Easter Sunday will mark the fourth anniversary of the BP oil well blowout in the deep waters of the Gulf of Mexico. Eleven workers on the Deepwater Horizon drilling platform died and almost five million barrels of oil poured into the Gulf from the Macondo well for 87 days.
Yet the worst environmental disaster in US history failed to trigger any changes by the US Congress in safety or environmental laws offshore. Drilling activity in the gulf today surpasses that in April 2010. It is time to ask: is drilling in the Gulf any safer now than it was before the disaster?
The question calls to mind the quip of a popular Russian comedian after the fall of the Soviet Union: “Much has changed, but nothing has happened. Or is it that much has happened but nothing has changed?”
And we have certainly seen a tsunami of innovation. There are new capping stacks for subsea intervention and containment, better blowout preventers tested in better labs, better clean-up techniques, advanced drones and sensors to monitor underwater conditions in real-time, and better algorithms in software programs. Operators can now bring pre-positioned capping stacks to the scene of a blowout in days, not weeks. BP can pack a containment device into seven large planes and fly it anywhere in the world.
There has also been a painful recognition that complacency is negligence. Industry and government both assumed that because no Deepwater Horizon-style disaster had previously occurred in the Gulf, all was fine. Yet, this very complacency is a root cause of accidents, as experts in safety management know. After a frightening event, stronger safety controls are heeded for a time, but then time dims the memory and corners are cut without obvious consequences. Complacency sets in and the system drifts into an unsafe state. A major role for the offshore regulator is to prevent this drift.
And we finally saw the adoption of a Safety and Environmental Management System (SEMS) requirement as a new regulation offshore, after industry lobbying had previously delayed its arrival. The SEMS rule is the mechanism to prevent workers and management from becoming complacent. It institutionalises the planning, procedures and training that keep safety always in mind.
Who audits the auditor’s auditor?
Much has happened, indeed. But has there been real change so that offshore operations in the Gulf are genuinely safer? For a start, the US regime does not require that operators' safety plans be approved by the new regulator, the Bureau of Safety and Environmental Enforcement (BSEE), before the operator receives a permit to drill. And the regulator is not an independent agency free from the politics which plagued its predecessor. Without an effective regulator that can check whether companies are sticking to their safety plans, the regime seems to be nothing more than prescriptive paperwork that must be shown to the regulator on demand, if it asks.
The offshore regulator is now two-and-a-half years old, with safety as its primary focus. Its predecessor agency was starved of funds for years while operators pushed the offshore frontier into deep water, and the new bureau too lacks the experienced, professional and technical staff it needs to oversee offshore operations. Its own website acknowledges that the agency must undergo a total human capital transformation before it can perform its tasks adequately.
This means that in many ways, the leading role in new safety measures in the Gulf has been taken by the Center for Offshore Safety (COS), a body created by the large operators in the Gulf in early 2011. Its stated mission is to “promote the highest level of safety” for offshore operations through “leadership and effective management systems”. The body is part of the API petroleum industry trade association, which also, of course, lobbies for lower taxes and less regulation.
The Center for Offshore Safety aims to improve the industry’s safety record by helping members develop those new safety programs and by building a process for auditors to rigorously assess them. The theory is that well-trained third-party auditors will spot bad performers and the industry will be protected against a “rogue” company whose sloppy safety practices could lead to another disaster – and more drilling bans.
The COS will also analyse aggregated audit data to see where its members are having the most problems conforming to new requirements and can also use the data to benchmark the safety performance of its members. It is worth noting that the data and analysis are the property of the industry association and may not be released to the public without its approval.
James Watson, the first director of the government regulatory bureau, characterised this new offshore safety regime as “an operator-driven safety program with BSEE oversight”. And it is true that the auditing system in use in the US today is almost wholly a construct of the offshore industry itself. The Center for Offshore Safety has been and still is the dominant player in raising safety standards offshore. The regulator’s only formal link to the center is that it “approves” it to accredit the third-party auditors, the companies which perform offshore safety audits for operators, much like Ernst & Young performs financial audits for clients.
In other words, the regulatory framework looks like “industry self-regulation through third-party audits”. The system can be simultaneously criticised for allowing too much industry self-regulation and for allowing operators to outsource their safety audits to third-party consultants rather than developing their own capability to do it alongside an embedded safety culture.
Steep learning curve
The toddler-aged government regulator does not pay for the audits and does not have to hire or retrain personnel to conduct them. This leaves the Bureau of Safety and Environmental Enforcement outside the “learning loop”. Its employees will not gain expertise in understanding the industry’s problems and how the regulations work in practice. Clearly, to earn public confidence in this system, the bureau must learn to “audit the auditor’s auditor”, that is, to audit how COS is auditing the third-party audit service companies that COS accredits after BSEE has accredited COS. (Did you get that?)
That’s not to say their interests aren’t aligned. Suppose an offshore deepwater operator receives a prized safety certificate from the industry-run Center for Offshore Safety as a sort of “Good Housekeeping Seal of Approval”. Suppose, then, that this operator suffers an incident like the Deepwater Horizon blowout. Will the COS be in the hot seat at Congressional hearings as the dominant player in the offshore safety regime? Or will the government bureau be faulted as having allowed regulation to be outsourced to the industry’s own body and to third-party companies? Both are at risk.
It will clearly take a number of years for the new bureau to be an effective regulator. And there are some critical tasks that it must learn to meet the standards of experienced UK and Norwegian regulators in the North Sea. It has been given a “trusted agent” to advise it in its tasks. Meet the just-born OESI, the Offshore Energy Safety Institute. It is a consortium of three universities (including the University of Houston) whose academic experts can help the regulator learn a host of tasks, including becoming a data-rich agency with the ability to crunch the numbers, spot trends and assess risk.
Until the regulator can do this, and report it to the public, we cannot know whether the Gulf of Mexico is really safer in the coming years as massive BP spill fades from memory.
An under-resourced regulator is not a trivial safety risk for industry. The European trade association (OGP) has warned its members that if a regulator is not providing robust oversight, then:
An important piece of the technical assurance process may be missing. This is a ‘weak signal’ that should lead the OGP member to carry out a more extensive self-audit to compensate for the lack of competent oversight.
Message to US politicians and industry lobbyists: pay heed to the “weak signals” that you create when an anti-government ideology trumps sound regulation. A good regulator is industry’s best friend. And that is the ultimate lesson of the Deepwater Horizon, four years out.