Gulf of Mexico: Oil Spill

Baroness Smith of Basildon Excerpts

Thursday 16th December 2010 Lords Chamber

[Baroness Smith of Basildon]

My Lords, I doubt that the noble Lord, Lord Moynihan, could have foreseen quite how topical his debate would become today, with the news coming through late last night that the US Government are to take legal action against BP and eight other firms following the Deepwater Horizon oil spill. The noble Lord clearly highlighted the challenges facing the industry. I found very interesting his assessment of the levels and elements of risk involved.

As we have heard, this catastrophic incident on 20 April this year created explosions and fire on the rig, causing the rig to collapse and leading to the deaths of 11 people with 17 others being injured. The oil spill continued until 15 July, when it was temporarily closed by a cap, and was then declared “effectively dead” on 19 September.

Initially, it was estimated that around 1,000 barrels of oil a day were being released from the well; that estimate was later increased to 5,000 barrels a day. In the largest ever accidental leak in the ocean, millions of barrels of oil were spilled over five months. It can be quite hard to comprehend the scale of such a disaster, the scale of the exercise undertaken to stop the oil spill and the scale of the clean-up operation, let alone the ongoing issue of whether there is adequate research and investment into spill response technology.

It is hard also to comprehend the social and environmental impact. The spill was in an area where 71 per cent of employment came from tourism and recreation. A further 200,000 jobs were in recreational fishing. It is an area on which the nation relied for commercial fishing stocks. It was hugely important also for bird and wildlife watchers.

It may take many years, particularly with the legal action that is now under way, for the financial implications fully to be understood. There is and, as we have seen, will continue to be considerable litigation. As was reported in the Financial Times, there is,

“no way to put this in historical context because we have never faced anything like this before”.

We know from the speeches that we have heard today that the ramifications are likely to be long lasting, not just for the Gulf of Mexico, which has been hit environmentally and economically, but for BP and the other companies involved. As the noble Lord, Lord Moynihan, outlined, there are implications for the future of offshore drilling across the world.

Do we know what exactly went wrong? The Minerals Management Service, which has since been renamed the Bureau of Ocean Energy Management, Regulation and Enforcement, is the regulatory and inspection body for offshore oil drilling and rigs in the USA. An investigation by the Associated Press claimed that such examination as was performed was in the most part brief, perfunctory, extremely lax and with poor record-keeping. Crucial safety and emergency procedure information, including documentation for the precise incident that later occurred, was not available. The investigation by AP claimed that after just over the first three years around 25 per cent of inspections were omitted, although that could be explained by weather and other factors, which could mean that an inspection was not possible. However, the last three inspections took two hours or less. Nevertheless, the rig was regarded as having a strong safety record and was never on the informal watch list for problem rigs.

The question is whether we in the UK should take comfort from the difference in our regulations from those in the US. There are key differences. Mr Steve Walker, the head of the Health and Safety Executive's offshore division, described it as,

“additional and different layers of regulation”,

with a system of independent verification enshrined in law, which the US does not have. In his evidence to the Select Committee in the other place, he also considered that our performance-based legislation was more sophisticated than the US checklist of inspection. When asked whether the Deepwater Horizon would have been allowed to operate in the UK, given that it had,

“a single blind sheer ram on the blowout preventer”,

he informed the members that in the UK the HSE would have seen the design 21 days before drilling began, asked questions about the design and would have assessed the answers before deciding whether to take any action. Also, in the UK we have a separation of licensing from health and safety oversight, which helps to ensure the appropriate distance between the interests of the industry and the health and safety of those involved. I welcome the fact that the HSE has made its own response to this incident and will undertake a further examination of the regulation and the record of the UK industry.

BP has undertaken its own investigation and, as we have heard from the noble Lord, Lord Grantchester, made significant and welcome changes to its own organisation to improve safety, becoming more risk-averse as a result. There are lessons to be learnt for the whole industry. The development of North Sea oil fields has been subject to considerable debate, controversy and conflicting views over many years. Numerous oil and gas companies, including BP and Chevron, which was granted a licence for deepwater drilling in the North Sea on 1 October, are looking to expand their operations and to go forward and deeper to more remote areas than previously. The debate between those who argue that such drilling is necessary for energy security and those who feel that the environmental costs are too high has been intensified by the Deepwater Horizon spill. The comments of the noble Lord, Lord Selsdon, highlighted his concerns about coastline pollution and the impact on the UK. Given his obvious love of the oceans, I am sure that he shares my concern at the news today that so many coastguard stations are to be closed around the coast of the UK.

Drilling for oil has continued; record numbers of bids for new offshore oil and gas licences were submitted in 2010 and, in October, 144 new licences were issued, including more than 20 for drilling in deep sea areas. Greenpeace has now issued a legal challenge against the Government to stop the 22 new deepwater drilling licences until the causes of the Deepwater Horizon explosion have been properly established. The arguments advanced by the lawyers are that the licences are close to environmentally sensitive areas which support legally protected species such as whales and dolphins. I am aware that the Minister can say very little about this issue because it is subject to legal action, but I seek his views on the department's confidence in the UK regulatory regime. The noble Lord, Lord Moynihan, was right in highlighting that safety has been of particular concern on this issue.

Following President Obama's review, the US Government have announced additional rules. Before drilling takes place, stronger environmental and safety standards are to be in place, working on the principle that the Administration should proceed with caution and create a more stringent regulatory regime. Does the Minister consider that the differences in the two countries’ regimes offer greater protection in the UK? What ongoing discussions is the department engaged in with the HSE? Is the Minister satisfied that all the current deep-drilling rigs in the UK fully comply with emergency policies and ongoing training on how to respond in event of an incident? How often does he consider that deepwater drilling rig inspections should take place to be confident of safety procedures, and what lessons have been learnt in the UK from this incident?

The noble Baroness, Lady Falkner, rightly highlighted her concern, shared by many, about the sustainability of the ever-increasing demand for oil and the ongoing quest for new reserves because of this demand. The Minister will be aware of the report last month from a group of business leaders, including Richard Branson, about UK dependence on oil and their concerns about this. What consideration has the department given to this report? With business, there is always the relationship between risk and money. How much will it cost when things go wrong? As we have heard, BP has footed a hugely significant bill for the beach clean-up and may, in addition, become liable to additional financial loss depending on the US Government's litigation. The Department of Energy and Climate Change has reported that licensees operating under the Petroleum Act 1998 are required to have sufficient funds available to discharge any liability for damage attributable to any oil pollution incident. The licence does not set a limit to the licensee's liability and licence applicants must demonstrate that at all times they have sufficient funds to meet expected commitments, liabilities and obligations. Further to the event in the Gulf of Mexico, I understand that the department has asked the Offshore Pollution Liability Association, or OPAL, immediately to revisit its risk modelling for worst case scenarios. Can the Minister provide any information about how this review is progressing and when we can expect to hear results? I appreciate that the news of the US legal action is very new and clearly carries the possibility of profound implications. It may be too early for the Minister to have reflected on these points but, if he is able to say anything further, particularly if there have been discussions between the Attorney-General in this country and the Attorney-General in the US, it would be helpful.

Finally, I thank the noble Lord, Lord Moynihan, for bringing this issue before us today, topical as it turned out to be. This debate should be seen in the wider context of ongoing debates that we are having and the Statement that we will shortly hear from the Minister on the ongoing Energy Bill. This is a huge issue for this country with huge implications. Our role as an Opposition is to work with him to deal with these hugely important and crucial issues. When we are able to support, help and advise, we will want to do so, playing a constructive and helpful role in securing the security for life of this nation.