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+
+ - FINAL REPORT OF THE PRESIDENT'S NATIONAL COMMISSION ON THE BP DEEPWATER HORIZON OIL SPILL AND OFFSHORE DRILLING
+
+[House Hearing, 112 Congress]
+[From the U.S. Government Publishing Office]
+
+
+
+
+ FINAL REPORT OF THE PRESIDENT'S
+
+
+ NATIONAL COMMISSION ON THE
+
+
+ BP DEEPWATER HORIZON OIL
+
+
+ SPILL AND OFFSHORE DRILLING
+
+=======================================================================
+
+ OVERSIGHT HEARING
+
+ before the
+
+ COMMITTEE ON NATURAL RESOURCES
+ U.S. HOUSE OF REPRESENTATIVES
+
+ ONE HUNDRED TWELFTH CONGRESS
+
+ FIRST SESSION
+
+ __________
+
+ Wednesday, January 26, 2011
+
+ __________
+
+ Serial No. 112-1
+
+ __________
+
+ Printed for the use of the Committee on Natural Resources
+
+
+
+ Available via the World Wide Web: http://www.gpoaccess.gov/congress/
+ index.html
+ or
+ Committee address: http://naturalresources.house.gov
+
+
+
+
+ U.S. GOVERNMENT PRINTING OFFICE
+63-876 WASHINGTON : 2009
+-----------------------------------------------------------------------
+For sale by the Superintendent of Documents, U.S. Government Printing
+Office Internet: bookstore.gpo.gov Phone: toll free (866) 512-1800; DC
+area (202) 512-1800 Fax: (202) 512-2104 Mail: Stop IDCC, Washington, DC
+20402-0001
+
+
+ COMMITTEE ON NATURAL RESOURCES
+
+ DOC HASTINGS, WA, Chairman
+ EDWARD J. MARKEY, MA, Ranking Democrat Member
+
+Don Young, AK Dale E. Kildee, MI
+John J. Duncan, Jr., TN Peter A. DeFazio, OR
+Louie Gohmert, TX Eni F.H. Faleomavaega, AS
+Rob Bishop, UT Frank Pallone, Jr., NJ
+Doug Lamborn, CO Grace F. Napolitano, CA
+Robert J. Wittman, VA Rush D. Holt, NJ
+Paul C. Broun, GA Raul M. Grijalva, AZ
+John Fleming, LA Madeleine Z. Bordallo, GU
+Mike Coffman, CO Jim Costa, CA
+Tom McClintock, CA Dan Boren, OK
+Glenn Thompson, PA Gregorio Kilili Camacho Sablan,
+Jeff Denham, CA CNMI
+Dan Benishek, MI Martin Heinrich, NM
+David Rivera, FL Ben Ray Lujan, NM
+Jeff Duncan, SC Donna M. Christensen, VI
+Scott R. Tipton, CO John P. Sarbanes, MD
+Paul A. Gosar, AZ Betty Sutton, OH
+Raul R. Labrador, ID Niki Tsongas, MA
+Kristi L. Noem, SD Pedro R. Pierluisi, PR
+Steve Southerland II, FL John Garamendi, CA
+Bill Flores, TX Colleen W. Hanabusa, HI
+Andy Harris, MD
+Jeffrey M. Landry, LA
+Charles J. ``Chuck'' Fleischmann,
+ TN
+Jon Runyan, NJ
+Bill Johnson, OH
+
+ Todd Young, Chief of Staff
+ Lisa Pittman, Chief Counsel
+ Jeffrey Duncan, Democrat Staff Director
+ Rick Healy, Democrat Chief Counsel
+ ------
+
+ CONTENTS
+
+ ----------
+ Page
+
+Hearing held on Wednesday, January 26, 2011...................... 1
+
+Statement of Members:
+ Flores, Hon. Bill, a Representative in Congress from the
+ State of Texas, Prepared statement of...................... 52
+ Hastings, Hon. Doc, a Representative in Congress from the
+ State of Washington........................................ 1
+ Prepared statement of.................................... 3
+ Holt, Hon. Rush D., a Representative in Congress from the
+ State of New Jersey, Prepared statement of................. 69
+ Landry, Hon. Jeffrey M., a Representative in Congress from
+ the State of Louisiana, Prepared statement of.............. 70
+ Markey, Hon. Edward J., a Representative in Congress from the
+ State of Massachusetts..................................... 4
+ Prepared statement of.................................... 5
+ Wittman, Hon. Robert J., a Representative in Congress from
+ the State of Virginia, Prepared statement of............... 70
+
+Statement of Witnesses:
+ Graham, Hon. Bob, Senator, Co-Chairman, National Commission
+ on the BP Deepwater Horizon Oil Spill and Offshore Drilling 9
+ Prepared statement of.................................... 11
+ Joint response to questions submitted for the record..... 71
+ Reilly, Hon. William K., Former Administrator of the
+ Environmental Protection Agency, and Co-Chairman, National
+ Commission on the BP Deepwater Horizon Oil Spill and
+ Offshore Drilling.......................................... 7
+ Prepared statement of.................................... 11
+ Joint response to questions submitted for the record..... 71
+
+Additional materials supplied:
+ Wall Street Journal editorial ``Gulf Political Spill'' dated
+ January 13, 2011, submitted for the record................. 66
+
+
+ OVERSIGHT HEARING ON THE FINAL REPORT OF THE PRESIDENT'S NATIONAL
+COMMISSION ON THE BP DEEPWATER HORIZON OIL SPILL AND OFFSHORE DRILLING.
+
+ ----------
+
+
+ Wednesday, January 26, 2011
+
+ U.S. House of Representatives
+
+ Committee on Natural Resources
+
+ Washington, D.C.
+
+ ----------
+
+ The Committee met, pursuant to call, at 2:19 p.m., in Room
+1324, Longworth House Office Building, Hon. Doc Hastings
+[Chairman of the Committee] presiding.
+ Present: Representatives Hastings, Young, Bishop, Lamborn,
+Wittman, Fleming, Coffman, McClintock, Thompson, Denham,
+Benishek, Rivera, Duncan of South Carolina, Tipton, Gosar,
+Labrador, Southerland, Flores, Harris, Landry, Fleischmann,
+Runyan, Johnson, Markey, Pallone, Grijalva, Boren, Lujan,
+Christensen, Sarbanes, Tsongas, and Hanabusa.
+
+ STATEMENT OF THE HON. DOC HASTINGS, A REPRESENTATIVE IN
+ CONGRESS FROM THE STATE OF WASHINGTON
+
+ The Chairman. The Committee on Natural Resources will come
+to order.
+ The Committee is meeting today to hear testimony on the
+report by the President's National Commission on the BP
+Deepwater Horizon Oil Spill and Offshore Drilling.
+ Under Committee Rule 4(f), any oral opening statements at
+hearings are limited to the Chairman and the Ranking Minority
+Member. This will allow us to hear from our witnesses sooner
+and help keep Members on their schedules. If other Members have
+statements, they can be included in the hearing record under
+unanimous consent.
+ So I ask unanimous consent that all Members' opening day
+statements be made a part of the hearing record if they are
+submitted to the Chief Clerk by 5:00 p.m. today. Hearing no
+objection, so ordered.
+ We have two witnesses today, and I will make the formal
+introductions after our opening statements, but I am very
+pleased that they are here. They are spending all day on the
+Hill. The first part of the day was spent on the other side of
+the Capitol, and now they are here, and I will welcome them
+formally in a moment.
+ It has been 9 months since the horrific explosion and oil
+spill in the Gulf of Mexico that resulted in the death of 11
+men and the burning and the sinking of the Deepwater Horizon.
+Since then, nearly 5 million barrels of oil spilled into the
+Gulf, resulting in the economic displacement of tens of
+thousands of fishermen, tourist workers, and people connected
+to the offshore energy industry.
+ The oil spill was a terrible tragedy and the effects are
+still being felt today. As this Committee proceeds with its
+oversight duties, we must be mindful of how we respond because
+that response could significantly impact American energy policy
+in the future. The response to this event could be the
+difference between making offshore drilling the safest in the
+world or locking up our resources, putting more Americans out
+of work and further relying on foreign countries for our energy
+needs.
+ It is because of these serious implications that I have
+stressed from day one the need to have all of the facts and
+information surrounding the cause of this incident before there
+is a rush to judgment or a rush to legislate. When President
+Obama announced that he was personally appointing an oil spill
+commission, many in Congress and around the country were deeply
+concerned with both the makeup and the mandate of the
+Commission.
+ There were concerns that the President's Commission didn't
+have enough experts in engineering or experience in the oil and
+gas industry and that it was comprised of individuals who had
+dedicated a significant portion of their career to opposing oil
+and gas drilling. While understanding these concerns, I kept
+and am keeping an open mind on the recommendations of the
+President's Commission.
+ This is why this is the first scheduled Committee hearing
+in this Congress, and I am anxious to hear from the Co-Chairs.
+This report provides further insight into the accident and will
+be a factor in Congress' discussions. However, even with the
+Commission's report, we still don't know precisely what caused
+the explosion or why the blowout preventer failed to work. Now,
+there will be additional reports from the joint Coast Guard-
+BOEM Marine Board hearings and the Chemical Safety Board
+hearings. And hopefully they will provide answers to these
+lingering questions among others.
+ Through this uncertainty, what I do know for sure is that
+America needs American-made energy. We need to keep and create
+American jobs. And we need to mitigate America's dependence on
+foreign energy that threatens potentially our national
+security. The oil spill, as I mentioned, was a terrible
+tragedy, but it should not be used as an excuse to further
+reduce America's access to our energy resources.
+ Some in Congress view this bill as an opportunity to shut
+down offshore drilling. To me, that is not a solution. That is
+giving up. Legislation aimed at this goal was introduced last
+year and will predictably be proposed again in this Congress--
+this despite the strong support among the American people for
+continued offshore energy productions.
+ Republicans want to make offshore energy drilling the
+safest in the world. We believe in the need to make smart,
+effective reforms that are centered on improving safety,
+putting people back to work and allowing responsible drilling
+to move forward. The right response to this bill is to focus on
+making drilling safe, not impossible.
+ The importance of this Committee's future work cannot be
+understated. Gas prices are steadily rising. Iran has assumed
+the presidency of OPEC, and rigs are leaving the Gulf for
+foreign countries like Cuba, Brazil and Mexico, taking American
+jobs with them. This isn't speculation. It is happening.
+ My colleagues from the Gulf can attest to the real economic
+pain being felt by people and businesses due to this
+Administration's drilling moratorium. Production in the Gulf of
+Mexico has already fallen by more than 200,000 barrels per day,
+and it is predicted by the Energy Information Administration to
+fall by more than 500,000 barrels per day by 2012. Every barrel
+that we don't produce from the Gulf means more lost revenue to
+the Federal Government, more lost jobs, and an additional
+transfer of American wealth to hostile nations.
+ I believe in American ingenuity, and I know that we can get
+this right. The answer is to address what went wrong and make
+smart reforms and allow drilling to resume. The stakes are too
+high to give up. Our economic competitiveness, American jobs,
+and national security are on the line.
+ And with that, I recognize the distinguished Ranking
+Member.
+ [The prepared statement of Chairman Hastings follows:]
+
+ Statement of The Honorable Doc Hastings, Chairman,
+ Committee on Natural Resources
+
+ It's been nine months since the horrific explosion and oil spill in
+the Gulf of Mexico that resulted in the death of 11 men and the burning
+and sinking of the Deepwater Horizon rig. Since then nearly five
+million barrels of oil spilled into the Gulf; resulting in the economic
+displacement of tens of thousands of fishermen, tourism workers, and
+people connected to the offshore energy industry.
+ The oil spill was a terrible tragedy and the effects are still
+being felt today.
+ As this Committee proceeds with its oversight duties, we must be
+mindful of how we respond, because that response could significantly
+impact American energy policy in the future. The response to this event
+could be the difference between making offshore drilling the safest in
+the world . . . or locking-up up our resources, putting more Americans
+out of work, and further relying on foreign countries for our energy
+needs.
+ It is because of these serious implications that I have stressed
+from day one the need to have all the facts and information surrounding
+the cause of this incident before there is a rush to judgment . . . or
+a rush to legislate.
+ When President Obama announced that he was personally appointing an
+Oil Spill Commission, many in Congress and around the country were
+deeply concerned with both the make-up and mandate of the Commission.
+ There were concerns that the President's Commission didn't have
+enough experts in engineering or experience in the oil and gas industry
+and that it was comprised of individuals who had dedicated a
+significant portion of their career to opposing oil and gas drilling.
+ While understanding these concerns, I kept, and am keeping, an open
+mind on the recommendations of the President's Commission. This is why
+it is the first scheduled Committee hearing of this Congress and I'm
+eager to hear from its Co-Chairs.
+ This report provides further insight into the accident and will be
+a factor in Congress' discussions. However, even with the Commission's
+report, we still don't know precisely what caused the explosion, or why
+the blowout preventer failed to work.
+ Additional reports from the joint Coast Guard-BOEM Marine Board
+hearings and the Chemical Safety Board are forthcoming and I'm hopeful
+they will provide answers to some of the lingering questions.
+ Through all this uncertainty, what I do know for sure is that
+America needs American-made energy.
+ We need to keep and create American jobs.
+ And we need to mitigate America's dependence on foreign energy that
+threatens our national security.
+ The oil spill was a terrible tragedy, but it should not be used as
+an excuse to further reduce America's access to our energy resources.
+Some in Congress view this spill as an opportunity to shut down
+offshore drilling. That is not a solution . . . that is giving up.
+ Legislation aimed at this goal was introduced last year and will
+predictably be proposed again this Congress. This despite the strong
+support among the American people for continued offshore energy
+production.
+ Republicans want to make offshore drilling the safest in the world.
+We believe in the need to make smart, effective reforms that are
+centered on improving safety, putting people back to work, and allowing
+responsible drilling to move forward. The right response to this spill
+is to focus on making drilling safe . . ., not making it impossible.
+ The importance of this Committee's future work cannot be
+understated. Gas prices are steadily rising, . . . Iran has assumed the
+Presidency of OPEC, . . . and rigs are leaving the Gulf for foreign
+countries--like Cuba, Brazil and Mexico--taking American jobs with
+them. This isn't speculation . . . it's happening.
+ My colleagues from the Gulf can attest to the real economic pain
+being felt by people and businesses due to this Administration's
+drilling moratorium.
+ Production in the Gulf of Mexico has already fallen by more than
+200,000 barrels per day, and is predicted by the Energy Information
+Administration to fall by more than 500,000 barrels per day by 2012.
+ Every barrel we don't produce from the Gulf means more lost revenue
+to the federal government, more lost jobs, and an additional transfer
+of American wealth to hostile nations.
+ I believe in American ingenuity and I know we can get this right.
+The answer is to address what went wrong, make smart reforms and allow
+drilling to resume. The stakes are too high to give up. Our economic
+competitiveness, American jobs and natural security are on the line.
+ ______
+
+
+ STATEMENT OF THE HON. ED MARKEY, A REPRESENTATIVE IN CONGRESS
+ FROM THE STATE OF MASSACHUSETTS
+
+ Mr. Markey. I thank the Chairman very much, and we thank
+you.
+ And on behalf of the Democratic Members of the Committee,
+please accept our sincere congratulations on your appointment
+as Chairman.
+ We, on this side of the aisle, look forward to a productive
+working relationship with you and with the majority,
+occasionally punctuated by knockdown drag-out fights over
+issues that we all care about deeply.
+ While I applaud the Chairman for holding this hearing
+today, I am also deeply saddened that this hearing is
+necessary. Industry and Federal regulators assured the American
+public that a disaster like the BP Deepwater Horizon spill
+could not happen. The events of last April and the subsequent
+investigations have demonstrated that those assurances were
+worthless. The American people are left to count the economic
+and environmental costs and 11 families are left without their
+loved ones.
+ It is vital to our Nation's energy future that we examine
+the causes of this tragedy with clear eyes, assess the lessons
+to be learned with open minds, and commit ourselves to
+fundamental reform with firm resolve.
+ In the testimony submitted for this hearing, the Commission
+Co-Chairmen--and we thank you both so much for your service to
+our country--point out that ``the United States has the highest
+reported rate of fatalities per hours worked in offshore oil
+and gas drilling among its international peers.''
+ Mr. Chairman, that shocking statistic does not mean that BP
+or Transocean or Halliburton operate unsafely. It means that
+the entire American offshore oil and gas industry operates
+unsafely compared to its international peers.
+ To quote from our witnesses again: ``The central lesson to
+be drawn from the catastrophe is that no less than an
+overhauling of both current industry practices and government
+oversight is now required.''
+ Mr. Chairman, this is not a time for half measures or
+tinkering around the edges. This is a time for bold reforms.
+The lives lost and the damage done as a result of this tragedy
+require nothing short of fundamental change in the way we
+conduct the business of offshore oil and gas development and
+production.
+ I am proud that Democrats in the House took a major step
+toward such an overhaul by passing the Consolidated Land,
+Energy and Aquatic Resources Act in the last Congress, known as
+the CLEAR Act. The legislation included many of the
+recommendations contained in the Commission's report.
+ While my colleagues on the Republican side may not have
+liked all that was in that legislation, it is my hope that now
+the Commission has made many of the same recommendations, that
+we can work together in a bipartisan effort to craft new
+legislation.
+ To that end, I have joined with Ranking Members Waxman and
+Rahall, Miller and Johnson, along with Energy Ranking Member
+Rush Holt and other Members to introduce new legislation
+combining the best elements of the CLEAR Act with
+recommendations from the Commission. We welcome review of that
+legislation by the Commission and by our colleagues on both
+sides of the aisle.
+ If we are shortsighted and complacent, today's hearing will
+be an end. If we are visionary and engaged, today's hearing is
+only the beginning of having America have the safest and most
+productive oil and natural gas industry. That should be our
+goal. And that is the goal I think every American should be
+aiming to achieve in any legislation we pass.
+ In closing, again, let me offer my sincere gratitude to
+Senator Graham; to you, Administrator Reilly; and to all of the
+Commission members and the staff for their Herculean effort and
+their willingness to take on this investigation and their
+dedication to completing it in such a short period of time and
+with such thoroughness.
+ This Committee and the American people are in your debt,
+and I thank you for your efforts. And I thank the Chairman for
+extending me those few extra seconds.
+ [The prepared statement of Mr. Markey follows:]
+
+ Statement of The Honorable Edward J. Markey, Ranking Member,
+ Committee on Natural Resources
+
+ Thank you Chairman Hastings and on behalf of the Democratic members
+of the Committee, please accept our sincere congratulations on your
+appointment as Chairman. We on this side of the aisle look forward to a
+productive working relationship--punctuated by knock-down, drag-out
+fights over issues we all care about deeply.
+ While I applaud the Chairman for holding this hearing today, I am
+also deeply saddened that this hearing is necessary. Industry and
+federal regulators assured the American public that a disaster like the
+BP Deepwater Horizon spill could not happen.
+ The events of last April and the subsequent investigations have
+demonstrated that those assurances were worthless. The American people
+are left to count the economic and environmental costs and eleven
+families are left without their loved ones.
+ It is vital to our nation's energy future that we examine the
+causes of this tragedy with clear eyes, assess the lessons to be
+learned with open minds, and commit ourselves to fundamental reform
+with firm resolve.
+ In the testimony submitted for this hearing, the Commission Co-
+Chairmen point out that, ``the United States has the highest reported
+rate of fatalities per hours worked in offshore oil and gas drilling
+among its international peers.''
+ Mr. Chairman, that shocking statistic does not mean that BP or
+Transocean or Halliburton operate unsafely; it means that the entire
+American offshore oil and gas industry operates unsafely, compared to
+its international peers.
+ To quote from our witnesses again, ``the central lesson to be drawn
+from the catastrophe is that no less than an overhauling of both
+current industry practices and government oversight is now required.''
+ Mr. Chairman, this is not a time for half measures or tinkering
+around the edges; this is a time for bold reforms. The lives lost and
+the damage done as a result of this tragedy require nothing short of
+fundamental change in the way we conduct the business of offshore oil
+and gas development and production.
+ I am proud that Democrats in the House took a major step toward
+such an overhaul by passing the Consolidated Land, Energy, and Aquatic
+Resources Act in the last Congress. Known as the CLEAR Act, that
+legislation included many of the recommendations contained in the
+Commission's report.
+ While my colleagues on the Republican side opposed that effort, it
+is my hope that, now that the Commission has made many of the same
+recommendations, we can work together in a bipartisan effort to craft
+new legislation. To that end, I have joined Ranking Members Waxman,
+Rahall, Miller, and Johnson, along with Energy Subcommittee Ranking
+Member Holt and other Members, to introduce new legislation combining
+the best elements of the CLEAR Act with recommendations from the
+Commission. We welcome review of our legislation by the Commission and
+by our colleagues on both sides of the aisle.
+ If we are shortsighted and complacent, today's hearing will be an
+end. If we are visionary and engaged, today's hearing is only the
+beginning.
+ In closing, let me offer my sincere gratitude to Senator Graham,
+Mr. Reilly, and all the Commission members and staff for their
+willingness to take on this investigation and their dedication in
+completing it so thoroughly. This committee and the American people are
+in your debt.
+ ______
+
+ The Chairman. I thank the gentleman.
+ And I thank the gentleman for his opening comments. I, too,
+look forward to working with you. And I want to welcome the two
+witnesses here today. I know that since this event happened and
+since the appointment of the Commission, there is a lot of work
+done by both of you.
+ The Honorable Bill Reilly is a former Administrator of the
+EPA and, of course, on the Hill people do remember the Florida
+Senator, Bob Graham, and former Governor, if I am not mistaken,
+of the State of Florida. So certainly there is expertise.
+ So, with that, I would just remind you that under Committee
+rules, you have 5 minutes for your oral testimony. However,
+your full statement will appear in the record.
+ You note that over here, we have these little boxes that
+have green lights, yellow lights and red lights. When the red
+light comes on, you know you are at 5 minutes. When the yellow
+light is on, you are up to 4.5 minutes and you have 30 seconds.
+ With that, we will allow both of you to testify and then we
+will open up to questions to an eager Committee that wants to
+talk.
+ So, with that, I will first introduce Mr. Reilly. Mr.
+Reilly, you are on.
+
+ STATEMENT OF THE HONORABLE WILLIAM K. REILLY, FORMER
+ ADMINISTRATOR OF THE ENVIRONMENTAL PROTECTION AGENCY, CO-
+ CHAIRMAN, NATIONAL COMMISSION ON THE BP DEEPWATER HORIZON OIL
+ SPILL AND OFFSHORE DRILLING
+
+ Mr. Reilly. Thank you, Mr. Chairman, Ranking Member Markey,
+members of the Committee, it is a privilege and an honor for us
+to appear before you as it has been for us to serve on this
+Commission, particularly for me to serve with my distinguished
+friend and long time, long time friend and colleague, Bob
+Graham. I will make a brief statement and ask that my testimony
+be included in the record.
+ I want to begin by saying that with respect to oil and gas,
+we need the resource. It is vital to the economy, to our
+mobility, to our way of life. It is itself, the oil and gas
+industry, a significant contributor to productivity, to jobs,
+to our GDP and to avoiding even more necessity to import from
+the international oil market.
+ This Commission believes that we can develop offshore oil
+and gas resources safely; we can do it in the deep water, and I
+would signal that the deep water is where it is. That is where
+the industry has been going and will be going in an even more
+significant way in the years to come.
+ But the country's confidence in offshore oil and gas
+development has been shattered. The Commission determined that
+the government and industry both were characterized by an aura
+of complacency. That has attracted a good deal of attention and
+some criticism. I would just say very briefly that, as I
+learned from Tony Hayward, the CEO of BP, the week after I took
+office as Commission Co-Chairman, when you learn from him that
+there is effectively no subsea containment technology or
+capability, when you look at response plans that talk about
+protecting walruses in the Gulf of Mexico, when you see the
+wholly inadequate response technology that has not evolved
+since I oversaw it 20 years before in Prince William Sound, and
+when you see that there have been 79 instances of loss of well
+control between 1996 and 2009 in the Gulf and that we have, as
+was mentioned, a fatality rate that is 5 times that of the
+North Sea in a much more punishing environment--and then
+finally that you have key omnipresent contractors who are
+deeply implicated in the bad decisions that contributed to the
+high risk that we uncovered--you have to conclude both that
+there was an aura of complacency--and so many industry leaders
+have said, which I would have said myself, we didn't think this
+was possible, and we didn't think this could happen--but also
+that contractors who have supplied faulty cement to a BP rig or
+who have failed to detect gas rising in the drill pipe on a BP
+rig, it is inconceivable given their presence in all of the
+oceans in the world where oil and gas are developed, it is
+inconceivable to us that this would only have been confined to
+one company, to a rogue company, which was my own conviction,
+my own premise starting out.
+ So we did conclude this is a systemic problem that has been
+characterized by an atmosphere of complacency.
+ I want to signal one more thing and that is the history of
+the budget of the government regulatory agency of which we are
+quite hard, we are quite critical of its effectiveness, its
+capability, its lack of professionalism, to carry out the
+assignment that the law gives it to monitor and control and
+regulate this industry. The budget for MMS, the predecessor to
+the Bureau of Ocean Energy Management, Regulation and
+Enforcement (BOEMRE), has gone down 20 percent since 1984,
+while offshore oil and gas production has tripled.
+ So to address these issues, we have three principal
+proposals: First is for a safety authority within the Interior
+Department entirely walled off from political interference with
+a Director appointed for a term much like the FBI Director and
+adequately resourced and budgeted, provided for.
+ We recommend that industry establish a safety institute.
+The high-risk industries that have had catastrophes have
+learned from them: The chemical industry after Bhopal with
+Responsible Care and the nuclear industry after Three Mile
+Island with the Institute for Nuclear Power Operations (INPO).
+Those should be focused on best practice and should bring up
+the game for everybody and allow the best companies to have
+some means of ensuring that one laggard company, one bad
+performer does not bring everybody down and cause all their
+rigs to be shut down in the Gulf, as was the case last summer.
+ Finally, I just want to signal the international dimensions
+of our issue. If you look at a map of the Gulf of Mexico, the
+United States has sovereign jurisdiction over far less than all
+of it. We now know Mexico intends to go into deep water in two
+years, Cuba within the next year or two, and we need some kind
+of international understanding or treaty with respect to the
+standards that will apply to those activities.
+ We also need it in the Arctic, where Russia is intending to
+go into its Arctic waters with BP and Rosneft. Canada. Denmark
+has already begun, and Greenland last summer. We need the same
+kind of attention on the part of our State Department to ensure
+that the Arctic waters are given the kind of special protection
+that they deserve. We make a number of recommendations
+particularly relevant to science and the science that is needed
+to pursue oil and gas development in those very different
+waters with all of the high risks that special storm action,
+fog and deep cold entail.
+ Well, those are some of the principal recommendations I
+wanted to cover, Mr. Chairman. I would only say that they are
+relatively modest in my view, in terms, both of money,
+certainly in terms of bureaucracy and disruption. To reorganize
+the Interior Department will not take much in the way of money.
+To budget adequately the BOEMRE, it will take some, but it is
+relatively small in lieu of both the huge cost of the accident
+we just experienced and the overall revenues that the United
+States receives from offshore oil and gas development leases
+and royalties. I think it is money that would be well invested,
+and we look forward to your questions and recognize that from
+the point of view of the Commission, we are just about done. So
+it really is over to you.
+ Thank you, sir.
+ The Chairman. Thank you, Mr. Reilly. I appreciate very much
+your testimony.
+ Senator Graham, you are on.
+
+ STATEMENT OF THE HONORABLE BOB GRAHAM, SENATOR, CO-CHAIRMAN,
+ NATIONAL COMMISSION ON THE BP DEEPWATER HORIZON OIL SPILL AND
+ OFFSHORE DRILLING
+
+ Mr. Graham. Thank you very much, Mr. Chairman, Ranking
+Member Markey and other members of this Committee.
+ And I know many of you are commencing your service in
+Congress, and let me extend my congratulations. You are
+beginning a journey which will have immense gratification and
+personal pleasure. I congratulate you and wish you well in your
+service.
+ Mr. Chairman, our Commission was established in May of last
+year. We were given three responsibilities: First was to
+determine the cause of the Deepwater Horizon explosion; second,
+to evaluate the response to that disaster; and third to advise
+the Nation about future energy exploration, particularly in the
+offshore environment.
+ On January 11th, we submitted our report, called ``Deep
+Water: The Gulf Oil Disaster and the Future of Offshore
+Drilling.'' We had been initially subject to some criticism.
+One was that we lacked independence. In the course of our
+investigation, we were able to make just about everybody mad at
+us. From time to time, the industry was mad, and the White
+House was mad. Maybe this Committee escaped that. I believe we
+established the fact that we were looking at this from the
+perspective of the American people's interest and none other.
+ Second, there was some criticism that we weren't competent
+to carry out this task. It would be immodest to try to defend
+our competency. I would just submit our report, its findings
+and recommendations, and you can evaluate whether you think
+that we had the skills, both among the seven commissioners and
+in an excellent staff led by Mr. Richard Lazarus, who gave us
+tremendous support throughout this endeavor.
+ I would like to make one general comment before I turn to
+the two areas that I am particularly going to discuss, and that
+is that there is a difference in the offshore of the Gulf from
+what we knnw well, which is onshore oil and gas production.
+Onshore oil and gas production is a combination of drilling on
+privately owned land and public land. All of the drilling in
+the Gulf of Mexico is on publicly owned land, land which
+belongs to the people of the United States of America.
+ So I think the way to look at this is not just as a
+regulator, a government regulating a private enterprise going
+about its private business. We also are in the role of a
+landlord. We have an obligation to protect this asset that
+belongs to all of the people of America and to be able to
+continue to draw upon it for a variety of purposes. Yes,
+energy, but also it is a major source of American seafood, and
+it is one of our major tourist areas, just to mention three of
+the benefits that we derive from the Gulf. So are we fulfilling
+our responsibility to be a prudent landlord?
+ I am going to discuss the area of response and containment
+and then the issue of, where do we go from here in terms of
+restoration of the Gulf?
+ My good friend, Bill Reilly, has already mentioned that the
+response to this event was, to say the least, very
+disappointing. Although there were some respondents who acted
+quickly, some heroically, the Commission concluded that neither
+BP nor the Federal Government was prepared to conduct an
+effective response. There was a failure to plan in advance for
+such an event, a failure to coordinate, particularly between
+Federal agencies and State and local officials. In addition,
+neither the industry nor the Federal Government had invested in
+the research to understand in an anticipatory way what we would
+be facing if we had such an event as the Macondo blowout.
+ Much of the technology that we were able to bring to this
+problem was the same technology that had been used 20 years
+earlier in the Exxon Valdez, which is to say there was almost
+no technological advances taken as a result of the experience
+of Exxon Valdez.
+ We have made a number of recommendations on response and
+containment, including that the Department of the Interior, in
+consultation with other agencies, should develop a more
+rigorous set of requirements for industry response plans. No
+more polar bears or walruses in the response plans for the Gulf
+of Mexico.
+ The EPA and the Coast Guard should involve State and local
+governments as significant players; the Congress should provide
+adequate and sustained funding for oil spills, including and
+particularly research into how to mitigate oil spills; and the
+industry should fund a private organization to develop, adopt
+and enforce standards of excellence to assure continuous
+improvement in the technology for oil spill response.
+ The second area is restoration. The day before this event
+was April 19, 2010. If we define our goal as being to restore
+the Gulf to the condition that it was in on April 19th, we have
+missed an enormous opportunity. Frankly, the Gulf on April 19th
+was a degraded area. It had suffered from decades of misuse and
+most dramatically shown by the marshes of Louisiana, which have
+been receding at a rate of over one football field every 30
+minutes.
+ We felt that this was a chance to begin a major process of
+restoring this very important part of our Nation. We have
+recommended that 80 percent of the fines and penalties that we
+anticipate will be assessed under the Clean Water Act be
+directed at Gulf restoration. That will require your approval.
+Only Congress can make that commitment of those fines and
+penalties. But we believe that it would be money well spent.
+ We recognize that it will require a significant amount of
+time, probably in the range of 20 to 30 years, to complete an
+effective restoration. We believe that these funds would be the
+basis of a major down payment toward that objective.
+ I would like to conclude my remarks--and I got the signal,
+Mr. Chairman--that drilling is inherently risky. We can never
+reduce it to zero. But we believe the steps that we have
+recommended will substantially reduce the probabilities of a
+repeat Macondo and, should that happen, will significantly
+enhance our capacity to restrain its consequences.
+ Mr. Chairman, I will submit my full report. I appreciate
+your willingness to receive it. I look forward to responding to
+your questions.
+ [The joint prepared statement of Mr. Reilly and Senator
+Graham follows:]
+
+Statement of The Honorable Bob Graham and The Honorable William Reilly,
+Co-Chairmen, National Commission on the BP Deepwater Horizon Oil Spill
+ and Offshore Drilling
+
+I. Introduction
+ Chairman Hastings, Ranking Member Markey, and members of the
+Committee, thank you for the opportunity to testify today on behalf of
+the National Commission on the BP Deepwater Horizon Oil Spill and
+Offshore Drilling.
+ The explosion that tore through the Deepwater Horizon drilling rig
+last April 20, as the rig's crew completed drilling the exploratory
+Macondo well deep under the waters of the Gulf of Mexico, began a
+human, economic, and environmental disaster.
+ Eleven crew members died, and others were seriously injured, as
+fire engulfed and ultimately destroyed the rig. And, although the
+nation would not know the full scope of the disaster for weeks, the
+first of more than four million barrels of oil began gushing
+uncontrolled into the Gulf--threatening livelihoods, the health of Gulf
+coast residents and of those responding to the spill, precious
+habitats, and even a unique way of life. A treasured American
+landscape, already battered and degraded from years of mismanagement,
+faced yet another blow as the oil spread and washed ashore. Five years
+after Hurricane Katrina, the nation was again transfixed, seemingly
+helpless, as this new tragedy unfolded in the Gulf. The costs from this
+one industrial accident are not yet fully counted, but it is already
+clear that the impacts on the region's natural systems and people were
+enormous, and that economic losses total tens of billions of dollars.
+ On May 22, 2010, President Barack Obama announced the creation of
+the National Commission on the BP Deepwater Horizon Oil Spill and
+Offshore Drilling (the ``Commission''): an independent, nonpartisan
+entity, directed to provide thorough analysis and impartial judgment.
+The President charged the Commission to determine the causes of the
+disaster, and to improve the country's ability to respond to spills,
+and to recommend reforms to make offshore energy production safer. And
+the President said we were to follow the facts wherever they led.
+ This Commission report (the ``Report''), which we ask be made part
+of the hearing record in its entirety, is the result of an intense six-
+month effort to fulfill the President's charge. As a result of our
+investigation, we conclude:
+ The explosive loss of the Macondo well could have
+ been prevented.
+ The immediate causes of the Macondo well blowout can
+ be traced to a series of identifiable mistakes made by BP,
+ Halliburton, and Transocean that reveal such systematic
+ failures in risk management that they place in doubt the safety
+ culture of the entire industry.
+ Deepwater energy exploration and production,
+ particularly at the frontiers of experience, involve risks for
+ which neither industry nor government has been adequately
+ prepared, but for which they can and must be prepared in the
+ future.
+ To assure human safety and environmental protection,
+ regulatory oversight of leasing, energy exploration, and
+ production require reforms even beyond those significant
+ reforms already initiated since the Deepwater Horizon disaster.
+ Fundamental reform will be needed in both the structure of
+ those in charge of regulatory oversight and their internal
+ decision-making process to ensure their political autonomy,
+ technical expertise, and their 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 technology, laws and regulations, and practices
+ for containing, responding to, and cleaning up spills lag
+ behind the real risks associated with deepwater drilling into
+ large, high-pressure reservoirs of oil and gas located far
+ offshore and thousands of feet below the ocean's surface.
+ Government must close the existing gap and industry must
+ support rather than resist that effort.
+ 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 same is true
+ of the human and natural impacts of oil spills.
+ We reach these conclusions, and make necessary recommendations, in
+a constructive spirit: we aim to promote changes that will make
+American offshore energy exploration and production far safer, today
+and in the future.
+II. The Root Causes of the Explosion
+ The Commission examined in great detail what went wrong on the rig
+itself. Our investigative staff uncovered a wealth of specific
+information that greatly enhances our understanding of the factors that
+led to the explosion. The results of that investigation are described
+in detail in Chapter 4 of the Report. The separate report of the chief
+counsel, to be published soon, will offer the fullest account yet of
+what happened on the rig and why. There are recurring themes of missed
+warning signals, failure to share information, and a general lack of
+appreciation for the risks involved. In the view of the Commission,
+these findings highlight the importance of organizational culture and a
+consistent commitment to safety by industry, from the highest
+management levels on down.
+ To summarize, the Macondo blowout happened because a number of
+separate risk factors, oversights, and outright mistakes combined to
+overwhelm the safeguards--promised by both government and by private
+industry--to prevent just such an event from happening. But most of the
+mistakes and oversights at Macondo can be traced back to a single
+overarching failure--a failure of management by BP, Halliburton and
+Transocean. Set out below are what Commission investigative staff
+determined were ``key facts.''
+ Key Facts: The investigation team identified several key human
+errors, engineering mistakes and management failures including:
+ A flawed design for the cement slurry used to seal
+ the bottom of the well, which was developed without adequate
+ engineering review or operator supervision;
+ A ``negative pressure test,'' conducted to evaluate
+ the cement seal at the bottom of the well, identified a
+ cementing failure but was incorrectly judged a success because
+ of insufficiently rigorous test procedures and inadequate
+ training of key personnel;
+ Flawed procedures for securing the well that called
+ for unnecessarily removing drilling mud from the wellbore. If
+ left in place, that drilling mud would have helped prevent
+ hydrocarbons from entering the well and causing the blowout;
+ Apparent inattention to key initial signals of the
+ impending blowout; and
+ An ineffective response to the blowout once it began,
+ including but not limited to a failure of the rig's blowout
+ preventer to close off the well.
+ Key Findings: The ``key facts'' led investigators to make the
+following ``key findings'':
+ Errors and misjudgments by at least three companies--
+ BP, Halliburton and Transocean--contributed to the disaster.
+ Management failures included:
+ Inadequate training of key personnel.
+ Inadequate management of numerous late-stage well
+ design decisions.
+ Poor communication within and between the companies
+ involved.
+ Inadequate risk evaluation and risk mitigation
+ measures.
+ The disaster could have been prevented. Notably,
+ workers on the rig incorrectly interpreted clear warning signs
+ of a hydrocarbon influx during the negative pressure test. If
+ recognized, those warning signs would have allowed them to shut
+ in the well before the blowout began.
+ Government regulations did not address several key
+ causes of the blowout, and regulators lacked the resources or
+ technical expertise to address others.
+ Whether purposeful or not, many of the risk-enhancing
+ decisions that BP, Halliburton, and Transocean made saved those
+ companies significant time (and money).
+ The Commission's investigation concludes that these failures were
+preventable. Errors and misjudgments by at least three companies--BP,
+Halliburton and Transocean--contributed to the disaster. Federal
+regulations did not address many of the key issues. For example, no
+regulation specified basic procedures for the negative pressure test
+used to evaluate the cement seal or minimum criteria for test success.
+The chapter also notes that, '' . . . whether purposeful or not, many
+of the decisions that BP, Halliburton, and Transocean made that
+increased the risk of the Macondo blowout clearly saved those companies
+significant time (and money).''
+ Attached to this testimony is a table that sets out decisions that
+increased risk at Macondo, while potentially saving time.
+III. Regulatory Oversight and the Need for Reform
+Regulatory Oversight
+ The responsibilities assigned to the Minerals Management Services
+(MMS) in an effort to regulate the offshore oil and gas industry have
+created conflicts of interest and have been subject to pressure from
+political and industry interests. MMS was not only responsible for
+offshore leasing and resource management; it also collected and
+disbursed revenues from offshore leasing, conducted environmental
+reviews, reviewed plans and issued permits, conducted audits and
+inspections, and enforced safety and environmental regulations.
+ Over the course of many years, political pressure generated by a
+demand for lease revenues and industry pressure to expand access and
+expedite permit approvals and other regulatory processes often combined
+to push MMS to elevate revenue and permitting goals over safety and
+environmental goals. As a result, the safety of U.S. offshore workers
+has suffered. The United States has the highest reported rate of
+fatalities per hours worked in offshore oil and gas drilling among its
+international peers (the U.K., Norway, Canada, and Australia) but has
+the lowest reporting of injuries. This striking contrast suggests a
+significant under-reporting of injuries in the United States.
+ These problems were compounded by an outdated organizational
+structure, a chronic shortage of resources, a lack of sufficient
+technological expertise, and the inherent difficulty of coordinating
+effectively with all of the other government agencies that have had
+statutory responsibility for some aspect of offshore oil and gas
+activities. Besides MMS, the Departments of Transportation, Commerce,
+Defense, and Homeland Security, and the Environmental Protection Agency
+(EPA) were involved in some aspect of the industry and its many-faceted
+facilities and operations, from workers on production platforms to
+pipelines, helicopters, drilling rigs, and supply vessels.
+Reorganization Needed
+ To remedy this conflict of interest, Congress should create an
+independent agency with enforcement authority to oversee all aspects of
+offshore drilling safety (operational and occupational) as well as the
+structural and operational integrity of all offshore energy production
+facilities, including both oil and gas production and renewable energy
+production. The roles and responsibilities of BOEMRE should be
+separated into three entities with clearly defined statutory
+authorities.
+ (1) The Offshore Safety Authority would have primary statutory
+ responsibility for overseeing the structural and operational
+ integrity of all offshore energy-related facilities and
+ activities, including both oil and gas offshore drilling and
+ renewable energy facilities. Congress should enact an organic
+ act to establish its authorities and responsibilities,
+ consolidating the various responsibilities now under the OCSLA,
+ the Pipeline Safety Act, and Coast Guard authorizations. This
+ should include responsibility for all workers in energy related
+ offshore activities.
+ (2) The Leasing and Environmental Science Office would be
+ charged with fostering environmentally responsible and
+ efficient development of the Outer Continental Shelf, and would
+ act as the leasing and resource manager for conventional
+ renewable energy and other mineral resources on the OCS. The
+ Office would also be responsible for conducting reviews under
+ the National Environmental Policy Act (NEPA).
+ (3) The Office of Natural Resources Revenue would be
+ responsible for revenue collection and auditing.
+ Congress should review and consider amending where necessary the
+governing statutes for all agencies involved in offshore activities to
+be consistent with the responsibilities functionally assigned to those
+agencies. The safety-related responsibilities of the new offshore
+safety agency should be included in a separate statute.
+ Since the Commission issued its final report on January 11th,
+Secretary of the Interior Ken Salazar has already announced changes in
+the organization within Interior that reflect many of the Commission's
+recommendations. Other Commission recommendations will require
+congressional action, especially those recommendations that seek to
+promote the independence of the Offshore Safety Authority from
+politics. For instance, the Commission recommends that the head of the
+Safety Authority be appointed to a fixed term that cuts across any one
+Presidential Administration, a change that can be accomplished most
+effectively only by statute.
+Regulation to Better Manage Risk
+ The Commission also recommends a more comprehensive overhaul of
+both the leasing program and the regulatory policies and institutions
+used to oversee the safety and environmental protection of offshore
+activities. The goals must be to reduce and manage risk more
+effectively, using strategies that can keep pace with a technologically
+complex and rapidly evolving industry, particularly in high-risk and
+frontier areas, and to secure the resources needed to execute the
+leasing function and provide adequate regulatory oversight. To
+accomplish these goals the Commission offers the following three
+recommendations:
+ The DOI should promulgate prescriptive safety and
+ pollution-prevention standards that are developed and selected
+ in consultation with international regulatory peers and that
+ are at least as rigorous as the leasing terms and regulatory
+ requirements of peer oil-producing nations.
+ The Department of the Interior (DOI) should develop a
+ proactive, risk-based performance approach specific to
+ individual facilities, operations, and environments, similar to
+ the ``safety case'' approach in the North Sea which requires
+ drilling rigs to be certified and have safety management
+ obligations separate and apart from the operator.
+ Working with the International Regulators' Forum and
+ other organizations, Congress and the DOI should identify those
+ drilling, production, and emergency-response standards that
+ best protect offshore workers and the environment, and initiate
+ new standards and revisions to fill gaps and correct
+ deficiencies. These standards should be applied throughout the
+ Gulf of Mexico, in the Arctic, and globally wherever the
+ international industry operates. Standards should be updated at
+ least every five years, as under the formal review process of
+ the International Organization for Standardization (ISO). (See
+ below for expansion on the development of international
+ regulations.)
+ BOEMRE currently relies heavily on prescriptive regulations
+incorporating a number of industry technical standards. Prescriptive
+regulations must be the basis of an effective regulatory system, but
+given the many variables in deepwater drilling, prescriptive rules can
+never cover all cases. The federal agency responsible for offshore
+activity must have a regulatory approach that integrates more
+sophisticated risk assessment and risk management practices into its
+oversight of energy developers operating offshore. The focus should
+shift from prescriptive regulations covering only the operator to a
+foundation of augmented prescriptive regulations, including those
+relating to well design and integrity, supplemented by a proactive,
+risk-based performance approach that is specific to individual
+facilities (production platforms and drilling rigs), operations, and
+environments. Both the operator and the drilling rig owners would have
+a legal duty to assess and manage the risks of a specific activity by
+engaging all contractors and subcontractors in a coordinated safety
+management system.
+ To ensure that Interior has the ability to provide adequate leasing
+capabilities and regulatory oversight for the increasingly complex
+energy-related activities being undertaken on the OCS, budgets for
+these new offices as well as existing agencies should come directly
+from fees paid by the offshore industry, akin to how fees charged to
+the telecommunications industry pay for the expenses of the Federal
+Communications Commission, the Nuclear Regulatory Commission, the
+Office of Pipeline Safety which are essentially fully funded by such
+regulated industry payments. Through this mechanism, Congress, through
+legislation, and DOI, through lease provisions, could expressly oblige
+lessees to fund the regulation necessary to allow for private industry
+access to the energy resources on the OCS, including renewables.
+IV. Environmental Review
+ As part of its inquiry into the existing regulatory structure for
+offshore drilling, the Commission reviewed existing mechanisms for
+protecting the environment. In its work on this question, the
+Commission focused on two issues: (1) the application of National
+Environmental Policy Act (NEPA) requirements to the offshore leasing
+process and (2) the need for better science and greater interagency
+consultation to improve decision-making related to management of
+offshore resources.
+NEPA
+ Based on the Commission's review of leasing and permitting
+processes in the Gulf of Mexico before the Deepwater Horizon incident,
+the Commission concluded that the breakdown of the environmental review
+process for OCS activities was systemic and that Interior's historical
+approach to the application of NEPA requirements for offshore oil and
+gas activities needs significant revision. In particular, the
+application of tiering, use of categorical exclusions, the practice of
+area-wide leasing, and failure to develop formal NEPA guidance all
+contributed to this breakdown. The Commission recommends that the
+Council on Environmental Quality and the Department of the Interior
+revise and strengthen the NEPA policies, practices, and procedures to
+improve the level of environmental analysis, transparency, and
+consistency at all stages of the OCS planning, leasing, exploration,
+and development process.
+Improved Interagency Consultation and Environmental Science
+ Under OCSLA, it is up to the Secretary of the Interior to choose
+the proper balance between environmental protection and resource
+development. In making leasing decisions, the Secretary is required to
+solicit and consider suggestions from any interested agency, but he or
+she is not required to respond to the comments or accord them any
+particular weight. Similar issues arise at the individual lease sale
+stage and at the development and production plan stage. As a result,
+NOAA--the nation's ocean agency with the most expertise in marine
+science and the management of living marine resources--effectively has
+the same limited role as the general public in the decisions on
+selecting where and when to lease portions of the OCS. The Commission
+recommends a more robust and formal interagency consultation process in
+which NOAA, in particular, is provided a heightened role, but ultimate
+decision-making authority is retained at DOI. The Commission further
+recommends the creation of an Office of Environmental Science, led by a
+Chief Environmental Scientist, with specified responsibilities in
+conducting all NEPA reviews, coordinating other environmental reviews,
+and whose expert judgment on environmental protection concerns would be
+accorded significant weight in leasing decision-making.
+V. Reforming Industry Safety Practices
+Changing Business As Usual
+ Without effective government oversight, the offshore oil and gas
+industry will not adequately reduce the risk of accidents, nor prepare
+effectively to respond in emergencies. However, government oversight
+alone cannot reduce those risks to the fullest extent possible.
+Government oversight must be accompanied by the oil and gas industry's
+internal reinvention: sweeping reforms that accomplish no less than a
+fundamental transformation of its safety culture.
+ Even the most inherently risky industry can be made much safer,
+given the right incentives and disciplined systems, sustained by
+committed leadership and effective training. The critical common
+element is an unwavering commitment to safety at the top of an
+organization: the CEO and board of directors.
+Industry Self-Policing as a Supplement to Government Regulation
+ One of the key responsibilities of government is to regulate--to
+direct the behavior of individuals and institutions according to rules.
+Many businesses and business groups are involved in internal standard
+setting, evaluation, and other activities that constitute self-policing
+or self-regulation. But even in industries with strong self-policing,
+government also needs to be strongly present, providing oversight and/
+or additional regulatory control--responsibilities that cannot be
+abdicated if public safety, health, and welfare are to be protected.
+ Industry-standard setting and self-policing organizations are
+widespread in the United States and in most industrialized nations--
+typically for operations marked by technical complexity, such as the
+chemical, nuclear power, civil aviation, and oil and gas industries,
+where government oversight is also present. These processes coexist
+where there are relatively limited numbers of people with the requisite
+expertise and experience, making it hard for government to be able to
+rely solely on its own personnel (especially when government cannot
+compete with private-sector salaries for those experts). Support for
+standard setting and self-policing also arises in industries whose
+reputations depend on the performance of each company, and where
+significant revenues are at stake. However, industry self-policing is
+not a substitute for government but serves as an important supplement
+to government oversight.
+ After Three Mile Island, the nuclear power industry established the
+Institute of Nuclear Power Operations (INPO), a nonprofit organization
+with the ambitious mission ``to promote the highest levels of safety
+and reliability--to promote excellence--in the operation of commercial
+nuclear power plants.'' The oil and gas industry, like the nuclear
+power industry, has both the substantial economic resources and the
+necessary economic incentive to make it happen. INPO was formed because
+doing so was in the industry's self-interest. As the Deepwater Horizon
+disaster made unambiguously clear, the entire industry's reputation,
+and perhaps its viability, ultimately turn on its lowest-performing
+members. If any one company is involved in an accident with widespread
+and potentially enormous costs, like those that followed the Macondo
+blowout, everyone in the industry--companies and employees--suffers, as
+do regional economies and the nation as a whole. No one, in industry or
+in government, can afford a repeat of the Macondo explosion and spill.
+ Like the nuclear power industry in 1979, the nation's oil and gas
+industry needs now to embrace the potential for an industry safety
+institute to supplement government oversight of industry operations. To
+be credible, any industry-created safety institute would need to have
+complete command of technical expertise available through industry
+sources--and complete freedom from any suggestion that its operations
+are compromised by multiple other interests and agendas. As a
+consensus-based organization, the American Petroleum Institute (API) is
+culturally ill-suited to drive a safety revolution in the industry. For
+this reason, it is essential that the safety enterprise operate apart
+from the API. API's longstanding role as an industry lobbyist and
+policy advocate--with an established record of opposing reform and
+modernization of safety regulations--renders it inappropriate to serve
+a self-policing function.
+ The INPO experience makes clear that any successful oil and gas
+industry safety institute would require in the first instance strong
+board-level support from CEOs and boards of directors of companies for
+a rigorous inspection and auditing function. Such audits would need to
+be aimed at assessing companies' safety cultures and encouraging
+learning about implementation of enhanced practices. The inspection and
+auditing function would need to be conducted by safety institute staff,
+complemented by experts seconded from industry companies. There would
+also need to be a commitment to share findings about safety records and
+best practices within the industry, aggregate data, and analyze
+performance trends, shortcomings, and needs for further research and
+development. Accountability could be enhanced by a requirement that
+companies report their audit scores to their boards of directors and
+insurance companies.
+ The industry's safety institute could facilitate a smooth
+transition to a regulatory regime based on systems safety engineering
+and improved coordination among operators and contractors--the
+principles of the U.K.'s ``safety case'' that shifts responsibility for
+maintaining safe operations at all times to the operators themselves.
+It should drive continuous improvement in standards and practices by
+incorporating the highest standards achieved globally.
+ The industry also needs to benchmark safety and environmental
+practice rules against recognized global best practices. The Safety and
+Environmental Management Program Recommended Practice 75 (API RP 75)
+developed in 1993 by the API and incorporated by reference in the
+Department of the Interior's new workplace safety rules, adopted in
+October 2010, is a reasonable starting point.
+VI. Response and Containment
+ As part of its charge from President Obama, the Commission looked
+at the effectiveness of the response to the spill. There were
+remarkable instances of dedication and heroism by individuals involved
+in the rescue and cleanup. Much was done well--and thanks to a
+combination of good luck and hard work, the worst-case scenarios did
+not all come to pass. But it is impossible to argue that the industry
+or the government was prepared for a disaster of the magnitude of the
+Deepwater Horizon oil spill. Twenty years after the Exxon Valdez spill
+in Alaska, the same blunt response technologies--booms, dispersants,
+and skimmers--were used, to limited effect. On-the-ground shortcomings
+in the joint public-private response to an overwhelming spill like that
+resulting from the blowout of the Macondo well are now evident, and
+demand public and private investment. So do the weaknesses in local,
+state, and federal coordination revealed by the emergency.
+ Neither BP nor the federal government was prepared to conduct an
+effective response to a spill of the magnitude and complexity of the
+Deepwater Horizon disaster. Three critical issues or gaps existed in
+the government's response capacity: (1) the failure to plan effectively
+for a large-scale, difficult-to-contain spill in the deepwater
+environment; (2) the difficulty of coordinating with state and local
+government officials to deliver an effective response; and (3) a lack
+of information and understanding concerning the efficacy of specific
+response measures, such as dispersants or berms. Moreover, the
+technology available for cleaning up oil spills had improved only
+incrementally since 1990. The technologies and methods available to cap
+or control a failed well in the extreme conditions thousands of feet
+below the sea were also inadequate. Although BP was able to develop new
+source-control technologies in a compressed timeframe, and the
+government was able to develop an effective oversight structure, the
+containment effort would have benefitted from prior preparation and
+contingency planning.
+Improved Oil Spill Response Planning
+ The Department of the Interior should create a rigorous,
+transparent, and meaningful oil spill risk analysis and planning
+process for the development and implementation of better oil spill
+response. Several steps are needed for implementation:
+ Interior should review and revise its regulations and
+ guidance for industry oil spill response plans. The revised
+ process should ensure that all critical information and spill
+ scenarios are addressed in the plans.
+ In addition to Interior, other agencies with relevant
+ scientific and operational expertise should play a role in
+ evaluating spill response plans to verify that operators can
+ conduct the operations detailed in their plans. Specifically,
+ oil spill response plans, including source-control measures,
+ should be subject to interagency review and approval by the
+ Coast Guard, EPA, and NOAA. Other parts of the federal
+ government, such as Department of Energy national laboratories
+ that possess relevant scientific expertise, could be consulted.
+ Plans should also be made available for a public comment period
+ prior to final approval and response plans should be made
+ available to the public following their approval.
+ Interior should incorporate the ``worst-case
+ scenario'' calculations from industry oil spill response plans
+ into NEPA documents and other environmental analyses or
+ reviews.
+Spills of National Significance
+ The Gulf oil spill presented an unprecedented challenge to the
+response capability of both government and industry. Though the
+National Contingency Plan permitted the government to designate the
+spill as one of ``national significance,'' this designation did not
+trigger any procedures other than allowing the government to name a
+National Incident Commander.
+ EPA and the Coast Guard should establish distinct plans and
+procedures for responding to a ``Spill of National Significance.''
+Specifically, EPA should amend or issue new guidance on the National
+Contingency Plan to:
+ Increase government oversight of the responsible
+ party, based on the National Contingency Plan's requirement
+ that the government ``direct'' the response where a spill poses
+ a substantial threat to public health or welfare.
+ Augment the National Response Team and Regional
+ Response Team structures to establish additional frameworks for
+ providing interagency scientific and policymaking expertise
+ during a spill. Further, EPA, NOAA, and the Coast Guard should
+ develop procedures to facilitate review and input from the
+ scientific community--for example, by encouraging disclosure of
+ underlying methodologies and data.
+ Create a communications protocol that accounts for
+ participation by high-level officials who may be less familiar
+ with the National Contingency Plan structure and create a
+ communications center within the National Incident Command--
+ separate from the joint information center established in
+ partnership with the responsible party--to help transmit
+ consistent and complete information to the public.
+Strengthening State and Local Involvement
+ The response to the Deepwater Horizon disaster showed that state
+and local elected officials had not been adequately involved in oil
+spill contingency planning, though career responders in state
+government had participated extensively. Unfamiliarity with, and lack
+of trust in, the federal response manifested itself in competing state
+structures and attempts to control response operations that undercut
+the efficiency of the response overall.
+ EPA and the Coast Guard should bolster state and local involvement
+in oil spill contingency planning and training and create a mechanism
+for local involvement in spill planning and response similar to the
+Regional Citizens' Advisory Councils mandated by the Oil Pollution Act
+of 1990.
+ In addition, a mechanism should be created for ongoing local
+involvement in spill planning and response in the Gulf. In the Oil
+Pollution Act of 1990, Congress mandated citizens' councils for Prince
+William Sound and Cook Inlet. In the Gulf, such a council should
+broadly represent the citizens' interests in the area, such as fishing
+and tourism, and possibly include representation from oil and gas
+workers as ex-officio, non-voting members.
+Research and Development for Improved Response
+ The technology available for cleaning up oil spills has improved
+only incrementally since 1990. Federal research and development
+programs in this area are underfunded: In fact, Congress has never
+appropriated even half the full amount authorized by the Oil Pollution
+Act of 1990 for oil spill research and development.
+ Specifically, Congress should provide mandatory funding (i.e.
+funding not subject to the annual appropriations process) at a level
+equal to or greater than the amount authorized by the Oil Pollution Act
+of 1990 to increase federal funding for oil spill response research by
+agencies such as Interior, the Coast Guard, EPA, and NOAA. In addition,
+Congress and the Administration should encourage private investment in
+response technology more broadly, including through public-private
+partnerships and a tax credit for research and development in this
+area.
+Dispersants
+ Prior to the blowout, the federal government had not adequately
+planned for the use of dispersants to address such a large and
+sustained oil spill, and did not have sufficient research on the long-
+term effects of dispersants and dispersed oil to guide its decision-
+making.
+ EPA should update and periodically review its dispersant testing
+protocols for product listing or pre-approval, and modify the pre-
+approval process to include temporal duration, spatial reach, and
+volume of the spill. EPA should update its dispersant testing protocols
+and require more comprehensive testing prior to listing or pre-
+approving dispersant products. The Coast Guard and EPA should modify
+pre-approvals of dispersant use under the National Contingency Plan to
+establish procedures for further consultation based on the temporal
+duration, spatial reach, or volume of the spill and volume of
+dispersants that responders are seeking to apply. EPA and NOAA should
+conduct and encourage further research on dispersants.
+Containment
+ The most obvious, immediately consequential, and plainly
+frustrating shortcoming of the oil spill response set in motion by the
+events of April 20, 2010 was the simple inability--of BP, of the
+federal government, or of any other potential intervener--to contain
+the flow of oil from the damaged Macondo well.
+ At the time of the blowout on April 20, the U.S. government was
+unprepared to oversee a deepwater source-control effort. Once the
+Secretary of Energy's science team, the U.S. Geological Survey, the
+national laboratories, and other sources of scientific expertise became
+involved, the government was able to substantively supervise BP's
+decision-making, forcing the company to fully consider contingencies
+and justify its chosen path.
+ The National Response Team should develop and maintain expertise
+within the Federal government to oversee source-control efforts. The
+National Response Team should create an interagency group--including
+representation from the Department of the Interior, Coast Guard, and
+the Department of Energy and its national laboratories--to develop and
+maintain expertise in source control, potentially through public-
+private partnerships.
+Industry's Spill Preparedness
+ Beyond attempting to close the blowout preventer stack, no proven
+options for rapid source control in deepwater existed when the blowout
+occurred. The Department of the Interior should require offshore
+operators to provide detailed plans for source control as part of their
+oil spill response plans and applications for permits to drill.
+ These plans should demonstrate that an operator's containment
+technology is immediately deployable and effective. In applications for
+permits to drill, the Interior should require operators to provide a
+specific source-control analysis for each well. As with oil spill
+response plans, source-control plans should be reviewed and approved by
+agencies with relevant expertise, including the Interior and the Coast
+Guard.
+Improved Capability for Accurate Flow Rate Estimates
+ Early flow rate estimates were highly variable and difficult to
+determine accurately. However, the understated estimates of the amount
+of oil spilling appear to have impeded planning for and analysis of
+source-control efforts like the cofferdam and especially the top kill.
+ The National Response Team should develop and maintain expertise
+within the federal government to obtain accurate estimates of flow rate
+or spill volume early in a source-control effort. The National Response
+Team should create an interagency group--including representation from
+Interior, the Coast Guard, the national laboratories, and NOAA--to
+develop and maintain expertise in estimating flow rates and spill
+volumes. In addition, EPA should amend the National Contingency Plan to
+create a protocol for the government to obtain accurate estimates of
+flow rate or spill volume from the outset of a spill. This protocol
+should require the responsible party to provide all data necessary to
+estimate flow rate or spill volume.
+More Robust Well Design and Approval Process
+ Among the problems that complicated the Macondo well-containment
+effort was a lack of reliable diagnostic tools and concerns about the
+well's integrity. The Department of the Interior should require
+offshore operators seeking its approval of proposed well design to
+demonstrate that:
+ Well components, including blowout preventer stacks,
+ are equipped with sensors or other tools to obtain accurate
+ diagnostic information--for example, regarding pressures and
+ the position of blowout preventer rams.
+ Wells are designed to mitigate risks to well
+ integrity during post-blowout containment efforts.
+Industry Responsibilities for Containment and Response
+ Industry's responsibilities extend to efforts to contain any big
+spills as quickly as possible and to mitigate the harm caused by spills
+through effective response efforts. Both government, which must be
+capable of taking charge of those efforts, and industry were woefully
+unprepared to contain or respond to a deepwater well blowout like that
+at Macondo. All parties lacked adequate contingency planning, and
+neither had invested sufficiently in research, development, and
+demonstration to improve containment or response technology.
+ From now on, the oil and gas industry needs to combine its
+commitment to transform its safety culture with adequate resources for
+containment and response. Large-scale rescue, response, and containment
+capabilities need to be developed and demonstrated--including
+equipment, procedures, and logistics--and enabled by extensive
+training, including full-scale field exercises and international
+cooperation.
+ To that end, at least two industry spill containment initiatives
+have emerged that build on ideas and equipment that were deployed in
+response to the Macondo blowout and spill. The nonprofit Marine Well
+Containment Company was created in July 2010 by four of the major,
+integrated oil and gas companies. The second spill containment
+initiative is being coordinated by Helix Energy Solutions Group, which
+played a role in the Macondo well containment efforts.
+ Yet neither the Marine Well Containment Company's planned
+capabilities nor Helix's go past 10,000 feet despite the fact that
+current drilling technology extends beyond this depth. Also it seems
+that neither is structured to ensure the long-term ability to innovate
+and adapt over time to the next frontiers and technologies. What
+resources, if any, either initiative will dedicate to research and
+development going forward is unclear.
+ The primary long-term goal of a spill containment company or
+consortia should be to ensure that an appropriate containment system is
+readily available to contain quickly spills in the Gulf of Mexico with
+the best available technology. Any spill containment company or
+consortia should ensure that it remains focused on this goal, even when
+doing so potentially conflicts with the short-term interests of its
+founding companies, in the case of MWCC, or the parent company, in the
+case of Helix. An independent advisory board, with representatives from
+industry, the federal government, state and local governments, and
+environmental groups could help keep any spill containment initiative
+focused on innovative, adaptive, effective spill response over the long
+term.
+VII. Financial Responsibility
+ Oil spills cause a range of harms, including personal, economic and
+environmental injuries, to individuals and ecosystems. The Oil
+Pollution Act makes the party responsible for a spill liable for
+compensating those who suffered as a result of the spill--through human
+health and property damage, lost profits, and other personal and
+economic injuries--and for restoring injured natural resources. The Act
+also provides an opportunity to make claims for compensation from a
+dedicated Oil Spill Liability Trust Fund. The Oil Pollution Act,
+however, imposes limits on both the amount for which the responsible
+party is liable, and the amount of compensation available through the
+trust fund. In the case of the Deepwater Horizon spill, BP (a
+responsible party) has placed $20 billion in escrow to compensate
+private individuals and businesses through the independent Gulf Coast
+Claims Facility. But if a less well capitalized company had caused the
+spill, neither a multi-billion dollar compensation fund nor the funds
+necessary to restore injured resources, would likely have been
+available.
+ Liability for damages from spills from offshore facilities is
+capped under the Oil Pollution Act at $75 million, unless it can be
+shown that the responsible party was guilty of gross negligence or
+willful misconduct, violated a federal safety regulation, or failed to
+report the incident or cooperate with removal activities, in which case
+there is no limit on damages. Claims up to $1 billion for certain
+damages can be made to, and paid out of, the Oil Spill Liability Trust
+Fund, which is currently supported by an 8-cent per-barrel tax on
+domestic and imported oil.
+ The Oil Pollution Act also requires responsible parties to
+``establish and maintain evidence of financial responsibility,''
+generally based on a ``worst-case discharge'' estimate. In the case of
+offshore facilities, necessary financial responsibility ranges from $35
+million to $150 million.
+Inadequacy of Current System
+ There are two main problems with the current liability cap and
+financial responsibility dollar amounts. First, the relatively modest
+liability cap and financial responsibility requirements provide little
+incentive for oil companies to improve safety practices. Second, as
+noted, if an oil company with more limited financial means than BP had
+caused the Deepwater Horizon spill, that company might well have
+declared bankruptcy long before paying fully for all damages. In the
+case of a large spill, the Oil Spill Liability Trust Fund would likely
+not provide sufficient backup. Thus, a significant portion of the
+injuries caused to individuals and natural resources, as well as
+government response costs, could go uncompensated.
+ Any discussion of increasing liability caps and financial
+responsibility requirements must balance two competing public policy
+concerns: first, the goal of ensuring that the risk of major spills is
+minimized, and in the event of a spill, victims are fully compensated;
+and second, that increased caps and financial responsibility
+requirements do not drive competent independent oil companies out of
+the market. A realistic policy solution also requires an understanding
+of the host of complex economic impacts that could result from
+increases to liability caps and financial responsibility requirements.
+Options for Reform
+ As this Committee and others in Congress consider options for
+addressing these problems, the Commission recommends that first,
+Congress significantly increase the liability cap and financial
+responsibility requirements for offshore facilities. To address both
+the incentive and compensation concerns noted above, Congress should
+significantly raise the liability cap. Financial responsibility limits
+should also be increased, because if an oil company does not have
+adequate resources to pay for a spill, the application of increased
+liability has little effect. Should a company go bankrupt before fully
+compensating for a spill, its liability is effectively capped. If,
+however, the level of liability imposed and the level of financial
+responsibility required are set to levels that bear some relationship
+to potential damages, firms will have greater incentives to maximize
+prevention and minimize potential risk of oil spills and also have the
+financial means to ensure that victims of spills do not go
+uncompensated.
+ Second, the Commission recommends that Congress increase the limit
+on per-incident payouts from the Oil Spill Liability Trust Fund. If
+liability and financial responsibility limits are not set at a level
+that will ensure payment of all damages for spills, then another source
+of funding will be required to ensure full compensation. The federal
+government could cover additional compensation costs, but this approach
+requires the taxpayer to foot the bill. Therefore, Congress should
+raise the Oil Spill Liability Trust Fund per-incident limit. Raising
+the Oil Spill Liability Trust Fund's per-incident limit will require
+the Fund to grow through an increase of the per-barrel tax on domestic
+and imported oil production. An alternative would be to increase the
+Trust Fund through a surcharge by mandatory provisions in drilling
+leases triggered in the event that there are inadequate sums available
+in the Fund.
+ Third, the Commission recommends that the Department of the
+Interior enhance auditing and evaluation of the risk of offshore
+drilling activities by individual participants (operator, driller,
+other service companies). The Department of the Interior, insurance
+underwriters, or other independent entities should evaluate and monitor
+the risk of offshore drilling activities to promote enhanced risk
+management in offshore operations and to discourage unqualified
+companies from remaining in the market.
+ The Interior Department currently determines financial
+responsibility levels based on potential worst-case discharges, as
+required by the Oil Pollution Act. Although the agency's analysis to
+some degree accounts for the risk associated with individual drilling
+activities, it does not fully account for the range of factors that
+could affect the cost of a spill, and thus the level of financial
+responsibility that should be required. Interior should analyze a host
+of specific, risk-related criteria when determining financial
+responsibility limits applicable to a particular company, including,
+but not limited to: geological and environmental considerations, the
+applicant's experience and expertise, and applicable risk management
+plans. This increased scrutiny would provide an additional guard
+against unqualified companies entering the offshore drilling market.
+VIII. Spill Impacts and Gulf Restoration
+ Even before the highly visible damages caused by the spill became
+clear, many crucial Gulf economic and ecological resources--fisheries,
+transportation, tourism--faced long-term threats. First, more than
+2,300 square miles of coastal wetlands--an area larger than the State
+of Delaware--have been lost to the Gulf since the United States raised
+the massive levees along the lower Mississippi River after the
+devastating Great Flood of 1927. Exceptionally powerful hurricanes,
+always a threat to the region, struck the coast in 2005 (Katrina and
+Rita) and 2008 (Gustav and Ike), causing even more wetland loss.
+Second, low-oxygen bottom waters were in the process of forming a
+massive ``dead zone'' extending up to 7,700 square miles during the
+summer of 2010. Referred to as hypoxia, this phenomenon has intensified
+and expanded since the early 1970s as a result of nutrient pollution,
+mainly from Midwestern agriculture. And finally, the Deepwater Horizon
+disaster made matters worse: 11 rig workers killed in the explosion and
+17 injured; many thousands of people exposed to contaminated waters,
+coasts, beaches, and seafood; thousands out of work; birds and sea
+animals killed and significant habitats damaged or destroyed. The
+Commission's investigation made plain that existing authorities are not
+adequate to redress these significant harms and ensure restoration of
+the Gulf.
+Human Health Impacts
+ The National Contingency Plan overlooks the need to respond to
+widespread concerns about human health impacts. For smaller oil spills,
+the response effort is generally carried out by trained oil spill
+response technicians, but given the scale of the response to the
+Deepwater Horizon spill and the need to enlist thousands of previously
+untrained individuals to clean the waters and coastline, many response
+workers were not screened for pre-existing conditions. This lack of
+basic medical information, which could have been collected if a short
+medical questionnaire had been distributed, limits the ability to draw
+accurate conclusions regarding long-term physical health impacts. EPA
+should amend the National Contingency Plan to add distinct procedures
+to address human health impacts during a Spill of National
+Significance. Spills of this magnitude necessarily require a
+significant clean-up effort, potentially exposing workers to toxic
+compounds in oil and dispersants.
+Consumer Confidence
+ Images of spewing oil and oiled beaches in newspapers and on
+television set the stage for public concern regarding the safety of
+Gulf seafood. Additional factors contributed to the lingering
+impression that the public could not trust government assurances that
+the seafood was safe: the unprecedented volumes of dispersants used,
+confusion over the flow rate and fate of the oil, frustration about the
+government's relationship with BP in spill cleanup, and lawsuits filed
+by fishermen contesting the government's assurance of seafood safety.
+The economic blow to the Gulf region associated with this loss of
+consumer confidence is sizable. BP gave Louisiana and Florida $68
+million for seafood testing and marketing, as well as money to assess
+impacts on tourism and fund promotional activities. As of early
+December 2010, BP was considering a similar request from Alabama.
+ In future spills, however, there is no guarantee that a responsible
+party will have the means or the inclination to compensate such losses.
+Such indirect financial harms are currently not compensable under the
+Oil Pollution Act. Nevertheless, losses in consumer confidence are real
+and Congress, federal agencies, and responsible parties should consider
+ways to restore consumer confidence in the aftermath of a Spill of
+National Significance.
+ The Commission recommends that Congress, federal agencies, and
+responsible parties take steps to restore consumer confidence in the
+aftermath of a Spill of National Significance.
+Lack of Sustained Funding for Gulf Restoration
+ A lack of sustained and predictable funding, together with failed
+project coordination and long-term planning, has resulted in incomplete
+and often ineffective efforts to restore the Gulf's natural
+environment. No funding source currently exists to support regional
+restoration efforts. While cost estimates of Gulf restoration vary
+widely, according to testimony before the Commission, fully restoring
+the Gulf will require $15 billion-$20 billion, or a minimum of $500
+million per year, over 30 years. A number of different sources
+currently provide funding to individual states for restoration, however
+none of these sources provides funds for Gulf-wide coastal and marine
+restoration, and none is sufficient to support the sustained effort
+required. Most policymakers agree that without a reliable source of
+long-term funding, it will be impossible to achieve restoration in the
+Gulf.
+ Several Gulf States and the federal government have filed or are
+expected to file suit against BP and other companies involved in the
+spill, which will likely create opportunities to direct new restoration
+funds to the region. In some cases, congressional action will be
+required to ensure that funds are directed to this purpose. The
+Commission recommends that 80 percent of any Clean Water Act penalties
+and fines be directed to Gulf restoration. Should such penalties and
+fines not be directed to the Gulf, Congress should consider other
+mechanisms for a dedicated funding stream not subject to annual
+appropriations. Although such mechanisms face hurdles, the fact remains
+that resources are needed if progress on coastal restoration is to
+continue. Inaction is a prescription for further degradation. Should
+CWA penalties not be redirected to Gulf restoration, Congress should
+consider other mechanisms for a dedicated funding stream not subject to
+annual appropriations.
+Decision-making Body for Expediting Work
+ In order for funding to be most efficiently directed at long-term
+restoration, a decision-making body is needed that has authority to set
+binding priorities and criteria for project funding. The Gulf Coast
+Ecosystem Restoration Task Force is now in place, as recommended by the
+September 2010 report on restoration from Secretary of the Navy Ray
+Mabus to the President, and subsequently established by Presidential
+Executive Order. According to the Executive Order, the job of the Task
+Force is to begin coordinating the different restoration projects being
+undertaken by various jurisdictions in the Gulf, coordinating related
+science activities and engaging stakeholders. However, as many in
+Congress and the Administration have suggested, the Task Force lacks
+some features necessary to effectively direct long-term restoration
+efforts in the Gulf--most importantly the ability to set binding goals
+and priorities.
+ The Commission recommends that Congress establish a joint state-
+federal Gulf Coast Ecosystem Restoration Council. The Council should
+implement a restoration strategy for the region that is compatible with
+existing state restoration goals. Experience in major restoration
+endeavors, including those in the Gulf, has shown that, absent binding
+goals to drive the process, restoration projects are insufficiently
+funded, focused, or coordinated. Therefore, the restoration strategy
+should set short- and long-term goals with binding criteria for
+selecting projects for funding. Key criteria should include national
+significance; contribution to achieving ecosystem resilience; and the
+extent to which national policies--such as those related to flood
+control, oil and gas development, agriculture, and navigation--directly
+contributed to the environmental problem. Congress should also ensure
+that the priorities and decisions of the Council are informed by input
+from a Citizens Advisory Council that represents diverse stakeholders.
+Restoration Rooted in Science
+ Finally, but essentially, restoration decisions must be rooted in
+science. An approach that draws heavily on information and advice from
+scientists will result in project selection and funding allocations
+that are more likely to lead to an effective region-wide restoration
+strategy. Such an approach will also advance transparency in decision-
+making and enhance credibility with the public.
+ The Commission accordingly recommends the establishment of a Gulf
+Coast Ecosystem Restoration Science and Technology Program that would
+address these issues in three ways: (1) by creating a scientific
+research and analysis program, supported by the restoration fund, that
+is designed to support the design of scientifically sound restoration
+projects; (2) by creating a science panel to evaluate individual
+projects for technical effectiveness and consistency with the
+comprehensive strategy; and (3) by supporting adaptive management plans
+based on monitoring of outcomes scaled both to the strategy itself and
+to the individual projects or categories of projects included in it.
+Managing Ocean Resources
+ The Commission recommends that as a part of management and
+restoration efforts in the marine environment, greater attention should
+be given to new tools for managing ocean resources, including
+monitoring systems and spatial planning. Marine scientists have emerged
+from the Deepwater Horizon incident with more precise questions to
+investigate, as well as a better sense of monitoring needs in the Gulf
+of Mexico, which because of its multiple uses and economic value should
+be a national priority. To that end, the National Ocean Council, which
+the President initiated in July 2010, should work with the responsible
+federal agencies, industry and the scientific community to expand the
+Gulf of Mexico Integrated Ocean Observing System, including the
+installation and maintenance of an in situ network of instruments
+deployed on selected production platforms. Participation in this system
+by industry should be regarded as a reasonable part of doing business
+in nation's waters.
+ Coastal and marine spatial planning has the potential to improve
+overall efficiency and reduce conflicts among ocean users. Congress
+should fund grants for the development of regional planning bodies at
+the amount requested by the President in the fiscal year 2011 budget
+submitted to Congress. Ocean management should also include more
+strategically sited Marine Protected Areas, including but not limited
+to National Marine Sanctuaries, which can be used as ``mitigation
+banks'' to help offset harm to the marine environment. Given the
+economic and cultural importance of fishing in the Gulf region--and the
+importance of Gulf seafood to the rest of the country--scientifically
+valid measures, such as catch share programs, should be adopted to
+prevent overfishing and ensure the continuity of robust fisheries.
+IX. The Future of Offshore Drilling
+ The central lesson to be drawn from the catastrophe is that no less
+than an overhauling of both current industry practices and government
+oversight is now required. The changes necessary will be transformative
+in their depth and breadth, requiring an unbending commitment to safety
+by government and industry to displace a culture of complacency.
+Drilling in deepwater, however, does not have to be abandoned. It can
+be done safely. That is one of the central messages of the Commission's
+final report. The Commission's recommendations are intended to do for
+the offshore oil and gas industry what new policies and practices have
+done for other high risk industries after their disasters. The
+Commission believes that the potential for such a transformation to
+ensure productive, safe, and responsible offshore drilling is
+significant, and provides reason for optimism even in the wake of a
+disaster.
+ The significance of the Deepwater Horizon disaster, however, is
+broader than just its relevance to the future of offshore drilling. The
+disaster signals the need to consider the broader context of the
+nation's patterns of energy production and use, now and in the future--
+the elements of America's energy policy. The explosion at the Macondo
+well and the ensuing enormous spill--particularly jarring events
+because of the belief they could never happen--force a reexamination of
+many widely held assumptions about how to reconcile the risks and
+benefits of offshore drilling, and a candid reassessment of the
+nation's policies for the development of a valuable resource. They also
+support a broader reexamination of the nation's overall energy policy.
+ Important decisions about whether, when, where, and how to engage
+in offshore drilling should be made in the context of a national energy
+policy that is shaped by economic, security, pace of technology,
+safety, and environmental concerns. Offshore drilling will certainly be
+an important part of any such policy, but its relative importance today
+will not, and should not, be the same a half-century from now. The
+nation must begin a transition to a cleaner, more energy-efficient
+future. Otherwise, its security and well-being will be increasingly
+dependent on diminishing supplies of nonrenewable resources and on
+supplies from foreign sources.
+ Drilling for oil in the Gulf of Mexico, however, is not solely a
+matter for U.S. consideration. Both Mexico and Cuba have expressed
+interest in deepwater drilling in the Gulf in the near future.
+Potential sites are close enough to the United States--Cuba's mainland
+lies only 90 miles from Florida's coast and the contemplated wells only
+50 miles--that if an accident like the Deepwater Horizon spill occurs,
+fisheries, coastal tourism, and other valuable U.S. natural resources
+could be put at great risk. It is in our country's national interest to
+negotiate now with these neighbors to agree on a common, rigorous set
+of standards, a system for regulatory oversight, and operator adherence
+to an effective safety culture, along with protocols to cooperate on
+containment and response strategies in case of a spill.
+Frontier Areas
+ Our Commission also examined prospects in so called ``frontier
+areas.'' On December 1, in the wake of the Deepwater Horizon
+experience, Interior Secretary Ken Salazar announced that the
+Administration would not proceed with drilling in areas where there are
+``no active leases'' during the next five-year leasing plan. As a
+result, exploration and production in certain frontier areas--the
+eastern Gulf and off of the Atlantic and Pacific coasts--are deferred.
+The Secretary also indicated that plans for 2011 drilling in Alaska's
+Beaufort Sea would be subjected to additional environmental
+assessments.
+ The major interest in offshore Alaska reflects the likelihood of
+finding significant new sources of oil there. The Chukchi and Beaufort
+Sea off Alaska's north coast rank behind only the Gulf of Mexico in
+estimated domestic resources. But finding and producing those
+potentially important supplies of oil offshore Arctic Alaska requires
+the utmost care, given the special challenges for oil spill response
+and containment, and heightened risks associated with this frontier,
+especially its extreme cold, extended seasons of darkness, hurricane-
+strength storms, and pervasive fog--all affecting access and working
+conditions--and the extraordinary richness of its ecosystems and the
+subsistence native communities dependent upon their protection. To deal
+with these serious concerns about Arctic oil spill response,
+containment and the heightened environmental stakes the Commission
+recommends three approaches before the Department of the Interior makes
+a determination that drilling in a particular area is appropriate.
+First, the Department should ensure that the containment and response
+plans proposed by industry are adequate for each stage of development
+and that the underlying financial and technical capabilities have been
+satisfactorily demonstrated in the Arctic. Second, the Coast Guard and
+the oil companies operating in the Arctic should carefully delineate
+their respective responsibilities in the event of an accident--
+including search and rescue--and then must build and deploy the
+necessary capabilities. Third, Congress should provide the resources to
+establish Coast Guard capabilities in the Arctic, based on the Guard's
+review of gaps in its capacity.
+ The Arctic is shared by multiple countries, many of which are
+considering or conducting oil and gas exploration and development. The
+extreme weather conditions and infrastructure difficulties are not
+unique to the U.S. Arctic. Damages caused by an oil spill in one part
+of the Arctic may not be limited to the waters of the country where it
+occurred. As a result, the Commission recommends that strong
+international standards related to Arctic oil and gas activities be
+established among all the countries of the Arctic. Such standards would
+require cooperation and coordination of policies and resources.
+ Bringing the potentially large oil resources of the Arctic outer
+continental shelf into production safely will require an especially
+delicate balancing of economic, human, environmental, and technological
+factors. Both industry and government will have to demonstrate
+standards and a level of performance higher than they have ever
+achieved before.
+ Creating and implementing a national energy policy will require
+enormous political effort and leadership--but it would do much to
+direct the nation toward a sounder economy and a safer and more
+sustainable environment in the decades to come. Given Americans'
+consumption of oil, finding and producing additional domestic supplies
+will be required in coming years, no matter what sensible and effective
+efforts are made to reduce demand--in response to economic, trade, and
+security considerations, and the rising challenge of climate change.
+ The extent to which offshore drilling contributes to augmenting
+that domestic supply depends on rebuilding public faith in existing
+offshore energy exploration and production. We have proposed a series
+of recommendations that will enable the country and the oil and gas
+industry to move forward on this one critical element of U.S. energy
+policy: continuing, safe, responsible offshore oil drilling to meet our
+nation's energy demands over the next decade and beyond. Our message is
+clear: both government and industry must make dramatic changes to
+establish the high level of safety in drilling operations on the outer
+continental shelf that the American public has the right to expect and
+to demand. It is now incumbent upon the Congress, the executive branch,
+and the oil and gas industry to take the necessary steps.
+ _____
+
+ [GRAPHIC] [TIFF OMITTED] 63876.001
+
+ .epsThe Chairman. Thank you very much.
+ And I thank both of you. For the record, it was not me that
+cleared my throat that you responded to. But nevertheless, I
+appreciate that.
+ Mr. Graham. The message was clear.
+ The Chairman. I did want both of you to finish your
+remarks, and I allowed that, but we do want to try to stay as
+closely as we can.
+ I just have an observation and a question that I want to
+ask both of you. Right from the get-go, when this event
+happened and I was asked to respond, I said something on the
+order: Number one, we need to stop the leak; number two, we
+need to hold BP accountable; and number three, we need to make
+sure that the restoration can get that part of the country back
+to normalcy, however you describe that.
+ I have been saying that right from day one. You have spent
+a great deal of time on it in your report. Your testimony
+talked about what should be done in the future, and I alluded
+to this in my opening statement. I would like you both to
+respond to it. We still don't know what caused the explosion,
+unless I missed something, and we don't know how or why the BOP
+malfunctioned, if that was the case. And I would like both of
+you to respond to that, and is there maybe a time in the future
+when you are going to answer that, or do we wait for other
+reports to come in before we draw conclusions? Whoever wants to
+go first. I would like both of you to respond to that.
+ Mr. Graham. Well, what we know is that the event occurred,
+and we know a great deal about why the event occurred. We have
+identified in our report nine instances, nine human decisions
+that were made in the hours before the Macondo explosion, which
+we think were the precipitating cause of this immediate event.
+ It is true that no one at this point has had the benefit of
+the full forensic examination of the blowout preventer. It is
+at a NASA facility in New Orleans being closely examined. But
+what we do know is that it didn't perform as it should have. If
+it had been able to perform at an optimal level, it is
+questionable whether that would have avoided the explosion
+because the gas had already gotten beyond the blowout preventer
+at the time that it would have gone into effect.
+ So I believe that our report adequately, accurately,
+comprehensively addresses both the immediate cause and then the
+context in which that occurred, which was a long period in
+which government had done a very inadequate job of regulation,
+at which the industry had fallen into this culture of
+complacency, and where the consequences have been an enormous
+economic and environmental cost to the people of the United
+States.
+ Mr. Reilly. I would just add, Mr. Chairman, we know enough.
+We know what happened. We know that the negative pressure test,
+which was supposed to determine whether cementing had
+effectively sealed off the well; we know that inconsistent
+information came from the kill line and the drill pipe. And the
+good news was accepted that while the conflicting information
+was rejected in the drill pipe itself, indicating that had not
+been a seal, the cementing had failed. We know that. We know
+that as gas did rise in the drill pipe, it was not noticed,
+although we have the documentation of the instrumentation, the
+record that should have been recognized by a professional
+monitoring that instrumentation to indicate that gas was coming
+up the riser. It was not recognized until it was too late. So
+we know those things. Those are a couple of examples.
+ A number of decisions were made by people who are not
+alive, and we cannot but speculate on how they came to make
+some of those decisions or to have missed some of the
+information that they did have.
+ And if you look at page 125 of our report, we list about
+nine decisions, seven of which had the corollary benefit of
+saving time. No doubt they were identified as more efficient
+ways to proceed, but there were alternatives to most of them,
+and they weren't chosen. So the immediate proximate cause was a
+series of bad decisions, very hard to understand decisions on
+the day of April 20th and leading up to it with respect to
+Halliburton's supply of cement which failed three of its own
+tests and nine tests that were subjected to by our Commission
+by Chevron's laboratory for testing cement. So we do know those
+things. And I am quite confident that we have established the
+facts here.
+ The Chairman. Since my time is running out, I would just
+make this observation. What you have alluded to, both of you,
+is the fact that somewhere along the line, there is human
+error; something wasn't read. We heard that in testimony,
+frankly, from the industry when they were here shortly after.
+They said, we don't know what happened, but we suspect that
+this is going to be the case. And that you have confirmed.
+ But we still don't know what mechanically or whatever else
+broke down, and I just wanted to thank you for responding to
+that.
+ Mr. Markey.
+ Mr. Markey. Thank you, Mr. Chairman, very much.
+ Thank you for this report. This report is a blistering,
+scalding indictment of the practices engaged in by the industry
+and by regulators that created the conditions that made this
+accident possible. My question to you is if your
+recommendations are not adopted or provisions similar to those
+which you recommend, do you think we run the risk of repeating
+that catastrophe once again in the waters of the United States?
+ Mr. Graham. Yes. As I said, even if all of the
+recommendations were adopted, no one could issue an insurance
+policy that there would be no repetition.
+ But I could issue an insurance policy that the likelihood
+of a repetition and the consequences of the repetition will be
+significantly less if these recommendations are adopted.
+ One of the things that characterizes these recommendations
+is they are not from outer space. Most of them are from the
+North Sea, a place which has a more punishing environment than
+the Gulf of Mexico, yet has a dramatically different record in
+terms of fatalities. We believe that some of the experience
+there--and ironically, the same companies that are operating in
+the Gulf are operating under those standards in the North Sea.
+So it is not a mystery or a new set of standards for those
+companies themselves.
+ And as I said in my report, I am concerned that if we don't
+act, if we are timorous and if we have an enhanced likelihood
+similar to the Macondo, that we are all going to be pointed at
+as to why we were unable to recognize and why we were unwilling
+to act in the public interest.
+ Mr. Markey. Do you agree, Mr. Reilly?
+ Mr. Reilly. I do agree. And I would add that this is a very
+dynamic industry, which has transformed itself in the last 25
+years as it has moved from shallow water into deep water, which
+is a much more high-risk environment. It has not adapted its
+own risk protections, its management systems adequately to
+either prevent or to respond to a problem of this sort.
+ And I will tell you one of the things that--well, it is
+reassuring that BOEMRE has issued new prescriptive regulations
+to try to govern a lot of the activities that would take place
+in the future, and that gives us some encouragement. Frankly
+speaking, we don't consider that agency as it is now staffed,
+formed, trained and compensated adequate to the task that they
+have; and that if it is not strengthened, I suspect that we
+will again see an incongruity grow between the sophistication
+of the industry and its dynamism and the failure of inspectors
+even to understand some of the basic technologies to stay on
+top of it.
+ Mr. Markey. Let me follow up on that then because you have
+recommendations here that can be implemented administratively
+by the Obama Administration, but there are other
+recommendations here that really need congressional action so
+that we change the laws. Do you think it would be wise for us
+not to act legislatively to give that authority to the
+government so that they can change business as usual? Would we
+be running a risk if we did not pass legislation?
+ Mr. Reilly. I think you would be running a big risk. There
+are two crucial moves that I believe the Congress has to take.
+One is to reorganize the Interior Department, simply to ensure
+that leasing revenue concerns of the sort that animated the
+agency over several administrations and three MMS Directors
+testified to before our Commission, that those no longer infect
+safety and environment regulation. And the way to do that is
+statutorily, the way to do it on any kind of sustainable basis,
+by creating a walled-off regulator within the Department of the
+Interior with a term appointment for the Director.
+ And the second, the second requirement--and the first
+doesn't cost anything--the second requirement is to adequately
+fund the BOEMRE to carry out the responsibilities that it has.
+ Mr. Markey. Thank you.
+ Just to note here, BP had 760 OSHA fines--versus one for
+ExxonMobil--so we can understand that there is something
+fundamentally wrong here that a company like that was allowed
+to continue to operate.
+ Senator Graham, your recommendation on legislation?
+ Mr. Graham. Well, I would agree with those two points, and
+then the third is the one I made relative to restoration, that
+only Congress can designate a portion of these fines and
+penalties for the specific purpose of restoration, which we
+think, in terms of the national interest in this region of
+America, the fact that many of the problems that have led to
+the degradation of the Gulf of Mexico had the Federal
+Government at least as a partner if not the primary indicted
+figure.
+ Mr. Markey. And can I just say very quickly, some people
+say, well, it is just BP and that the other actors didn't play
+a role, including the government, that the other companies
+didn't play a role; true or not true?
+ Mr. Graham. In the area of response, it was not just BP
+that was incapable. If this same thing had happened on
+virtually any of the rigs in the Gulf, we would have had the
+same response because we had the inadequate, unplanned-for
+capabilities that made this such an unnecessarily significant
+impact on the economy and the environment of the Gulf of
+Mexico.
+ Mr. Markey. I thank you both for your service.
+ The Chairman. I thank the gentleman.
+ Mr. Young of Alaska.
+ Mr. Young. Thank you, Mr. Chairman. I thank the witnesses.
+ Mr. Chairman, I have reviewed the report, and I have also
+reviewed the members of the Commission. And I have statements
+from every one of the members of the Commission that do not
+support offshore drilling, including the two witnesses before
+us.
+ And that concerns me because I cannot figure out how this
+can be a report that was supposed to look for the cause is now
+trying to ask us to pass legislation when their basic goal is
+against offshore development. In your statement you said you
+were for it; you know the importance. But one gentleman said we
+can establish 75 years as the goal for independence. To meet
+that goal, we would have to reduce domestic production, not
+increase it.
+ I am just questioning the Commission and the sincerity of
+really seeking a solution to a needed commodity, which is oil.
+ Now, I personally have another question because of this
+Administration. From either one of you, from the technical
+perspective, what makes drilling in the deepwater Gulf of
+Mexico so different? And are these conditions typical of the
+other areas of the U.S. OCS? What is different between the Gulf
+and Alaska?
+ Mr. Reilly. Well, the difference between the Gulf and
+Alaska is the deep water that we are involved with in the Gulf,
+5,000--we are going to 10,000 feet. Three rigs have been
+commissioned that will take----
+ Mr. Young. That I know and I appreciate your answer. I
+appreciate your answer.
+ But as I read your report, your position on Arctic drilling
+with the President is, in fact, we have to step forward with
+caution; we have to make sure it can't be done too rapidly, et
+cetera, et cetera.
+ But it is 150 feet versus 2,000 some odd feet or, excuse
+me, 20,000 feet, 18,000 feet. And I am worried about this
+country. We are going to spend about $400 billion again to buy
+our oil. And this Commission--the make up of this Commission,
+they are all against the development of offshore drilling and
+onshore, by the way. Some on the Commission voted against
+opening ANWR; 39 billion barrels were 74 miles from the
+pipeline.
+ We are facing bankruptcy because we have not been able to
+develop our fossil fuels. And yet the Commission, the majority
+of them, in fact all of them, their intent is not to have
+fossil fuels. And I think that is inappropriate.
+ Now, last, if I can suggest one thing, Mr. Chairman, we
+have drilled in the Gulf about 42,000 wells, including 2,500
+deepwater wells. No where do you report in your report or
+suggest why that was successful. We have had one big spill
+since Santa Barbara. Now, how do you answer that? Was there any
+credit given for what was done before and for those who did it?
+Question. Answer.
+ Mr. Reilly. Well, I referred to 79 losses of well control.
+I think many of those contributed to accidents and several
+contributed to fatalities. That is the record that we have for
+the Gulf, and it is not a pretty one.
+ Mr. Young. How many spills? How many spills?
+ Mr. Reilly. I don't know how many spills were associated
+with those, but if you look at that list in the report, if they
+weren't spills, they were near misses and close calls and
+enough to kill people, and there were fires.
+ Mr. Young. Just like driving down the street, slipping on
+the ice.
+ Mr. Reilly. I would like to say that again with respect to
+ice.
+ Mr. Young. Like driving down the street, slipping on the
+ice. There is going to be a chance. There is no fail-safe way
+to do anything.
+ Mr. Reilly. No. And it can be done better. As Senator
+Graham said, you cannot eliminate risk; you can reduce it
+significantly.
+ I would point out to you, Mr. Young, that--first of all,
+when you say what we really believe--what we really believe is
+in this report. And it is pretty detailed, and I think we have
+a lot of authority and documentation behind the recommendations
+and findings that are in here. So I actually would suggest that
+instead of interpreting comments made by Commissioners perhaps
+in an earlier time without this mission, you look at this as a
+definitive record of where we really stand.
+ And we are for offshore oil and gas development. We think
+it can be done safely. And we also specifically recommend
+against a moratorium in Alaska in the Arctic.
+ Mr. Young. And that means that you, in fact, want us to go
+forth?
+ Mr. Reilly. Yes, sir.
+ Mr. Young. Will you express that in your report? It doesn't
+say that.
+ Mr. Reilly. This Commission believes that we can go forward
+to drill in the offshore the Chukchi and Beaufort Seas, but it
+recommends a series of scientific analyses of Coast Guard
+search-and-rescue movements, of a range of activities that will
+have to be supplied--either by government or the industry--to
+ensure over the long term that it will be done safely. But we
+specifically say that should not be a barrier to moving
+forward.
+ Mr. Young. It does say, then, you are supporting Arctic
+drilling in the report?
+ Mr. Reilly. Yes, sir.
+ Mr. Young. I didn't read that. And if you do so, I wish you
+would explain that to the President.
+ Mr. Reilly. You said in your remarks that we recommended it
+be done with caution and that is certainly true. We have a
+distinctive set of challenges that are being presented there.
+ Mr. Young. That is what happens, though. We have the
+studies--for 40 years, we have been drilling in the Arctic,
+just not Prudhoe Bay. We had been drilling there when we had
+the PET-4, when we had the new line operation. We have been
+doing the drilling, and we have done the studies. We have done
+the work. And all of the sudden now we have that moratorium in
+place by someone that doesn't believe in fossil fuels.
+ You heard him last night on the Floor. He doesn't believe
+in fossil fuels. And I think it is wrong for this country. I
+want all forms of power, but all of the sudden, we have a
+Commission report I don't believe that really suggests we can
+do without a big long delay. But we will send the money
+overseas.
+ Mr. Chairman, my time is up.
+ The Chairman. Thank you very much.
+ Mr. Pallone from New Jersey.
+ Mr. Pallone. Thank you.
+ Thank you, Chairman Hastings and Ranking Member Markey, for
+having the hearing today.
+ The report in front of us today is clear in my opinion that
+we cannot drill safely off our shores under the current system
+and that our coastal communities need protection from
+untrustworthy big oil.
+ Only big oil will claim that they can drill safely and look
+to expand drilling in the wake of our country's worst
+environmental disaster and the finding of their systematic
+failures.
+ Now, since the Deepwater Horizon disaster, the President
+has reversed course and, thankfully, taken drilling in the
+Atlantic off the table, at least for the next five years, and I
+commend him for that action and believe we must make that
+policy permanent. Only then can we be safe from the greed of
+the oil industry.
+ Also, House Democrats passed the CLEAR Act to prevent
+another catastrophic spill, and at that time, my Republican
+colleagues opposed the legislation, saying we needed to wait
+for this Commission's report. Now that we have it, it is time
+to take action to prevent big oil from wreaking havoc on our
+environment, and that is why I introduced the No New Drilling
+Act to prevent the expansion of offshore drilling, which I
+believe must be the policy, at least until we can be certain
+another Deepwater Horizon incident will not happen again.
+ I represent a district along the Jersey Shore. I live along
+the Jersey Shore, as well. I have all my life. And one of the
+things I wanted to ask the two members of the panel is that I
+believe very strongly that the farther you go out and the
+deeper you are, the more dangerous it becomes. In arguing
+against the need for reform, the oil and gas industry likes to
+make the argument that the BP spill was like an outlier, and
+they point to the long history of drilling in the Gulf.
+ But in reality, isn't it true that the vast majority of the
+oil and gas industry's offshore drilling in the Gulf has been
+in shallow water where drilling is much less complicated than
+in the ultra-deep water where the Deepwater Horizon was
+operating? So, basically, as we go farther out--and certainly
+my understanding is that the Atlantic is strictly deep water,
+not in shallow water--the danger is greater, and that is even
+one more reason why the recommendations that you put forth are
+crucial. I am asking either of you if you could answer that
+question.
+ Mr. Graham. Well, the answer is clearly there is a
+relationship between the danger and risk the deeper you go. And
+it is also true that up until about 1990, virtually all of the
+drilling that had ever taken place in the Gulf of Mexico was in
+waters of less than 1,000 feet, which is the definition of
+shallow drilling, so that the circumstances have dramatically
+changed. And at the same time that the industry was developing
+a technology that can, frankly, only be analogized to the
+technology of the space program and its sophistication, there
+was an enormous burst of the offensive capability to drill in
+deeper areas. There was not a commensurate increase in the
+defensive capability to respond should there be an accident and
+to create the safety environment that would reduce the
+prospects, not to zero but to the degree possible, that there
+would not be accidents.
+ In the materials that have been distributed, there is a
+chart, which is called ``MMS Budget and Gulf of Mexico Crude
+Oil Production, 1984 to 2009.'' It is on page 73 of our report.
+And you can see the degree to which the production in the Gulf
+of Mexico has gone from being shallow water production now not
+only to deep water, but the greatest increase has been in what
+is described as ultra-deep water, where the risks are even more
+significant.
+ Mr. Pallone. Mr. Reilly, did you want to respond?
+ Mr. Reilly. No. just to reenforce what Senator Graham said,
+the formations are deeper in the deepwater. That is, they are
+well under even very often--certainly in the case of Macondo--
+they were down at 18,000 feet, which is 13,000 feet below the
+mud level. The formations are under much greater pressure,
+something up in the range of 30,000 pounds per square inch,
+which means all sorts of things in terms of the complexity of
+dealing with a well situation that also involves, of course,
+robots, which are the only way you can actually monitor and
+maintain and improve or repair technology down at that level.
+ So, for all of these reasons, it is a much more challenging
+enterprise. And that is why the industry in our view needs to
+improve its capacity, recognize that they are in a different
+era from the one that characterized shallow water drilling and
+establish the kind of safety institute we recommend.
+ Mr. Pallone. Thank you, gentlemen.
+ The Chairman. I thank the gentleman.
+ Mr. Lamborn from Colorado.
+ Mr. Lamborn. Thank you, Mr. Chairman.
+ I want to the thank both of the distinguished witnesses for
+being here today and giving your testimony.
+ You said earlier that you do not know why the blowout
+preventer did not work, and I am very concerned that you didn't
+even wait until you knew what the cause of it not working was
+before issuing your report.
+ Why didn't you wait until we knew why that blowout
+preventer didn't even work? Because that is a key element in
+this whole chain of events.
+ Mr. Reilly. Yes, sir. This was clear from the start, when
+the President created us with an executive order, he gave us a
+timetable of 6 months. In our early conversation with him, we
+made clear to him we didn't expect the blowout preventer to be
+pulled out before late August, which is about I think when it
+was taken up, and still hasn't been forensically analyzed. So
+it was always understood that the blowout preventer would not
+be a part of our report; we would not have access to it and not
+be able to make any judgments about it.
+ But the failure of the blowout preventer to work is itself
+known; as to specifically why it didn't work, that remains to
+be seen. I think all other aspects of this spill, though, were
+subject to our investigatory analysis, and we were able to make
+the judgments that give us confidence that we know what
+happened.
+ Mr. Lamborn. Thanks for that answer. I think you or the
+President should have had the patience to know why it didn't
+work, and your report would have been much more significant in
+my opinion had we had that information.
+ Mr. Reilly. As commissioners, we, sir, didn't have that
+option.
+ Mr. Lamborn. Second, in a Wall Street Journal editorial
+from two weeks ago, it states that not a single member of your
+Commission was a drilling engineer or an expert in oil
+exploration technology or practices. Don't you think that the
+Commission would have been improved had you had people with
+that kind of expert background on your board?
+ Mr. Graham. Frankly, I think that was a relevant question
+to ask in the summer of 2010. Today, we have submitted an
+almost 400-page report. We would like our competence to be
+judged on this report.
+ And if there are areas that you think demonstrate a lack of
+capacity to make the judgments that we did, we would be pleased
+to know what those are, and we would attempt to provide a
+response or an admission of our naivety.
+ I would say that I believe even if you took the most
+extreme explanation of why the blowout preventer failed to
+function, that doesn't trump the other nine factors that we
+have identified that were contributing causes to this.
+ So while I am curious to know what the BOP did, I don't
+think it would change the findings or the recommendations that
+we have made.
+ We certainly wouldn't withdraw our recommendations that the
+oil and gas industry should adopt, as the nuclear power
+industry has, some form of internal capability to assess
+safety.
+ We would not change our position that we need to have an
+effective, competent Federal agency that can oversee the
+industry.
+ We would not change our recommendation that that agency
+should be protected by independents within the Department of
+the Interior.
+ Those are our key safety recommendations, and I don't think
+there is any evidence that is going to come from the forensic
+examination that is currently going on at a NASA facility in
+New Orleans of the blowout preventer that would alter those
+recommendations.
+ Mr. Lamborn. Well, I will move on to my next question here.
+ In its undertaking of the investigation of the Deepwater
+Horizon incident, the National Academy of Engineering and the
+National Research Council announced that they would not be
+issuing their final report until it has been peer-reviewed,
+which is their standard practice for reports issued by the
+National Academies. Has your report been submitted for peer
+review to any other kind of body or experts or--
+ Mr. Graham. It is a public document, so it is not just
+submitted to peers, it is submitted to the American people for
+their comment and evaluation.
+ Mr. Reilly. I would just say that it has been pretty well
+reviewed and pretty well received and commented on by experts
+in the field.
+ And I also want to note that we say in our formal testimony
+that our senior technology and science advisor on this
+enterprise was Richard Sears, who has 33 years of experience,
+senior experience with Shell Oil, and he was present through
+all of our deliberations on technology.
+ And I would also like to acknowledge publicly, we had
+strong cooperation from industry, from three companies in
+particular that spent several hours with us--Chevron, Shell,
+and ExxonMobil--and cooperation, obviously, from the
+Departments of the government, from BOEMRE and Director
+Bromwich, and Secretary Salazar.
+ So I think we had a full range of input and plenty of
+opportunity on the part also of the scientific agencies, NOAA,
+the Coast Guard, to ensure that what we say is grounded in good
+science and respectable technology.
+ And I must say we have become a little impatient, Bob and
+I, with the criticisms of our competence, or the credentials of
+our Commissioners, which maybe was OK to raise 6 months ago,
+but the proof is here. If there is something wrong or if there
+are people who have objections to the findings or think they
+are wrong or to the recommendations, we would be very happy to
+debate on that point.
+ But it seems to me now a little churlish to refer back to
+the credentials without saying in some way how they are
+connected to the inadequacies in the report, which nobody seems
+to be doing.
+ Mr. Lamborn. Thank you.
+ The Chairman. Thank you.
+ Mr. Grijalva from Arizona.
+ Mr. Grijalva. Thank you, Mr. Chairman.
+ Gentlemen, if the current offshore policy is based on some
+similar assumptions, as I understand it, one was the blowout
+preventers actually worked. That was an assumption. The
+assumption was that the industry had the ability to contain
+spills. The assumptions were that spills offshore won't ever
+hit onshore. There was an assumption based that rigs are
+operated as safely as possible.
+ And I read through your report that brought into question
+those assumptions. So, as a result, just for both of you
+gentlemen, don't we have to rewrite our offshore policy based
+on the fact that we don't have assumptions we can make right
+now? Senator?
+ Mr. Graham. Well, I think some of the assumptions are that
+drilling in the offshore is going to be a continuing and
+increasing part of America's energy supply; number two, that
+its acceptability to the American people will be closely
+aligned with its safety.
+ You may recall that when Three Mile Island blew, almost 25
+percent of America's electricity was coming from nuclear power,
+and there was an expectation that that percentage was going to
+grow, maybe even to where France is, which is over 70 percent.
+But that one incident so chilled the public toward nuclear
+power, that we have had effectively a 30-year hiatus of any
+expansion. And therefore, the percentage of electricity from
+nuclear power is dramatically less than it was 30 years ago.
+ Now, whether the continued activities in the Gulf, more
+Macondos, could have the same effect as Three Mile Island, as a
+singular event had on the nuclear power industry, we can all
+speculate. But I think it is in everybody's interest that we
+conduct this industry to the highest standards.
+ Would anyone answer the question, why should drilling for
+offshore oil in the Gulf of Mexico be at a lower standard of
+safety and environmental protection than it is in the North
+Sea? If there is some explanation as a matter of public policy,
+why we should accept a lower standard, then I think we could
+have a very good debate. No one has come forward making that
+assertion.
+ Mr. Grijalva. The other point I think you called the
+liability cap arbitrary in the report. The question is, lifting
+the cap entirely as a means to assure that the taxpayer doesn't
+get stuck with any bill beyond the cap; and two, as incentive
+to meet the highest standards that the Senator just mentioned
+for drilling, any reactions to no cap at all on liability?
+ Mr. Graham. We have recommended that the cap be lifted. We
+did not go beyond that. Clearly the $75 million cap, which is
+now 21-years old, just this year the change in the value of
+money as a result of inflation over 21 years would cause you to
+believe that 75 million was not adequate. Second, as Bill
+pointed out, when that cap was established, virtually all of
+our offshore drilling was in known, comparatively safe, low-
+pressure areas. And today the largest share of our drilling is
+in much riskier, deeper water.
+ Now, I am now going beyond what the Commission recommended
+and just saying my own feeling is that if we have liability
+caps, the rationale is to maintain a competitive marketplace in
+the Gulf of Mexico, that we don't want only the largest oil
+companies in the world to be able to drill, but we also don't
+want to have financially incapable companies causing enormous
+consequences.
+ So that would lead me to feel that the Congress might be
+able to fashion a policy built around liability limits in
+relationship to risk. It is one thing to have a liability limit
+for 100 feet of water than 18,000 feet of water. Today, the law
+applies the same standard to both of those two cases.
+ Mr. Reilly. I would just add if I might, Congressman, that
+the establishment of some kind of liability cap that both
+ensures a continuing capacity of independence to operate in the
+Gulf, that doesn't just restrict to leasing or bidding to a few
+majors, but also protects the public against being handed a
+bill for major damages caused is something that is going to
+take more time than we had in the 6 months and probably more
+involvement of the insurance industry, since I assume an
+insurance consortium of some sort would be necessary to address
+this.
+ I also would note that the liability cap in Canada is $35
+million. I think it is 50 million pounds in Britain. And it
+does strike me, too, that particularly with respect to those
+resources, such as the Gulf and the Arctic, where other
+countries' activities are also involved, there might be some
+merit in trying to work out a uniform system of liability which
+applies systematically to all oil and gas development in these
+areas.
+ Mr. Grijalva. Thank you, Mr. Chairman.
+ The Chairman. Mr. Fleming from Louisiana.
+ Dr. Fleming. Thank you, Mr. Chairman.
+ And thank you, panel members, for being here today and your
+service. This was, no question about it, a disaster. And like
+any disaster, even though we don't know the precise cause of
+the blowout, we do know some things happened that are typical
+of disasters.
+ Because this is a high-risk operation, much like many other
+things we do, travel in space, flying in airplanes, rarely is
+one thing the cause of the disaster. It is usually a number of
+different situations and occurrences and bad decisions that
+align themselves which probably over time have occurred, but
+because of some backup or redundancy, the disaster was
+prevented. And that can sometimes be a bad thing because what
+happens is we become, in your words complacent. If I make a
+mistake, there is a backup system that will solve that problem
+for me. And obviously that is something that on the industry
+side and on the government side we need to bear in mind going
+forward.
+ But it was a disaster to Louisiana, my home State, in two
+ways: One, to our ecology, no question about it; but maybe even
+worse and longer term in jobs. Louisiana has now lost tens of
+thousands of jobs. Because these rigs are so expensive, they
+have left our shores in some cases, and more will come, to go
+to Brazil and Africa and other places.
+ And you know what is interesting is that they are going to
+other parts of the world that have less standards than we do.
+So I think that is a real issue we need to look at.
+ Now, the President lifted the moratorium, and I have been
+researching this. I cannot find one single permit for deepwater
+drilling that has been issued since the lifting of the
+moratorium, and we don't know when they ever will.
+ So what I am concerned about and I would like to have your
+reaction to this, I see recommendations for more legislation,
+but I think we need to be careful about just moving the chairs
+on the deck. For one thing, we are asking NOAA to sign off on
+things, and that is a good thing. But is that going to make the
+permit process even slower and more difficult?
+ So I would love to have the reaction from both you
+gentlemen. Is this really going to get us where we need to be,
+and how is this going to affect the jobs, which are so
+desperately needed, and, finally, the price of gasoline and oil
+that is going up because of the loss in supply?
+ Mr. Reilly. I would say two things. I would agree with you
+completely to the degree that we restrict our own domestic
+production, we are essentially, given our demand on supply,
+intending to get more oil and gas from risky places, like the
+Niger Delta or Venezuela. That is a given. And I think we have
+to take an international perspective on the whole issue and
+also recognize that the environment in those places counts,
+too, and it has been very badly abused, particularly in the
+Niger Delta; some 2,500 accidents over the last 10 years. That
+is a perfectly fair point, and I think it is one that ought to
+underlie our approach to many of these questions.
+ With respect to the moratorium itself, Senator Graham and I
+were pretty specific early on. We did not understand it,
+thought that it was excessive and considered that a more
+selective approach that did not penalize those companies with
+good records, particularly after they had once been inspected,
+as they all were in the weeks following the Macondo disaster.
+Once those few infractions that were found were corrected for,
+it struck us that it would have been reasonable to resume
+drilling at that time. But that has not happened.
+ I would say that going forward, to the degree that we
+continue to under-staff, under-prepare, under-reform, and
+under-finance the regulatory agency, we probably are going to
+find that it is more reluctant to issue permits, less confident
+about signing a name to a permit, and less able to get us back
+into business.
+ Mr. Fleming. Senator, do you have a response?
+ Mr. Graham. I would just add that what Bill said at the end
+happens to be the position of the major petroleum companies in
+Great Britain, that they actually affirmatively support a
+strong, well-financed, competent regulator as a key part of
+their ability to do their business. I believe they are right,
+and I hope that we will come to the same conclusion as to the
+industry here in the United States.
+ Mr. Fleming. Can I get a commitment from you gentlemen--and
+Mr. Reilly has already suggested that the President not only
+lift the official moratorium, but actually allow permits--
+should we do away with what we have now, which is a de facto
+moratorium? Would you both agree that the President should move
+forward and begin to allow the issuance of permits?
+ Mr. Graham. As I understand it, there is a news story today
+that states the reason--or at least a primary reason for the
+delay in issuing permits for those rigs that have met the
+individual standards, rig by rig--is that the industry has not
+demonstrated that it has the capability to respond and contain
+such an event or, if it does, those standards have not yet been
+incorporated in the permit applications.
+ If that is the case, that actually, in my judgment, is a
+positive signal that we are now down to essentially one issue.
+And there also is some indication that the ability to meet that
+standard of adequate response and containment is near an end.
+ The Chairman. I thank the gentleman. Mr. Boren of Oklahoma.
+ Mr. Boren. Thank you, Mr. Chairman. I want to thank the
+members of the Commission for being here today and for your
+work. Thank you, Mr. Reilly, Senator Graham. It was mentioned
+earlier that there was some question about the qualifications
+of the Commission. I want to say that I have a high regard for
+the members of the Commission. Senator Graham--Chairman Graham
+of the Intelligence Committee, you and my father were chair of
+the Intelligence Committee about the same time, and we have a
+warm regard for you and your work. So I want to thank you for
+your service. I want to touch on a couple of things that were,
+you know, in this book that we have here before us. I think a
+vast majority of the recommendations--actually, a lot of the
+industry would say that they don't really have a problem with.
+You know, you are listening to someone who is a big supporter
+of the oil and gas industry coming from Oklahoma.
+ But some of the verbiage, sometimes even just the words,
+just to pick out of the report, I kind of have some concerns
+about. One was the use of the term ``systemic,'' that there are
+these systemic problems in the industry. And if you look at the
+30-year history, you know, over the last 30 years, the history
+of offshore oil and gas production, there have been some
+incidents but I think a major incident is very rare. And if you
+compare it with, you know, the airline industry or the commuter
+train industry or any other industry, the oil and gas industry
+has done quite a good job. The last few years, we have seen
+documentaries like ``Gasland'' on hydraulic fracturing. A lot
+of this that is out there is driven by a motion. It really
+isn't driven by facts or science. And so I am really concerned.
+The rhetoric, even the State of the Union last night, about,
+oh, these oil and gas companies are making all this money.
+Let's throw some more taxes on them. There are a lot of good
+quality jobs that are created in States like Oklahoma,
+Louisiana, all across this country, and they want to do the
+right thing. They want to do the right thing for the
+environment, as do most Americans.
+ I do have one question about the CLEAR Act legislation that
+was brought out earlier about the cap on liability. And I have
+a lot of independent oil and gas producers in Oklahoma that
+have this question. We have been talking quite a bit about
+this. But given such liability requirements, did your staff or
+the Commission ask the insurance industry if any independent
+operators would be able to obtain an insurance policy under
+such guidelines or circumstances? And the reason why I ask that
+question is, I am worried--and you kind of touched on this
+earlier with Mr. Grijalva. If we only have one or two
+companies, U.S. companies that do the drilling, we are going to
+have the Chinese be the only folks that can drill these wells.
+I would like to see--I am not talking about a mom and pop
+company.
+ I am talking about, you know, Devon Energy is a huge
+company in Oklahoma, but it is not as large as some of the big
+majors. These are thousands of employees. They are very well
+capitalized. These are types of companies that could do this
+drilling without any problem. Are you all worried about that?
+And did you talk to the insurance industry about whether or not
+these smaller companies could, in fact, do this?
+ Mr. Reilly. We are worried about it, and it is why we did
+not select a number with respect to an increase. We said it
+should be increased but we didn't say how much. And we knew
+that it would require insurance company consultation and advice
+and help and didn't, frankly, have time to get it. So we did
+not meet with the insurance industry on the liability cap. But
+for all the reasons you mention, and our own sense that it is a
+valued contribution that independent operators make to the
+economy, to the culture, to the industry in the Gulf, we did
+not want to make an irresponsible choice without adequate
+information that might, in any way, inhibit their activities,
+or possibly even cause them to move to other jurisdictions
+where their liability cap is lower even than it is in the
+United States.
+ Mr. Boren. Senator, do you have the same opinion?
+ Mr. Graham. I would agree with that statement. We tried to
+operate within our areas of confidence. So the specific
+recommendations we made, we are prepared to defend them. Where
+an issue was outside of what we thought was our regional
+component, such as the role of insurance companies in
+determining the liability cap and how the role of insurance
+companies might be a means of giving some assurance that we
+would not be limited to just a handful of companies. We didn't
+feel competent to comment on that. We did feel that on its
+face, the $75 million liability cap across the board for
+activities that are as divergently risky as shallow and ultra-
+deep water needed to be lifted and re-examined.
+ We also were aware that the Congress is going to make that
+ultimate decision, and we did not feel that we had anything
+additional to add to your consideration of that.
+ Mr. Reilly. Mr. Boren, if I could add, I knew your dad too.
+I served in the EL Corporation with him for 6 years. And I know
+your district some. I serve on the board of an oil company who,
+half of which used to be based, headquartered in Bartlesville.
+And the senior executives there--
+ Mr. Boren. ConocoPhillips?
+ Mr. Reilly. Yes, sir.
+ Mr. Boren. OK. Great.
+ Mr. Reilly. --are stung by the use of the term
+``systemic,'' and yet are perfectly willing to acknowledge they
+didn't see this coming and weren't prepared for it, didn't
+think it could happen, and had a response plan which the
+Chairman acknowledged was embarrassing to him because it had
+the same characteristics as the other response plans.
+ So I would just say, we do not by any means intend to
+disparage the safety or environmental standards of some of our
+leading iconic oil and gas companies, whether the majors or the
+independents. But the facts, I think, speak for themselves with
+respect to this particular disaster. And they led us to report
+all we did.
+ The Chairman. Thank you, Mr. Chairman. Mr. McClintock,
+California.
+ Mr. McClintock. Gentlemen, thank you for being here today.
+When the Challenger exploded, we knew only one thing for sure
+after the accident. We knew that the launch vehicle had failed
+catastrophically. The Rogers Commission was impaneled. It was
+filled with technical experts. It painstakingly recovered the
+wreckage from underneath the ocean. It reassembled that
+wreckage. It then determined the precise cause of the disaster,
+and it then recommended changes so that the space program could
+move forward.
+ The one thing we know for sure in this disaster was that
+the blowout preventer failed. Let me ask you quite directly,
+did you determine why the blowout preventer failed?
+ Mr. Graham. The answer is ``no'' for the reasons that we
+have given.
+ Mr. McClintock. Did you look?
+ Mr. Graham. Can I finish answering the question?
+ Mr. McClintock. It is a yes-or-no question. It is my time,
+Senator. It is limited. So please. Did you even look at the
+blowout preventer?
+ Mr. Graham. No.
+ Mr. Reilly. Most of the time we were at work, we would have
+taken a robot to go down and get us there.
+ Mr. McClintock. Well, let me read you The Wall Street
+Journal that took you apart for ideological bias, for a lack of
+expertise, credibility, lack of thoroughness. And this is what
+they said, Unable to name what definitely caused the well
+failure, the Commission resorts to a hodgepodge of speculation.
+Adding to the confusion, it acknowledges it could find no
+evidence that BP or its contractors consciously chose a riskier
+alternative. And so forth.
+ The Commission didn't even wait to get an autopsy of the
+failed blowout preventer--and again, this is coming directly
+from The Wall Street Journal--which is rusting on a Louisiana
+dock. Why should we take your report seriously if you have not
+even made that modicum of effort to determine the actual cause
+of the disaster?
+ Mr. Graham. Well, as Mr. Reilly said to an earlier
+question, we had a Presidential 6-month charter. We knew early
+on that that charter was going to run out before the forensic
+examination of the--
+ Mr. McClintock. Did you ask for an extension of your
+deadline?
+ Mr. Graham. We did not.
+ Mr. McClintock. So you just participated in a rush to
+judgment without even looking at the cause of the failure that
+created this entire disaster?
+ Mr. Graham. Well, I would just direct your attention to
+page 125 of our report which lists the nine steps that we
+assessed that contributed and cascaded.
+ Mr. McClintock. I understand that. But that would be like
+the Rogers Commission issuing its report without looking at any
+of the wreckage--
+ Mr. Reilly. Congress, the cementing failed. The cement job
+failed to contain the well free from hydrocarbons. We said
+that. Is that not enough?
+ Mr. McClintock. Let me get to the question of ideological
+bias because this is also an indictment in The Wall Street
+Journal editorial. They said, The conclusions in your report
+were, ``all too predictable given the political history of
+Commission members. Former Democratic Senator Bob Graham fought
+drilling off Florida. William Reilly is the former head of the
+anti-drilling World Wildlife Fund, and Frances Beinecke ran the
+Natural Resources Defense Council, which is opposed to carbon
+fuels. Not a single member was a drilling engineer or expert in
+oil exploration technology or practices.'' Why should we take
+you seriously?
+ Mr. Reilly. Congressman, I would just say the use of the
+word ``predictable'' is surprising to me because what was
+predictable in the view of The Wall Street Journal when they
+wrote their first critical editorial was that we would
+recommend against future offshore oil and gas development,
+which we very definitively did not.
+ Mr. McClintock. You are recommending a whole new level of
+bureaucracy on top of an obviously already failed bureaucracy
+with the obvious aim of indefinitely delaying of the production
+of our Nation's energy reserves. What is the economic damage
+caused by this disaster? Do we have a figure on that yet?
+ Mr. Reilly. We know it is in the tens of billions.
+ Mr. McClintock. I have an estimate here of a worst-case and
+base-case analysis of the economic damage caused by the
+moratorium, and it runs from $279 billion all the way up to
+$341 billion.
+ Mr. Reilly. Billion?
+ Mr. McClintock. Billion, I believe.
+ Mr. Reilly. I haven't seen those numbers before, sir.
+ Mr. Graham. Could we have an opportunity to evaluate those
+numbers?
+ Mr. McClintock. Absolutely. Absolutely.
+ Mr. Reilly. I would only say, with respect to the
+bureaucracy question, I made clear in my opening statement, I
+think that--and certainly the report goes into detail on this--
+that the reorganization of the Interior Department should be
+cost-free. We do want to segregate the leasing, the revenue
+generating, and managing functions from the environment and
+safety regulation. That is a matter of straightforward
+reorganization.
+ Second, the degree to which we add anything is intended to
+provide more capability, more expertise, more professionalism
+in an agency that then I would fully expect, based on my own
+history at the Environmental Protection Agency, of facilitating
+more confident permitting and a better regulatory oversight of
+the industry. I don't think that it would work to delay. I
+think it would work to improve and create more efficiency in
+the relationship between the regulator and the industry.
+ The Chairman. Mr. Lujan from New Mexico.
+ Mr. Lujn. Mr. Chairman, thank you very much. And I know
+this important hearing is going to outlie the recommendations
+to prevent another Deepwater Horizon disaster from happening
+again, which is why I think we are here. It is not to debate
+whether one supports or opposes offshore drilling. It is to
+make sure that we don't let this happen again, and that we all
+understand the roles that we have to play to get there.
+ And I want to thank the Commission for the work that they
+did because this was a tough job, and you have a tough set of
+circumstances with many critics. Many of us being those critics
+as well. And I hope that we truly listen closely to your
+recommendations and that we see what we can do to find common
+ground to be able to get to that point.
+ By the time this Committee had convened last year to hear
+testimony from BP executives, it had already become clear what
+led to the Deepwater Horizon explosion was the culmination of
+systemic failures. It was the failure of companies who
+knowingly refused to implement the necessary safeguards to
+prevent this disaster, and it was a failure of governmental
+policies and regulators that did not apply the proper oversight
+to minimize the risk of the disaster. BP has shown itself to be
+negligent in safety violations and environmental protections.
+ We should not forget what happened in 2005 with the
+explosion in Texas and the lives that were lost, 15 people.
+200,000 gallons of crude oil and a pipeline that ruptured in
+northern Alaska. These are real incidents.
+ But what is most significant about the Commission's report
+is that it reveals the culture of undermining safety standards.
+It is not just an issue for BP, but an epidemic failure facing
+the entire offshore drilling industry. Quoting directly from
+the report, ``The blowout was not the product of decisions made
+by a rogue industry or government officials. Rather, the root
+causes are systemic, and absent significant reform in both
+industry practices and government policies, might well recur.
+ The Bipartisan Commissions report only confirms that
+Congress must take action, do our part to prevent the disasters
+like this from happening again. During the 111th Congress, this
+Committee put in a lot of work to develop safeguards that would
+modernize safety and environmental protections for Federal
+offshore leasing programs in the CLEAR Act. Many expressed an
+interest to see the report before we moved forward.
+ We now have that report. And as we hear from witnesses of
+the Bipartisan Commission today, we have to ask ourselves, What
+are we going to do? What is our role as Congress to make sure
+this never happens again? Are we going to sit back and allow a
+failed system to continue? We cannot turn a blind eye on this
+issue. The Commission's report clearly outlines that Congress
+needs to act quickly to protect the safety of people, the
+welfare and livelihoods of communities, and the habitat of
+fragile wildlife.
+ Only 7 months ago, we saw the horrific images of the
+explosion that killed workers, the plumes of oil that
+devastated marine life, local seafood industries, vulnerable
+wetlands, and the waters of the Gulf. Over 205 million gallons
+of oil were spilled in the Gulf because of the Deepwater
+Horizon spill. Let us never forget the people who were impacted
+and the families who lost so many of their loved ones.
+ It is in everyone's best interest, including industry, to
+not let this happen again, and to truly understand the
+responsibility that we all have to do our part to prevent that.
+ The first question I have is a yes-or-no question. We also
+learned during the spill how woefully under-prepared the
+Federal Government was to estimate the actual flow rate of oil
+spewing from the well. In fact, the Federal response was
+initially entirely dependent on misleading flow rate estimates
+provided by BP, which had every reason to low-ball them because
+we knew that the liability was tied to the calculations on a
+per-barrel basis.
+ The legislation Democrats introduced today creates a
+permanent scientific group which includes scientists from the
+National Laboratories in the Department of Energy that will
+maintain expertise needed to estimate flow rates. Is this
+consistent with your recommendation?
+ Mr. Reilly. It is consistent. Yes, it is. We determined
+that one consequence of the structure of our laws is that the
+responsible party takes the lead in overseeing response, and we
+want to keep liability fixed there. But one part of it which
+government should have independent capability to carry out is
+determination of the flow rate and the USGS Director, Marcia
+McNutt, has now said that will not be an issue next time.
+ Mr. Lujn. And one last question, Mr. Chairman, to get on
+the record and we can get this answered later is, the report
+reveals that the cause of the spill was corporate
+mismanagement, inadequate government regulation, and a lack of
+political will to ensure proper oversight of the offshore oil
+industry as they pushed offshore drilling into deeper waters.
+You describe in the report that this problem is pervasive
+across the entire offshore drilling industry. So my question
+is: What will be the consequences if reforms fail to be
+prioritized, including the passage of proper legislation to
+minimize the chances of a disaster like this from ever
+happening again.
+ And Mr. Chairman, I know we are going to run out of time. I
+want to be respectful of the other members. So we could ask the
+witnesses, Senator, to maybe send those back to us because I
+think that there is a very thoughtful answer that we need as a
+part of that. Thank you, sir. Thank you, Mr. Chairman. I yield
+back.
+ The Chairman. I thank the gentleman. Mr. Fleischmann of
+Tennessee.
+ Mr. Fleischmann. Thank you, Mr. Chairman. Gentlemen, thank
+you for being here today. It is a privilege. In addition to
+serving on this distinguished Committee, I also serve on the
+Small Business Committee. And my first question to you all in
+this group is in this regard.
+ Gentlemen, what would you all say to the owners of the
+small businesses in this region struggling to survive until
+operations are restored in the Gulf? These people have lost
+most of their revenue streams, if not all of their revenue
+streams. They have made extraordinary personal and professional
+sacrifices to retain their employees and to preserve their
+businesses. But they cannot hold on indefinitely. I would like
+you all to address that, please.
+ Mr. Graham. Well, of course, what you just described
+describes a number of the industries that are dependent on the
+Gulf. There were thousands of fishermen who lost their ability
+to acquire their income and there was a degradation of the
+brand of Gulf seafood, a 20 percent to 30 percent drop almost
+overnight in the consumption of Gulf seafood which has not yet
+been overcome. We make some specific recommendations on that
+subject. The tourism industry, which depends upon people's
+feeling that they are going to go to a place that is clean and
+healthy and enjoyable.
+ It also suffered tremendous damage. So the consequences of
+an event like this have rippling effects. Mr. Reilly has
+described the fact that we believe that there needs to be a
+safe industry, that there can be a safe industry but that there
+needs to be an offshore oil industry in order to meet the
+energy requirements of the United States. And we sympathize
+with all the small business, whether they be fishermen,
+restaurant owners, or suppliers to the oil and gas industry.
+And we hope that we can get back in business as rapidly as
+possible with the safety measures that will protect all of
+those interests.
+ Mr. Fleischmann. Thank you. Mr. Reilly.
+ Mr. Reilly. Congressman, I don't know if you have had this
+experience. But I ordered some oysters in New York some time in
+September, I think, and asked whether they were from the Gulf,
+and was reassured very confidently by the waitress, no, we
+would not serve any seafood from the Gulf. That problem
+persisted through the fall. I understand it has not entirely
+disappeared now. People continue, the seafood processors, the
+fishermen to suffer because of that. I remember talking to the
+Governor just around Memorial Day, the Governor of Mississippi,
+who told me that there wasn't any oil within 60 miles of the
+beaches of Mississippi but there was 30 percent occupancy in
+what is usually the most important vacation tourism weekend of
+the year in Mississippi. Those stories and the Europeans
+canceling trips to Key West where the oil never approached are
+very poignant stories. The Vietnamese fishermen I think
+impressed me more than those of any other in my experience when
+I was in the Gulf. And we had hearings. Our first hearing was
+in New Orleans. We became very familiar with the problems you
+describe, and they are as serious as you say.
+ Mr. Fleischmann. Thank you, gentlemen. I have a follow-up
+question. In a lot of the additional fees and proposed taxes on
+industry, what would the total government take-away be,
+including royalties, severance taxes, property taxes, income
+taxes, lease bonuses, and the proposed additional fees and
+taxes mentioned in the report?
+ Mr. Reilly. I don't think we have costed those numbers in
+total. The only thing I would say is that it is really
+important to keep in perspective the amount of revenues the
+government takes in from offshore oil and gas development,
+anywhere from $6 billion to $8 billion in one year up to, I
+think, $18 billion in 2008. It is the second largest revenue
+generator after the IRS, and we can afford to spend some very
+small proportion of that which would be in dollar numbers
+reasonably significant, ensuring that it is better done and
+that it has been done by the government.
+ Mr. Graham. According to the chart which appears on page 73
+of our report, in the year 1984, the budget of the MMS was
+approximately $250 million. And in the year 2009, it was
+something south of 200. At the same time, the industry, as the
+same chart displays, has moved from being a relatively well-
+known shallow water industry to increasingly a deepwater, high-
+risk industry. You would have thought that the lines of cost of
+effective regulation would have coincided with the increased
+risk. So I can't tell you exactly what the number is, but it
+would be hard to justify what appears to be about a $60 million
+to $70 million a year reduction in the capability of the
+regulatory agencies at the time the industry is going into more
+risky areas.
+ Mr. Fleischmann. Thank you, Senator.
+ The Chairman. Dr. Christensen.
+ Mrs. Christensen. Thank you, Mr. Chairman. And I want to
+thank our panelists for being here. I too want to commend you
+and the broad array of contributors to this very comprehensive
+report. And among the many areas of concern, I too have to say
+that I could never understand why the U.S. permitting standards
+were lower than other countries and specifically lower than the
+U.K., if I remember correctly, where BP is actually based.
+ Ours should be the highest in the world. And I also want to
+support, before I get to my question, Senator Graham's response
+on the moratorium. Because according to my reports, the
+Department of the Interior, since June of last year, has
+approved 28 permits to drill offshore in shallow water of 500
+feet or less, and there are only four or five shallow water
+permits currently pending. On deepwater drilling, the
+moratorium was lifted on October 12, and gas operators have to
+comply with new regulations to show that they have a strategy
+in place to actually contain a bailout. According to the
+Interior Department, thus far, no one has been able to
+demonstrate that actually, although I know that they are
+working on it, and that is the holdup--not the Department, but
+the fact that the companies are not able to respond adequately
+at this time. The good news though is that according to the
+Department, some companies are getting close, as you said, to
+being able to demonstrate that ability, and I do share the
+majority's hope that this can happen as quickly as possible.
+ My first question, if I can get to it, I wanted to follow
+up on Mr. Boren's question. In saying that a systemic failure
+occurred, did you mean systemic in this case, of the three
+companies in their management of the Deepwater Horizon drilling
+and MMS? Or did you mean to apply it to the entire industry and
+say that the entire industry has been complacent? So I just
+want to understand what you meant by systemic?
+ Mr. Graham. Well, we did not mean parity, that is that all
+companies were equally subjected to this culture of
+complacency. In fact, there are some companies that have a very
+strong record. What we meant to say was that there was evidence
+that the industry had not responded to the recognition that
+there were some outlier companies that needed to be sanctioned.
+You are a medical physician. If there were a physician in the
+U.S. Virgin Islands who was known by the other physicians to be
+performing at a rate that put people's lives at risk, I would
+assume it would be your professional responsibility to bring
+that to the attention of someone in authority. Well, we do not
+feel that the industry carried out its obligation for self-
+policing and, thus, in part, the recommendation for the INPO-
+type organization.
+ Second, the example of response. Response is an industry-
+wide obligation. We don't expect every company to have all the
+equipment that is necessary to respond, but we expect the
+industry at large to have the capacity to respond, and it was
+clear that not only was there not that capacity, but that there
+had been relatively little investment in the technology or
+research and development, the understanding of the environment
+that would have put them in a position to have produced a
+response.
+ Mr. Reilly. I will just comment on your point about the
+U.K. experience. We have discovered--and, of course, in our
+research that companies and industries get serious about
+reforming practices and improving them when they have their
+catastrophe. The U.K. had a very serious catastrophe. It cost
+187 lives in 1989, Piper Alpha. Our chief counsel was
+intimately involved in investigating that accident. It was
+after that that the regulator separated revenues from
+regulation, just as we are proposing here. And it was after
+that that they developed a different mode of regulation which
+is known as the Safety Case where the particular risks that are
+likely to be entailed in a particular well situation--that is,
+with acknowledgement of the formation, the depth, the pressures
+and all the rest, be explained by the company and the way in
+which the company proposes to address those risks, he made
+clear to the regulator. That is their system now.
+ Norway has a similar system and they came to it after their
+catastrophe. Australia today, dealing with a blowout that
+occurred last year, has had a commission of inquiry, and they
+are reforming their own practices.
+ Mrs. Christensen. Are you seeing that happening now?
+ Mr. Reilly. We know that the industry is very seriously
+examining the possibility and the practical challenges to
+creating the safety institute of the sort we recommend. We very
+much look forward to having the results of those inquiries, and
+we very much hope that they will do something along the lines
+that we have recommended. We think that it is very possible
+that they will. We certainly know that several CEOs of major
+companies take it seriously.
+ Mrs. Christensen. Thank you.
+ The Chairman. I thank the gentlelady. Mr. Coffman of
+Colorado.
+ Mr. Coffman. Thank you, Mr. Chairman. First of all, thank
+you so much for your work and what you have accomplished. I
+think you mentioned some things that need to be done from your
+perspective, some kind of international agreement so there are
+uniform standards. I think you talked about responsibility to a
+spill or an accident if it occurs, having a better definition
+of that. And perhaps some insurance requirements for viewing
+that, liability issues. And I think what I am hearing from you
+is that in terms of prevention--so the two aspects. One is
+responding and the other one is prevention.
+ So in terms of prevention, I guess my question to you is,
+did adequate regulations exist? But was it merely the
+enforcement of the regulations that was a problem? Because
+certainly we know that MMS had very significant problems. I
+think there was an IG report in 2008 that talks about how
+dysfunctional MMS was, and I think that we heard in this
+situation here how the inspection simply didn't occur in the
+manner that they were prescribed and were supposed to occur.
+ So sometimes we have problems I think where we actually
+have laws on the books, regulations on the books but they are
+simply not being enforced. So I think that when we look at what
+is now the Bureau of Ocean and Energy Management, Regulation
+and Enforcement that, Mr. Reilly, you know, it is reported that
+you yourself said that personnel working for this agency are
+``often badly trained.''
+ Secretary Salazar has said that he has already considered
+and executed some of the suggestions that your report has
+highlighted. Hopefully effective training and a cultural shift
+at his organization were implemented as well.
+ Do you believe that these reforms, among the others that
+Secretary Salazar has said to have made, would have been
+sufficient to correct the missteps that were made by MMS prior
+to enduring the cleanup of the Deepwater Horizon spill? Let's
+just go into the prevention. I mean, if, in fact, we had a
+functional regulatory organization that was enforcing the
+existing rules, would that have been adequate to prevent the
+incident that occurred?
+ Mr. Reilly. Let me say, I think that the recommendations in
+the new policies for scripted regulations that the Secretary
+and the BOEMRE's Director Bromwich have imposed are very
+desirable and likely to be effective. Negative pressure tests
+are now prescribed. They were not before. There are a whole
+range of new requirements that appear to us to make sense. But
+the reality is that the existing personnel complement entails
+an inspector for every 55 rigs. In California, it is one for
+every six. The answers given to a series of interrogatories of
+questions posed by the Interior Department, and the Coast Guard
+in their investigations make clear that basic petrochemical
+technologies, oil and gas technologies, like cementing and
+centralizing negative pressure tests, are not really
+understood, are not mastered by many of the inspectors who have
+said, frankly, that they take industry's lead on those
+technologies, that they have been evolving over time.
+ And we simply have to provide better formation, better
+training, and I think better compensation for the people who
+are conducting that work. So even if today the regulations are
+sufficient to guard against the repetition of this set of
+problems, I worry that in a fast evolving industry in 3 to 5
+years, they may be outdated. And in order to keep them up to
+date, I think we are going to have to bring up the game among
+the professionals at the agency.
+ Mr. Coffman. Senator Graham.
+ Mr. Graham. Yes. I would agree with that. And I believe
+that our recommendations, such as the independence of the
+safety function within the Department of the Interior, are as
+important as the decisions that Congress made a number of years
+ago to make the FBI a quasi-independent agency within the
+Department of Justice. Just like the FBI, the safety function
+within the Department of the Interior is susceptible to
+political interference. And in fact, in the case of MMS, it was
+rampant interference. And we think that it is a combination of
+good regulations, competent capacity, adequate capacity, and
+then insulation from inappropriate external influences that are
+all part of what is necessary to get us up to world-class
+standards of safety in this industry.
+ Mr. Coffman. Thank you, Mr. Chairman. I yield back.
+ The Chairman. The time of the gentleman has expired. Mr.
+Sarbanes of Maryland.
+ Mr. Sarbanes. Thank you very much, Mr. Chairman. Thank you
+all for being here. I know it has been a long day.
+ I first wanted to commend you on the report. I haven't had
+a chance to read it from beginning to end, but I did look at a
+summary. And I think your recommendations based on the findings
+you have made are very, very helpful and will be for a lot of
+us going forward.
+ My understanding, you have gotten some criticism about
+whether you had everything in front of you, whether you had the
+blowout preventer and so forth. But as I look at the
+recommendations, they seem to me all to be confined to a kind
+that you could make with a lot of confidence without having
+that extra piece of information at your disposal. It doesn't
+strike me that anything about your recommendations will be
+changed in any kind of significant way based on other
+information that comes forward because you have really derived
+it from what you saw before you.
+ There was also a comment about your recommending layering
+another bureaucracy on top of a failed bureaucracy. But as I,
+again, read your recommendations, I think what you are doing is
+suggesting a reasonable set of regulatory oversight which in
+many ways will substitute for what has been a failed
+bureaucracy.
+ On the issue of bureaucracy, I will ask you to respond to a
+proposal. This is something I suggested in earlier iterations
+of legislation suggesting the oil spill. It was a provision
+that we tried to include in the CLEAR Act. And this would be a
+requirement that the CEO of these corporations, these companies
+would certify--personally certify with the potential for
+liability to the adequacy and safety of the response plan, for
+example. You talked about, and many have alluded to how these
+response plans that were developed really across industry. It
+was highlighted in BP's particular oil spill response plan but
+were wholly inadequate.
+ So I would like you to speak to whether you think we ought
+to give meaningful consideration, as I would like to see, to a
+requirement on the part of the corporate CEO to certify that
+these plans are, in fact, good plans and that they have done
+due diligence in creating those plans. And you could do more in
+terms of changing the culture of those companies with that one
+sort of piece of leverage than a whole new bureaucracy could
+do. So if you could speak to that, I would appreciate it.
+ Mr. Reilly. My own sense is that the way such
+certifications would occur practically is the head of offshore
+or North America would sign a certification. The chief
+financial officer might sign a certification. The chief safety
+and environment vice president would sign a certification. And
+if all of those signatures were present, then the CEO would
+sign. And I don't know that it would enhance the liability
+assignment that you would like to see.
+ It might, from a personal point of view, more closely
+involve, more intimately include a CEO in a decision that is
+made; but as Mr. Hayward said, he didn't know anything about
+the problems that characterized that well situation. He did not
+know that it had been a troublesome well. He hadn't been
+particularly involved in making decisions for it or apparently
+didn't even know that it was coming in late. It is a very large
+company. So I am not confident myself, based on my own
+experience with boards of directors, that that would contribute
+that much positively to safety, frankly.
+ Mr. Sarbanes. Do you think he would have bothered to know
+more if he had been required to personally certify the safety
+and adequacy of these plans?
+ Mr. Reilly. Well, he would have probably have had to sign
+scores and scores of certifications without any individual
+personal knowledge of the degree to which the characteristics
+of the well situations were familiar to him. And so, I have
+reservations about that particular recommendation. I had a
+conversation with Mr. Waxman about it. I know that it was
+strongly supported on the part of the Committee. But from my
+point of view--it is not that common in other high-risk
+industries either to try to fix the responsibility at the very
+top. It is there anyway if the company encounters a $10 to $20
+to $30 billion expense, obviously. And now I think everybody's
+attention is very focused on liability. And to my knowledge,
+every company has stood down to examine their own
+vulnerability, their own risk and get their practices improved.
+But that is my personal judgment. I actually consulted our
+senior technology adviser on that particular issue, and we gave
+it some consideration within the Commission and did not go
+forward with it.
+ Mr. Sarbanes. Mr. Chairman, can I get the Senator's answer
+to that question?
+ The Chairman. If the Senator can do it in 15 seconds, which
+is a test.
+ Mr. Graham. Your question was, would this be something
+worthy of exploring. I think the answer to that question is,
+yes. My colleague has done some of that exploring and has come
+to the conclusion that he has but I think it is an issue. And
+frankly, your father has given us the opportunity to move this
+from being a theory to reality, and that it hasn't changed the
+behavior of corporate executives, that under his legislation,
+they now are required for public companies to sign personally
+as to the accuracy of their financial statements. It would be
+interesting to do some oversight and see what effect that has
+been. And then you might be in a better position to evaluate
+the potential applicability of offshore oil drilling.
+ The Chairman. You didn't quite do it, Senator. But
+ nice try.
+ Mr. Graham. Well, I got a little bit off.
+ The Chairman. Well, that is all right. You were talking to
+the son of a Senator. I can understand why that happened there.
+ Mr. Duncan from South Carolina.
+ Mr. Duncan of South Carolina. Thank you, Mr. Chairman. And
+gentlemen, thank you for being here. I sat by this graph all
+afternoon and I have studied it. And I want to comment on it.
+ Mr. Reilly. You are the only one who can read it.
+ Mr. Duncan of South Carolina. You have referenced it
+several times today, and you have come to some conclusions that
+I think are flawed and here is why. I spent some time on the
+MMS OCS 5-year planning subcommittee where we looked at oil and
+natural gas leases and came up with recommendations for the
+next 5-year plan on where those leases would be granted. And it
+struck me during the time that the only areas that we could
+even talk about within that committee was deepwater western
+Gulf of Mexico and deepwater Alaska. And nearshore--the 1,000
+foot and shallower areas on that grid--were off-limits for us
+to even talk about for the next 5-year period.
+ So when you see an increase in activity in deepwater
+exploration and production, I think it is directly attributable
+to the fact that policies of the U.S. Government have pushed
+oil exploration and production away from the shore, away from
+the marshes and the rivers and other things to deep water.
+ So I think some of the conclusions you have come to based
+on that chart that your graphics were flawed. So I want to make
+those comments. Mr. Chairman, I hope that us on the Energy and
+Minerals Subcommittee or this Committee will continue to look
+at the policies that are in place that pushed it to deep water
+and continue to look at nearshore, onshore, and other resources
+going forward.
+ A couple of questions for you based on your report that are
+on a whole different line of thinking, so bear with me. In your
+report, you provide a short review of the fire-fighting efforts
+and response to the disaster. And I want to commend the guys
+that went out there on the rescue effort with our Coast Guard
+and others. And this line of questioning has no bearing on
+their efforts. But the lack of attention to this critical part
+of the disaster has left many of us confused.
+ In the report, you state that others are going to study in
+issue more completely. Can you tell me first--and there are
+going to be three questions here--can you tell me first, in
+your opinion, if you believe the fire-fighting efforts were
+properly coordinated? That is number one. The second thing many
+believe that fire fighting contributed to the sinking of the
+rig and was there a possibility of saving the rig? And would
+the rig not sinking have permitted the sub-sea blowout that we
+saw? Was there a possibility to let the oil continue burning
+and work on shutting off the flow of oil that was contributing,
+that was the source of fuel for the fire? Or was the structural
+integrity of that rig in jeopardy anyway? So if you could
+answer those. And either one.
+ Mr. Graham. Well, I said that one of the lessons learned
+was that we were very ill-prepared to respond, particularly in
+the critical first hours and days of this. And I would suggest
+that that included our ability to restrain fire under these
+circumstances. If I could, I would like to go back to your
+first comments. I think you have to also look at the issue of
+depletion. We have been heavily mining for oil and gas in
+shallow waters since 1938 and continue to do so today.
+ I believe that these charts are as much a function of the
+reality that most of where the oil is today--the so-called
+elephants of offshore oil--are not at 1,000 feet. They are more
+likely to be at 5,000 or 10,000 feet, and that is why that is
+where the industry is moving. But that might be a question that
+your subcommittee could examine as to what are the factors that
+have gone into----
+ Mr. Duncan of South Carolina. We will pursue that at a
+later time. Let's get back to the fire-fighting efforts and
+what may have attributed. Because there are a lot of questions
+in my district and around South Carolina and across the land
+that I have heard. Do you think the fire-fighting efforts were
+coordinated? Do you think that the rig could have sat there and
+burned until we shut off the flow of oil underwater? And the
+structural integrity of the rig, was it in jeopardy? Do you
+have any input on that?
+ Mr. Reilly. The only thing I would say without wanting to
+characterize a lot of activities that occurred in the chaos of
+the fire and the response is that there were moments at various
+times when well control could still possibly have been
+established, when even the gases that were rising in the drill
+pipe could have been diverted over the side and perhaps not
+come into contact with the ignition source and not caught fire,
+but that once the fire began, when we looked at transcripts of
+reports of what it was like on that rig and how it seemed like
+a jet airplane or a fast-moving train had just come out of the
+drill pipe, I am not sure that there was a great deal that
+could have been done that would have averted the disaster that
+did occur.
+ It does occur to us, however, that the degree to which the
+response to the emergency immediately was characterized by a
+lot of chaos of one of the rescue boats leaving a number of
+people still on the rig who then jumped into the water and did,
+in fact, survive, people who made that choice and then
+discovered those who were in the evacuation boat that they
+couldn't get away from the rig, as it looked like it was going
+to topple on them. And they discovered it was because they were
+tethered by a rope and no one was allowed to have a knife on
+the rig. So they had to look for a means of severing the rope.
+It didn't appear to us--and I think the documentation supports
+this--that there had been the kind of drills, simulations,
+practices that would have been appropriate and I think probably
+will be insisted upon in the industry in the future. And that
+is one more change that needs to occur that we have really
+learned a lesson from.
+ Mr. Duncan of South Carolina. Do you think the rig would
+have continued burning.
+ The Chairman. The time of the gentleman has expired. Mr.
+Landry of Louisiana.
+ Mr. Landry. Thank you, Mr. Chairman. Just for the record, I
+did raise the Commission's credentials on my campaign to get
+here. Maybe they weren't raising it here in June, but I sure
+was in Louisiana.
+ Considering the industry's performance record in the Gulf
+of Mexico, where over 42,000 wells have been drilled in
+addition to 2,500 deepwater wells without any significant
+incidents, in my opinion, reflects a successful risk
+management, were these safety factors--and these are yes or no
+questions--were these facts the success and history of all of
+these wells that had been drilled out in the Gulf of Mexico,
+were they taken into account when you did this report?
+ Mr. Reilly. Yes, sir.
+ Mr. Graham. Yes.
+ Mr. Landry. OK. Was there any economical analysis done
+during the course of this report in terms of the impact on not
+only the Gulf economy, but on the national economy as well? Was
+that taken into account?
+ Mr. Graham. We know that tens of billions of dollars of
+damage was done to the environment and the economy primarily of
+the Gulf as a result of this spill.
+ Mr. Landry. So you say yes?
+ Mr. Graham. The answer is yes.
+ Mr. Landry. The President charged his Commission to
+determine the cause of the disaster to improve the country's
+ability to respond to spills and recommend reforms that make
+offshore energy production safer. Prior to the accident, there
+existed multiple layers of environmental reviews, including
+multiple EISs at all of the different phases that DOI uses,
+NEAs, environmental impact statements and environmental
+assessments. These included an EIS during the development of
+the 5-year review, and again, prior to the lease sales. Where
+does the Commission receive both the authority and conclusion
+that the need for review warrants any additional changes as I
+find that no conclusion that had contributed to the accident or
+to the impact of the cleanup?
+ Mr. Graham. Well, I think that the increasing emphasis on
+NOAA, the Coast Guard, other agencies that represent the best
+science in government, and our proposal to use best science
+from outside the government all go to our interest in enhanced
+safety, including understanding what are the risks at the
+individual sites that are being suggested and what are the
+potential adverse effects on the safety of those who will be
+operating in that area and the environmental quality of the
+Gulf. So the answer to your question is yes, we took those into
+account as part of our overall assessment. We are aware of the
+fact that the industry, and particularly certain companies
+within the industry, have had a very strong safety record.
+ We are not saying that everybody was the same. But we are
+saying that we think that the overall record in the Gulf is
+stunningly below what is in the standard of the world. If our
+aviation industry had a record by a 3-to-5-to-1 ratio, we were
+killing more people in airplanes than, for instance, Great
+Britain was, we would be pretty upset about why this was
+happening. That happens to be about the case in this industry
+between Norway and Great Britain and the U.S. We believe it is
+in the spirit of America to want to be the best.
+ Mr. Landry. I am glad you brought that up, Senator.
+ Mr. Graham. And these recommendations will move us.
+ Mr. Landry. I am also confused that you would make the
+suggestion of underreporting incidents in the U.S. because the
+numbers are low. Are you aware that the industry, as a whole,
+regards the European standards of reporting incidents much less
+reliable than the U.S. standards?
+ Mr. Graham. I am not aware of the assessment of that by the
+U.S. industry. I am familiar with the fact that our fatality
+accident ratio is significantly different than it is in the
+North Sea, which raises questions as to whether we are
+capturing all of the accidents that, in fact, are occurring. I
+am unaware of any evidence that would indicate that there
+should be such a significant differential between the
+fatalities and accidents in the Gulf and in the North Sea.
+ Mr. Landry. I will be supplementing some questions to you
+all.
+ Mr. Reilly. If I could just add, we are aware that there
+are very different ways of categorizing incidents, accidents,
+fatalities, days lost and so forth, total recordables in the
+North Sea versus the Gulf, different jurisdictions even between
+the U.K. and Norway.
+ So some of those data need to be very closely scrutinized
+to determine that you are dealing with oranges and oranges and
+not apples and oranges.
+ Mr. Landry. On both sides you would agree, though?
+ Mr. Reilly. Yes, I would.
+ Mr. Landry. I want to make sure that it is not just a one-
+way street.
+ Mr. Reilly. But the less disputable number is the fatality
+number. It is a little harder to hide the bodies. So I think we
+are confident that those numbers are as we found and that they
+are disturbing.
+ The Chairman. The time of the gentleman has expired. Mr.
+Flores from Texas.
+ Mr. Flores. Mr. Chairman, thank you for holding today's
+hearing. And Chairman Reilly, Chairman Graham, thank you for
+joining us today. I know you have put in a lot of work on your
+report and study and we appreciate you being here today. I have
+an opening statement that I would like to give to the Chairman
+for the record. I will dispense with that for now.
+ [The prepared statement of Mr. Flores follows:]
+
+ Statement of The Honorable Bill Flores,
+ a Representative in Congress from the State of Texas
+
+ Mr. Chairman, thank you for holding today's hearing, and let me
+also take this opportunity to thank Chairman Reilly and Chairman Graham
+for appearing before us today.
+ It has been nine months since the Macondo Well tragedy, and we all
+grieve for the families who lost loved ones and for the environmental
+and economic impacts along the Gulf coast. We can all agree that both
+industry and the federal government need to examine all the facts
+surrounding this incident and take the appropriate steps to ensure that
+we continue to produce American energy with safe, environmentally sound
+practices. Please know that I also lost a brother in an oilfield
+accident, so I want the oil and gas industry to operate in a safe and
+responsible manner. At the same time we should make sure that we
+facilitate a robust oil and gas industry to fuel our economy and jobs.
+ For the past year and a half, the top concern that I've heard from
+all Americans is jobs, economic growth, and balancing the federal
+budget. We all know that our economic health is dependent on the energy
+sector, especially as we see gas prices rising to more than $3.00 per
+gallon. That being said, I'm afraid that the Obama Administration is
+taking us in the wrong direction--locking away our own energy resources
+and making us more dependent on foreign energy from unstable parts of
+the world. Even our Treasury is taking a direct hit. With production in
+the Gulf down due to the Obama Administration's moratorium, it is
+costing them at least $3.7 million each day in lost revenue.
+ I look forward to hearing from our witnesses today and to working
+with my colleagues on the committee to take what we've learned from the
+Macondo Well incident and ensure that we have a robust domestic energy
+sector that contributes to our economic recovery.
+ ______
+
+ Mr. Flores. It has been 9 months since the Macondo well
+accident and we all grieve for the 11 families that lost loved
+ones and for those that were injured and for the impact on the
+families along the Gulf Coast. I want you to know from a
+personal standpoint that I lost a brother in the oil drilling
+business, so I have as much interest in conducting this
+industry as safely as possible as anybody in this room. But
+that said, I want to make sure that we facilitate a robust oil
+and gas industry because it is integral to our economic
+security and our military security. And as a person who is
+actively involved in the offshore energy business for over 30
+years, I am keenly concerned about the recommendations in the
+Commission's report.
+ I think it is interesting that you use the Three Mile
+Island analogy because, as you pointed out, after Three Mile
+Island, we have not started and completed the construction of a
+nuclear power plant in 30 years. It appears we are headed down
+the same road today with offshore drilling. We have a permit
+moratorium, a de facto moratorium in deep water, and we have an
+incredible slowdown in shallow water drilling.
+ Mr. Flores. And we are already seeing that show up in
+higher oil prices, higher gasoline prices, and reduced economic
+activity along the Gulf Coast.
+ Here is the issue. Congress has passed legislation. You
+want Congress to consider legislation. The Department of the
+Interior has issued new regulations. Lease sales have been
+canceled. Other areas of potential offshore activity have been
+put off-limits again. And it is all based on a report that
+doesn't provide a full postmortem of what happened.
+ And here is the key phrase that is used that causes the
+concern. You keep referring to systemic industrywide failure.
+In chapter 4 of the report dated January 6th, you have
+following key finding: The well blew out because a number of
+separate risk factors, oversights, and outright mistakes
+combined to overwhelm the safeguards meant to prevent just such
+a happening.
+ But most of the mistakes and oversights in Macondo can be
+traced back to a single overarching failure: a failure of
+management. Better management by BP, Halliburton, and
+Transocean would almost have certainly prevented the blowout by
+improving the ability of individuals involved to identify the
+risk they faced and to properly evaluate, communicate, and
+address them.
+ So how can you reconcile between what has happened in the
+offshore energy business today to calling a systemic failure--a
+systemic industrywide failure to report, which really just gets
+down to three companies. And we put the entire Nation's economy
+in peril by doing this.
+ Let me give you an example. What if we find out after we
+get the blowout preventer fully evaluated, it takes a $10 bolt
+that could cure the problem 99.999 percent of the time, and
+then this accident would essentially never happen. And that is
+about the ratio of accidents to wells drilled that we have in
+deep water. So, you know, we have gone overboard.
+ So why did we use those words, systemic industrywide
+failure? Because that is what has caused the paranoia here.
+ Mr. Reilly. In 1963, Congressman, it was a single weld, as
+I understand it, that sank the Thresher submarine. And the
+SUBSAFE system was developed, and we have not lost a SUBSAFE
+submarine since. We lost one every third year, on average, in
+peacetime before that.
+ The reason that we concluded it is systemic--and I didn't
+come in believing it was a systemic problem. I thought it was a
+single company that had blundered fatally because of the very
+large presence of those three companies throughout the oil and
+gas industry in the deepwater and in the shallow water
+throughout the world, BP is, I think, the largest explorer of
+offshore oil and gas development. Transocean is the largest rig
+operator. And Halliburton is the largest supplier of resource
+help, such as cementing.
+ It is no longer possible for most companies to test the
+cement, for example, that they are provided by Halliburton.
+They no longer have the research capacity. Chevron does. Maybe
+one or two more do. But most decided in the 1980s and 1990s to
+contract that out. So the cement that is provided is the cement
+that gets used. And the cement that was provided by the test
+that Halliburton itself conducted and our commission had
+conducted was faulty.
+ It is simply inconceivable to us that this was a problem so
+exclusive, so specially circumstantial with respect to one rig,
+especially since we know in Australia the cementing failed in
+the Montara well, just a year and a half or so ago, also.
+ This is something that caused us to believe--and, again,
+most of the people on that rig were Transocean employees, the
+people who were responsible for responding to the emergency, as
+I just described. That is the largest rig operator and owner in
+the world. It operates for everybody. Everybody hires
+Transocean. They also are implicated in this, in significantly
+failing to detect gas rising in the drill pipe.
+ We concluded from that that all companies are at risk if
+they are using these two contractors, or BP, itself, is
+probably at risk in other places.
+ Now, we did hear--and we asked the Norwegian regulators,
+are you taking any actions against BP? The answer was somewhat
+surprising: ``No, we are not because we do not see issues in
+the North Sea with respect to BP operations. And, therefore, we
+have taken no action to discourage their continued operation.''
+ That posed the question to us, well, what is it about the
+North Sea and the Gulf that has our companies operating safely
+and protectively in the North Sea, subject to a different set
+of regulators, and not in the Gulf? And that caused us to look
+very closely at the degree of oversight, the quality of
+regulation, and the capacity of the regulators, which we also
+fault.
+ The Chairman. The time of the gentleman has expired. I
+wanted to let that response come because that, I know, is very
+important to the gentleman from Texas.
+ Mr. Rivera from Florida.
+ Mr. Rivera. Thank you, Mr. Chairman.
+ Thank you, gentlemen, for being here today.
+ Commissioner Graham, Senator Graham, as a Floridian and, I
+believe, as my neighbor, are you still living in the Lakes, are
+you still in Miami Lakes?
+ Mr. Graham. I am, yes.
+ Mr. Rivera. West of the Palmetto?
+ Mr. Graham. Yes.
+ Mr. Rivera. Well, I am right there with you, in Doral,
+right down the road. So, as my distinguished constituent--as my
+distinguished constituent and fellow Floridian, I know we share
+a great concern for the economy and the environment of our
+State of Florida.
+ One of the recommendations that you make in your report
+addresses the need for greater international scrutiny,
+international standards. As a representative from south
+Florida, I am deeply concerned about the ongoing development
+off the coast of Florida, ongoing oil development off the cost
+of Florida, off the coast of Cuba in particular.
+ As you know, as we speak, there are a number of companies,
+including Repsol, interested in drilling in the waters off of
+Cuba. And I wanted to ask you, do you believe that this Cuban
+drilling between the coast of Florida and Cuba will be done
+safely? And what could the U.S. do to ensure that any lax Cuban
+oversight doesn't threaten Florida and the Southeastern United
+States?
+ Mr. Graham. I am concerned about the safety, the relative
+lack of experience of the Cubans, in terms of being able to
+oversee this activity. The record of some of the companies that
+are being brought in to do this work is not comforting.
+ I believe that something analogous to what Mr. Reilly has
+said, that we feed to have a Gulf of Mexico-wide set of safety
+standards that would apply to any country touching the Gulf, is
+the best assurance that the United States has against
+inappropriate, unsafe practices in our backyard.
+ And I believe that there is sufficient interest, at least
+between the United States and Mexico, to move forward in that
+direction. And, as Mr. Reilly has indicated, the Mexicans have
+suggested, at least, that they might be the interlocutory to
+Cuba, to get it involved.
+ To me, it also underscores the importance of the United
+States having the highest standards. If you go into a
+negotiation and you are urging the other parties to take their
+game up a notch and you have not already done that, your
+persuasiveness is limited. To me, for our own protection and
+for our ability to raise the standards in the Gulf, we need to
+adopt policies such as those we have suggested.
+ Mr. Rivera. Well, to that end, following through on that,
+do you believe that responsible domestic development in the
+eastern Gulf of Mexico would result in additional oil spill
+response capabilities being staged in Florida that could be
+used to respond to a potential spill off of Florida from the
+Cuban dictatorship's oil-drilling efforts?
+ Mr. Graham. You say in the eastern Gulf. Do you mean in the
+U.S. waters or the Cuban waters?
+ Mr. Rivera. No, U.S. waters.
+ Mr. Graham. I don't know what the ultimate treaty might
+say, but I would be surprised if it did not make it the
+sovereign responsibility of each of the countries to provide
+that kind of capability for those wells within their own area.
+ And I certainly don't think the United States ought to be
+depending upon Mexico, providing them the containment and
+response capability. We ought to do that. The Mexicans ought to
+do it. And if the Cubans proceed with their plan, they ought to
+do it.
+ So the answer would be no.
+ Mr. Rivera. Thank you.
+ The Chairman. The time of the gentleman has expired.
+ Another gentleman from Florida, Mr. Southerland.
+ Mr. Southerland. Thank you very much, Mr. Chairman.
+ And thank you for your report. Thank you for appearing
+before us today.
+ I am from Panama City, Florida. My district is the 2nd
+District of Florida. I took my baby steps on the beaches of
+Panama City. And I love our environment. And a day with my
+family, with my children on Shell Island is a little piece of
+heaven for me.
+ I will tell you, my community, dear friends of mine, were
+deeply affected by this disaster. I just wanted to ask some
+brief questions.
+ Number one, how much responsibility, in light of this
+disaster, how much responsibility do you believe that the
+government bears after having cited 790 violations? How much
+responsibility do they bear?
+ Also, by refusing to waive the Jones Act and bringing in
+oil ships that had the ability to clean up that oil, OK, by oil
+leaders around the world that had produced those ships, how
+much responsibility should be beared by this government?
+ Mr. Reilly. We did inquire into the application of the
+Jones Act and the allegations that have been made, particularly
+by the Europeans and a couple of commissioners of the European
+Union, that we were keeping out Belgian and Dutch response
+capability. And the response we received from the Coast Guard
+is that their offers of help were looked at, largely not taken
+into account, I guess mostly not taken into account, because
+they were not considered necessary at the time or useful for
+the particular task.
+ But I know that, in Mississippi, there were from France a
+series of skimmers, six or eight skimmers or something, that
+were brought in and were used. So it was possible, in other
+words, to get out help from other countries.
+ My sense, frankly is that the Coast Guard was sufficiently
+preoccupied with its own response, that vetting applications
+from other companies and countries and other technologies was
+probably something that in realtime they didn't have an awful
+lot of time to give.
+ Mr. Graham. If I can just say, I think this goes back to a
+theme of today, and that is, you don't do basic research while
+fire is out of control. If you haven't done it before the fire,
+it is not likely to be very effective. So I think that things
+like the----
+ Mr. Southerland. I understand, Senator. But when you have a
+neighbor that is willing to bring a boatload of hoses, you
+accept those hoses, and you say, you know what? My first
+priority is to put out the fire. OK?
+ And I have to tell you, I get angered when I think of the
+pain that we have experienced along that Gulf Coast, and I
+think of my dear friends who are no longer in business. It
+angers me. And yet today we want to talk about the
+responsibility of BP and how they should self-regulate their
+industry. When 790 violations were noted, that is incompetent.
+And yet, you know, we have the idea that we are going to have
+CEOs stand up and sign a letter of certification certifying
+liability. I want Secretary of the Interior and regulatory
+department heads to sign those same documents. OK?
+ The American people are tired of sending their money to
+Washington, D.C., and Washington be the problem. I am angered
+by the response of this government in light of this disaster. I
+am angered by the same government that failed in its response
+to Katrina.
+ And until we start looking inward and take personal
+responsibility for the lives we are destroying instead of
+assessing blame, it has to be somebody else's fault. The
+responsibility is here. The buck stops here.
+ And I am bothered that this commission--Qdecisions, there
+should be 10 down here. In the bottom, I wrote, ``government's
+decision to aid and abet.'' Was there a less likely alternative
+available? Yes. Less time than alternative? Yes, they save
+time--decisionmakers--the Federal Government--onshore.
+ And I am bothered, OK, that we are just going to add to the
+bureaucracy when the bureaucracy was the problem, in many ways.
+ Mr. Reilly. May I answer that question, Mr. Chairman?
+ The Chairman. You sure can.
+ Mr. Reilly. You raise an important question that we address
+with respect to safety and personal safety, occupational safety
+and health on the rigs themselves. Presently, when a rig is
+under sail or in motion, it is the responsibility of the Coast
+Guard to ensure safety.
+ We recommend that BOEMRE has the full responsibility on the
+rig for safety personnel and that it understand and have the
+capability to enforce that, so that there is not a division of
+responsibility or a confusion about whether this is a delegated
+responsibility from OSHA to the Coast Guard and the role of MMS
+in all of this, that it be amalgamated in one agency.
+ On the Jones Act, the key issue, in my view, is to have
+procedures in place ahead of time so that the extensive
+permitting reviews and approvals by the State Department are
+not necessary once the catastrophe may have occurred.
+ Mr. Graham. And that was what I was going to say, is that
+you need to anticipate. And I would suggest that this Committee
+could make a significant contribution in doing some serious
+thinking about what are the questions, what are the resources,
+what are the potential impediments when we have the next
+disaster. It won't be exactly like this one, but we will have
+more disasters. And how can we, by anticipating, take actions
+that will avoid the hoses not being delivered.
+ Mr. Southerland. Yeah.
+ The Chairman. The time of the gentleman has expired.
+ The gentleman from Pennsylvania, Mr. Thompson.
+ Mr. Thompson. Thank you, Mr. Chairman.
+ Gentlemen, thank you for your testimony.
+ Someone had offered an airline analogy earlier. And as I
+have looked at and read through and tried to synthesize this
+commission's recommendations, if I applied the Commission's
+recommendations to the airline industry, essentially, with one
+airplane crash, we would shut down all airplanes and, frankly,
+all airports.
+ I apologize for being late. I was in a workforce hearing,
+and I had an opportunity to question Governor McDonnell from
+Virginia. And, specifically, my questions were about the impact
+of the Administration's response and shutting down offshore as
+a result of this.
+ Here are some of the statistics. And I will be quick with
+this, and then I have my questions. He indicated that, you
+know, this industry would create more than 1,900 new jobs just
+in Virginia, increase the State's gross domestic product by
+$365 million annually, and generate approximately $19.48
+billion in Federal, State, and local revenues.
+ Senator Graham, Secretary Reilly, page 2 of your testimony
+states, quote, ``But most of the mistakes and oversights of
+Macondo can be traced back to a single overarching failure--a
+failure of management by BP, Halliburton, and Transocean,'' end
+quote.
+ And under the key facts, you also stated that the
+investigation team identified several human errors, engineering
+mistakes, and management failures.
+ You know, based on those statements, a logical person would
+conclude that it wasn't the lack of adequate science and
+engineering but the proper application of science and
+engineering by those on the rig that resulted in the Deepwater
+Horizon Macondo tragedy.
+ Basically yes or no, do you agree with that conclusion?
+ Mr. Graham. Well, I think part of the responsibility of
+effective management is to understand the risk and take steps
+to mitigate the risk. The fact is that there was no effective
+plan in place or capability to implement a plan before this
+accident occurred.
+ Mr. Thompson. So it sounds that you agree, it was
+management.
+ Mr. Graham. I think that is a failure of management to do
+effective risk analysis and take steps to mitigate the risk.
+ Mr. Thompson. Great. Thank you.
+ Secretary, any thoughts?
+ Mr. Reilly. I would support that. Yes, sir.
+ Mr. Thompson. OK. Thank you.
+ On page 7 of your testimony, you state, under the headline
+of ``Reforming Industry Safety Practices,'' quote, ``Government
+oversight must be accompanied by the oil and gas industry's
+internal reinvention, sweeping reforms that accomplish no less
+than a fundamental transformation of its safety culture,'' end
+quote.
+ Internal reinventions, sweeping reforms, and fundamental
+transformation, you know, frankly, of an entire industry is
+what the implications are of the result of these
+recommendations, frankly are words of alarm and cast a very
+wide net. I assume they are based on a thorough review of the
+hundreds of companies involved in U.S. energy production and
+not just three companies, despite how large they are, that were
+mentioned in the report.
+ Did the Commission conduct such a review?
+ Mr. Reilly. We conducted a review of the incident itself,
+of accident data----
+ Mr. Thompson. So your review----
+ Mr. Reilly.--through the industry.
+ Mr. Thompson. I think if you answer my question, your
+review was of three companies out of perhaps thousands.
+ Mr. Reilly. Well, it is of 79 losses of well control in the
+last, whatever, 20 years or so, affecting a very large number
+of companies operating in the Gulf.
+ Mr. Thompson. No, I understand. So the review--frankly,
+there are 3,500--the number I looked at--3,500 rigs in offshore
+production and thousands of companies engaged in production,
+but the conclusion was really based on looking at three
+companies?
+ Mr. Reilly. Well, the inferences drawn for the likelihood
+of entailed risk with those three companies largely rest upon
+what we learned from the experience of those three companies.
+But we had significant data about many other companies and
+their experiences that caused us to use the term ``systemic.''
+ Mr. Thompson. And I appreciate, you know, that you are
+taking that inference from there, but, essentially, the
+inference is drawn from three companies but, frankly, casting a
+pretty wide net with your recommendations, impacting thousands
+of companies.
+ Mr. Graham. But if I could add to that, you made the
+allusion to, and I had suggested, if the United States had a
+four-fatalities-to-one ratio in airline accidents versus, let's
+say, Norway or the United Kingdom, I believe the American
+public would be outraged. That is the situation between the
+North Sea and the Gulf of Mexico. And I don't think that one
+company----
+ Mr. Thompson. If I can reclaim my time, because I know I am
+going to get gaveled out here--I am new on the Committee.
+ I think the American people would also be pretty irate--
+they would be saddened with the loss of one life in an airplane
+accident, no doubt about it, and they would be concerned with
+that airplane crash. But they would also be irate if the
+Federal Government essentially shut down the entire airplane
+industry, as opposed to really focusing on drilling down, no
+pun intended, and systematically determining the root cause of
+that airplane crash.
+ And I, obviously, am out of time.
+ Mr. Reilly. Congressman, neither Senator Graham nor I nor
+our commission are here to defend the moratorium, not for a
+minute.
+ Mr. Thompson. Very good.
+ The Chairman. The time of the gentleman has expired.
+ That completes the first round, but several Members have
+expressed an interest to follow up on their first questions.
+ And, Senator Graham, while I didn't ask you, I asked Mr.
+Reilly, and he says, ``I have all the time in the world.'' So
+he is going to have to answer to you if that is--you know,
+however you want to work that.
+ Let me start--Mr. Grijalva had a follow-up, so let me
+recognize Mr. Grijalva for 5 minutes.
+ Mr. Grijalva. Thank you very much.
+ And let me, at the outset, thank the gentlemen for your
+presence here and for a compelling report.
+ The only question, I think--page 142 to 143 in your report,
+you deal with the issue of the Jones Act that came up, that it
+was not, indeed, an impediment to getting foreign assistance or
+outside assistance to come to the aid of that spill. Also,
+there are comments there, after the Governor insisted on those
+berms, that they probably created more problems than they
+solved.
+ But the question, I think, has to deal with the word that
+some of my good friends found offensive, and that is the issue
+of ``systemic.'' We have here--and I think your report is
+compelling because it deals with the role of government and the
+lack of oversight on the part of the Federal Government as a
+contributing factor to the laxness that we found. And it deals
+very directly with systemic issues that occur within the
+management and the operation of the industry.
+ I think the report is compelling insofar as something needs
+to be done. And if we want to raise the standard of oil
+production offshore, where it is safe, both for life and for
+the environment, then this report needs to be responded to.
+ The recommendations that you made for legislative action
+are sound. I don't agree with all of your recommendations, nor
+do I assume every Member agrees with everything in there. It is
+a sound framework. There are principles in there that we must
+deal with. I want to thank you for that, for the time that you
+took and for, I would assume, the seriousness in which we are
+going to take this report.
+ So thank you for your time, and thank you for the report.
+As I said, compelling, necessary, and timely.
+ Thank you.
+ Mr. Reilly. Thank you, sir.
+ Mr. Graham. Thank you.
+ The Chairman. OK. I thank the gentleman.
+ Let me go to Mr. Landry of Louisiana.
+ Mr. Landry?
+ Mr. Landry. Thank you, Mr. Chairman.
+ I am having trouble understanding how you all can come to
+the conclusion that there are these systemic failures by using
+those three companies and claiming that because those three
+companies do such a large percentage of the work in the Gulf of
+Mexico, that every time they go on a job they are using the
+same protocols in engineering for the different customers that
+they are doing business with.
+ That simply is not true. There are different well designs
+that are in place by different oil and gas companies. Some of
+those well designs, I might add, have been around since the
+inception of deepwater drilling.
+ And so I don't understand how you came to this decision of
+a systemic failure. Why not look at those oil and gas companies
+who have drilled successfully, without incident, looking at the
+well design and saying, this type of well design seems to be
+the safest? In my opinion, it certainly would save the
+taxpayers a lot of bureaucracy if you all took a look at those
+different designs.
+ Did you all take a look at the different well designs? And
+did you take in mind that they did not--that when those
+contractors work for different oil and gas companies, they
+don't follow the same protocols and engineering specs?
+ Mr. Reilly. We did look at the design of this particular
+well, and at least two companies made clear to us that they
+would not have chosen the design that BP did for that formation
+in that place.
+ Mr. Landry. But, Mr. Reilly--and I apologize for cutting
+you off, but you told me earlier that you all took into account
+the 2,500 wells that were drilled in deep water. You told me
+you took into account their history and their success. But yet,
+now you are telling me you only took into account the well
+design on BP, on BP's Macondo well.
+ Mr. Reilly. Well, the conclusion that the well design that
+was used by BP at Macondo was not an appropriate one or is one
+that created more risks than were necessary in the eyes of at
+least two companies is based upon a judgment about alternative
+well designs of the sort that you suggest.
+ Mr. Landry. Well, I am trying to clarify your answer. I
+mean, did you look at the other well designs and take into
+account that, when you issued your report telling us that there
+is a systemic failure in the industry and that we have to
+create these additional levels of bureaucracy, costing the
+taxpayers hundreds of millions of dollars, when you made that
+recommendation, did you or did you not look at the history of
+the other deepwater wells, the 2,500 or so, that have been
+drilled in the Gulf of Mexico when you took into account
+issuing this report?
+ Mr. Reilly. Yes. Yes, sir, we did.
+ And let me say, from the point of view of someone who
+considers 1 in 2,500 not so impressive, frankly, if it is going
+to cost $40 billion or $50 billion to the economy of the area
+and to the company involved, I think we are drawing a different
+conclusion from the success rate.
+ I regulated at the Environmental Protection Agency, with
+respect to a number of issues, one in a million, which was the
+maximum acceptable impact or fatality, mortality, premature
+death associated with a certain kind of decision, a pesticide
+decision, for example. So 1 in 2,500 doesn't impress me as a
+very positive record, frankly.
+ Mr. Landry. Well, I certainly would like you to look in the
+eyes of the people who are losing their jobs down in Louisiana,
+who have built this industry, who have basically been drilling
+since 1947 off of that coast, and tell them that. I can tell
+you, from living down there, that safety is number one. It has
+been for a very, very long time.
+ Mr. Reilly. Congressman, the decision to deny them their
+jobs and to shut down every rig in the deepwater area, every
+exploration rig, is one that I think is highly contentious,
+excessive, and hard to justify. And I have made that clear, as
+has Senator Graham, from the outset.
+ We would have approached this in a more selective fashion
+so as not to penalize those companies that had not been
+specifically implicated in the disaster after some short period
+of review and inspection which did, in fact, take place, and
+they were cleared.
+ So we are not here to defend the denial of jobs or against
+the resumption of activity in the Gulf. Very much we want to
+see it resume, but we want to see it resume safely and
+effectively.
+ Mr. Landry. And may I put your name in as a recommendation
+to take Ms. Browner's place then?
+ Mr. Graham. Congressman, I have to take some exception to
+the statement that you made about that we are recommending
+hundreds of millions of dollars of additional regulation. Yes,
+we are recommending that there be an adequate, competent,
+politically insulated safety function within the U.S.
+Department of the Interior. I don't think those are radical
+suggestions.
+ Number two, we are recommending that the industry, as other
+high-risk industries have done, assume more responsibility for
+their own evaluation of safety. That is no cost to the U.S.
+Government and, I think, is a very prudent suggestion to the
+industry and one which will contribute to the industry's long-
+term viability.
+ So I would just--if you see something in our report that
+you think is hundreds of billions of dollars, or millions of
+dollars, of additional expense and an excessive addition to
+bureaucracy, I would like to be directed toward that, because
+that was not our intention.
+ The Chairman. The time of the gentleman has expired.
+ Mr. Flores?
+ Mr. Flores. Thank you, Mr. Chairman.
+ With the backdrop that I introduced earlier today, and that
+is that we have lease sales that have been canceled, offshore
+areas that have been taken off the availability list to be
+drilled on in the future, higher gas prices, lower domestic oil
+production, lost jobs, a hurt economy, with that--and a lot of
+that is because this report is being relied upon to continue
+moratoria, either de facto or regulatory or however they want
+to be described. And it goes back to this ``systemic,
+industrywide failures'' comment.
+ Co-Chairman William Reilly stated, in your January 6th
+release, on chapter 4's release, ``My observation of the oil
+industry indicates that there are several companies with
+exemplary safety and environmental records. So a key question
+posed from the outset of this tragedy is, do we have a single
+company''--that being BP--``that blundered with fatal
+consequences, or a more pervasive problem of a complacent
+industry? Given the documented failings of both Transocean and
+Halliburton, both of which served the offshore industry in
+virtually every ocean, I reluctantly conclude that we have a
+systemwide problem.'' That is your quote.
+ Now, Mr. Reilly, based on what I see of the internal
+inconsistency and the weight which this report is being given
+and the energy future of this country, I would respectfully ask
+the Commission if they will amend the report to remove the
+words ``systemwide industry failure.'' Will you do that?
+ Mr. Graham. Congressman, how would you defend the presence
+of walrus protection and polar bears in a response plan? Or how
+would you defend Mr. Hayward's telling me there is no subsea
+containment capability? Or the inadequacy of the response
+technology and the failure to invest in it over the last 20
+years after we experienced the disaster in Prince William
+Sound? I think these speak for themselves.
+ And the response plans were not confined to the three
+companies. All the majors that we looked at had literally the
+same response plans and the same concern for walruses and the
+dead expert and all the other things we know. And several CEOs
+have said they found it embarrassing and were humiliated by it.
+And that had a lot to do with their decision to create the
+Marine Well Containment Corporation, which is a very
+significant and positive step on the part of the industry.
+ So I don't think that you can infer anything other than,
+``Well, it sure looked like complacency.'' And when people say,
+``We never thought it could happen''--and I include myself in
+that--we were complacent. I think the government was, the
+industry was, I was.
+ Mr. Flores. Well, again, the application for permits that
+are filed are based on pretty much cookie-cutter requirements
+that the MMS--or what was formally called MMS used to issue.
+ Mr. Reilly. And I don't exempt them from the criticism.
+ Mr. Flores. OK. And so, maybe there was a regulatory
+failure----
+ Mr. Reilly. Uh-huh.
+ Mr. Flores.--as part of it. I think we all agree that there
+was. And we all agree that BP had an integral part to play in
+this failure.
+ But, unfortunately, what has been condemned here is the
+entire industry, as well as the energy security of this
+country, going forward. And I think it goes back to those
+words, ``industrywide, systemic failure.''
+ And I just--I would respectfully disagree with you. I don't
+think that we have that type of a failure. And I would like to
+state for the record, I think those words ought to be struck
+from the report.
+ Mr. Reilly. Well, let me just say that our report is 11
+days old, and the degree to which there has been a delay in
+issuing permits or a de facto moratorium that has been referred
+to, I don't think has anything to do with this report. And we
+certainly don't expect or didn't intend that we would
+contribute to that.
+ We, in fact, were assuming that a number of these
+recommendations could be implemented coterminously with the
+resumption of activity on the part of the companies that
+weren't in any way involved in the Macondo disaster.
+ Mr. Flores. Thank you.
+ I yield back.
+ Mr. McClintock. [presiding.] The gentleman yields back.
+ Congressman Thompson?
+ Mr. Thompson. Thank you, Chairman.
+ Just one additional question. On page 6 of your testimony,
+under the heading ``Environmental Review,'' you state that the
+Commission recommends, quote, ``a more robust and more formal
+interagency consultation process in which NOAA, in particular,
+is provided a heightened role, but ultimate decision-making
+authority is retained by the Department of the Interior,'' end
+quote.
+ And my question--and I wanted to get your rationale behind
+it. Obviously, you know, the role of NOAA was of great concern
+to the Commission. My question actually is, shouldn't the
+Departments of Energy and Commerce have an equal, if not
+greater, voice in NOAA in the formulation of rules and
+regulations that certainly have a great influence on our
+domestic energy production?
+ Mr. Graham. Well, just let me clarify. NOAA is part of the
+Department of Commerce. So, I assume, through NOAA----
+ Mr. Thompson. Commerce was involved. How about Energy?
+ Mr. Graham. Yeah, Department of Commerce would be involved.
+ What we were focusing on there, I mentioned it in my
+opening statement. A key fact to understand is that the
+relationship of the U.S. Government to the offshore oil
+industry is not just as a regulator. It is not like the
+relationship of the Department of Transportation to the bus
+industry of America. It is also the relationship of the owner
+of the property. All of that property out there in the Gulf of
+Mexico, beyond the State limits, belongs to the people of the
+United States of America.
+ We have made a decision that we will lease portions of that
+to oil companies under certain conditions to evaluate and, if
+found, extract oil and gas. We have the same interests that, if
+you owned a small shopping center, you don't want to have a
+tenant in your center who is trashing it and is going to make
+it impossible for other tenants to have a profitable
+enterprise.
+ So I think we need to put ourselves in the position of,
+what should we be doing to assure that our children and
+grandchildren will have a Gulf of Mexico that is of a quality
+that we would be proud to hand over to them as our inheritance.
+ I think these recommendations, and particularly the
+recommendations of bringing the best science--and we think the
+Department of Commerce and NOAA represents the best science in
+this area--to bear, in terms of what should be the conditions
+of our proposed tenant to lease our property, is not an
+imprudent thing to do.
+ Mr. Thompson. OK.
+ Well, one of the--as I came to Congress 2 years ago, one of
+the things that just appalled me--and, you know, this is over
+different administrations, different parties--is the absolute
+lack of a national energy plan in this country. And when we are
+talking about the Outer Continental Shelf and offshore
+resources or onshore resources, you know, frankly, the Energy
+Department was formed for that very purpose, to achieve energy
+independence, I guess, in the 1980s when it happened. It has
+failed miserably. But I think one of the proper steps,
+obviously, would be involved in this type of a process.
+ Mr. Graham. I am completely in agreement with that. In
+fact, it was my position, and I think this is reflected in the
+report, that you can't answer the question, ``What is the
+future of the offshore industry?'' without answering the larger
+question, ``What is our energy policy in the United States?''
+ I was telling Bill, and he had already seen it, that in
+yesterday's newspapers there were some articles about the fact
+that the RAND Corporation had raised questions about whether
+the U.S. military could convert to a less fossil-dependent
+Navy, Air Force, Army. And they raised serious doubts about
+whether that could be done, which, to me, just underscores the
+importance of this industry for our fundamental national
+security.
+ Mr. Thompson. Great. Well, thank you.
+ Thank you, gentlemen, for your testimony. I have additional
+questions, but we will forward those along. Thanks.
+ Mr. McClintock. Thank you.
+ Mr. Grijalva?
+ Mr. Grijalva. Thank you.
+ And this, gentlemen, I swear, are the last questions. We
+all need to be outside, enjoying the blizzard that is
+happening.
+ Mr. McClintock. Why not stay here? There is no place else
+to go.
+ Mr. Grijalva. Gentlemen, both of you have said that the
+resumption and full production of offshore drilling, in terms
+of energy production, is something that you want to see and
+that could be occurring as we make the other kinds of
+adjustments that we have to make to make this industry safer
+and our role as a government stronger.
+ And one of the key recommendations that the Commission made
+is that the Federal oil and gas regulators that have been
+underfunded--I think they are getting less now than they did 20
+years ago--that we create a dedicated funding stream for oil
+and gas fees to fund this, so it is well-trained, professional,
+a level of--an insulation of independence.
+ And yet, as we are talking about this and the critical need
+to deal with the production issue that has come up consistently
+here by my colleagues, we are also talking about reductions to
+2006 levels, to 2008 levels, based on the resolutions that we
+are dealing with on the Floor.
+ So, at some point, this full production restoration idea
+and concept that you support as commissioners, with the
+backdrop of not ever meeting the Commission report in terms of
+providing a robust oversight regulatory function for government
+that is independent, how do you reconcile that one opinion with
+the lack of resources on the other end?
+ Any comment would be fine.
+ Mr. Graham. Well, it is our recommendation that, like is
+the case with most other industries, industries who don't have
+this additional characteristic of being our tenants, we expect
+the airline industry, the telecommunications industry, across
+the board virtually, to pay for their own regulation. They are
+self-funded regulation. We did not see any compelling reason
+why that should not be true of this industry. So that would be
+our basic recommendation.
+ That would take action by the Congress if, for instance,
+there were--as there is now for the oil liability fund--a fee
+attached to each barrel of oil. I believe that is for both
+imported as well as domestically produced, which goes into that
+fund. Maybe we need to have a supplemental stream to go into a
+fund for the regulation of the industry so that we can assure
+to the industry that we will have a competent, sustained
+ability to assure safety and----
+ Mr. Grijalva. Well, Senator, on my question, if I may, you
+see a linkage and not an either/or proposition?
+ I21Mr. Graham. I mean, either/or----
+ Mr. Grijalva. Either you have the regulatory capacity and
+the resources to deal with the demand for full production, and
+if that linkage doesn't occur, is it an either/or proposition?
+ Mr. Graham. No, my----
+ Mr. Grijalva. Can you have one without the other?
+ Mr. Graham. Well, the answer is, I don't think it is in the
+interest of the American people not to have adequate standards,
+again, in part, because we have just seen what the consequences
+are to a lot of very innocent people, and we have seen what the
+consequences are to an important piece of real estate that
+belongs to all of the people of America.
+ Mr. Grijalva. Yeah, I think the question is, reducing
+Interior's levels to 2006-2008 that directly impact your
+recommendation, in terms of building up the resource capacity
+and the overall capacity of regulators and oversight, that, I
+think, does not help the safety demands for offshore drilling
+that is also a part of the recommendations.
+ Mr. Reilly. We are quite clear that the quality of
+regulation has been insufficient; that an industry which did
+not used to be a high-risk industry, as it has proceeded so
+heavily into deep water, has become that. The industry, itself,
+needs to take the steps that are suggested by this catastrophe,
+but so does government.
+ Other governments have done so after their own
+catastrophes. We have mentioned the United Kingdom and Norway,
+which responded to very severe accidents that they had by
+separating the revenue-generating function from the regulatory
+function and significantly improving the quality of their
+regulator.
+ Senator Graham mentioned that, in the United Kingdom, the
+oil and gas industry lobbies for more appropriations for the
+regulator, because they recognize that quality in the
+regulator--as did Mr. Tillerson, the Chairman of ExxonMobil, in
+his testimony before us, and Mr. Odum, the President of Shell
+USA. Both of them mentioned the quality of regulation as
+essential to the quality of industrial activity.
+ That is all we are really suggesting. So, to try to save
+money at BOEMRE, at this point, having seen that budget go down
+20 percent over the last 20 years as the oil and gas production
+in the Gulf went up 300 percent, is really penny-wise and
+pound-foolish.
+ Mr. Grijalva. Thank you, sir.
+ The Chairman. [Presiding.] The time of the gentleman has
+expired.
+ Mr. McClintock of California?
+ Mr. McClintock. Thank you, Mr. Chairman.
+ First, I would like to ask unanimous consent to insert into
+the record the Wood-MacKenzie report commissioned by the
+American Petroleum Institute, entitled, ``The Impact of Gulf of
+Mexico-Deepwater Permit Delays on U.S. Oil and Natural Gas
+Production, Investment, and Government Revenue,'' dated
+December 2010, which I cited earlier. And I have souvenir
+copies for our lucky panelists.
+ The Chairman. Without objection, so ordered.
+ Mr. McClintock. Thank you.
+ [NOTE: The report entitled, ``The Impact of Gulf of Mexico-
+Deepwater Permit Delays on U.S. Oil and Natural Gas Production,
+Investment, and Government Revenue'' has been retained in the
+Committee's official files.]
+ Mr. McClintock. I would also like to ask unanimous consent
+to include the Wall Street Journal editorial which I
+referenced.
+ The Chairman. Without objection, so ordered.
+ [The Wall Street Journal editorial follows:]
+
+ Gulf Political Spill
+
+Wall Street Journal
+Editorial dated January 13, 2011
+ President Obama's drilling commission released its 398-page report
+on the causes of the Gulf oil spill this week, and talk about a lost
+opportunity. After six months of hearings and interviews, the
+commission still doesn't know what caused the accident but does think
+it knows enough to condemn all and sundry.
+ The disaster, we are told, was primarily the result of
+``overarching failure of management'' \1\ by BP, Transocean and
+Halliburton--which is hardly news to anyone who's been paying
+attention. Yet the commission didn't stop with the companies that
+managed the Macondo well, going on to blame the highly unusual blowout
+on a ``system-wide problem'' of failed regulation and a complacent
+industry that requires ``significant reform.''
+---------------------------------------------------------------------------
+ \1\ Page 90 of the full Obama Spill Commission Report
+---------------------------------------------------------------------------
+ These sweeping conclusions are remarkable from a commission that
+admits to knowing so little. The report cites several questionable
+decisions made by Macondo drillers as the ``immediate causes'' of the
+blowout, only to acknowledge it can't say which, if any, were the
+cause:
+ ``It is not clear whether the decision to use a long
+string well design contributed directly to the blowout.'' \2\
+---------------------------------------------------------------------------
+ \2\ Page 115
+---------------------------------------------------------------------------
+ ``The evidence to date does not unequivocally establish
+whether the failure to use 15 additional centralizers was a direct
+cause of the blowout.'' \3\
+---------------------------------------------------------------------------
+ \3\ Page 115
+---------------------------------------------------------------------------
+ ``Whether ... `unconverted' float valves contributed to
+the eventual blowout, has not yet been, and may never be, established
+with certainty.'' \4\
+---------------------------------------------------------------------------
+ \4\ Page 116
+---------------------------------------------------------------------------
+ Unable to name what definitely caused the well failure, the
+commission resorts to a hodgepodge of speculations. Adding to the
+confusion, it acknowledges it could find no evidence that BP or its
+contractors ``consciously chose a riskier alternative because it would
+cost the company less money.'' The commission didn't even wait to get
+an autopsy of the failed blowout preventer, which is rusting on a
+Louisiana dock.
+ The report's one firm conclusion boils down to this: In the hours
+preceding the explosion, crew members missed ``critical signs'' that
+something was wrong. ``The crew could have prevented the blowout--or at
+least significantly reduced its impact--if they had reacted in a timely
+and appropriate manner.'' \5\ This is called human error, in this case
+with tragic consequences to those who erred.
+---------------------------------------------------------------------------
+ \5\ Page 120
+---------------------------------------------------------------------------
+ Yet it's hardly evidence that the entire drilling industry is an
+accident waiting to happen, as the commission insists. Its section
+``The Root Causes: Failures in Industry and Government'' \6\ uses
+questionable decisions made by the Macondo players to suggest, with no
+evidence, that such behavior is the industry norm.
+---------------------------------------------------------------------------
+ \6\ Page 122
+---------------------------------------------------------------------------
+ The report fails to reconcile this indictment with the industry's
+prior safety record, or with the fact that many countries have modeled
+their drilling technology and practices on those of the Gulf. For a
+better account of how unusual the Macondo practices were, we recommend
+the June 11, 2010 letter to the editor in this newspaper from Terry
+Barr, the president of Samson Oil and Gas.
+ The commission nonetheless offers an array of recommendations, most
+of which would severely restrict oil and gas drilling. Despite
+President Obama's promises that the new Bureau of Ocean Management
+(formerly the Minerals and Management Service) is now a shipshape
+regulator, the commission recommends that Congress create another
+agency to supervise drilling. Now, there's a new idea--another layer of
+bureaucracy to supervise the bureaucracy that failed.
+ The report also advocates toughening the National Environmental
+Policy Act to make it harder for companies to obtain drilling leases.
+Another section doubts it is possible ever to drill safely in Alaska or
+the Arctic--a hardy perennial of the anti-oil lobby.
+ This was all too predictable given the political history of
+commission members. Former Democratic Senator Bob Graham fought
+drilling off Florida, William Reilly is the former head of the
+antidrilling World Wildlife Fund, and Frances Beinecke ran the Natural
+Resources Defense Council, which is opposed to carbon fuels. Not a
+single member was a drilling engineer or expert in oil exploration
+technology or practices.
+ Compare this to the Rogers Commission, which investigated the
+Challenger space shuttle disaster of 1986. Led by former Secretary of
+State William P. Rogers, that group included theoretical and solar
+physicists, engineers and aeronautics specialists. The commission
+located the exact cause of the disaster (failed O-rings) and prescribed
+precise safety changes. The preface of the Rogers report states that
+the only way to deal with such a failure is to investigate, correct and
+``continue the program with renewed confidence and determination.''
+ The unbalanced, tendentious nature of the commission report
+vindicates those who suspected from the start that this was all a
+political exercise. The White House has been pounded on the left for
+agreeing to ease drilling restrictions before the spill, and now it is
+looking for support to walk that back. Though the Administration
+officially lifted its Gulf drilling moratorium and issued new safety
+rules two months ago, it has refused to permit a single new well.
+ U.S. gasoline prices are now above $3 a gallon, and the decline in
+Gulf drilling will not help supply. Forecasters predict domestic
+production will fall at least 13% this year due in part to the Gulf
+lockdown. Meanwhile, last week the British Parliament rejected a
+drilling moratorium in U.K. waters on grounds it would cause
+``expertise to migrate,'' decrease ``security of supply'' and harm the
+British economy.
+ The BP spill was a tragedy that should be diagnosed with a goal of
+preventing a repeat, not in order to all but shut down an industry that
+is vital to U.S. energy supplies and the livelihood of millions on the
+Gulf Coast.
+ ______
+
+ Mr. McClintock. Mr. Chairman, if I were to summarize what
+we have learned today, it is this: We faced an engineering
+issue. A blowout preventer failed, and it failed
+catastrophically. It caused enormous environmental and economic
+devastation.
+ Before this commission was empaneled, we did not know why
+that blowout preventer failed. After the Commission concluded
+its work and issued this report, we still don't know why that
+blowout preventer failed. We don't know why it failed because
+the Commission never even bothered to look at the blowout
+preventer, which, according to the Wall Street Journal, is
+rusting on a dock in Louisiana.
+ We have never had a blowout failure like this one. Until we
+find out why it failed, it could happen again. It could happen
+at any time. And the Commission has not advanced our
+understanding of how to prevent it one bit.
+ The contrast between this commission's work and the Rogers
+Commission after the Challenger disaster is staggering. If the
+Rogers Commission had operated in the same manner, we would
+still have no idea what caused the Challenger to explode or how
+to prevent it in the future.
+ We have before us a report offering bureaucratic
+prescriptions to an engineering problem, authored by
+bureaucrats, rather than an engineering prescription authored
+by engineers.
+ I don't know exactly how the Committee would advance the
+issue from here. I certainly seek the Chairman's guidance. But
+I would recommend that we take whatever action is necessary to
+empanel a panel of engineering experts to go down to that dock
+in Louisiana, retrieve that blowout preventer, tear it apart
+piece by piece, find out what caused it to fail, and do so
+before it happens again.
+ Mr. Reilly. Would the gentleman yield? I would just respond
+to that, if I might.
+ Sir, I think that you can draw an analogy between the
+blowout preventer and a seatbelt in an automobile accident. It
+is obviously important to the survival of someone that the
+seatbelt wasn't fastened, but it doesn't really explain why the
+accident occurred.
+ We explained why the accident occurred. We fingered and
+identified, I think, all of the major contributors, the
+decisions, and their technological consequences, their
+engineering consequences that led to the disaster.
+ Examining the blowout preventer is not going to cause those
+other facts that we uncovered to go away. They are there. They
+are distressing. They do have implications for policy, and we
+tried to draw them.
+ The Chairman. Well, I want to thank both of your witnesses
+for being here today. I know you had a long day. You started at
+10 o'clock in the Senate. And I very, very much appreciate your
+willingness to stay here so some of our Members could have
+another explanation or a clarification of what is going on.
+ I know that there will be some other questions that
+Members, probably on both sides, would like to ask you. And if
+you would agree to respond in writing to those questions, we
+would very much appreciate that.
+ Mr. Reilly. We will do that, Mr. Chairman. We have a staff
+I think for another 5 weeks, 4 weeks.
+ The Chairman. OK, great.
+ Mr. Reilly. And we will use them to the very end, to the
+extent they allow that.
+ I would just like to say, we very much appreciate the
+attentiveness, the interest of this Committee, the thoroughness
+of the kinds of questions that we received, and understand the
+seriousness of different kinds of concerns about our report and
+about the conclusions that we drew.
+ We hope it is helpful to the deliberations of the Committee
+and that the relatively modest proposals we have made are
+looked at seriously and perhaps implemented. As I mentioned, I
+think they are modest in terms of cost and bureaucracy
+disruption.
+ The Chairman. Well, I thank you for that.
+ And let me just mention and, again, reiterate what I said
+at the start of this, at the start of when the BP well broke,
+that we had to find out what went wrong. We will continue to do
+that. And, as I mentioned in my opening statement, there are
+two more reports out. We will look at what they have to say and
+draw, hopefully, some conclusions from that.
+ But I also will reiterate what I also said in my opening
+response. What we do here will send a very, very strong signal
+into what I think is very, very critical long term. And long
+term is the energy security of our country. You alluded to
+that. So the balance we have to make is make sure that we
+continue to have a robust industry, especially in a down
+economy.
+ So, with that, I want to thank all of the Members again for
+being here, and especially for the two of you to stay for this
+long time.
+ And, with that, if there is no further business, the
+hearing stands adjourned.
+ [Whereupon, at 5:16 p.m., the Committee was adjourned.]
+
+ [Additional material submitted for the record follows:]
+
+ [The prepared statement of Mr. Holt follows:]
+
+ Statement of The Honorable Rush D. Holt,
+ a Representative in Congress from the State of New Jersey
+
+ Thank you Chairman Hastings and Ranking Member Markey for holding
+this hearing today on the final report of the National Commission on
+the BP Deepwater Horizon Oil Spill and Offshore Drilling. I look
+forward to hearing from the distinguished co-chairs of the Commission;
+Senator Graham and Mr. Reilly on the findings of the Report.
+ Although the oil has stopped gushing into the Gulf, the crisis is
+far from over. The Report to the President from the Commission made one
+point all too clear. The BP Deepwater Horizon Spill is not an isolated
+incident. As long as we continue to drill for gas and oil off our
+shores it is not a question of if, but when the next oil spill is going
+to happen.
+ Our existing regulatory system is inefficient, plagued with loop-
+holes for big oil companies, and all too often lets polluters off the
+hook while exposing taxpayers to economic harm.
+ One of the issues that I am pleased that the Commission addressed
+in the Report is that of liability limits for oil and gas companies as
+the result of an oil spill. Since the spill began I have been concerned
+about the fisherman, the hotel owner, the tourism operator and those
+whose livelihoods depend on the Gulf. Under the Oil Pollution Act (OPA)
+of 1990, oil companies are required to cover the full costs of
+``removal.'' However the law set a $75 million cap for economic and
+natural resources damages.
+ Many of us breathed a sigh of relief when BP established a $20
+billion escrow account to compensate individuals and businesses for the
+damages inflicted by the spill. So far they have paid over $2.5 billion
+in economic damages from the spill, demonstrating that the current $75
+million liability cap remains a laughable amount.
+ When the next spill occurs--and it's a matter of when, not if--
+there is no guarantee that the next oil company can or will cover all
+damages. We shouldn't wait for that spill to occur to make the
+necessary legal changes to ensure that companies like BP pay for every
+last cent of the mess they made.
+ This is why today I, along with 17 of our colleagues, introduced
+the Big Oil Bailout Prevention Act which would eliminate the liability
+cap for economic and natural resources damages.
+ The report reinforces the need for this legislation, finding that
+the current liability cap ``limits liability well below levels that
+might actually be incurred'' and that the ``cap distorts the incentives
+of industry participants to adopt cost-effective safety precautions.''
+ The liability cap is just one of the issues that need to be
+addressed by Congress in the wake of this report. The Commission's
+Report states that without Congressional action, we cannot ensure that
+the Department of Interior will have the tools necessary to protect
+America's coastal communities economic and environmental interests, or
+guarantee the safety of our nation's oil and gas rigs for workers. I am
+proud to be a cosponsor of legislation introduced by Ranking Member
+Markey today that would implement all of the much needed reforms cited
+in the Report. I look forward to hearing from our distinguished
+speakers today and to work with my colleagues to implement these much
+needed reforms.
+ ______
+
+ [The prepared statement of Mr. Landry follows:]
+
+ Statement of The Honorable Jeffrey M. Landry,
+ a Representative in Congress from the State of Louisiana
+
+ Thank you, Chairman Hastings, for calling this hearing and for
+starting this Congress off on the right foot with responsible and
+meaningful oversight. I can think of no better way to start a new
+tradition of oversight than reviewing the BP Deepwater Horizon Oil
+Spill Commission Report.
+ Many thanks to the Chairman for also giving me time to express the
+views of many of my constituents who have not had an opportunity to
+make known their grievances with the recommendations of the Commission.
+ I would also like to thank Senator Bob Graham and the Honorable
+William Reilly for coming before this committee to answer, what I
+believe will be tough but fair and very important questions.
+ Let me state that the tragic accident of April 20, 2010 cannot be
+ignored nor minimized. This disaster killed eleven workers and
+generated one of the largest oil spills in United States history. Many
+Louisianans were affected by the explosion on the Gulf and the
+subsequent waves of oil that blanketed our coastline.
+ While this accident cannot be ignored, it can also not be employed
+as justification for debasing the entire offshore drilling industry.
+ My first priority is always the safety and economic well-being of
+my constituents in Coastal Louisiana. After analyzing and evaluating
+the Commission's broad range of recommendations, I have some concerns
+that I would like for our witnesses to address today.
+ First, I would like to express my concerns with the Commission's
+recommendation of continued overlapping of new and existing regulatory
+agencies within the Department of Interior. I believe that more
+agencies at the Department of Interior and at the Bureau of Ocean
+Energy Management, Regulation and Enforcement (BOEMRE) will ultimately
+create more red tape without improving human or environmental safety.
+ Moreover, the proposed regulations will delay offshore oil
+production and will prolong Louisiana's high unemployment rate. Thus,
+the Commission's recommendations are diametrically opposed to the
+Administration's own stated goals of reducing unemployment and
+lessening our dependence on foreign oil.
+ Furthermore, I am disappointed that the Commission does not address
+the economic and labor impacts of actually implementing all the
+Commission's recommendations.
+ A scant eight days ago, President Obama signed an Executive Order
+stating that government regulations should ``take into account benefits
+and costs'' and ``further economic growth, innovation, competitiveness
+and job creation.'' Again, the Commission's report runs directly
+counter to the Administration's own stated goals.
+ Specifically, I am frustrated that the Commission failed to address
+the economic factors of the President's offshore drilling moratorium--
+including the number of lost jobs, wages and oil revenue to the United
+States Treasury. The moratorium has already reduced United States oil
+production and has cost numerous Louisiana jobs. I believe these facts
+needed to be fully addressed in the report.
+ Finally, I believe we need to make sure that effective, efficient
+reforms are made to improve safety while still allowing drilling to be
+conducted in the Gulf of Mexico. Rest assured, I will continue to work
+with my fellow like-minded colleagues on the Natural Resources
+Committee to create and keep jobs in the offshore energy sector.
+ ______
+
+ [The prepared statement of Mr. Wittman follows:]
+
+ Statement of The Honorable Robert J. Wittman,
+ a Representative in Congress from the State of Virginia
+
+ Chairman Hastings, thank you for holding this important oversight
+hearing. Senator Graham and Administrator Reilly thank you for your
+presence here today and for your efforts leading the President's
+National Commission on the BP Deepwater Horizon Oil Spill and Offshore
+Drilling.
+ The fire, sinking and loss of the 11 crewmembers of the Deepwater
+Horizon drilling rig was a true tragedy. The Gulf region is still
+recovering from the economic and ecological impact of the oil spill.
+ We must make every effort to ensure that federal agencies are
+effectively structured to regulate offshore drilling, while protecting
+the environment and meeting our nation's energy demands.
+ Since the oil spill significant steps have already been taken to
+improve safety standards for the oil and gas industry. Structural
+reforms at the Department of Interior by Secretary Ken Salazar have
+fundamentally altered the regulatory body responsible for offshore
+drilling. These new regulations and structure address many of the key
+government oversight failures that led to the Gulf oil spill.
+Additionally, the oil and gas industry has taken steps to develop
+advanced technology that would lessen the likelihood of similar
+catastrophic blowouts. These and other steps have already made the
+offshore industry safer.
+ It is appropriate to carefully review and ensure that offshore
+energy production is appropriately regulated and conducted in a safe
+and environmentally sensitive manner. However, it is also critical that
+we promote responsible American made energy, including oil, natural
+gas, nuclear, coal, and renewable energy. Unfortunately, the
+Commission's report on balance includes proposals that would ultimately
+restrict domestic energy production with little measurable increases in
+safety. Of particular concern is the Commission's implicit support for
+the Administration's ongoing moratorium on energy development in the
+Atlantic Ocean.
+ Virginia has the opportunity to develop offshore energy in an
+environmentally friendly manner and lead the nation in improving our
+energy security and creating thousands of jobs. The economy of Virginia
+will benefit tremendously from the demand for goods and services
+created by offshore development.
+ Promoting offshore oil and gas development is one tool in an ``all
+of the above'' energy strategy that is necessary to meet our nation's
+growing needs. In addition to oil and gas, Virginia has the potential
+to develop offshore windmills and other types of renewable energy. All
+of these forms of energy are necessary to meet the challenges of the
+21st Century.
+ I look forward to continuing to move Virginia towards energy
+independence, offshore energy development and job creation.
+ ______
+
+ [The response to questions submitted for the record by Mr.
+Reilly and Senator Graham follows:]
+
+ Response to questions submitted for the record by the National
+ Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling
+
+Chairman Doc Hastings (WA-R)--Questions
+ Question: Acknowledging that the U.S. will have less domestic
+ production from the OCS in the foreseeable future; does the
+ Commission have any recommendations as to where Congress should
+ promote domestic oil and gas development to offset those
+ losses?
+ Response: The Commission does not foresee that any of its
+recommendations will lead to less domestic production from the OCS in
+the foreseeable future. The Commission instead concluded that the
+Macondo well blowout was fully preventable and that deepwater drilling
+in the Gulf can be done safely in the future with appropriate
+safeguards, all of which are readily achievable. The only threat to
+domestic production from the OCS would be the failure of industry and
+government to take those necessary steps to restore safe drilling to
+the Gulf.
+ Question: The Commission dealt primarily with offshore production,
+ would the Commission encourage greater onshore oil and gas
+ production from federal lands where an oil spill would be less
+ complex to clean up and mitigate?
+ Response: The Commission did not consider the comparative safety of
+onshore and offshore drilling because the President's charge to the
+Commission was limited to the viability of offshore drilling,
+especially in deep waters. Because, moreover, the Commission concluded
+that deep water drilling in the Gulf can be done safely and those deep
+waters are where significant oil and gas resources exists, the
+Commission never had occasion to determine whether onshore production
+was needed as a substitute for offshore drilling.
+ Question: According to press reports, after the Commission released
+ some of its findings, companies came forward with information
+ that rebutted specific statements in the Commission's report.
+ Since the Commission doesn't appear to have incorporated the new
+ information provided after the press leak in the final report,
+ how will that new information be utilized and made available to
+ the public?
+ Response: The Commission has received no information from companies
+since the release of the Commission's final report that has refuted any
+of the Commission's findings and conclusions concerning the causes of
+the Macondo well blowout and the resulting Deepwater Horizon rig
+explosion. Chapter 4 of the Commission's final report summarized those
+findings and conclusions. As promised by that report, moreover, the
+Commission's Chief Counsel has since released a detailed and full
+account of those same findings and conclusions in a 350 page technical
+report. That Chief Counsel's Report describes in exhaustive detail all
+the engineering and management mistakes made by the three companies
+that resulted in the well blowout and rig explosion.
+ The Chief Counsel, the Commission's Chief Scientist, and the Chief
+Counsel's investigation team met repeatedly with representatives of the
+three companies principally involved in the blowout--BP, Halliburton,
+and Transocean--and other oil and gas companies. Indeed, for much of
+the investigation, those companies were all extremely cooperative and
+provided invaluable information. The Chief Counsel asked BP,
+Halliburton, and Transocean to review his draft final report to the
+Commission prior to its publication to give them the opportunity to
+correct misstatements and provide additional information. The Chief
+Counsel took that same precaution in late October 2010, immediately
+prior to holding a public hearing in which he detailed for the
+Commission his preliminary findings and conclusions. Each of the three
+companies was provided a preview of that presentation, again, in order
+to allow them to correct misstatements and provide additional
+information.
+ In short, the Commission's Chief Counsel gave the companies
+extraordinary opportunities to comment on the Chief Counsel's findings
+and conclusions prior to their release because the Chief Counsel was
+determined to provide the Commission and the American public with the
+most comprehensive and accurate accounting of the causes of the Gulf
+oil spill disaster. The Commission's investigation has never been aimed
+at determining legal responsibility or allocating blame for the
+blowout. The companies involved may nevertheless believe that the Chief
+Counsel's and Commission's findings could be relevant to the outcome of
+other proceedings. It is therefore understandable that they would
+advocate factual positions that would, if accepted, minimize their
+potential liability.
+ Question: Did any controversial findings require corroboration?
+ Response: The Commission does not view its findings as
+controversial or in any manner as unsupported. The Commission's
+exhaustive investigation identified precisely the mistakes made that
+caused the well blowout and rig explosion. Both the Commission's final
+report and the Chief Counsel's report to the Commission provide
+detailed corroboration for each of the Commission's findings and
+conclusions regarding the causes of the blowout and explosion. The
+Commission's final report provides that description and corroboration
+in a more summary fashion as part of the Commission's overall report,
+and the Chief Counsel's report to the Commission sets it forth in
+greater detail, in over 350 pages of text, figures, and footnotes. That
+accounting properly identifies areas where there is unavoidable
+uncertainty. Any remaining uncertainty, however, has no bearing on the
+strength of the Commission's ultimate recommendations for changes in
+government and industry practices, which are more than amply supported
+by what the Commission concluded with certainty.
+ Question: What record of proof was considered sufficient to support a
+ particular finding?
+ Response: The Commission did not assume the role of a judge or
+jury, applying a strict legal standard of proof, such as the
+``preponderance of evidence test'' applied in civil liability lawsuits
+or the ``beyond reasonable doubt'' standard applied in criminal
+prosecutions. The President's Executive Order to the Commission
+expressly instructed the Commission not to apply formal legal standards
+that might intrude upon potential civil litigation or criminal
+prosecution. For that reason, the Commission instead applied a standard
+of reasonable certainty, meaning whether the evidence allowed the
+Commission to conclude with reasonable certainty what had happened and
+whether the action taken was either an engineering mistake or failure
+in management.
+ Question: How did Commission staff resolve conflicts between witness
+ accounts?
+ Response: As a practical matter, by the time the Commission staff
+had completed its investigation, there were very few witness accounts
+of facts that differed in ways that affected the Commission's ultimate
+findings and conclusions regarding the causes of the well blowout. The
+Commission's investigation instead found striking common ground
+regarding the basic facts and the Commission consulted its own Chief
+Scientist and a team of expert engineers and scientists, many of whom
+work with industry, to evaluate those facts in identifying the mistakes
+made by the three companies.
+ When the Chief Counsel discovered an important factual or
+analytical dispute that was central to the Commission's investigation,
+he took the steps to resolve the dispute. For instance, after BP called
+into question the stability of the Halliburton cement slurry, and
+Halliburton refuted those claims, the Chief Counsel obtained from
+Halliburton the cement recipe used at Macondo as well as materials for
+testing the recipe. The Chief Counsel then obtained the services of
+Chevron, one of the world's leading experts on cement, to test the
+stability of that formula. Those tests revealed that Halliburton's
+cement, based on that formula, was in fact unstable. This was a major
+fact finding achieved by the Commission.
+ Finally, to the extent that the Commission concluded that the facts
+were uncertain, the Commission expressly acknowledged that uncertainty
+and explained to what extent, if any, that uncertainty affected the
+Commission's finding and conclusions. Such candor was consistent with
+the Commission's charge: to provide the American people with a full and
+comprehensive accounting of the blowout. Such an accounting invariably
+includes acknowledgement of remaining uncertainties.
+ Question: What standards did the staff apply to determine whether a
+ particular statement was credible or not? For example, was
+ hearsay considered reliable?
+ Response: The Commission staff considered the full context of any
+statement in determining its reliability, including but not limited to
+the credibility of the person making the statement, his or her relative
+expertise, and corroborating documentary evidence. As a general matter,
+the Commission sought to rely primarily on statements of facts offered
+by those with firsthand knowledge of factual assertions being made.
+And, for that same reason, hearsay as a general matter was discounted.
+In some instances, however, the Commission staff had no choice but to
+rely on hearsay, for example, to investigate the statements and actions
+of several men who died on the rig. In such circumstances, hearsay is
+the only available evidence. When such hearsay was the basis of the
+Commission's findings, the Commission sought, as fact finders
+traditionally do in such circumstances, corroboration of those
+statements by more than one source. In addition, the Commission always
+made clear in its report the full basis of its factual finding so
+others could weigh it accordingly.
+ As described in response to an earlier question, however, as a
+practical matter, factual disputes were not a major problem for the
+Commission staff investigation. The Commission's factual investigation
+resulted in a factual accounting regarding the drilling of the Macondo
+well and the response and containment efforts about which there is very
+little meaningful dispute about what happened.
+ On occasion, there were disputes regarding the engineering or
+scientific significance of certain facts and data. In some instances,
+representatives of the companies principally involved disputed the
+importance of certain data or undisputed facts. In cases of analytic
+disputes, the Chief Counsel's staff consulted an extensive array of
+industry and academic experts before reaching conclusions, and noted in
+the Chief Counsel's report any meaningful differences between our
+findings and those of others.
+ Question: How did the staff conduct its deliberations?
+ Response: There were no formal deliberations by staff. Staff met
+frequently and informally to discuss facts, analyses, and written work
+products. In addition, they prepared draft written work products, which
+were reviewed by staff team leaders and ultimately by the Executive
+Director and/or Chief Counsel prior to submission to all the
+Commissioners. The Commissioners, by contrast, did deliberate and, as
+required by the Federal Advisory Committee Act, Commissioner
+deliberations took place in public.
+ Question: Who was present?
+ Response: There were no formal meetings in which staff deliberated.
+Of course, there were informal conversations between staff on a
+consistent basis over the course of their research and investigation.
+ Question: Were they confidential?
+ Response: There were no staff deliberations. Internal staff
+discussions that occurred regularly on an informal basis during staff
+research and investigation were not open to the public. As discussed
+above, staff frequently invited technical experts from the companies
+involved in the blowout to discuss and explain facts and data.
+ Question: If they were not confidential, will you make the
+ deliberations public?
+ Response: Because there were no formal staff deliberations, there
+is no information to be made public. There are no minutes or written
+account of the myriad informal conversations that staff had with each
+other during staff research and investigation. The work product that
+resulted from staff research and investigation were draft staff working
+papers, draft staff findings and recommendations, and draft staff
+chapters, all of which were submitted to the Commissioners. Draft staff
+working papers submitted to Commissioners were published on the
+Commission website. Draft staff findings and recommendations were
+presented to the Commissioners at a hearing open to the public at a
+December deliberative meeting. And, finally both the Commission's final
+report, which was based on the Commission's written work and the final
+staff working papers have all been released to the public, as has the
+Chief Counsel's Report to the Commission.
+ Question: Some individuals have raised concerns about the
+ investigative techniques practiced by the staff working on the
+ Commission's report. In order to better understand the reasons
+ behind the investigative techniques employed by the staff,
+ please answer the following questions:
+ Why did the staff conduct ``group interviews,'' that is, interview
+ more than one person at a time, thus allowing the perspective
+ of one person to influence that of another?
+ Response: The Commission staff conducted interviews both on an
+individual basis and on a group basis. Both types of interviews can be
+effective in fact finding. At the November hearing, the Chief Counsel
+engaged in some group interviews because that was an effective means of
+resolving and highlighting for the Commissioners and the American
+public significant differences in viewpoints expressed by witnesses.
+Staff also conducted several group interviews with teams of technical
+experts (as opposed to fact witnesses) to facilitate a robust
+discussion of technical issues.
+ Question: Why did the staff announce preliminary findings publicly,
+ thus allowing witnesses and subjects of the investigation to
+ adjust their rendition of events prior to the final findings
+ being published?
+ Response: The purpose of announcing preliminary findings when the
+Commission staff did so was to ensure the accuracy of the staff's final
+proposed findings for submission to the Commissioners. Such a procedure
+allowed, and the Commission staff encouraged, anyone with information
+relevant to the preliminary findings to submit that information prior
+to the issuance of any final staff proposed findings. Like any fact
+finder, the staff can discount the persuasiveness as appropriate of
+efforts by witnesses and subject to investigation to adjust their
+rendition of facts in light of those preliminary staff findings.
+ Question: Why did the Chief Counsel paraphrase and summarize testimony
+ during the Commission's public hearings instead of quoting
+ witness statements as a means of ensuring an accurate record?
+ Response: The transcript of the hearing already provided a verbatim
+record of what witnesses said. The purpose of the Chief Counsel's
+paraphrasing and summarizing was to provide the full Commission with
+the benefit of the Chief Counsel's considered judgment concerning what
+had been learned from the two days of testimony the Commissioners had
+heard. The Commission has publicly posted all transcripts of witness
+testimony on its website for public review.
+ Question: The Commission's recommendations state that pollution
+ prevention standards should be developed in consultation with
+ international regulatory peers. Are you familiar with the joint
+ work of the International Oil Spill Conference? Is that an
+ adequate international working group?
+ Response: The Commission is aware of the International Oil Spill
+Conference and Commission staff had occasion in their research to
+review some of the papers and abstracts presented at every
+International Oil Spill Conference from 1969 to 2008. The Commission
+has taken no view on whether that particular organization would be
+sufficient for the development of the necessary standards.
+ Question: The Commission has made it clear that all of industry has
+ the same ``safety culture'' that was practiced on board the
+ Deepwater Horizon and that the failure of the ``safety
+ culture'' as evidenced by the explosion and subsequent oil
+ spill are systemic and overarching.
+ How many drilling contractors operate in the Gulf and what percentage
+ of those operators did the Commission interview and which of
+ these operators safety records and cultures did the Commission
+ analyze?
+ Response: The question is based on an incorrect premise. The
+Commission made no such statement regarding the safety culture of the
+offshore oil and gas industry. The Commission's final report instead
+makes clear that many companies have exemplary safety records. And the
+Commission further expressly praised those companies not only in the
+Commission's final report but in public hearings held this past
+November.
+ The basis for the Commission's conclusion that the offshore
+drilling industry suffered from a ``systemic'' problem was very
+different, as the Commission's report makes clear. That conclusion was
+based on the nature of the mistakes that the Commission found were the
+cause of the Macondo well blowout and rig explosion as well as the
+identity of those making the mistakes. The Commission did not discover
+one or two isolated mistakes but a pattern of repeated mistakes in well
+drilling operations that revealed a fundamental failure of risk
+management and safe drilling practices. In addition, those making the
+mistakes were not just three insignificant companies. They included the
+largest operator of deepwater drills in the Gulf (BP); the largest
+supplier of cement for all deepwater wells, not just to BP but to all
+operations in the Gulf (Halliburton); and the largest operator of
+deepwater drilling rigs in the Gulf that services not just BP but all
+major operators (Transocean). In addition, the Commission staff
+investigation revealed that BP was not the only company that had failed
+to plan for a possible deepwater well blowout;BP did not maintain
+resources adequate to contain and respond to such a blowout, as
+promised by the oil spill response plans BP had submitted to the
+government. None of the other oil companies was prepared for such a
+blowout, notwithstanding their formal and repeated claims to the
+government that they were prepared. Indeed, all of their oil spill
+response plans were riddled with inaccuracies and false promises. It
+was on this firm basis that the Commission concluded that the offshore
+industry as a whole suffered from a culture of complacency that had
+assumed away, rather than effectively planned for a possible deepwater
+well blowout.
+ Question: The report includes a ``loss of well control graph'' showing
+ 79 accidents in the Gulf of Mexico between 1996 and 2009.
+ How many wells were drilled during that time period?
+ Response: According to the Bureau of Ocean Energy Management,
+Regulation and Enforcement, operators drilled 13, 359 wells in the Gulf
+between January 1, 1996 and December 31, 2009.
+ Question: What does the Commission believe constitutes a safe
+ industrial record?
+ Response: A loss of well control does not, by itself, indicate that
+an operator was engaging in unsafe drilling practices. Some risk is
+inevitable in offshore drilling, especially in deep water. The purpose
+of the chart in the report describing the 79 incidents of loss of well
+control is not to suggest that each of those incidents demonstrates
+unsafe drilling practices. It is instead simply to document the
+inherent risks of offshore drilling and the reason why it is so
+essential that industry always be on guard to ensure that such
+incidents do not result in the kind of major disaster that occurred
+with the Macondo well blowout.
+ Question: Does the Commission believe it is possible to eliminate
+ human error from the disaster equation?
+ Response: No, it does not. Safe drilling practices, however,
+require anticipating the potential for such human error and building in
+safeguards both to minimize its occurrence and its consequences. The
+human error that caused the Macondo well blowout was entirely
+preventable and was not the result of unavoidable human error.
+ Question: Since taking office one of Secretary Salazar's primary
+ efforts has been to ensure that oil and gas companies ``use or
+ lose'' their leases. This effort has included changes in rental
+ payments, reducing the length of leases, and greater regulatory
+ attention to the speed of the development of leases. You have
+ highlighted in your report that many of the steps taken by BP
+ in the development of this well were done to save time.
+ Considering the Department's pressure to speed development, does the
+ Commission believe that BP felt obligated to use these time
+ saving measures to meet the Department's demands?
+ Response: The Commission has insufficient information upon which to
+form a belief concerning BP's motivations for saving time and whether
+they might have been related to Department of the Interior policies.
+ Question: Does the Commission believe that we should consider
+ extending the length of leases to allow companies and
+ regulators additional time to conduct environmental and safety
+ studies?
+ Response: The Commission did not consider that issue and neither a
+decision to extend or a decision not to extend the length of leases
+would, accordingly, be inconsistent with the Commission's
+recommendations.
+ Question: UCSD Economics Professor James Hamilton has written that
+ ``nine out of ten of the U.S. recessions since World War II
+ were preceded by a spike up in oil prices.'' In fact, he has
+ recently written that it was high oil prices that caused a
+ significant decline in personal spending and new car purchases
+ that contributed to our current recession.
+ Did the Commission look at the impact of reduced domestic oil and gas
+ production on gasoline prices, the GDP, or the Nation's balance
+ of trade?
+ If high gasoline prices and oil price spikes are known to do
+ significant harm to the U.S. economy, should the U.S. ensure
+ that adequate domestic production is available to prevent
+ significant price spikes and declines?
+ Did the Commission conduct an analysis on the economic impacts of
+ higher gasoline prices and declining domestic production on the
+ lower income brackets of the U.S. population?
+ Response: The Commission did not undertake a detailed analysis of
+the relationship of the nation's economy to oil and gas prices because
+such an inquiry was outside the Commission's charge, as described by
+the President's Executive Order creating the Commission. Consistent
+with that Executive Order, the Commission identified the root causes of
+the oil spill and made recommendations concerning how to prevent future
+spills and mitigate their consequences.
+ Question: Did the Commission at any time receive direction on policies
+ to consider or recommendations that should be made from:
+ a. Ms. Carol Browner, Special Assistant to the President?
+ b. Mr. Steve Black, Counselor to the Secretary of the
+ Department of the Interior?
+ c. The Honorable Ken Salazar, Secretary of the Department of
+ the Interior?
+ d. Mr. Michael Bromwich, Director, Bureau of Ocean Energy
+ Management
+ e. The Honorable Steven Chu, Secretary Department of Energy?
+ f. Would the Commission please provide any directions or
+ instructions from these individuals that were provided to the
+ Commission to the Committee? (These requests include emails,
+ letters, phone logs, and other communications)
+ Response: The only direction or instruction that the Commission
+received from anyone outside the Commission itself concerning the
+proper scope of the policies and recommendations for the Commission's
+consideration was contained in the President's Executive Order
+establishing the Commission. That Executive Order defined the scope,
+purpose, structure, and timetable for the Commission's work. The
+Commission neither received nor entertained any other instructions or
+directions concerning what the Commission should consider or recommend.
+No one, including any of the listed individuals, purported to direct or
+instruct the Commission on policies or recommendations or otherwise to
+exercise supervisory or managerial authority over the substantive
+nature of the Commission's work. Any such assertion, moreover, of
+supervisory or managerial authority would have been antithetical to the
+independence of the Commission's investigation and recommendations and
+for that reason rejected by the Commission. Because the Commission
+received no ``instructions'' or ``directions'' of this kind, the
+Commission has no related documents to provide.
+Congressman and Ranking Member Edward J. Markey (MA-D)--Questions
+ Question: During the hearing, it was asserted that the Commission
+ should not have issued its final report until it knew
+ definitively why the blowout preventer (BOP) failed to function
+ as it should have. How can you say you did a thorough review of
+ the accident and determined the causes if you weren't able to
+ inspect the BOP?
+ Response: The Commission could do so for the straightforward
+reason, explained in the Commission's Final Report and further
+elaborated upon in the Chief Counsel's Report to the Commission, that
+even if the blowout preventer did fail, that failure did not cause the
+explosion that killed 11 men on April 20th. As the Commission report
+and Chief Counsel's Report explain, the rig crew realized too late what
+was happening and thus activated the BOP too late to have prevented an
+explosion. By the time the crew tried to activate the BOP, gas had
+already flowed above the BOP and was rocketing up the riser. That gas
+is what ignited on April 20th.
+ By contrast, as the Commission report and Chief Counsel' Report
+further explain, if the crew had heeded warning signs earlier in the
+day, they could easily have prevented the explosion from happening.
+These included misinterpreting the negative pressure test used to check
+the integrity of the cement job. In the hour or so before the
+explosion, there were several other odd and unexpected pressure
+readings that the crew should have realized were signs of a problem,
+but unfortunately did not. If they had properly recognized these signs,
+they could easily have closed in the well.
+ To be sure, any blowout preventer failure may potentially have
+played a part in the severity of the oil spill, but the disaster as a
+whole was due to a rather staggering series of errors by the three
+companies, all of which our investigation has documented. These errors
+can be addressed through better regulation, better training for
+workers, and a strong commitment to safety by both the companies and
+the regulators. Examples of key mistakes by BP, Halliburton, and
+Transocean as identified by the Commission's investigation include:
+ Failure to get a good cement job
+ Failure to understand that the negative pressure test
+ indicated that the cement was instable
+ Problems with BP's temporary abandonment procedures,
+ in particular, its decision to displace mud from the riser
+ before setting additional barriers to back up the cement at the
+ bottom of the well. This left the faulty cement at the bottom
+ of the well as the only physical barrier that could prevent the
+ flow of hydrocarbons into the well
+ Failure to understand that a kick was occurring, even
+ though there were several odd and unexpected pressure readings
+ in the hour or so leading up to the explosion that the crew
+ should have realized signaled a problem
+ Failure to respond appropriately once mud and gas
+ began spewing onto the rig floor. The crew should have diverted
+ the gas overboard instead of diverting it through the mud-gas
+ separator. While it is not entirely clear this would have
+ prevented the explosion, it could have at least limited its
+ impact.
+ For these reasons, the blowout preventer analysis, while important,
+will not change the Commission's conclusions that a failure of
+management led to numerous risky and unnecessary decisions made by the
+companies involved, each of which led to the occurrence of the blowout.
+The blowout preventer can, like a seatbelt, reduce the amount of harm
+that is caused, but in the circumstances of the Macondo well, even a
+properly functioning blowout preventer was not a root cause of the
+accident and its immediate tragic consequences for those on the rig on
+the night of April 20th. The BOP's relationship to an oil or gas well
+is the same as the relationship of an airbag to a car--it is not
+intended as a means to prevent an accident, but to mitigate its
+effects.
+ Question: Can you briefly list all the errors or other problems
+ encountered in the weeks, days and hours leading up to the
+ blowout at the Deepwater Horizon well that caused the accident
+ to occur in the first place?
+ Response: A brief and necessarily under inclusive list of errors
+and other problems follows. Chapter 4 of the Commission's overall
+report provides a summary of the engineering, process, and management
+decisions that led to the blowout. The Chief Counsel's report explains
+these mistakes and others in greater detail.
+ 1. BP and the rig crew experienced difficulties drilling the
+ well. When combined with earlier design decisions, these
+ problems required them to plan a ``finesse'' cement job.
+ 2. The cement slurry that BP and Halliburton used was very
+ likely unstable.
+ 3. BP and Halliburton did not adequately test the cement or
+ review test results prior to pumping the cement.
+ 4. BP's temporary abandonment procedures called for the crew
+ to unnecessarily underbalance the well and stress the cement
+ without first installing additional static barriers.
+ 5. BP provided inadequately detailed procedures to the crew
+ for temporary abandonment and negative testing, and provided
+ them late, causing confusion.
+ 6. BP's well site leaders, in consultation with the Transocean
+ rig crew, misinterpreted data from the negative pressure test.
+ 7. The rig crew and mudloggers missed several signs of the
+ ``kick'' that became the blowout in the last hour before the
+ blowout occurred.
+ 8. Once the blowout began, the rig crew did not immediately
+ divert mud flow overboard and instead attempted to route flow
+ through the mud-gas separator.
+ Question: Can you also describe any delays, errors or other problems
+ associated with efforts to activate the BOP once it became
+ clear that this was necessary (please only describe any
+ problems that are separate and apart from BOP malfunctions)?
+ Could any of these have impacted the likelihood of using the
+ BOP to stop the explosion(s) on the Deepwater Horizon even if
+ it had properly functioned?
+ Response: The Chief Counsel concluded that the crew first activated
+an annular preventer in the BOP at best only moments before drilling
+mud erupted onto the rig floor. By this time, gaseous and liquid
+hydrocarbons had already passed the BOP rams and were in the riser.
+Once those materials were in the riser, there was nothing the crew
+could have done to prevent them from flowing to the surface. As gaseous
+hydrocarbons flowed up through the mile of riser pipe, they expanded,
+further increasing the speed and force of the blowout as they rose.
+Accordingly, the Chief Counsel concluded that even if the BOP had
+functioned flawlessly, the explosion would have occurred and eleven men
+would have died. Put another way, the main problem associated with
+activating the BOP was timeliness--the rig crew recognized signs of a
+kick too late to use the BOP to prevent a blowout and an explosion.
+ Question: The Commission report concluded that safety problems in the
+ oil and gas drilling sector are ``systemic'' in nature and not
+ just associated with one company or group of companies.
+ Could you please provide me with some specific justifications for this
+ conclusion?
+ Response: The Commissioner's conclusion concerning the systemic
+nature of the problem was based on the nature of the mistakes that the
+Commission found were the cause of the Macondo well blowout and rig
+explosion as well as the identity of those making the mistakes. The
+Commission did not discover one or two isolated mistakes but a pattern
+of repeated mistakes in well drilling operations that revealed a
+fundamental failure of risk management and safe drilling practices.
+They included the largest operator of deepwater drills in the Gulf
+(BP); the largest supplier of cement for all deepwater wells, not just
+to BP but to all operations in the Gulf (Halliburton); and the largest
+operator of deepwater drilling rigs in the Gulf that services not just
+BP but all major operators (Transocean). In addition, the Commission
+staff investigation revealed that BP was not the only company that had
+failed to plan for a possible deepwater well blowout. BP did not
+maintain resources adequate to contain and respond to such a blowout,
+as promised by the oil spill response plans BP had submitted to the
+government. None of the other oil companies was prepared for such a
+blowout, notwithstanding their formal and repeated claims to the
+government that they were prepared. Indeed, all of their oil spill
+response plans were riddled with inaccuracies and false promises. It
+was on this firm basis that the Commission concluded that the offshore
+industry as a whole suffered from a culture of complacency that had
+assumed away, rather than effectively planned for a possible deepwater
+well blowout. Finally, the Commission concluded that the nature of the
+problem was of such a nature that a ``systemic'' solution was needed to
+ensure achievement by industry of safety in offshore drilling
+operations.
+ Question: Did your meetings with foreign regulators or other entities
+ that are familiar with safety or safety culture in other
+ countries highlight differences between the safety of offshore
+ drilling operations in the United States compared with other
+ countries? If so, can you describe the key elements of what you
+ were told that informed your views?
+ Response: Two key factors in particular influenced the Commission's
+views. The first was that the same operators that were drilling in U.S.
+waters were operating more safely in their drilling operations offshore
+of other nations. They were successfully complying with pro-active risk
+management approaches in other nations. The costs were not exorbitant
+and better safety was apparently being achieved elsewhere. Second, the
+Commission learned that other nations had prescriptive technical
+standards for drilling safety not reflected in U.S standards. The
+Commission saw no excuse for U.S. standards not to be at least as
+demanding as what other nations applied and what the same companies
+were already doing in those other nations to achieve regulatory
+compliance.
+ Question: In arguing against the need for reform, the oil and gas
+ industry and some Members of the Committee have asserted that
+ the BP Deepwater Horizon disaster was an outlier and point to
+ the long history of drilling offshore in the Gulf of Mexico.
+ Does the industry's record of drilling tens of thousands of wells
+ offshore in the Gulf of Mexico mean that this was an isolated
+ incident? Why or why not?
+ Response: The offshore drilling industry certainly deserves praise
+for the lack of any major well blowout in the Gulf of Mexico in U.S
+waters during the past several decades of exploration and production
+there. As the Macondo well blowout demonstrates, however, one cannot
+rely on a past record of safety when, as has occurred offshore in
+recent years, the industry is moving to wells located in ever deeper
+waters where the potential for recovery of increased volumes of oil and
+gas is accompanied by significant increases in associated risk.
+ Question: What differences exist between drilling or responding to a
+ blowout in shallow water verses in ultra-deep water where the
+ Deepwater Horizon was operating? Please detail any added
+ technical challenges and difficulties presented by deepwater
+ drilling.
+ Response: Added water depth itself creates complications and risk
+because of the lower temperatures and higher pressures exerted on
+wellhead equipment and BOPs at those greater depths. For example:
+ In deeper water, rigs need to be larger with greater
+ lifting capacity to manage heavy tubular (casing, riser, drill
+ pipe).
+ Deeper water requires a longer riser pipe, which
+ makes it more difficult to manage mud pressures and also makes
+ it more dangerous when gas enters the riser.
+ Hydrates are also a more common problem in deepwater
+ due to the seabed pressure-temperature relationships. This
+ poses challenges in development and production, but also in
+ well control.
+ Deepwater oil and gas reservoirs can have
+ exceptionally high porosity and permeability. These
+ characteristics promote productivity but also make well control
+ more difficult and means that ``kicks'' (influx of oil and gas
+ into the well bore) can be significant
+ In deepwater, the margins between pore pressure and
+ fracture gradient are typically less than in shallow water.
+ This leads to greater risks of taking a ``kick'' not just
+ during drilling, but also during topping (pulling out of the
+ hole).
+ Because the water is so deep, gas expansion of any
+ kick is mostly in the riser and therefore above the BOP. This
+ means that drillers must be attuned to subtle signs of an
+ influx and shut in the well before hydrocarbons enter the
+ riser. In shallow water, the expansion is mostly below the BOP.
+ Added water depth also increases the complexity of
+ efforts to stop a blowout that is already in progress. For
+ instance, BOP stacks are often on the surface in shallow wells,
+ which means that repairs can be done above water. By contrast,
+ BOPs in deep water wells can be a mile or more below the
+ surface, meaning that all work must be done by Remote Operated
+ Vehicles (ROVs). On the other hand, rigs and equipment can
+ station themselves directly over a deepwater blowout, which has
+ operational advantages, and cannot as readily do so in shallow
+ waters because of the presence of hydrocarbons at the surface.
+ Deepwater wells tend to contain significantly larger
+ volumes of oil and gas and consequently can be more productive,
+ which also means that spills resulting from deepwater blowouts
+ may potentially be larger. Good shallow wells produce at rates
+ of a few thousand barrels of oil a day. By contrast, deepwater
+ wells commonly produce more than 10,000 barrels per day.
+ For much of the nation's history offshore drilling occurred
+exclusively in shallower waters, where the risks were generally lower.
+During the last two decades, however, offshore drilling has
+increasingly occurred in ever-deeper water, beginning with ``deep
+waters'' (approximately 1,000-5000 feet) and now even ``ultra-deep
+waters'' (more than 5,000 feet), where the amount of oil and gas can be
+greater still. The Deepwater Horizon was operating at depths of
+approximately 4,992 feet of water.
+ Chapter 2 of the Chief Counsel's report addresses these issues in
+greater detail.
+ Question: On January 26th, I, along with several other House Members,
+ introduced legislation, H.R. 501, to implement the
+ recommendations of the National Commission on the BP Deepwater
+ Horizon Oil Spill and Offshore Drilling. The legislation we
+ introduced contains provisions designed to be consistent with
+ the recommendations of the Commission. For each of the
+ following provisions, please describe whether the legislation
+ appears to be generally consistent with the recommendations the
+ Commission has made to improve the safety of offshore drilling:
+ a. Our legislation would reorganize the regulatory structure
+ of the Department of the Interior to separate the offshore
+ leasing, revenue collection, and environmental and safety
+ review and enforcement functions. The legislation would also
+ make the head of the safety agency a fixed-term appointee.
+ b. The legislation would create a dedicated funding stream
+ from oil and gas fees to fund the agencies responsible for
+ regulating and overseeing the industry.
+ c. The legislation would require the federal government to use
+ sound science to properly estimate the potential worst-case
+ spill scenarios and then requires industry's oil spill response
+ plans to incorporate those worst-case scenarios into a
+ realistic analysis of what could happen in the event of a
+ catastrophic blowout.
+ d. The legislation would establish a permanent scientific
+ group to ensure that the government develops and maintains the
+ extensive expertise needed to estimate the flow rate of oil
+ from a spill.
+ e. The legislation would dedicate 80 percent of the Clean
+ Water Act fines and penalties to Gulf Coast restoration.
+ f. The legislation would ensure that the National Oceanic and
+ Atmospheric Administration (NOAA) has a formal consultative
+ role in the decision making process for where and how new
+ drilling can occur so that the best possible science can be
+ incorporated into the decision-making process. The Department
+ of the Interior would have to respond in writing if it chose
+ not to accept NOAA's recommendations.
+ g. The legislation would create a dedicated funding stream
+ from oil and gas fees to fund oil spill response research and
+ development.
+ h. The legislation would increase the per incident payout from
+ the oil spill liability trust fund.
+ i. The legislation would require strong new standards for
+ blowout preventers, cementing and well-design.
+ j. The legislation would require extensive study on the
+ potential effects of dispersants on the marine environment.
+ k. The legislation would protect whistleblowers from being
+ retaliated against for reporting violations of oil and gas
+ drilling safety laws and regulations.
+ Response: All of the above legislative proposals, if enacted, would
+be consistent with the Commission's final report and recommendations.
+ Question: One of the Commission's findings is that federal oil and gas
+ regulators have historically been underfunded and the
+ Commission recommends creating a dedicated funding stream from
+ increased oil and gas fees to fund the agencies responsible for
+ overseeing and regulating the industry.
+ However, some have indicated a desire to reduce federal non-security
+ spending levels across the board. In your opinion, would
+ reducing rather than increasing funding for federal oil and gas
+ regulators help or hurt our ability to ensure that offshore oil
+ and gas drilling operations are safe?
+ Response: The Commission believes that increasing funding for oil
+and gas regulators is essential to ensuring drilling safety and is
+necessary to get the oil and gas industry fully back in operation in
+the Gulf as expeditiously as possible.
+ Question: The Commission's recommendations note that historically most
+ applications of the Natural Resource Damage Assessment process
+ have focused on coastal restoration, as opposed to restoration
+ in water column or on the sea floor. Would focusing primarily
+ on coastal restoration be appropriate in this case? What
+ suggestions do you offer for how to address the damage
+ offshore, which the Commission notes is ``unprecedented and
+ unknown''?
+ Response: The Commission recommends that restoration not be limited
+to coastal restoration but also encompass the full marine environment
+damaged by the Gulf spill, including the water column. To address this
+need, the Commission recommends, among other things, longer term study
+of those non-coastal adverse impacts and broader efforts at
+implementing the Gulf Hypoxia Action Plan, utilizing marine spatial
+planning, and providing for marine protected areas to conserve marine
+biodiversity and to enhance the resilience of fish stocks.
+ Question: What are some of the challenges that would be associated
+ with responding to an oil spill offshore in the Arctic,
+ especially at certain times of the year when sea ice is
+ present? Would effectively responding to a spill in the Arctic
+ present greater challenges than responding to a spill in the
+ Gulf of Mexico?
+ Response: As described in Chapter 10 of the Commission's final
+report, three of the greatest challenges presented by the Arctic in
+particular include: (1) the current lack of significant Coast Guard
+resources in the Arctic or readily deployable there; (2) the presence
+of ice during significant parts of the year, which would complicate
+significantly and potentially delay effective containment and oil spill
+response efforts; and (3) the absence of daylight during significant
+parts of the year, which would hinder both containment and oil spill
+response efforts. In at those three respects, the challenges would be
+greater in the Arctic than in the Gulf. As described in Chapter 10, in
+some respects there are fewer challenges. For instance, many of the
+areas now under consideration for exploration and production in the
+Arctic are located in shallow rather than deep or ultra deep waters as
+in the Gulf.
+ Question: During the hearing, questions were raised regarding the
+ expertise of the Commission members and its staff. Could you
+ please describe a) the expertise and experience possessed by
+ those responsible for conducting the Commission's technical
+ work and writing those aspects of its report and b) the range
+ of experts consulted by the Commission or its staff as it
+ sought to develop its findings and recommendations?
+ Response: The Commission established a team of staff to investigate
+the root causes of the Macondo well blowout with enormous technical and
+legal expertise. That team was led by the Commission's Chief Counsel,
+Fred Bartlit, and by the Commission's Chief Scientist, Richard Sears.
+Bartlit is not only one of the nation's most highly regarded trial
+lawyers, with deep professional roots with industry and a degree in
+civil engineering from West Point, but he led for industry the
+investigation of the Piper Alpha rig explosion in 1988, in which 167
+people died in the North Sea. Bartlit is widely credited by industry
+and government alike for the rigor and fairness of that investigation,
+which successfully identified the root causes of the explosion. Richard
+Sears is a petroleum engineer with over three decades of experience
+with the oil and gas industry, having recently retired from Shell Oil.
+Bartlit and Sears put together not only an in-house team within the
+Commission staff, but also worked closely with experts in the oil and
+gas industry itself, who were enormously cooperative in assisting the
+Commission's work. The Commission's investigative team consulted with
+industry and academic experts on virtually every aspect of deepwater
+well drilling and fully vetted the investigation's findings with those
+same experts. The best proof of the depth, scope, rigor, balance, and
+fairness of that staff work is the recently-released Chief Counsel
+Report to the Commission, which describes in exhaustive detail in 350
+pages the engineering and management mistakes made that caused the well
+blowout and rig explosion.
+Congressman Dale Kildee (MI-D)--Questions
+ Question: Your comments today and the findings of your report
+ highlight the vital importance of the Gulf Coast ecosystem. Can
+ you briefly tell us, in terms of natural, economic, and other
+ resources, why this area and its fragile ecology are so
+ significant to the region and to the nation at large?
+ Response: Chapter 6 of the Commission's final report best describes
+the significance of the Gulf to the Gulf economy and environment, as
+well as to the nation as a whole. In addition to the oil and gas
+industry, the Gulf hosts the nation's largest seafood industry as well
+as an enormously important and vital tourism and recreation industry.
+As witnessed last summer, both those critical economies were devastated
+by the spill and it is still unclear, almost eleven months later, the
+extent to which they will have recovered this coming summer. Those who
+live along the coast were especially hard struck, including many
+vulnerable communities, not only in their livelihoods but in terms of
+their mental and physical heath, by the spill. More than 650 miles of
+Gulf coastal habitats--salt marsh, mudflat, mangroves, and sand
+beaches--were oiled. Tidal mudflats are especially sensitive to oil
+pollution and the Louisiana delta and the estuarine bays of Mississippi
+and Alabama have large expanses of tidal mudflats, and support dense
+populations of species. Salt marsh and mangroves are likewise both
+highly productive and sensitive habitats highly vulnerable to oil
+pollution.
+ Question: What would you say to the average American who sees the
+ prices at the gas pump going up each week and may be reluctant
+ for the government to apply additional regulations to gas and
+ oil drilling companies?
+ Response: None of the Commission's recommendations should have a
+significant impact on the price of gasoline. The primary factor in the
+price of gasoline is the price of crude oil, which is set by the global
+market. U.S. crude oil production currently accounts for roughly 10% of
+total global production, and it is unlikely that small changes in U.S.
+crude oil production could affect global prices. More importantly, our
+recommendations are aimed at moving us forward to allow for the full
+recovery of offshore operations in the Gulf. Improved drilling safety
+could impose some upfront costs on oil and gas companies, but these
+costs are small compared to the cost to industry of another major
+blowout.
+ Question: Your report calls for the dedication of a significant
+ portion of Clean Water Act penalties for restoration of the
+ Gulf Coast's threatened ecosystem. Can you tell us more about
+ the relationship between resiliency of the Gulf Coast ecosystem
+ and your proposed use of these incident-specific spill-related
+ funds?
+ Response: The Gulf is presently especially vulnerable to oil spills
+because of the elimination of natural barriers, loss of land,
+destruction of wetlands, and high concentrations of nutrients otherwise
+threatening the viability of marine life within the Gulf. As a result
+of these accumulating threats to the Gulf ecosystem, the harm caused by
+a catastrophic oil spill can be much greater because, combined with
+existing harm, the Gulf may lack the strength needed for recovery. It
+is for this reason, that mitigation of the harm of future spills
+warrants not just eliminating the incremental harm caused by the
+Macondo well blowout, but building back the strength of the Gulf
+ecosystem so as to be able to withstand future spills.
+ Question: Given that your report sites that ``since 2001, the Gulf of
+ Mexico workforce--35,000 people, working on 90 big drilling
+ rigs and 3,500 production platforms--has suffered 1,550
+ injuries, 60 deaths, and 948 fires and explosions.'' Do you
+ believe that the oil and gas industry is capable of regulating
+ itself without additional government oversight?
+ Response: We think that safe drilling operations will require both
+effective government and industry oversight. Neither can do it alone.
+That is why the Commission recommends the creation of an independent
+safety authority within the Department of the Interior. And that is why
+the Commission further recommends that industry establish its own
+independent, self-policing entity to oversee offshore drilling
+operations, akin to what the nuclear power industry did in 1979 in the
+immediate aftermath of the Three Mile Island Accident when industry
+established the Institute of Nuclear Power Operations.
+ Question: Some experts have suggested that the Commission has drawn
+ overly broad conclusions about the oil and gas industry's
+ commitment to safety, based on the decisions on a single rig.
+ How would you respond to this criticism?
+ Response: The Commissioner's conclusion concerning the systemic
+nature of the problem was based on the nature of the mistakes that the
+Commission found were the cause of the Macondo well blowout and rig
+explosion and the identify of those making those mistakes. The
+Commission did not discover one or two isolated mistakes but a pattern
+of repeated mistakes in well drilling operations that revealed a
+fundamental failure of risk management and safe drilling practices. In
+addition, those making the mistakes were not just three insignificant
+companies. They included the largest operator of deepwater drills in
+the Gulf (BP); the largest supplier of cement for all deepwater wells,
+not just to BP but to all operations in the Gulf (Halliburton); and the
+largest operator of deepwater drilling rigs in the Gulf that services
+not just BP but all major operators (Transocean). In addition, the
+Commission staff investigation revealed that BP was not the only
+company that had failed to plan for a possible deepwater well blowout;
+BP did not maintain resources adequate to contain and respond to such a
+blowout, as promised by the oil spill response plans BP had submitted
+to the government. None of the other oil companies was prepared for
+such a blowout, notwithstanding their formal and repeated claims to the
+government that they were prepared. Indeed, all of their oil spill
+response plans were riddled with inaccuracies and false promises. It
+was on this firm basis that the Commission concluded that the offshore
+industry as a whole suffered from a culture of complacency that had
+assumed away, rather than effectively planned for a possible deepwater
+well blowout. Finally, the Commission concluded that the nature of the
+problem was of such a nature that a ``systemic'' solution was needed to
+ensure achievement by industry of safety in offshore drilling
+operations.
+ Question: I appreciate the fiscal logic of your recommendation that
+ Clean Water Act penalty dollars be returned to revive the
+ natural and economic resources of the Gulf Coast's wetlands.
+ Can you summarize for us the reasons why that kind of funding
+ is needed here, and what you expect it to accomplish?
+ Response: As described in Chapter 7 of the Commission's Final
+Report, many have studied the current problems affecting the Gulf's
+ecosystem and the central role it plays in the nation's economy and
+there is no lack of understanding concerning the kind of steps now
+needed to address those problems. The problem has not been lack of
+understanding but lack of sufficient resources to commit to the
+necessary measures. The estimated costs of such a restoration effort,
+however, roughly mirror estimates of the amount of monies potentially
+recoverable in Clean Water Act penalties from those private companies
+responsible for the Gulf oil spill. Those penalties, accordingly,
+provide an extraordinary opportunity for the Gulf and the nation to
+undertake restorative measures of enormous value to the Gulf, the
+nation, and current and future generations of Americans.
+ Question: In last night's SOTU address, the President talked about the
+ need for investments in critical infrastructure for America's
+ long-term economic health. Would your proposal to invest Clean
+ Water Act penalties in Gulf Coast restoration offer this kind
+ of necessary economic security?
+ Response: Yes, it would. The Gulf's ecosystem supports some of the
+nation's most important economies.
+ Question: Recognizing the importance of the Gulf Coast ecosystem, many
+ of us are hopeful that the Natural Resource Damages Assessment
+ process will result in an aggressive response to some of the
+ worst effects of the spill. How would your proposal for Clean
+ Water penalties go beyond this NRDA response?
+ Response: It would go beyond because the NRDA is more limited in
+its ability to extend beyond the immediate effects of the spill itself
+and address the longer term and broader need to restore the overall
+health of the Gulf's ecosystem, which has been threatened by many
+activities in recent decades, including the Gulf's ability to withstand
+future oil spills.
+Congresswoman Betty Sutton (OH-D)--Questions
+Question #1 (Questions on Culture of Worker Safety):
+ 1. In your report you suggested that the oil and gas industry
+ should work to establish a ``Safety Institute'' similar to
+ organizations in other high risk industries like the nuclear
+ industry. By your recommendation, this would be an industry
+ sponsored entity aimed at improving safety and operation
+ standards in the offshore drilling industry.
+ 2. At the same time, you hint at the lack of a ``safety
+ culture'' in this industry. You make some great
+ recommendations, but there is a concern that industry will be
+ slow to self-regulate and change long standing practices.
+ 3. Have you found the industry receptive in any way to your
+ suggestions for forming a safety group?
+ 4. What obstacles exist to creating a culture of safety in the
+ oil and gas industry?
+ 5. What are some of the concerns you've encountered or what
+ might be done to encourage the establishment of a safety
+ culture?
+ Response: The Commission has been encouraged in many private
+conversations with leading industry officials that they are receptive
+and ready to create such an industry self-policing entity and that many
+recognize its value and importance. The greatest obstacle right now,
+however, is that there still seem to be significant voices in industry
+that have not reached that conclusion and seem open instead to seeing
+if the current demands for safer drilling will naturally subside
+without industry taking significant steps to reform drilling practices.
+The Commission's related concern is that there appears to be a tendency
+within the oil and gas industry, promoted by the American Petroleum
+Institute, to be reflexively opposed to enhanced oversight measures and
+a willingness to defer to ``average'' business practices rather than to
+demand ``best'' drilling practices. It is not yet clear to the
+Commission that those industry leaders who made clear that they share
+the Commission's view of the existing problem and the need for industry
+reform will be successful in moving the industry as a whole.
+Question #2 (Conflicts within Agencies Dealing with Drilling):
+ 1. In your report you hit on one of the major issues leading
+ up to the oil spill, the conflicting mission of the Minerals
+ Management Service. The report suggested the creation of an
+ independent agency to oversee aspects of offshore drilling.
+ 2. Secretary Salazar recently announced two new independent
+ agencies to carry on functions once assigned to MMS, one agency
+ to deal with leasing and one agency to deal with safety issues.
+ 3. But even under these two new agencies the Bureau of Safety
+ will still operate under the same assistant secretary who
+ oversees leasing duties.
+ 4. How do these agencies line up with your recommendations?
+ Response: Much of what the Secretary is doing is fully consistent
+with the Commission's recommendations. The Commission does, however,
+believe that more is needed, including not having the two new agencies
+operating under the same Assistant Secretary. In addition, the
+Commission recommends a series of other steps to enhance the
+independence of a new safety authority within Interior, including
+having the head of that authority possess special engineering
+credentials and experience and be appointed to a fixed term.
+ 5. What consequences do you foresee with the way Interior has
+ moved forward in forming these new agencies?
+ Response: The risk of not making the new agency as autonomous as
+the Commission recommends is that the new agency, especially after
+there is less political attention paid over time to the risks of well
+blowouts, will, as in the past, place greater weight on revenue
+collection to the detriment of ensuring safe drilling operations.
+Congressman Jeff Landry (LA-R)--Questions
+ Question: Do you propose these recommendations from the report for
+ both deep and shallow water drilling operations?
+ Response: The Commission's recommendations are not limited to
+deepwater drilling. As a practical matter, however, the challenges and
+associated risks of drilling are greater for deep water than they are
+for shallower water, so the practical impact of the recommendations are
+commensurately great for operations in deep water.
+ Question: Can you discuss what the economic impacts are on the nation
+ as a whole in light of your recommendations in the report and
+ the Obama Administration's response to permitting post-spill?
+ Specifically, can you discuss what the International Energy
+ Agency meant by it's anticipation of the U.S. needing an
+ additional 300,000 barrels per day of imports by 2015 based on
+ the ongoing permitorium and Interior Department actions?
+ What about the U.S.'s own Energy Information Administration's
+ announcement that production in the Gulf would be down 220,000
+ barrels per day in 2011 and 400,000 barrels per day by 2012 due
+ to the permitorium. Can you please discuss those numbers,
+ including what they mean for the Gulf economy, the U.S.
+ economy, and our national security?
+ Response: The Commission is aware of the Energy Information
+Administration and International Energy Agency analyses of the adverse
+impact of the moratorium and permitting delays in the Gulf of Mexico on
+U.S oil production. Indeed, precisely because the Commission was aware
+of the significant associated costs of such delays on the nation's
+energy supply and the national economy, the Commission made a series of
+recommendations for the purpose of reducing permitting delays. Most
+important, the Commission concluded that a significant cause of current
+and potential future delays was a lack of sufficient funding for the
+government agency, the Bureau of Ocean Energy Management, Regulation
+and Enforcement (the successor to the Minerals Management Service).
+Absent the necessary resources, BOEMRE cannot process permit
+applications as expeditiously as possible while ensuring drilling
+safety and the impact on the nation's energy resources and economy may
+well be even worse than projected by these two forecasts.
+ In particular, the Commission found that Congress had persistently
+and increasingly underfunded the Minerals Management Service to meet
+the challenges of the expanded activity in the Gulf. As offshore
+activity dramatically increased during the 1990s, the Minerals
+Management Service had increasingly-stretched budget resources
+available and its ability to maintain the capacity necessary for safety
+management and permitting suffered. The Commission, accordingly,
+identified the need for new hiring authority to compete with other
+employers for technical expertise as well as the budget certainty to
+enable the agency to make the hiring and training commitments necessary
+to accommodate the industry's permitting needs. Neither of these has
+yet been provided. Until Congress provides those resources, the absence
+of necessary government oversight will likely be the greatest source of
+continuing permit delays.
+ Question: Other countries have determined that there was no need to
+ shut down offshore production. In fact, African and South
+ American countries are actively pursuing long-term contracts
+ for rigs to move out of the Gulf. Including rigs from energy
+ companies from the likes of Murphy Oil, BP, Anadarko and
+ Statioil. How come the commission report did not discuss the
+ loss of rigs in the Gulf and economic impacts long-term?
+ Response: The Commission report did not discuss the loss of rigs
+and the economic impacts long term because the Commission concluded
+that deepwater drilling could be done safely and economically in the
+Gulf and sought to propose recommendations that would allow such
+drilling to occur in a safe and expedited manner. The Commission,
+accordingly, did not foresee a reason to assume that there would be a
+long term loss of rigs in the Gulf.
+ Question: Due to a 2008 Bureau of Labor Statistics Report on Work
+ Place injuries 89 percent of working Americans work in
+ industries with higher injury rates than oil and gas
+ extraction. So please explain why only commercial banking,
+ insurance carriers and certified public accountants fare better
+ and why child day-care services were twice as high as oil and
+ gas extraction?
+ This BLS report goes on to state that a total of 120 fatal work
+ injuries occurred in the oil and gas extraction industry in
+ 2008. The three most frequent fatal events in 2008 were
+ transportation incidents (41 percent), contact with objects and
+ equipment (25 percent), and fires and explosions (15 percent).
+ The number of fatal work injuries associated with fires and
+ explosions over the past five years ranged from 10 fatalities
+ in 2007 to 21 fatalities in 2006. In 2008, there were 18
+ fatalities. Why would the extraction portion of the industry be
+ labeled by the Commission ``a systematic breakdown of safety
+ and engineering practices'' when in 2008 41% of fatal work
+ injuries happened in the Transportation sector of the industry?
+ Do you or don't you agree that without any further regulations the
+ Offshore Oil and Gas industry is safer today then it was prior
+ to the accident?
+ Response: In the immediate aftermath of an accident, it is
+reasonable to assume that the offshore industry has on its own
+initiative taken some measures to enhance safety by learning from the
+specific mistakes made at the Macondo well and on the Deepwater Horizon
+rig. The Commission's recommendations, however, seek to promote safety
+far more by identifying the root causes, and thereby not just prevent a
+repetition of the precise, same mistakes, and to create an
+institutional structure for safety oversight within both government and
+industry that will endure over the longer term, long after memories of
+the BP Deepwater Horizon Gulf Spill begin inevitably to dim.
+ Question: The President charged this commission to determine the
+ causes of the disaster, to improve the country's ability to
+ respond to spills, and recommend reforms that make offshore
+ energy production safer. Prior to the accident, there existed
+ multiple layers of environmental reviews, including multiple
+ EIS and EA's. These included EIS's during the development of
+ the 5 year review and again prior to the lease sale. Where does
+ the Commission receive both the authority and the conclusion
+ that the NEPA review warrants any additional changes, as I find
+ no conclusion that it contributed to the accident or to the
+ impact of the clean up?
+ Response: Under the Executive Order that established the Oil Spill
+Commission, the President specifically tasked the Commission with
+suggesting improvements to Federal laws and regulations applicable to
+offshore drilling that would prevent future spills and mitigate their
+impact. Investigating the Department of the Interior and the Mineral
+Management Service's application of NEPA for offshore oil and gas
+development was an important part of this review because such NEPA
+review is designed to ensure, among other things, that agency decision-
+making considers potential adverse environmental consequences,
+including those resulting from oil spills conducted on federal
+properties and supervised by federal agencies.
+Congressman Jeff Denham (CA-R)--Questions
+ Question: The report recommends that there needs to be the creation of
+ a new government bureaucracy. How is it that the functions of
+ this new agency can't be performed by the current massive [over
+ sized] federal structure?
+ 1. Why can't the need for planning, coordination, execution,
+ and clean up after a disaster fall under the jurisdiction of
+ the Federal Emergency Management Agency (FEMA)?
+ 2. With better and more efficient government action couldn't
+ the damages from an emergency be lessened?
+ 3. Isn't it necessary to reduce the bureaucratic red tape that
+ prevents an overseeing agency, such as FEMA, from being allowed
+ to take the lead role and manage the necessary actions
+ following an incident?
+ 4. Wouldn't having one agency allowed to take the lead and
+ coordinate eliminate the communication breakdown and resolve a
+ need for an expansion of expensive and inefficient government?
+ Response: The Commission does not recommend the creation of a new
+federal bureaucracy to plan, coordinate, or execute the response to an
+offshore oil spill. Rather, the Commission recommends maintaining the
+existing command structure, in which the Coast Guard takes the lead
+role in responding to an offshore spill of oil or other hazardous
+substances. The National Contingency Plan properly assigns this lead
+role to the Coast Guard because of its expertise in the offshore and
+marine environment. Reassigning that role to FEMA would ignore the
+Coast Guard's decades of experience in oil spill response and planning,
+and would require a significant and inefficient expansion of FEMA to
+duplicate functions and expertise that already exist within the federal
+government (indeed, within the same cabinet department).
+ The Commission agrees that ``better and more efficient government
+action'' could lessen the damage caused by a major oil spill. As set
+forth in the Commission's report, the response to the Deepwater Horizon
+disaster revealed a series of deficiencies in government planning and
+execution. Accordingly, the Commission recommends a series of steps
+that the federal government could take, consistent with the existing
+command structure, to better address the demands created by a spill of
+national significance.
+
+
+
+