A week after the long-awaited release of a presidential commission’s report on the Macondo disaster, US Interior secretary Ken Salazar announced the latest moves in the reorganization of the agency that oversees offshore oil & gas activities. Russell McCulley reports.
On 19 January, US Interior secretary Ken Salazar announced the creation of two new agencies to manage offshore development and enforce safety and environmental regulations. The move was part of the Obama Administration’s restructuring of the former Minerals Management Service initiated after the 20 April 2010 Macondo well blowout and subsequent oil spill at the BP-operated prospect in the Gulf of Mexico. Weeks after the disaster, Salazar said the agency would be renamed the Bureau of Ocean Energy Management, Regulation & Enforcement and that its leasing, revenue collection and regulatory functions would be broken off into separate units.
The revenue collection arm of the former MMS last October became the Office of Natural Resources Revenue. The two new agencies unveiled last month are the Bureau of Ocean Energy Management, whose functions will include leasing, environmental studies and resource evaluation; and the Bureau of Safety & Environmental Enforcement, which will oversee field operations such as regulatory compliance, permitting and research, and inspections, among other duties.
At a joint press conference Salazar and BOEMRE director Michael Bromwich also announced the creation of the Offshore Energy Safety Advisory Committee, a permanent 13-member advisory body to be led by former Sandia national laboratory director Ton Hunter. Committee members representing the industry, government, academia and research organizations will advise BOEMRE on issues related to offshore energy safety, Salazar said.
Hunter was a member of the scientific team that worked on the capping and containment of the Macondo well in 5000ft water depths.
‘The creation of the three independent agencies – ONRR, BSEE and BOEM – was guided by the natural distinctions among the three missions and ensures that robust environmental analyses and safety considerations are given appropriate weight throughout the permitting and development process,’ Salazar said in prepared remarks.
The secretary said the restructuring would ‘foster greater independence’ within the oversight agency.
‘By separating the conflicting missions, the new agencies will have clarity in purpose – and will be stronger for it. At the same time, it provides the right checks and balances as we evaluate proposed oil and gas projects.’
Initial industry reaction was mixed. ‘Today’s announcement may provide a bit more clarity, but seems to only add to the uncertainty,’ said National Ocean Industries Association (NOIA) president and former MMS director Randall Luthi. ‘It seems that offshore operators will now need to communicate with one agency (BSSE) to obtain permits, but those permits will be reliant upon swift completion of environmental review by another agency (BOEM), thus creating the possibility for further bureaucratic delay. The real test is whether or not a permit for new deepwater drilling is issued in the very near future,’ Luthi said.
‘Systemic failures’
The news came on the heels of the 11 January release of the final report from the administration’s commission set up to investigate the Macondo disaster. The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling blamed the tragedy on ‘systemic failures in risk management’ and a ‘series of identifiable mistakes’ by BP, Halliburton and Transocean, and called for tighter regulation of the offshore oil & gas industry.
The report attributed the blowout, which killed 11, destroyed Transocean’s Deepwater Horizon rig and led to the worst oil spill in US history, to ‘missed warning signals, failure to share information, and a general lack of appreciation for the risks involved,’ along with a degree of complacency regarding deepwater safety among both industry and government regulators.
‘The impressive technologies developed for offshore drilling and production have not been accompanied by comparable improvements in safety and environmental protection,’ the seven-member commission wrote. ‘As Americans now know, three major companies failed to apply rigorous process safety measures to their drilling operations in the Gulf of Mexico: Halliburton and Transocean, which service drilling operations throughout the Gulf, along with BP – underscoring the systemic nature of the offshore industry’s problems.’
The report faulted several steps taken during the drilling and completion stages, including BP’s decision to use a long string casing rather than a liner, which the commission said complicated efforts to obtain a reliable primary cement job. The commission also questioned BP’s decision to use only six centralizers in the well and the company’s failure to inform contractor Halliburton of the decision.
Halliburton was faulted for not redesigning a slurry formula selected for Macondo after two February foam cement tests suggested the mixture could be unstable, and cited a series of BP decisions during temporary abandonment that may have contributed to the blowout, including the decision to displace heavy mud in the well with seawater, increasing stress on the cement plug.
The commission also said BP and the Transocean crew did not properly conduct or interpret the results of negative pressure tests indicating that hydrocarbons were flowing into the well.
‘The immediate cause of the Macondo blowout was a failure to contain hydrocarbon pressures in the well,’ the report said. ‘Three things could have contained those pressures: the cement at the bottom of the well, the mud in the well and in the riser, and the blowout preventer. But mistakes and failures to appreciate risk compromised each of those potential barriers, steadily depriving the rig crew of safeguards until the blowout was inevitable and, at the very end, uncontrollable.’
Halliburton responded to the report in a release criticizing the commission’s characterization of the foam stability tests. The company said the two February tests were ‘pilot tests’ performed before final well conditions were known and that subsequent tests were successful. The commission ‘selectively omitted information provided to it by Halliburton in response to its numerous inquiries’, the company added.
Halliburton has maintained that it followed proper procedures according to BP’s well design.
Transocean also issued a statement defending the Deepwater Horizon crew’s actions. ‘Consistent with industry standards, the procedures being conducted in the final hours were crafted and directed by BP engineers and approved in advance by federal regulators,’ Transocean said. ‘Based on the limited information made available to them, the Transocean crew took appropriate actions to gain control of the well.’
The company also questioned the appropriateness of drawing conclusions about the disaster’s cause before an investigation of the well’s failed blowout preventer is complete.
The Deepwater Horizon report faulted federal regulators for failing to provide the oversight necessary to prevent ‘lapses in judgment and management by private industry’. The commission issued a number of recommendations that would tighten regulatory oversight and establish rules governing spill response and preparedness.
US industry groups took issue with the report’s sweep.
‘We object to the commission’s insistence on there being a “systemic” problem throughout the industry,’ NOIA said in a statement attributed to Luthi. ‘This is not supported by the facts. Over 43,000 wells have been drilled in the Gulf of Mexico without a Macondolike accident. Over 14,000 wells have been drilled in the deepwater Gulf without a Macondo-like accident. This is not because the industry has been lucky. Nor does this disaster-free record show a culture of complacency.’
The Louisiana Oil & Gas Association, which represents some of the companies hardest hit by the post-Macondo drilling moratorium and BOEMRE’s sluggish restart of the permitting process, accused the government of ‘stall tactics’ that could delay the resumption of deepwater exploration well into 2011.
‘To be clear, industry does not take the position no reform is needed in light of the tragic oil spill; however, the report’s conclusions and demonization of an entire industry for the missteps and accident of a few companies are unfair and unwarranted,’ the association said in a statement shortly after the report’s release.
‘Industry practices in regards to safety always have been ahead of the curve to legislative measures,’ the group said. ‘A panel of illexperienced bureaucrats in Washington knows little about the complexities of offshore drilling. Companies that operate in the Gulf of Mexico do so in real-time. It’s imperative we put an end to the stall tactics and get deepwater drilling back online.’ OE
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