Regulatory Failure in the Offshore Oil Industry: From Piper

Alpha to Deepwater Horizon

Charles Woolfson

Vulnerable Workers and Precarious Work in a Changing World

London Middlesex University 10-11 September 2012

 

Gulf  of  Mexico  The  Gulf  of  Mexico  covers  around  600,000  square  miles  of  water.    The  outer  continental  shelf  of  the  United  States  is  

offshore  oil.    Production  of  offshore  oil  began  during  the  1940s  and  today  accounts  for  about  one  third  of  the  US  total  supply.  13.9  billion  cubic  feet  of  natural  gas  and  1.3  million  barrels  of  oil  are  removed  from  the  outer  continental  shelf  each  day.      

Transocean  Deepwater  Horizon  

 

The  spill  

Coast  of  Louisiana  

Pensacola  Beach,  Florida  

Empty  deckchairs,  Orange  Beach,  Alabama  

Louisiana  pelican  

Cleaned  up  and  released  

The  reactions  

Presidential  concern  10  May  2010  

Casino  Beach,  Pensacola  

Protestors  in  front  of  town  hall  Jackson,  Mississipi  May  30th  

 

Secour,  Alabama  

Seafood  store  front  in  Bon  Secour,  Alabama  June  2010  

Governor  Bobby  Jindal  of  Louisiana  speaks  against  6  month  drilling  moratorium    

Oil  workers  protest  the  moratorium  

Containment  and  clean-­‐up  

Local  shrimp  fisherman  employed    with  boat  in  clean  up  

The  booms  

Contract  clean-­‐up  workers  gather  for  briefing  

Back  to  basics  

Control  room  with  US  coastguards  

Under  pressure  

The  human  cost  

Memorial  Service  for  Victims  Jackson,  Mississippi,  May  2010  

Fear  of  reprisals  A  report  on  safety  conditions  aboard  the  Deepwater  Horizon  points  to  widespread  fear  of  reprisal  for  reporting  employee  mistakes.  "Only  46.3  percent  of  participants  felt  that,  if  their  actions  led  to  a  potentially  risky  situation  (e.g.,  forgetting  to  do  something,  damaging  equipment,  dropping  an  object  from  height),  they  could  report  it  without  any  fear  of  

 The  study  also  found  some  Transocean  employees  entered  fake  data  to  try  to  circumvent  a  safety  system  

 

US  Senate  Hearing  11  May  2010  

Tony  Hayward,  House  subcommittee  on  oversight  and  investigations  17  June  2010  

The  British  Pig  

President  Obama  

regulators  and  the  oil  industry  "It's  pretty  clear  that  the  system  failed  and  it  failed  badly."    "I  did  not  appreciate  what  I  considered  to  be  a  ridiculous  spectacle  during  the  congressional  hearings  into  this  matter.  You  had  executives  of  BP  and  Transocean  and  Halliburton  falling  over  each  other  to  point  the  finger  of  blame  at  somebody  else,"  the  president  said.  "The  American  people  could  not  have  been  impressed  with  that  display,  and  I  certainly  wasn't."    

Corporate  contrition  

National  Commission    

Overarching  Management  Failures  by  Industry  Whatever  irreducible  uncertainty  may  persist  regarding  the  precise  contribution  to  the  blowout  of  each  of  several  potentially  immediate  causes,  no  such  

.  The  blowout  was  not  the  product  of  a  series  of  aberrational  decisions  made  by  rogue  industry  or  government  officials  that  could  not  have  been  anticipated  or  expected  to  occur  again.    Rather,  the  root  causes  are  systemic  and,  in  the  absence  of  significant  reform  in  both  industry  practices  and  government  policies,  might  well  recur.  Rooted  in  systemic  failures  by  industry  management  (extending  beyond  BP  to  contractors  that  serve  many  in  the  industry),  and  also  by  failures  of  government  to  provide  effective  regulatory  oversight  of  offshore  drilling.  

 Decision-­‐making  processes  at  Macondo  did  not  adequately  ensure  that  personnel  fully  considered  the  risks  created  by  time-­‐  and  money-­‐saving  decisions.    

Transocean  made  that  increased  the  risk  of  the  Macondo  blowout  clearly  saved  those  companies  significant  time  (and  money).    

Macondo  team,  there  appears  to  have  been  no  formal  system  for  ensuring  that  alternative  procedures  were  in  fact  

subject  to  a  comprehensive  and  systematic  risk-­‐analysis,  peer-­‐review,  or  management  of  change  process.    

A  flawed  regulatory  agency  

Secretary,  James  Watt,  created  the  Minerals  Management  Service  (MMS)  in  support  of  his  goal:-­‐  to  open  unprecedented  reaches  of  U.S.  territorial  waters  to  oil  and  gas  exploration.    

MMS  had  a  conflicting  mandate:-­‐  to  both  regulate  offshore  energy  leases  and  collect  the  revenue  they  generated  

MMS  budget  1990-­‐2010  

MMS  announced  and  unannounced  inspection  visits  1990-­‐2009  

 

National  Commission  -­‐  Regulatory  Failure  Government  failed  to  provide  the  oversight  

management  by  private  industry.    MMS  regulations  were  inadequate  to  address  the  risks  of  deepwater  drilling.  Many  critical  aspects  of  drilling  operations  were  left  to  industry  to  decide  without  agency  review.  The  root  cause  can  be  better  found  by  considering  how  efforts  to  expand  regulatory  oversight,  tighten  safety  requirements,  and  provide  funding  to  equip  regulators  with  the  resources,  personnel,  and  training  needed  to  be  effective  were  either  overtly  resisted  or  not  supported  by  industry,  members  of  Congress,  and  several  administrations.    

The  latest  chapter  

 

Wednesday  5  September  2012    -­‐ US  Department  of  Justice  charged  BP  in  District  Court  of  Louisiana  

-­‐  -­‐ The  behavior,  words,  and  actions  of  these  BP  executives  would  not  be  tolerated  in  a  middling  size  company  manufacturing  dry  goods  for  sale  in  a  suburban  mall.  Yet  they  were  condoned  in  a  corporation  engaged  in  an  activity  that  no  less  a  witness  than  Tony  Hayward  himself  described  as  comparable  to  exploring  outer  space.  

Previously  unpublished  emails  between  BP  engineering  management    

operation  that  (Well  Site  Leaders  offshore)  have  finally  come  to  their  wits  end.  The  quote  

 

 

     

The  price  of  corporate  safety  failure  

BP  facing  future  civil  fines  of  $21  billion  and  potential  criminal  penalties  ranging  between  $5  billion  and  $10  billion  and  a  total  bill  of  around  $69  billion.  BP  shares  are  still  about  a  third  below  their  pre-­‐spill  levels  Company  forced  into  new  more  risky  provinces  Corporate  probation,  disbarment,  corporate  homicide?