As I mentioned in December’s Law Now column, last month I co-chaired a conference in New Orleans on oil & gas law in the aftermath of the Macondo incident.
We were extremely fortunate to hear from some very influential speakers, including William K. Reilly who is co-chair of the National Commission on the BP Deepwater Horizon oil spill, and Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), on the future of American offshore regulation.
It was apparent that the regulation of oil & gas exploration in the US Gulf of Mexico is likely to undergo a dramatic overhaul in the months to come.
It seems that Reilly is giving serious consideration to recommending a change to a safety case-based regime in the US, similar to that in operation on the UK Continental Shelf.
This would be a significant shift from the existing system which relies on a great deal of prescriptive regulation.
It was fascinating to look back to the system adopted in the UK after the tragedy of Piper Alpha – and a very similar system in Norway – and see that it has been proven to have tangible advantages in keeping a focus on real risks and allowing rapid adoption of new technologies.
What is not clear, however, is whether the American agencies are really prepared for the mind shift necessary to operate within such a system, which is somewhat alien to the prevailing US legal culture.
It seems that despite the end of the official moratorium on deepwater drilling in the Gulf, the delays in granting permits are likely to continue while this new system is introduced and beds in, with no official wanting to be the first to sign off on a deepwater well.
Whatever the regulatory environment, Reilly – who is, of course, in some senses an industry insider as a board director of ConocoPhillips – made the point that: “The interest group that could most threaten the future viability of offshore drilling is the oil & gas industry itself.”
He added: “There has to be a recognition that the industry has not made safety a high enough priority. We need a major transformation in the oil & gas industry’s understanding of what it means to put a priority on creating a safety culture. This is an industry-wide challenge that can’t simply be laid at the feet of a few rogue players.”
Reilly also criticised industry officials who had been responsible for lax regulation and called for better training for them. But most interestingly, he called on the industry to establish an independent safety institute that would carry out audits of companies’ safety practices and cultures, and whose work would be shared with insurers and companies’ boards.
“You can invest in safety now, or you can pay for failure later,” he said.
Another theme to emerge from the conference was the lack of investment in recent decades into oil spill response technologies.
David Kennedy, who commanded the US National Oceanic and Atmospheric Administration’s response to the Deepwater Horizon oil spill, made clear that the technologies at his disposal were essentially no different to those that had been used in response to the Exxon Valdez spill in 1989. The really great thing, however, is that this is something which the industry is now already and proactively addressing through initiatives such as the Marine Well Containment Company in the US, and the similar development of a capping system by OSPRAG.
It seems that the industry is responding to the clarion call to put its own house in order – just as it responded so quickly after Piper Alpha.
What also became clear in New Orleans, however, is the real need for different countries to work together to support the global oil & gas industry.
As well as the US, we heard from regulatory experts from the UK, Norway, Brazil and Mexico, and were able to compare and contrast. It was noted that however comprehensive the regulatory solution in the Gulf, it will not completely protect the environment unless the regime is extended to Mexico and Cuba – oil does not respect national boundaries.
Penelope Warne is head of energy at the international law firm CMS Cameron McKenna
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