The Piper Alpha fire (July 6, 1988) was the worst disaster in the history of offshore oil and gas operations and sent shock waves around the world. Eight months later another interactive pipeline-platform fire killed 7 workers at the South Pass 60 “B” facility in the Gulf of Mexico. A US Minerals Management Service task group reviewed the investigation reports for both fires and recommended regulatory changes with regard to:
the identification and notification procedures for out-of-service safety devices and systems,
location and protection of pipeline risers,
diesel and helicopter fuel storage areas and tanks,
Lord Cullen’s comprehensive inquiry into the Piper Alpha tragedy challenged traditional thinking about regulation and how safety objectives could best be achieved, and was perhaps the most important report in the history of offshore oil and gas operations. Per Cullen:
“Many current safety regulations are unduly restrictive because they impose solutions rather than objectives. They also are out of date in relation to technological advances. Guidance notes lend themselves to interpretations that discourage alternatives.There is a danger that compliance takes precedence over wider safety considerations and that sound innovations are discouraged.“
Cullen advocated management systems that describe the safety objectives, the system by which those objectives were to be achieved, the performance standards to be met, and the means by which adherence to those standards was to be monitored. He called for safety cases that describe major hazards on an installation and provide appropriate safety measures. Per Cullen, each operator should be required in the safety case to demonstrate that the safety management systems of the company and the installation are adequate to assure that design and operation of the platform and its equipment are safe.
Addressing regulatory fragmentation will improve efficiency and lower costs for industry and government while reducing safety and environmental risks.
Unfortunately, the regulatory regime for US offshore oil and gas operations is noteworthy for redundancy, uncertainty, and complexity that divert industry and governmental attention from safety and environmental protection objectives to administrative processes, interpretations, and jurisdictional boundaries.
“Poster Child”for regulatory fragmentation?
The 12 Federal entities that have some OCS regulatory responsibilities are identified in the above chart. The organizations with core regulatory roles are included in the overlapping circles. The responsibilities of BOEM and BSEE are so inextricably intertwined that those bureaus occupy the same circle.
Coastal states also have OCS regulatory roles through authority granted in the Coastal Zone Management Act.
When multiple agencies have jurisdiction over a facility, system, or procedure, the redundancy inevitably results in inconsistency, ambiguity, and gaps in oversight. The focus of operating companies and contractors is diverted from safety and risk management to understanding and satisfying the regulators. The inevitable result is a compliance mentality that weakens the safety culture.
Interagency agreements in the form of MOUs and MOAs, which are ostensibly for the purpose of managing redundancy, are often unclear or inconclusive. They tend to be more for the benefit of the agencies than the regulated industry. The interests of the regulators and protecting turf are paramount.
Where legislation is not required (e.g. BOEM and BSEE), use executive orders to combine and streamline the regulatory functions.
Where agencies have separate legislative authority, establish a lead regulator by executive order pending corrective legislation. Under the EO, the agencies would function as a joint authority under the direction of the lead regulator.
A combined BOEM/BSEE would be the logical choice for leading the joint authority given that OCS energy is their sole focus and they are accountable for the success of OCS programs.
Use a management system regulatory approach that holistically considers all of the legislatively enacted regulatory objectives.
Increase the attention given to regulator and operator performance in terms of both outcomes and efficiency.
Reduce and simplify permitting requirements for operating companies that have demonstrated outstanding safety and environmental performance over a sustained period.
Regulatory fragmentation occurs when multiple federal agencies oversee a single issue. Using the full text of the Federal Register, the government’s official daily publication, we provide the first systematic evidence on the extent and costs of regulatory fragmentation. We find that fragmentation increases the firm’s costs while lowering its productivity, profitability, and growth. Moreover, it deters entry into an industry. These effects arise from regulatory redundancy and, more prominently, regulatory inconsistency between agencies. Our results uncover a new source of regulatory burden: companies pay a substantial economic price when regulatory oversight is fragmented across multiple government agencies.
The US has a highly fragmented offshore regulatory regime that has become even more fragmented with the complex division of responsibilities between BOEM and BSEE. The slide below is from a presentation on this topic.
While the linked paper focuses on costs and productivity, fragmentation may also be a significant safety risk factor. A UK colleague once asseted that “overlap is underlap,” and I believe there is something to that. If multiple agencies have jurisdiction over a facility, system, or procedure, the resulting redundancy, inconsistency, and ambiguity may create significant gaps in industry and governmental oversight.
For example, regulatory fragmentation was arguably a significant factor in the most fatal US offshore fire/explosion incidents in the past 35 years – the South Pass B fire in 1989 and the Macondo blowout in 2010. More specifically:
South Pass 60 B: The investigation of the 1989 South Pass 60 B platform explosion that killed 7 workers noted the inconsistency in regulatory practices for the platform, regulated by DOI, and the pipeline regulated by DOT. Cutting into the 18-inch pipeline riser did not require an approved procedure, and the risks associated with hydrocarbon pockets in the undulating pipeline were not carefully assessed. Oversight by the pipeline operator was minimal, and the contractor began cutting into the riser without first determining its contents. A massive explosion occurred and 7 lives were lost.
One would hope that this major spill will lead to an independent review of the regulatory regime for offshore pipelines. Consideration should be given to designating a single regulator that is responsible and accountable for offshore pipeline safety (a joint authority approach might also merit consideration) and developing a single set of clear and consistent regulations.
Macondo: While the root causes of the Macondo blowout involved well planning and construction decisions regarding the casing point, cementing of the production casing, and well suspension procedure, the blowout would likely have been at least partially mitigated (and lives saved) if the gas detection system was fully operable, the emergency disconnect sequence was activated in a timely manner, flow was automatically diverted overboard, or engine overspeed devices functioned properly. Indeed, regulatory overlap led to underlap as summarized below:
Macondo contributing factor
jurisdiction
flow not automatically diverted overboard
DOI/USCG (also concerns about EPA discharge violations)
some gas detectors were inoperable
DOI/USCG
generators did not automatically shutdown when gas was detected
USCG/DOI
failure to activate emergency disconnect sequence in a timely manner (training deficiencies and chain-of-command complications)
USCG/DOI
engine overspeed devices did not function
USCG/DOI
hazardous area classification shortcomings
USCG/DOI
MOUs and MOAs are seldom effective regulatory solutions as they are often unclear or inconclusive, and tend to be more about the interests of the regulator and protecting turf. They also do nothing to ensure a consistent commitment among the regulators. In the case of the US OCS program, BOEM-BSEE have a greater stake in the safety and environmental outcomes given that offshore energy is the reason for their existence. That is not the case for any of the other regulators identified in the graphic above.
In terms of the total number of fatalities, the Piper Alpha fire was the worst disaster in the history of offshore oil and gas operations and sent shock waves around the world. Eight months later another interactive pipeline-platform fire killed 7 workers at the South Pass 60 “B” facility in the Gulf of Mexico. A US Minerals Management Service task group reviewed the investigation reports for both fires and recommended regulatory changes with regard to:
the identification and notification procedures for out-of-service safety devices and systems,
location and protection of pipeline risers,
diesel and helicopter fuel storage areas and tanks,
Lord Cullen’s comprehensive inquiry into the Piper Alpha tragedy challenged traditional thinking about regulation and how safety objectives could best be achieved, and was perhaps the most important report in the history of offshore oil and gas operations. Per Cullen:
“Many current safety regulations are unduly restrictive because they impose solutions rather than objectives. They also are out of date in relation to technological advances. Guidance notes lend themselves to interpretations that discourage alternatives.There is a danger that compliance takes precedence over wider safety considerations and that sound innovations are discouraged.“
Cullen advocated management systems that describe the safety objectives, the system by which those objectives were to be achieved, the performance standards to be met, and the means by which adherence to those standards was to be monitored. He called for safety cases that describe major hazards on an installation and provide appropriate safety measures. Per Cullen, each operator should be required in the safety case to demonstrate that the safety management systems of the company and the installation are adequate to assure that design and operation of the platform and its equipment are safe.
Bud's Offshore Energy (BOE) 