IADC fights on front lines of industry battle for safe return to drilling, reasonable regulations

IADC has taken extensive steps during 2010 to help the industry get back to drilling in the Gulf of Mexico, driving forward a multitude of initiatives to resume shallow and deepwater drilling via the legal system, the media and cooperation with regulators and lawmakers in Washington. Below are some of the highlights.

Joint Industry Task Force

IADC and its members actively participated in the work of the Joint Industry Task Force (JITF), formed jointly with API in the days following the initial blowout. At the request of the Department of Interior (DOI), the group produced recommendations on what industry could do immediately to ensure the safety of personnel and the environment.

Two initial groups were kicked off in May 2010 – the Offshore Operating Procedures Task Force and the Offshore Equipment Task Force. They delivered two sets of recommendations in May that were heavily adopted by the government – first as part of the report to the president issued by the DOI in May 2010, in the Notices to Lessees (NTLs) that followed, then as part of the new Drilling Safety Rule and the Workplace Safety Rule promulgated in October.

The procedures group reviewed critical processes associated with drilling and completing deepwater wells to identify gaps between existing practices and regulations and industry best practices. Their recommendations are intended to move industry standards to a higher level of safety and operational performance and approach or achieve industry best practice.

Under this group, the Guidelines for Well Construction Interface Document (WCID) was drafted and delivered to the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE). Alan Spackman, IADC vice president – offshore technical and regulatory affairs, participated in this effort to ensure that the WCID guidelines are compatible with the IADC HSE Case Guidelines.

The equipment group reviewed current BOP equipment designs, testing, protocols, regulations and documentation and made recommendations to close any gaps or capture any improvements.

Both sets of recommendations were heavily adopted by the government – first as part of Notices to Lessees issued by the BOEMRE in May 2010, then as part of the new Drilling Safety Interim Final Rule.

The JITF later established the Subsea Well Control and Containment Task Force and the Oil Spill Response Task Force, both of which have delivered recommendations to the BOEMRE.

The Subsea Task Force offered 29 recommendations, including 15 immediate-action items that could help control the release of oil from its source. One highlight of the report was the Marine Well Containment Company (MWCC), formed by Chevron, Shell, ExxonMobil and ConocoPhillips. The company will operate and maintain a rapid response system designed to contain any future underwater blowouts in the Gulf of Mexico.

The Oil Spill Response Task Force made recommendations for spill response plans and training, as well as ways to expedite spill response capabilities. It also called for a better understanding of dispersants and in-situ burning techniques.

Further, IADC is participating in the latest JITF initiative aimed at suggesting the framework for a comprehensive safety management/safety culture program for the deepwater drilling industry. John Pertgen, IADC assistant director – offshore technical & regulatory affairs, has participated in the group’s meetings. The goal is to suggest key components of an industry safety management program for submission to the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. The group planned to provide the commission with final recommendations by late October.

The initial meeting focused on similar programs put in place in other industries following disastrous events, notably the Institute of Nuclear Power Operations efforts following Three Mile Island and the chemical industry’s Responsible Care program developed as a result of the plant leak in Bhopal, India. The group also reviewed the Step Change initiative founded in the United Kingdom in the 1990s.

Congressional visits

A delegation led by 2010 IADC chairman Louis Raspino, Pride International, and IADC president Dr Lee Hunt made numerous calls on the Washington offices of senators and congressmen in July 2010 to promote industry’s position against the drilling moratorium. The delegation included Dan Rabun, Ensco; Chip Keener, Transocean; Cor Selen, Maersk Drilling USA; Bob Warren, Pride; David Russell, Rowan Companies; Brian Petty, IADC executive vice president – government affairs; as well as representatives from advocacy firm Van Scoyoc Associates.

Shallow Water Energy Security Coalition

IADC staff teamed with the Shallow Water Energy Security Coalition (SWESC) in May 2010 to make a case for allowing shallow-water drilling to resume in the Gulf of Mexico. Through these efforts, several senators and congressmen made commitments to contact Secretary of Interior Ken Salazar to explain why drilling in the shallow-water Gulf should continue. Additionally, 10 senators signed a letter to Secretary Salazar supporting the industry’s requests on the issue. Another letter was sent to the Secretary with the signatures of 56 energy Democrats and Republicans.

As part of this effort, IADC sent a letter to Secretary Salazar on 13 May that set forth the case for immediately resuming new drilling in shallow waters.

The group had a small victory when President Obama agreed to allow new drilling to resume in water depths of 500 ft or less in his 27 May announcement. However, operators and contractors in the shallow-water Gulf have continued to face a de facto moratorium in the months since.

A study conducted by the SWESC and the Gulf Economic Survival Team in August 2010 found that the BOEMRE simply does not have the resources available to process drilling permits in a timely manner under the new NTLs 2010-N05 and 2010-N06.

It was found that, although industry was having relatively little trouble meeting the requirements of NTL N05, NTL N06 was proving more complex. Under NTL N06, BOEMRE had insisted that operators use the absolute open flow rate as the worst-case discharge figure in their exploration plans and drilling permit applications.

Operators, however, point out that geologic conditions must also be considered, including known reservoir characteristics, the presence of sand or rock barriers, analog reservoir information, production date from nearby wells and the propensity of many wells to “bridge” themselves over and naturally stop the flow in a well control event.

Deepwater Coalition

In June 2010, IADC formed the Deepwater Coalition and secured the services of Washington, DC-based advocacy firm Van Scoyoc Associates. As part of this effort, IADC sent a letter to Secretary Salazar on 4 June to urge that the DOI recertify deepwater rigs and allow them to resume drilling.

The letter stressed that the blanket suspension of deepwater drilling in the Gulf of Mexico would lay waste to tens of thousands of jobs, not only in the drilling industry but also their nearby communities. According to estimates by the Louisiana Mid-Continent Oil and Gas Association, as many as 46,000 jobs could be impacted by idling the 33 deepwater drilling units in the Gulf. The direct wages lost could be as high as $330 million per month.

Rather than shutting everything down without discretion, the DOI should recertify all BOP equipment, ensure rig personnel are trained to accepted standards and review operator well plans.

On 14 July, IADC issued a news release in response to drilling suspensions that the BOEMRE issued following the 22 June court ruling lifting the moratorium.

IADC reiterated its unequivocal opposition. “In issuing this new moratorium, the Department of the Interior has chosen to ignore volumes of evidence regarding the industry’s safe operating practices, as well as industry’s exhaustively produced recommendations – made at DOI’s request – for moving forward even more safely,” Dr Hunt said.

He continued: “Prevention is the key to safety in drilling, whether offshore or land. The industry’s history of drilling 42,000 Gulf of Mexico wells over more than six decades proves that, when accepted practices are followed, the threat of spillage is minimal.”

Drilling could safely resume, he added, through non-hydrocarbon-bearing strata with virtually no risk.

Court injunction, amicus brief

IADC filed an amicus brief in July in support of Hornbeck Offshore Services et al, whose case won the 22 June ruling from US District Judge Martin Feldman lifting the original moratorium. “The question is not whether the drilling moratorium will have a severe effect on the economy of the Gulf Coast. No one doubts that. The question is more basic: whether the local economy can even survive the moratorium,” the brief stated.

It also cited news reports and comments from public figures and citizen groups warning of dire economic consequences, including a “catastrophic” loss of jobs. Moreover, a sustained moratorium would drive mobile rigs out of the Gulf of Mexico and cut down badly needed oil production, the brief emphasized. It refers to a study by industry analysts Wood MacKenzie, which found that deepwater Gulf of Mexico production will fall by 93,000 barrels of oil equivalent per day during 2011 as a direct result of the six-month moratorium.

In the preliminary injunction issued in June, the judge noted that the moratorium was “imposed contrary to law.” He repeatedly referenced the 27 May report by Secretary Salazar to the president, noting that “the Court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium.”

The ruling further stated that the Secretary’s report makes no effort to explicitly justify the moratorium: It does not discuss any irreparable harm that would warrant a suspension of operations, and it does not explain how long it would take to implement the recommended safety measures.

The determination that the moratorium is necessary “does not seem to be fact-specific and refuses to take into measure the safety records of those others in the Gulf,” Judge Feldman stated in his 22-page decision.

The ruling also recognized the irreparable harm the plaintiffs have suffered as a result of the moratorium. “The Court is persuaded that it is only a matter of time before more business and jobs and livelihoods will be lost,” the decision stated.

Offshore GOM Reform website

IADC set up the Offshore GOM Reform website (www.iadc.org/offshore_GOM_reform) in May to provide resources related to the industry’s post-Macondo efforts, including IADC letters and news releases, government documents and reports, and other related news articles and videos.

As part of its campaign to encourage individuals to contact congressional representatives to advocate the resumption of GOM drilling, the association also provided pre-addressed, generic model letters to US congressional representatives and senators, as well as their contact information, via this website.

Town hall meeting

IADC held a town hall meeting in July in Houston to discuss the GOM drilling moratorium and related regulatory issues. Texas Congressmen Pete Olson and Kevin Brady participated in the meeting, and both vowed to support the energy industry in fighting the moratorium. They also encouraged the industry to work harder at getting its message out.

Congressman Brady praised the “thoughtful, reasoned responses” that IADC has taken to Washington since the blowout but urged individuals “to take the message to every lawmaker in Congress.” Congressman Brady later hosted a leadership meeting at the University of Houston, attended by IADC.

In voicing his support, Congressman Olson reiterated the fact that the drilling moratorium will do nothing to make deepwater drilling safer yet will do everything to damage the US economy. “There’s another motivation here, and it’s not the safety of the rigs,” he said.

Joining the congressmen on the panel were Moe Plaisance, Diamond Offshore, and Tom Williams, Nautilus International. Mr Plaisance described his efforts leading a work group under the JITF. Mr Williams provided comments on his work as part of a group of scientists who reviewed recommendations for Secretary Salazar’s safety report. He emphasized that the scientists did not recommend a blanket drilling moratorium, as was implied in the final report. “In fact, everybody recommended that it wasn’t the answer,” he said.

Canadian testimony

Kevin Roche, division manager for Noble Drilling in Canada, testified in June before a panel of the Standing Committee on Natural Resources of the House of Commons. In the appearance coordinated by IADC, Mr Roche provided the panel with critical information regarding the drilling industry as Canadian regulators considered the future direction of offshore oil and gas drilling in their country.

Explaining the role of the operator versus that of the drilling contractor, Mr Roche noted that, under the drilling contract, it is the operator who is ultimately accountable to the regulator for compliance and performance in delivering the well according to the drilling plan. The operator is accountable for pollution and spills emanating from the well, plus associated spill response and contingency plans, while the drilling contractor is responsible for pollution emanating from the drilling unit and its equipment.

Mr Roche noted that Canada already has a robust regulatory system in place; authorization submissions must include a safety plan, an environmental protection plan and a contingency plan for drilling and production regulation compliance. Regulatory regimes around the world are moving toward less prescriptive and more goal-oriented regulatory models; this should not lower standards but promote more effective and innovative practices, he said.

He also stressed that the primary focus of the drilling contractor must be on managing operational risks – to prevent the loss of well control, which removes the risk of injury to personnel and damage to the environment from the uncontrolled flow of hydrocarbon fluids at surface. He described drilling contractors’ five primary tools for managing well control risks: maintaining two well barriers at all times; using a robust competency assurance program; conducting regular drills and well control exercises to test personnel; deploying an effective planned maintenance program for critical equipment; and enforcing a comprehensive HSE management system to identify and correct hazards.

Testimony before US House

Testifying before the US House Subcommittee on Energy and Mineral Resources in June 2010, Mr Spackman called attention to the implementation of the HSE Case for deepwater operations in the Gulf of Mexico using a subsea BOP and its immediate challenges.

Mr Spackman expressed concerns that any US regulatory implementation of a safety case must allow for dialogue between industry and regulators. This dialogue is necessary so that industry and the government can reach a mutual understanding of government’s goals for the safety case.

Additionally, noting the Secretary has recommended that a Well Construction Interface Document accompany the HSE Case, Mr Spackman pointed out that, at that time, no government or industry guidelines existed describing such a document.

Industry is also concerned that implementing a safety case could lead to jurisdictional issues between the bureau and other regulatory agencies that exercise regulatory authority over offshore drilling operations, such as the US Coast Guard (USCG). In the past, the MMS and USCG had worked together to clearly identify boundaries on areas of individual and mutual regulatory concern. The industry is concerned that the BOEMRE’s implementation of a safety case could blur or shift those boundaries.

Further, in order for the HSE Case to be an effective regulatory tool, the BOEMRE must have “a cadre of personnel with the knowledge and experience to address the full scope of the identified hazards and risk control measures addressed in the document,” Mr Spackman said.

The agency also will need auditors to assess the implementation of both the safety case and the supporting management systems on the MODUs and floating facilities and at the corporate offices of both the oil companies and drilling contractors undertaking deepwater operations.

“IADC is extremely concerned that BOEMRE will not have the personnel with the requisite knowledge, skills and abilities to effectively oversee this new responsibility,” he testified.

Presidential Commission

In July, IADC filed testimony with the Department of Energy’s National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling to advocate a return to deepwater drilling as soon as possible. IADC presented data illustrating the industry’s proven record of safety in offshore drilling, including deepwater operations. Some 14,000 deepwater wells have been drilled without major incident until Macondo, “an extreme and unprecedented event,” the testimony said.

The association also presented results from its study on the offshore rig worker population. Data on residences of 11,875 offshore employees and onshore support personnel showed that these workers call 68% of all US congressional districts home. Residences of these workers are spread across 296 congressional districts. There are 435 such districts in the US. Nine drilling contractors and one boat company participated in the project.

“As this study shows, communities across the United States depend on the wages of offshore workers… The economic trauma that this deepwater moratorium is causing and the de facto shutdown of issuing shallow-water permits spans the entire United States,” Dr Hunt said.

The study was cited extensively by policymakers, including Sen Mary Landrieu, D-La., and US Rep Kevin Brady, R-Texas, who read the findings into the Congressional Record. Results were also used by the president’s Council of Economic Advisors in developing recommendations to the administration. See map of data on Page 118.

In August, Mr Petty met with staff of the presidential commission on the BP oil spill. In anticipation of the second formal hearing of the commission later that month, Mr Petty furnished various documents, including IADC’s safety case template. He also provided congressional testimony made in June by Mr Spackman on international regulatory systems and the safety case.

Mr Petty also discussed OGP’s new initiative on producing a “global response” to containment and spill issues, the IADC Deepwater Well Control Guidelines, and JITF-produced recommendations for Secretary Salazar.

Commission staff was interested in whether the BOEMRE should follow a UK or Norwegian model of compliance and enforcement. Mr Petty replied that may not be appropriate but that BOEMRE should be left to devise a post-Macondo regulatory system without congressional specific direction as to, e.g., well design and BOPs. In response to whether OSHA should be involved in inspecting offshore facilities, he explained IADC’s position against it, commenting that the better course would be to add resources to BOEMRE and the US Coast Guard.

In September, Mr Petty and IADC group vice president – operations & accreditation Steve Kropla, along with Jan Schoonmaker, Van Scoyoc Associates, again met with commission staff in Washington, DC. The discussion centered on considerations associated with implementing a safety case system in the US, as well as a possible role for IADC in training new BOEMRE inspectors. Other items discussed included real-time monitoring and development of leading indicators for industry safety performance.

Louisiana workshop

Dr Hunt and Mr Spackman participated in a workshop in August 2010 in Lafayette held by Louisiana Lt. Gov. Scott Angelle to discuss expediting shallow-water permitting. The workshop fell on specific regulatory requirements that are impeding the shallow-water drilling industry from obtaining the necessary permits in a timely manner. Specifically discussed were worst-case discharge calculations and best practices for constructively engaging with the BOEMRE. Weekly conference calls were also planned with shallow-water industry representatives and BOEMRE employees to discuss permitting status.

BOEMRE public workshop

Mr Spackman supported the use of a safety case, based on the IADC HSE Case Guidelines for Mobile Offshore Drilling Units, for drilling operations using a subsea blowout preventer, at a forum of the BOEMRE in September. He explained how an HSE case, when bridged to the lease operator’s safety management system, can be used to support the proposed WCID for deepwater operations in the US.

He once again outlined challenges that must be overcome, including the need for industry and BOEMRE to reach a mutual understanding on the hazards to be addressed and the tolerance of risk associated with those hazards. The need to provide clarity regarding the approach to hazards falling under the regulatory jurisdiction of other agencies, particularly the USCG, was also emphasized.

Mr Spackman recommended that the BOEMRE establish a multi-year implementation roadmap that recognizes both the complexity of the task of implementing the HSE case and WCID, as well as the resource limitations of the BOEMRE.

WellCAP at BOEMRE workshop

IADC’s internationally recognized well control training programs are designed to develop competency, IADC director of accreditation & certification Dr Brenda Kelly explained at a forum organized by BOEMRE, held in August in California. “The WellCAP curriculum was designed from the beginning to be more than training, including both knowledge and skills development with practical and simulator exercises that contribute to competency development,” she explained, addressing BOEMRE director Michael Bromwich and other BOEMRE staff.

Dr Kelly also explained that a process exists for periodic review of curriculum and other WellCAP processes. Program changes are made proactively, responding to industry’s changing needs.

Environmental lawsuits

Environmental organizations have launched a flurry of anti-offshore drilling lawsuits in various federal courts since Macondo. IADC, along with USOGA and IPAA, is an amicus curiae supporting API in opposing these lawsuits:

• Center for Biological Diversity (CBD), Sierra Club and Gulf Restoration v. Salazar (Fifth Circuit, New Orleans) targets 16 GOM exploration plans and development plans approved after 29 March. IADC, API, IPAA and USOGA were granted intervention in the five petitions brought by Sierra Club and Gulf Restoration. The associations filed a motion on 21 September 2010 to dismiss these petitions for lack of subject matter jurisdiction. The Sierra Club and Gulf Restoration filed their opposition to the motion to dismiss on 1 October 2010. A reply brief in support of the associations’ motion to dismiss was expected to be filed later in October.

The petitioners’ opening brief on the merits was due on 1 November 2010, although a motion was filed on 29 September to stay the cases through 3 November. The associations’ opposition to that motion was pending.

The associations’ motion to intervene in the 11 CBD petitions was denied. The oil companies whose intervention was granted with respect to the CBD petitions filed a motion to dismiss these petitions for lack of subject matter jurisdiction that is substantively identical to the motion filed by the associations in the Gulf Restoration/Sierra Club cases. CBD’s response to the motion to dismiss was due by 12 October.

CBD’s opening brief on the merits was filed on 4 October. The government’s responsive brief was due on 8 November. Petitioners and the government filed a motion on 29 September to stay the cases through 3 November while they consider settlement. Some interveners filed an opposition to that motion, which is pending.

• CBD v. Salazar (Washington, DC, District Court). This lawsuit seeks to forbid the secretary from relying on “categorical exclusions” as grounds not to perform environmental assessments and/or environmental impact statements for all GOM E&P plans. It also seeks to nullify more than two dozen approved drilling plans. Further, it seeks to enjoin any future GOM lease sale until a supplemental environmental impact statement has been prepared and to set aside the leases that were awarded in the most recent lease sale.

API, IPAA, USOGA and IADC’s motion to intervene was granted by the court over CBD’s objection. The associations have filed a motion to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted. That motion is pending. The lawsuit has been stayed through 29 October over the associations’ objection. The court has indicated that the stay will not be extended beyond 29 October.

• Defenders of Wildlife v. Salazar (Southern District, Alabama). This lawsuit raises the same issues and seeks the same relief as the second lawsuit. API, IPAA, USOGA and IADC’s motion to intervene was granted. The associations have filed a motion to dismiss the complaint for improper venue, lack of subject matter jurisdiction, and failure to state a claim upon which relief can be granted. That motion is pending. The lawsuit had been stayed through 13 October over the associations’ objection.

• Gulf Restoration Network and Sierra Club v. Salazar (Eastern District, Louisiana). This lawsuit seeks to enjoin the application of NTL 2008-G04, which limited the required information in GOM exploration plans with respect to blowout scenarios and worst-case oil spill scenarios. It also seeks to impose broader information requirements retroactively for all deepwater permits.

API, IPAA, USOGA and IADC’s motion to intervene has been granted. The associations have filed a motion to dismiss the complaint for lack of subject matter jurisdiction and failure to state a claim upon which relief can be granted. That motion is pending.

The Gulf Restoration case was consolidated by the court with the multi-district proceeding that involves all Deepwater Horizon oil spill lawsuits. The associations’ and the government’s separate motions to deconsolidate were pending.

• Natural Resources Defense Council v. Salazar (Eastern District, Louisiana).  This lawsuit challenges the adequacy of the 2004 environmental assessment with respect to seismic surveys in the Gulf of Mexico and challenges the government’s right to issue permits with respect to geophysical activities in the Gulf without additional environmental review and the imposition of additional limitations. API, IPAA, USOGA and IADC’s motion to intervene has been granted. The government’s answer to the complaint was due in late October.

OSPRAG

Oil & Gas UK established the Oil Spill Prevention and Response Advisory Group (OSPRAG) in May 2010 to provide a focal point for the sector’s review of industry practices in the UK. IADC is involved in this effort.

Work within OSPRAG is proceeding but will be informed by the findings from the Gulf of Mexico investigation. The group’s remit is to review UKCS regulation and arrangements for spill prevention and response; assess the adequacy of financial provisions for UKCS response; and monitor and review information from the Macondo incident and share the recommendations and lessons learned.

OGP GIRG

The International Association of Oil & Gas Producers (OGP) formed the Global Industry Response Group (GIRG) in July 2010 to focus on the outcome of the official Macondo investigations under way. IADC is participating in this effort.

The group will also identify other questions raised by the incident. Particular emphasis will be on subsea well control, oil containment at the well and cleanup techniques for major oil spills. Additionally, the GIRG will review offshore operating procedures and equipment, audit inspections, oil spill liabilities and financial provisions and possible changes to regulations and legislation.

Once available, results of the official investigation and lessons learned will be consolidated and disseminated. The group could also oversee research projects that may be prompted by the Gulf of Mexico findings.

In September 2010, the GIRG formed a specific team to review oil containment methods; initial recommendations are expected in three to six months. Ten companies have committed staff members on a full-time basis. They will liaise with industry groups working the issue, including the Marine Well Containment Co.

Our efforts continue

IADC continues to provide updates on its Macondo-related efforts to its members worldwide via regional operations forums, committee meetings and conferences.

The association also continues to educate government and regulatory agencies regarding industry efforts and improvements. In September 2010, Mr Kropla participated in an industry panel as part of an extraordinary meeting of the International Regulators Forum (IRF), which included representatives of regulatory agencies from Australia, Brazil, Canada, the Netherlands, New Zealand, Norway and the United Kingdom.

The presentation focused on IADC’s involvement with the JITF, primarily on the equipment and procedures work groups, on proposed implementation of a safety case system in accordance with the IADC HSE Guidelines, and the proposed WCID. WellCAP curriculum revisions and new instructor qualification guidelines were also highlighted, as well as “SWAT Team” audits conducted of WellCAP training providers in the US.

In October, Mr Spackman represented IADC at the IRF’s Global Offshore Safety Conference in Vancouver, BC, which held focused roundtable sessions on the Montara and Macondo incidents and the potential lessons to be learned from those incidents.