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March 21, 2018

Burden of proof: will changes to US offshore safety rules compromise safety?

The US Bureau of Safety and Environmental Enforcement is proposing changes to offshore safety rules in response to President Trump’s order to reduce “unnecessary burden on industry”. Julian Turner asks Greg Julian, Press Secretary of the Bureau, if it is possible to increase both production and safety.

By Julian Turner

In December 2017, in response to a presidential order to reduce undue burden on industry, the US Bureau of Safety and Environmental Enforcement (BSEE) completed a review of Production Safety Systems regulations governing oil and gas production on the US Outer Continental Shelf (OCS).

Under new rules, operators will use industry-set “recommended practices” to ensure that safety equipment works – as was done prior to the Deepwater Horizon disaster – and are not required by law to follow guidelines laid out by industry groups such as the American Petroleum Institute (API).

“The documents are filled with ‘should’ instead of ‘must’,” Nancy Leveson, a professor at the Massachusetts Institute of Technology  who served as a senior adviser to a presidential commission set up after the Deepwater Horizon disaster in 2010, told the Washington Post.

BSEE director Scott Angelle disagrees. Announcing the proposed rule changes, he claimed it was possible to increase US domestic energy production and safety and environmental protection.

Is this really feasible and is it unrealistic to expect oil and gas companies to regulate themselves?

“Contrary to recent misleading reports, the Department of the Interior is not weakening offshore safety or environmental rules,” BSEE press secretary Greg Julian tells me. “The BSEE is working hard to fulfill Executive Orders, which require an extensive review of our regulations.

“Our common sense approach is to propose revisions that could potentially reduce unnecessary burdens on operators without impacting safety and protections of the environment. Our changes will never reduce safety, and will in some cases improve safety.”

Critical resource: production decline on the OCS

The OCS is a critical ingredient of the US energy mix. One out of every six barrels of oil produced in the US originates there; annual production exceeds 550 million barrels of oil and 1.3 trillion cubic feet of natural gas. However, in the past three years production on the OCS has markedly declined.

“Let us be clear that the decline in offshore drilling is not merely ‘perceived’ – it is a fact,” says Julian. “In January 2015, there were 79 drilling rigs active on the OCS of the Gulf of Mexico. In January 2018, there were only 41 – representing a 48% decrease over that three year period.”

The offshore industry lays the blame squarely at the feet of the Obama administration, which it says overstretched on safety regulations enacted in the wake of the Deepwater Horizon disaster in 2010.

However, Julian concedes that other factors – among them the US onshore shale boom, historically low global oil prices and resource scarcity – may have contributed, at least in part, to this decline.

“We have no meter that suggests how much of the offshore drilling decline in the US has been due to regulations or to onshore growth, but certainly those factors can affect drilling decisions,” he says.

“Those who make the capital deployment decisions have said, consistently and publicly, that over-regulation of the US Outer Continental Shelf has led them to consider it less desirable relative to other options.”

Analysis carried out by the BSEE estimates that the proposed amendments to the Production Safety Systems Rule would reduce industry compliance burdens by at least $228m over ten years.

Regulatory changes: the Production Safety Systems Rule explained

The Production Safety Systems Rule addresses safety and pollution prevention equipment, subsea safety devices and safety device testing for the production of oil and gas resources on the OCS.

Potential technical changes to another piece of safety legislation, the well-control rule, which aims to prevent blowouts similar to the one that claimed the lives of 11 workers on Deepwater Horizon, have been put forward by seven industry groups, and are still under review.

Neither proposal seeks to radically overhaul the existing rules. Instead, the proposals will, if enacted, minimise some oil and gas industry obligations and change several compliance terms to language favoured by drillers.

The revised Production Safety Systems Rule, for example, eliminates the requirement that safety and pollution prevention equipment be inspected by independent auditors certified by the BSEE.

“Enacted in late 2016, the Production Safety Systems Rule covering production operations is not related to the 2010 Deepwater Horizon incident, which was an exploration operation covered under separate regulations,” explains Julian. “The changes we propose are common sense – reducing unnecessary notifications and clarifying when operators must provide documentation.

“We also affirm that safety and pollution prevention equipment that meets required industry standards set by the API and American National Standards Institute has achieved third-party verification and ensures that each device will function in the conditions for which it was designed.

“We also propose to codify 17 updated standards in the regulation so they bear the force of law as another sign of our commitment to safety. We are examining other rules, but have not reached the public-comment phase.”

Safety first: lessons learned from Deepwater Horizon

Among the more vocal critics of both proposed rule changes is Michael Bromwich, who served as the BSEE’s first director. He claims the argument that the regulatory burden needs to be lifted as put forward by the oil and gas industry is not credible since neither rule came into force until 2016.

Bromwich also noted the incumbent government’s emphasis on promoting offshore energy when proposing regulations, in marked contrast to the policies advocated by the Obama administration.

“The rhetoric seems to be moving away from being a tough-minded but fair regulator and instead being a cheerleader for industry,” he told the Washington Post.

Julian insists that the BSEE is committed to maintaining safety levels on the OCS, not systematically rolling back laws put in place in the wake of Deepwater Horizon.

“We have no plans to alter two significant rules enacted following Deepwater Horizon, the Drilling Safety Rule and the Safety and Environmental Management Systems Rule,” he says. “The SEMS approach rightly moves operators toward a performance-based safety approach, allowing the government, industry and independent third parties to focus on improving safety outcomes.

“We are also strengthening our inspection programme by implementing a risk-based process that focuses our efforts on potential safety problems. I am confident that BSEE will be able to achieve the goal of integrating a risk-based inspection protocol in 2018.

“Through these efforts, and many others, we are moving forward toward meeting the administration’s goal of achieving energy dominance without sacrificing safety.”

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