast Governors
  wanted to proceed as though Deepwater Horizon had
  not happened
• Complaints that the government did not resume
  deepwater activities before the development of
  containment capabilities
• Persistent demands for increased speed of
  reviews, including the introduction of misguided
  legislation that placed artificial time limits on
  plan and permit approvals
• Sharp criticism of Administrations offshore
  drilling policies, including the 2012-2017 Five
  Year Program, which is based on the best
  available science

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Politics of Offshore Drilling
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Where Are We Now?

• Offshore activities are currently moving forward
  safely and steadily
• Number of deepwater rigs is near or at
  pre-Macondo levels
• Pace of permit and plan approvals is near or at
  pre-Deepwater Horizon levels
• February 28, 2009-February 27, 2010 67 new well
  deepwater permits
• February 28, 2011-February 27, 2012 61 new well
  deepwater permits
• Why?
• Industry has become familiar with new regulatory
  requirements
• Containment capabilities , worst case discharge,
  drilling safety rule requirements
• The pace for approvals of permit applications has
  increased as personnel have become more familiar
  with new procedures
• New congressional funding has allowed for
  increase in personnel and training

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Where Are We Now?

• Operators continue to have access to significant
  offshore areas
• Western Gulf Lease sale (Dec 2011)
• 338 million in high bids

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What Remains to be Done?

• Congress and the White House must ensure adequate
  funding for regulatory agencies
• Industry needs to focus on creative ways to share
  innovations in safety and environmental
  protection with each other and the federal
  government
• Industry and government must step up research on
  challenges posed by frontier environments ,
  including the Arctic and ultra-deepwater
• Investments in safety and environmental
  protection must keep pace with advancing
  technology and continued ambition to move into
  frontier areas

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What Remains to be Done?

• Recruitment of engineers with adequate level of
  expertise into government must remain a high
  priority
• Creative steps need to be taken to bolster
  technical expertise of government through
  exchange programs with other countries and with
  industry
• Need for greater global cooperation on
  prevention, containment and spill response issues

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The Cost of Complacency
Deepwater Horizon post-April 20
Deepwater Horizon pre-April 20
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