William J. Downey
Early Lessons from Deepwater Horizon
Deepwater Horizon is probably the greatest ecological disaster to strike the United States as well as a massive human tragedy. While it is still early in the game there are some lessons to be learned.
1] More research and development of deepwater technology needs to be undertaken not only by the industry but also the interested governments.
2] Internationally oil, gas and other minerals exploration and development both in onshore and offshore, requires the development of more robust response teams and project management capabilities. Independent response/project teams with the ability to liaison between government and company response would be highly desirable. This would remove the perception that companies are skewing the public information and response operations to their benefit.
3] Government agencies need to strictly enforce existing regulations and laws, and to conduct more frequent operational audits/reviews.
4] Corporate risk professionals need to think in terms of worst case scenarios, and participate in operational response planning. It is not enough to say we can handle X type of disaster. In today’s environment identification of risk has to be accompanied by strong response management planning.
5] Corporations who chose to keep Response Management in house need to ensure that their logistics/supply chain is designed to accommodate the need for pop-up logistics to respond rapidly to an emergency.
6] Offshore exploration and development is recognized as inherently dangerous and expensive. In the case of Deepwater Horizon, there is some evidence that the onboard management team of BP and Transocean may have been too complicated to recognize the need to halt drilling operations, starting at the point when workers identified pieces of rubber which could only have come from the Blow Out Preventer, and later as the situation began to deteriorate, that the stop drilling protocol required both the BP and Transocean managers to agree to halt drilling. Keep emergency protocols and procedures simple.
7] Training, training and more training for workers, supervisors and management is critical. Not only is it important to know the appropriate government regulations and company operating and safety procedures, it is vital for every level of employee to be able to recognize the warning signs that something is or may be wrong. Management needs to recognize the need to understand that line workers often have a unique perspective and can recognize issues at the start before they turn into a major incident.
8] Rotation of onsite inspectors can provide agencies and companies with valuable insight into regulatory compliance issues, by their comments and recommendations. It also eliminates the possibility of “cozy” relationships between inspectors and company representatives.
9] Revisions to the way Blow Out Preventers operate in any environment by increasing the redundancy factors to close a well; increasing the shearing power of rams needs to be considered.
10] There are numerous companies not only capable of first response management, but with the ability to source material quickly and provide technical advice/assistance/ideas. Companies that have suffered a disaster and responding government agencies need to find a way to open up inbound and outbound communications channels with these firms prior to and during a disaster.
Building a Safe Work Environment
In the wake of the explosion, fire and sinking of the semi-submersible drilling vessel Deepwater Horizon, this is an opportune time to examine the work environment and to create a culture of safe operations. Most companies have safety procedures but is your company really developing a culture of safety? There are 10 initial steps to ensure that your operating environment is safe.
1] Management Buy In. Company leadership from the Chairman/President on down to line supervisors must not only espouse safety, they must embrace it. A commitment to safety requires that management must demonstrate that safety is critical to the success of the company. We have seen the result on stock prices for BP, with the total incident wiping almost 40% off their market value. We have also seen what a lack of safety and an aggressive or combative stance regarding alleged serious safety factors can have on a company like Massey Energy.
2] Training, Training. The key to creating a safer operating environment is training for all employees from the bottom up and back down. Every employee needs to be educated and trained in the company’s procedures and policies. Create a zero tolerance environment for unsafe work practices. In certain highly hazardous operating environments give the employee the right to shut down an operation if they detect a potentially severe problem. Transocean maintains that it has such a policy, yet it is alleged that when a driller noticed pieces of rubber in the shaker which could only have come from the Blow Out Preventer (BOP), drilling was ordered to continue. Better to have a shut down cost a day of drilling at $1 million than what happened at Deepwater or in the Massey mine in West Virginia, than cost lives.
3] Action. Make sure that employees are observed when performing job related tasks. This is especially important in relation to safety sensitive positions. Make sure that you reinforce positive behavior by pointing it out and call employees by name. When making other types of comments to correct behavior, make sure it is in a coaching style. Make sure everyone understand that they have a responsibility to themselves and other members of the team to report behavior that could result in accidents or other incidents. Document the complaints and discuss them with the employee, again using a coaching framework, but also let them know that unsafe behavior will not be tolerated.
4] Involvement. Safety teams should meet monthly, focusing on accident prevention, identifying unsafe conditions and preventing injuries. They should identify risks that could result in injuries. These teams really need to be cross functional, drawing from operations, sales, administrative and finance staff. This provides an opportunity to have employees that are familiar with various operating environments in a facility while giving them a greater appreciation of what is involved in others jobs. An additional benefit is that these cross functional teams create an environment that fosters open communication by gaining different perspectives. Worcester Quality Foods, Inc. had a serious problem with commercial accidents. When we implemented a cross functional program with two goals (1) reduce these accidents through accountability by 50% in the first year (2) conduct accident reviews to determine possible corrective measures and to make recommendations; we were able to achieve a 85% reduction in accidents annually, identified several areas in the loading and transfer system that needed to be addressed (lights, lane marking, trailer axel locks and red/green warning lights at loading docks), as well as methods to address a chronic driver shortage.
5] Site Assessments. Health and safety professionals should work with site management to identify unsafe conditions and hazards. They should then create action plans to bring the site or facility into compliance with the appropriate industry and federal/state standards. I am a strong advocate of creating action and compliance plans whose goals are to meet or exceed the most stringent regulatory requirement.
6] Risk Assessment. Identify not only individual job activities and potential site hazards, but bear in mind the risk factors associated with the location of the site, particularly if it is located in a foreign country, or high crime area. Assign a rating that considers the probability of loss, severity and frequency. Strictly as an example in the oil and gas industry a catastrophic failure as evidenced in the Macondo spill would have a low probability rating but a high severity rating. Now, if you know that you are using a piece of equipment in which 200+ things can prevent it from working properly then you need to adjust your risk rating for additional controls.
7] Work Schedules. One of the common threads in many accidents is the establishment of unreasonable work schedules. The U. S. Chemical Safety Board (CSB) identified 12 hours shifts over a period of 4 weeks without a day off as a factor in the 2005 Texas City refinery blast. Many safety related occupations such as drivers of commercial motor vehicles and airline pilots for example have mandated maximum on-duty hours and off-duty hours. Fatigue can result in serious judgment errors and other unsafe behaviors. Ensure that employees have adequate rest periods (particularly in environments that may have excessive heat, humidity or even cold) and that they have adequate time off-duty.
8] Investigation. When an accident or incident occurs identify both the immediate and “upstream” causes. Use the information to define and improve procedures and controls to prevent another.
9] Metrics. Gather meaningful metrics that identify the presence of safety as well as the lack of it. Gather information from your industry on safety programs and practices as well as training and operating procedures. When establishing these metrics as part of a program they should be very detailed to facilitate analysis. This is a team effort. The team and leadership need to establish levels that not only identify the problems, but that will set the bar high enough to create a challenge within a time frame, but not high enough to guarantee failure or low enough to guarantee success.
10] Communicate. Frequent and consistent messages between all levels of management and employees along with a demonstration of the commitment to the safety culture by all levels of management will help to build a strong program in operations and compliance, leading to success.
Chemical Safety Board to Probe “Root Causes” of BP Oil Rig Blast
June 14, 2010
The U. S. Chemical Safety Board (CSB) has agreed to investigate the root causes of the blast which resulted in the sinking of the Deepwater Horizon with the loss of 11 lives, at the request from Reps. Henry Waxman, Chair of the House Committee on Energy & Commerce, and Bart Stupak who chairs the sub-committee on oversight and investigations.
Specifically the CSB has been answer 5 questions:
1] Do the circumstances and events leading up to the Deepwater Horizon explosion reflect problems in BP’s safety culture?
2] What role, if any, did cost cutting and budgetary concerns play in BP’s decisions about well design and testing?
3] How did BP, Transocean, and other contractors apply “management of change” programs to assess the consequences of modifications to the process, technology, and equipment on the Deepwater Horizon oil rig as well as organizational changes, including changes to personnel, training and budget?
4] Did BP provide adequate oversight of the contractors working on the well?
5] Can the CSB draw any parallels between the root causes of the April 20 oil rig explosion and the causes of the 2005 BP Texas City refinery explosion?
The CSB examined the 2005 Texas City explosion and fire that resulted in 15 deaths. In that probe the CSB concluded that cost-cutting, a lax safety culture and production pressure from BP executives were key factors that led to the explosion.
BP and the Law
June 21, 2010
There are numerous legal issues that BP will encounter over the loss of the Deepwater Horizon and resulting Gulf of Mexico tragedy.
There are several securities suits filed or pending against BP basically on the plummeting share price and fiduciary responsibilities if it is proven that BP sacrificed safe operating procedures in order to save money and meet production demands. The safety culture at BP has been an issue for several years since the BP Texas City refinery explosion. The Chemical Safety Board which conducted an investigation into that tragedy found that BP had employees working 12 hours over 7 days without a day off for several weeks. Those employees were working in the immediate area of the blast. The CSB also noted that there were issues with production demands and budgets for safety at the plant. If it is proven that BP had the same issues at the time of the Deepwater Horizon, then their fiduciary management may be called into question. The same issue arises in the Massey Energy securities suits. BP could also face criminal charges regarding the deaths resulting from the explosion on Deepwater Horizon as well as potential criminal charges with regards to the ensuring leak under a variety of federal laws relating to fish and wildlife and other environmental legislation and regulations.
There is the potential for BP to file for bankruptcy. What might drive this decision? BP has lost 50% of its market value. The costs of the clean up and related costs which BP must bear under the Oil Pollution Act of 1990 as the responsible party could by some estimates exceed $75 billion USD. As analyst Matt Simmons told Forbes Magazine, “A BP filing was likely in a month. They are going to run out of money from lawsuits, clean up and other expenses. The other scenario would be that BP could take on a minority partner. This would probably not be a US major, since there would be extensive problems in the anti-trust area. However a national oil company perhaps from China or even Aramco could become a suitor. Would BP have to separate its US operations from the rest of the company? Who would have ownership of the producing wells and leases in the Gulf of Mexico? Would BP US then be used to corral the other toxic assets and file for bankruptcy using a strategy similar to GM’s prepackaged bankruptcy?
In addition to securities and bankruptcy or acquisition issues BP faces a raft of civil and criminal issues based not only on Oil Pollution Act of 1990 but also environmental laws which are intertwined with references to other acts and enforcement by one or more agency, sometimes in consultation with others. These include but not limited to such legislation as:
· Endangered Species Act
· Clean Water Act
· Marine Protection Research and Sanctuaries Act
· Estuaries and Clean Water Act
· Marine Mammal Protection Act
· Migratory Bird Treaty Act
To the best of my knowledge there has never been a serious spill that did not result in a criminal charge under at least the ESA and MBTA.
In addition there are numerous civil suits filed or contemplated against BP resulting from the deaths of the 11 workers killed in the Deepwater Horizon explosion and fire.
Other civil issues that BP will have to deal with include actions that may be filed by the JV minority partners one of whom maintains that BP’s drilling operations management was reckless;
Potential action by Transocean or its insurers for the loss of the Deepwater Horizon should it be determined that BP was negligent in its drilling operations;
Civil actions by states and some local governments to recoup losses that BP may decline as not legitimate;
Actions in federal and state courts filed by businesses, associations and individuals who may feel that the compensation received is insufficient or was denied without adequate adjustment. BP has it is alleged hired one claims management firm and one adjustment firm with a limited number of adjustors.
In addition animal rights groups are considering filing animal cruelty charges against BP and or its executives;
BP has also received letters from several state attorneys general complaining about the potential harmful effects of the spill on birds and marine life along their coasts. These include North Carolina, Connecticut, Maryland and New York.