NOIA President on National Oil Spill Commission’s Final Report

Wednesday, January 12, 2011

NOIA President Randall Luthi issued the following statement in response to the National Oil Spill Commission’s Final Report - Deep Water: The Gulf Oil Disaster and the Future of Offshore Drilling:

“The lengthy report and its numerous recommendations will certainly provide ample fodder for all those interested in offshore drilling for months to come.  The Commission has put forth recommendations that should be vetted, aired and in some cases possibly implemented. The Commission went through a thoughtful, lengthy, deliberative process and now it is time for Congress and industry to do the same in evaluating the Commission’s findings. This report will become required reading for the offshore industry for years to come. 

“However, the report is not an indictment of offshore oil and gas production.  While many opposed to offshore exploration will undoubtedly use the report to bolster their calls to stop offshore oil and gas development, even the Commission Members themselves recognize the importance of moving ahead with additional development. The report contains several essential salient points from an industry standpoint: 

•    The Macondo well accident was ultimately the result of several human decision errors and, as the Commission noted itself on page 90, ‘not a statistical inevitability.’  Mistakes in offshore energy production can be dire, but it appears the events outlined by the Commission can all be corrected. 

•    The report also rightfully points out that we in the oil and gas industry, as in any walk of life, should always be striving to improve safety.  No well is worth the loss of 11 lives, however, there is a lack of recognition of industry efforts to correct and improve the system, particularly since April 20, 2010.  Even before the Commission was formed, industry had established task forces to review the available information regarding what happened and determine what needed to be improved. Throughout the summer and fall, industry personnel evaluated the response and containment efforts and made numerous recommendations for improvement.  Some of the major companies have established the Marine Well Containment Corporation, which will continue technology research and development in deepwater containment efforts. Other companies have made immediate efforts to have the best available containment and response equipment more available now.

•    We object to the Commission’s insistence on there being a ‘systemic’ problem throughout the industry.  This is not supported by the facts.  Over 43,000 wells have been drilled in the Gulf of Mexico without a Macondo-like accident.  Over 14,000 wells have been drilled in the deepwater Gulf without a Macondo-like accident.  This is not because the industry has been lucky.  Nor does this disaster-free record show a culture of complacency.  The April 20 accident cannot be taken lightly, but it should not be used as a dam to halt efforts for energy security and reliability.

•    The Commission’s recommendation for the industry to establish a self-regulating body or safety institute is certainly worth more discussion and study.  Critics of the oil and gas industry have railed on about the industry being able to set safety standards. Now, the Commission’s recommendation is to be self-policing as well.  Any such institute must have the full support of all aspects of the industry, from the smallest service company to the largest multinational corporations.  This comes down to what those with the most experience and skin in the game have been saying all along: wise and careful development of energy for our nation is best achieved through an open and cooperative process involving both industry and government.  A regulatory agency, no matter how well staffed and armed, will never be efficient or successful without the industry’s technical expertise and experience.  And a self-regulating subset of industry will never have credibility and trust of the American public without the proper oversight of a federal regulatory agency.

•    The oil and gas industry is global in nature with many differing standards of safety currently used.  The ‘safety case’ system is certainly worthy of discussion, but as is often the case, the devil is in the details.  Any major change in operations and regulations must include viewpoints of all parties affected, including small and large operators, producers and service providers.

•    As we saw when this issue came up last summer, the issue of liability for economic damages has many facets and consequences. For example, the existing limit of $75 million does not apply if there has been a violation of federal or state standards. Currently there is no limit for response and clean up liability. We look forward to frank and open discussions of the issue with members of Congress, all sizes of companies in the oil and gas industry and other interest groups.

•    Another concern is the Commission’s recommendation concerning formal involvement of NOAA during the Interior Department’s Five Year Leasing Plan development process.  This is certainly a case where too many cooks spoil the broth.  Under current law, Interior is directed to establish a lease sale process.  During the almost two year phase to develop this leasing plan, Interior already works with other agencies like NOAA to review, participate and comment.  To increase the actual decision making role of these partnering agencies means confusing the end goal (a workable leasing plan for safe and environmentally sound development of the nation’s energy resources) and will result in delay.  We may very well end up with a five year process to develop a Five Year Plan.

•    The Commission wanders off the range with its recommendations that Alaska offshore energy production is stopped until better Coast Guard response mechanisms can be developed and deployed. Such a pronouncement ignores the years of planning that companies and regulators have already spent understanding the intricacies of safe Arctic operations, deeming them inadequate and inferring that the Coast Guard is the only response capability that matters. This was not true in the Gulf of Mexico after the Deepwater Horizon and it is not true in Alaska. Linking Alaskan energy development to the ability of the Coast Guard to fund and build additional ships seems like an indirect attempt to simply shut down operations, imperiling jobs and the economies of Alaska and the local communities in the region.

•    At a time when the issuance of both deepwater and shallow water drilling permits have nearly stopped, the Commission’s recommendation that permitting timelines be delayed further is misguided.  The current 30-day statutory requirement for approval or rejection of Exploration Plans prevents bureaucratic foot-dragging, recognizing that several layers of environmental review have already taken place during formulation of a Five Year Plan and subsequent lease sale.  Furthermore, Congress has already rejected increasing the current 30-day requirement.”

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