BP Deepwater Horizon Oil Spill and Offshore Drilling

Charles Hendry Excerpts

Wednesday 12th January 2011 Written Statements

[The Minister of State, Department of Energy and Climate Change (Charles Hendry)]

The US National Commission on the BP Deepwater Horizon oil spill and offshore drilling delivered its final report yesterday. This is a substantial document, both in its scope and in the careful detail of its analysis and recommendations. It will of course be reviewed carefully by my Department and all other relevant bodies within Government, to identify the implications from this tragic incident in the gulf of Mexico for the regulation of deep-water drilling in the UK. We will be working closely with the industry, our colleagues in HSE and the MCA to ensure that any lessons to be learned from this report are understood and effectively communicated throughout companies working in the UKCS. This will take time. Nevertheless, there are some key points which emerge even at this early stage.

While noting that the precise contribution of specific actions to the disaster remains to some degree uncertain, the report confirms earlier information on the root causes of the accident. The report makes comprehensive recommendations for the US offshore regulatory regime, including:

A new approach to risk assessment and management, with regular third-party audits of management systems;

A new independent agency responsible for safety and environmental regulation of offshore drilling;

Stronger environmental regulation and enforcement;

A reorientation of oil spill response and containment planning; and

A revision of liability rules.

The regulatory system in the gulf of Mexico at the time of the incident was of course very different from that which we maintain in the UK and is employed in the North sea in general. And indeed the report recommends the adoption in the US of a risk-based performance approach similar to the safety case approach in the North sea. It also recommends the development of plans and procedures for responding to a “Spill of National Significance” which is an approach already reflected in our national contingency plan. As regards environmental assessment, we have a comprehensive suite including strategic environmental assessment, project-specific environmental impact assessments and habitats directive assessments. But notwithstanding these strengths of our existing system, we are committed to learning what we can from the commission’s findings and recommendations, and, where appropriate, applying that learning on the UKCS.

And we have already acted, in the light of the emerging information from the many investigations into the disaster, to strengthen where we can what is already one of the most robust environmental and safety regimes in the world.

As announced by the Secretary of State in May, we conducted an immediate review of our regime and decided to increase the number of offshore environmental inspectors. He also announced yesterday our plans to further increase the number of offshore environmental inspections from 60 to 150 annually.

We also required the companies to update their oil pollution emergency plans, to address the possibility of an uncontrolled blow-out.

And consents for new drilling operations in deep water, already subject to case-by-case review, have been required to demonstrate stringently the arrangements for co-ordination between the various companies engaged, and are subject to individual inspection before drilling commences.

At the same time, the industry has been working through the new OSPRAG grouping, with Government participation, to develop new technical solutions which could be deployed to bring any uncontrolled blow-out under control as rapidly as possible.

Also the OPOL liability pool, which is unique to North sea operations, has increased its cover from $125 million to $250 million. OSPRAG is further reviewing the implications of Macondo for the scale of liability cover which would now be appropriate for UKCS conditions.

The report highlights the importance of ensuring adequate liability arrangements are in place to better protect victims and provide appropriate incentives to industry. Some of the recommendations in this area address particular circumstances in the US, including a limit on the liability of drilling operators. There is no such limit in the UK—the liability of companies for the consequences of their actions is subject to no statutory restriction. And the existence of the OPOL liability pool provides a globally unique, and very substantial, assurance that victims would be adequately protected. However, this is an area on which the Select Committee has also made recommendations and in which the European Commission has proposed further work. We will continue to work with industry and with European partners to see how further improvements could be made.

I should add that we welcome the stress placed by the presidential commission on international collaboration and co-operation in developing the most effective approaches to meeting the challenges of ensuring safe and environmentally responsible conduct of offshore drilling operations. As the commission recognises, the industry is truly a global one, and we wish to draw on all the expertise, in industry and in regulators around the world, and in particular with the US Administration, to make these operations as safe as we can.

As the Secretary of State made clear in May, we intend to review the UK’s oil and gas offshore regulatory regime against the findings of the US investigations. This review will begin within a month, once the report of the National Commission has been thoroughly analysed. It will be carried through by DECC, the Health and Safety Executive and the Maritime and Coastguard Agency, and will be based on the full life cycle of an offshore development thus ensuring that all activities are covered. The review will report later this year, once the US Maritime Board investigation report—currently expected in March 2011—has been published and the details analysed.