UK Deepwater Drilling - Implications of the Gulf of Mexico Oil Spill - Energy and Climate Change Contents

8  Conclusions and Recommendations

1.  In the light of recent drilling activity in the waters around the Falkland Islands, we asked witnesses from OSPRAG and Oil and Gas UK whether the UK regulatory regime applied to drilling in that area. There was a lack of clarity over responsibility for drilling and oil response in the Falkland Islands. We recommend that the Government clarify what regulatory regimes apply to drilling and oil spill response in the Falkland Islands and who is responsible for enforcing them. (Paragraph 22)

2.  Oil company boards lack members with environmental experience. The industry should take steps to remedy this and the Government should encourage them to do so. (Paragraph 30)

3.  We conclude that the UK has high offshore regulatory standards, as exemplified by the Safety Case Regime that was set up in response to the Piper Alpha tragedy in 1998. The UK regulatory framework is based on flexible, goal-setting principles that are superior to those under which the Deepwater Horizon operated. (Paragraph 34)

4.  Nevertheless, despite the high regulatory standards in the UK we are concerned that the offshore oil and gas industry is responding to disasters, rather than anticipating worst-case scenarios and planning for high-consequence, low-probability events. (Paragraph 35)

5.  It is imperative that there is someone offshore who has the authority to bring a halt to drilling operations at any time, without recourse to onshore management. We urge the Government to seek assurances from industry that the prime duty of the people with whom this responsibility rests is the safety of personnel and the protection of the environment. (Paragraph 38)

6.  Given that the failure of the single blind-shear ram to fire on the Deepwater Horizon's blowout preventer seems to have been one of the main causes of the blowout of the Macondo well, we recommend that the Health and Safety Executive specifically examine the case for prescribing that blowout preventers on the UK Continental Shelf are equipped with two blind shear rams. (Paragraph 45)

7.  While the flexibility of the UK safety regulation regime appears to have worked well, we recommend that for fail-safe devices such as the blowout preventer the Government should adopt minimum, prescriptive safety standards or demonstrate that these would not be a cost-effective, last-resort against disasters. (Paragraph 52)

8.  We believe that the Government must ensure that the UK offshore inspection regime could not allow simple failures—such as a battery with insufficient charge—to go unchecked. (Paragraph 55)

9.  Whilst there is a risk of conflicts of interests affecting the judgement of independent competent persons who assess the design of wells we have had no evidence of such conflicts presented to us. (Paragraph 60)

10.  We find some conflict in the reports from the HSE about bullying and harassment on rigs and the assurances of the industry that sincere whistleblowers will be heard and protected. We recommend that the Government should discuss with the industry and unions what further steps are needed to prevent safety representatives from being or feeling intimidated into not reporting a hazard, potential or otherwise. (Paragraph 66)

11.  It is important and necessary that the offshore safety culture is cascaded throughout the supply chain, from existing contractors at all levels, through to new-entrants on to the UK Continental Shelf. (Paragraph 68)

12.  There is both risk and the advantage of competition where global oil and gas companies operate to different standards when working in different regulatory regimes. We recommend that the Government monitor any changes in the US regulatory regime to see if—in the light of the response to the Deepwater Horizon incident—the US establishes a new gold-standard of regulation, as the UK and Norway did after the Piper Alpha tragedy. We would urge the Government to work with regulators in other offshore oil and gas provinces to ensure that the highest standards of safety can be achieved globally through an exchange of best practice lessons. (Paragraph 72)

13.  The Bly Report—BP's internal investigation into the Deepwater Horizon incident—does not contain a root-cause analysis of the events that led to the blowout of the Macondo well, the loss of 11 men on the Deepwater Horizon, and the release of 4.9 million barrels of oil into the Gulf of Mexico. We urge the Government not to rely extensively on the Bly Report, given the controversy surrounding the responsibility for the incident and the design of the Macondo well, but rather to consider its conclusions in parallel with the observations of other companies involved with the incident, and with the recommendations of US agencies investigating the incident. (Paragraph 78)

14.  We believe that the environmental impacts of a sub-sea well blowout need to be understood and taken into account when a drilling licence is issued in the UK. We urge the Government to ensure that the licensing regime takes full account of high consequence, low probability events. (Paragraph 79)

15.  We recommend that as part of the drilling-licence process, the Government require companies to consider their responses to high-consequences, low-probability events—such as a blowout. The Government should not automatically accept claims that companies have mitigated away the risk of such worst-case scenarios. We urge the Government to introduce this requirement as drilling ventures into increasingly extreme environments. (Paragraph 81)

16.  Given the high costs of the incident in the Gulf of Mexico, we believe that the OPOL (Offshore Pollution Liability Association) limit of $250 million is insufficient. We are concerned that the OPOL provisions only cover direct damage and also that the precise definition of "direct damage" is unclear. While membership of OPOL remains voluntary—despite it being a pre-requisite for a licence—its voluntary nature weakens its legality and the control and deployment of its funds. We believe this lack of legal control will allow polluters to claim that damages to biodiversity and ecosystems are indirect, and therefore do not qualify for compensation. (Paragraph 90)

17.  We conclude there needs to be clarity on the identity and hierarchy of liable parties to ensure that the Government, and hence the taxpayer, do not have to pay for the consequences of offshore incidents. We conclude that any lack of clarity on liability will inhibit the payment of compensation to those affected by an offshore incident. We recommend that it should be a requirement of the licensing process that the licensee prove their ability to pay for the consequences of any incident that could occur. We recognise that these measures could add to the cost of investing in new UK oil and gas production and urge the Treasury to reflect this when considering incentives to such investments. (Paragraph 91)

18.  We recommend that the Government consider whether compulsory third-party insurance should become a necessary requirement for small exploration and production companies. (Paragraph 93)

19.  We acknowledge that oil spill response plans often share procedures for dealing with oil spills. There is some concern that in the past this may have led to a culture of copying-and-pasting rather than the production of site-specific plans which recognise the drilling environment and the risk of high-consequence, low-probability events. We recommend the Government re-examine oil spill response plans to ensure that this is not the case. (Paragraph 101)

20.  We recommend that the Government draw up clear guidelines on the sub-sea use of dispersants in tackling oil spills, based on the best available evidence of both their effectiveness and their environmental impact. We also recommend the Government monitor the effects of sub-sea dispersants in the Gulf of Mexico to inform these guidelines. (Paragraph 108)

21.  We recognise that the UK's oil spill response system is robust and rightly focuses on prevention, followed by containment and then clean-up. We welcome the development of new capping and containment systems capable of dealing with a sub-sea blowout. However, we feel that the absence of these devices before the Macondo incident is indicative of the industry's and the regulator's flawed approach to high-consequence, low-probability events. Prevention is better than cure, and we recommend once again the Government recognise that in its regulatory regime these systems are not a substitute for fully functioning blowout preventers. (Paragraph 111)

22.  There are serious doubts about the ability of oil spill response equipment to function in the harsh environment of the open Atlantic in the West of Shetland. We recommend that the Government ensures that any capping, containment and clean-up systems are designed to take full account of the harsh and challenging environment West of Shetland. (Paragraph 117)

23.  We conclude that—as it stands—the EU Environmental Liability Directive is unlikely to bring to account those responsible for environmental damage caused by an offshore incident such as happened in the Gulf of Mexico. We recommend that the Government works with the EU to ensure a new directive is drawn up that follows the polluter-pays principle and unambiguously identifies who is responsible for the remediation of any environmental damage. (Paragraph 122)

24.  We utterly reject calls for increased regulatory oversight from the European Commission. We recommend that EU countries without a North Sea coastline should not be involved with discussions on regulation of the offshore industry on the UK Continental Shelf. (Paragraph 127)

25.  We conclude that a moratorium on offshore drilling in the UK Continental Shelf would cause drilling rigs and expertise to migrate to other parts of the globe. A moratorium on deepwater drilling would decrease the UK's security of supply and increase the UK's reliance upon imports of oil and gas. A moratorium could also harm the economies of communities in Scotland who rely upon the UK offshore oil and gas industry as well as the wider British economy to which the industry makes a major contribution. There is insufficient evidence of danger to support such a moratorium. We conclude that there should not be a moratorium on deepwater drilling in the UK Continental Shelf. (Paragraph 138)

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