November 15, 2018

Where’s Macondo? Where’s BAST? DOI’s Offshore Rules

Milo C. Mason

On May 11, 2018, the Bureau of Safety and Environmental Enforcement (BSEE), so called after the Deepwater Horizon (DWH) disaster and the Macondo well blowout, proposed 59 changes to the finalized 2016 regulations on offshore well control and blowout prevention. These proposed rules admirably correct and make more accurate many of the 2016 cross references and incorporations-by-reference of American Petroleum Institute (API) standards. 83 Fed. Reg. 22,128 (May 11, 2018). Most importantly though, the proposed rules fail to fix a fundamental and previously fatal flaw in the current rules.

While the DWH Macondo well blowout, 11 fatalities, and an 87-day oil spill were caused by improper drilling and poor choices by British Petroleum (BP) and its subcontractors, the lives lost and the oil spill pollution damage of the Macondo well most likely would have been prevented if the blowout preventer (BOP) had been the best available and safest technology (BAST). If the BOP had two blind shear rams sufficiently apart to have at least one ram pinch-close the drill pipe and kill the well, the disaster would not have happened.

The Outer Continental Shelf (OCS) Lands Act, as amended nine years after the 1969 Santa Barbara, California, oil spill, mandates that the secretary of the Interior “require, on all new drilling and production operations and, whenever practicable, on existing operations, the use of the best available and safest technologies which the Secretary determines to be economically feasible, wherever failure of equipment would have a significant effect on safety, health, or the environment, except where the Secretary determines that the incremental benefits are clearly insufficient to justify the incremental costs of utilizing such technologies.” 43 U.S.C. § 1347(b) (emphasis added). The statutory language requires that the secretary make determinations about these technologies and about whether the incremental benefits are clearly not worth the extra cost. It is as simple as that.

The 2016 regulations on drilling and production safety and BOPs were a vast improvement in many areas over the pre-DWH regulations. However, they fell short in many ways by relying on standard industry practice (SIP), American Petroleum Institute (API) member-agreed-upon performance guidelines. The BAST regulations mainly mimic the statutory language regarding BAST (substituting BSEE’s “Director” for “Secretary”). 30 C.F.R. § 250.170 (c)(1). And the BAST regulations then state that compliance with the regulations (mostly requiring SIP and API agreed-upon standards) is presumed to constitute BAST. 30 C.F.R. § 250.170 (c)(2). The preamble to these regulations explicitly states, “BSEE disagrees with the suggestions that the revisions to § 250.107(c) constitute either a BAST program or a BAST determination, and that those revisions will impose new costs on operators.” 81 Fed. Reg. 61,834, 61,847 (Sept. 7, 2016). Indeed, the current BSEE website claims that any BAST determination process will not result in an automatic review of existing systems and technology, the development of a prescriptive technology list, or the automatic phaseout of existing technology that is not capable of meeting new performance levels. (Perhaps the webmaster has not read that the statute prescribes BAST.) BSEE estimates that the 2018 proposed rule’s annualized undiscounted regulatory cost savings for industry will exceed $94 million. 83 Fed. Reg. 22,128, 22,145 (May 11, 2018).

To have a robust U.S. offshore oil and gas energy program requires the best available and safest technologies. The law requires all operations to always be safe and pollution-free, not 99 percent or 98 percent of the time. BOPs need to prevent blowouts 100 percent of the time. Another DWH disaster event most likely would set back our nation’s OCS program for years. Even a one percent risk of another DWH event is too high, and the costs of a repeat disastrous spill are enormous. Probably half of the operators on the federal OCS are thinly capitalized, and yet are largely self-insured. The risk of another DWH disaster without an entity like BP stepping up to bear most of the billions of dollars required to remediate the damage would transfer that cost to the coastal states, the tourism industry, the environment, and the public.

SIP and API agreed-upon technology may be good enough most of the time. Until it is not. The DWH disaster proved as much. Obviously, the single shear ram in BOPs was neither BAST nor good enough. Anything less than BAST courts the next ocean disaster. If we overlay a “good, better, best” analysis on OCS technology, those three tiers of technology quality would place SIP as good, API standards as better, and constantly reviewed and upgraded standards as best.

While BSEE nearly always allows the best affordable technology, that is not what the law requires. API standards can live with affordable risk. The double shear rams for BOPs designed to always crimp close the drill pipe are quite expensive. But if they had prevented DWH, it would have been worth every cent and saved billions of dollars. Of course, the “incremental benefits” would have been sufficient “to justify the incremental costs.” 43 U.S.C. § 1347(b). The 2016 regulations moved in the right direction, requiring double shear rams by 2021. 30 C.F.R. § 250.734 (a)(1). But even that requirement may be waived. Id. § 250.170 (a)(3). The 2018 proposed regulations did not change this.

Most of the 100 plus operators on the federal OCS likely want to use BAST and try to use BAST when they can afford it. But the short-term economic pressure not to use BAST, like BP’s too-quick efforts to drill the Macondo well, may overcome the desire to use BAST. The regulatory apparatus at BSEE needs to step up and accomplish the statutory mandate of BAST and prevent the next DWH disaster.

As written, the 2016 regulations and the 2018 proposed regulations almost always deferred to industry standards. Relying on SIP and API guidelines may seem reasonable, given the limited resources provided by the Department of the Interior (DOI) budget. But the statute mandates that the secretary determine BAST and expects, on a technology-by-technology basis, the determination of BAST. At the very least, dedicated independent DOI staff should review on an ongoing and individual technology basis whether SIP or API standards constitute BAST. An industry cost/benefit calculus may be rational, but it does not achieve the statutory mandate requiring the secretary to make independent BAST determinations. This statutory language is not just aspirational. It is the law.

Deferring to API guidelines and industry standards creates more risk than necessary and substantiates the obvious conclusion that API, often touted as wise and benevolent, is, in fact, the pro-industry fox that designs and guards our precious off-shore chicken coop. The secretary of DOI is just to count the eggs and occasionally decide, when he has the budget and inkling, whether coop repair needs to occur and is justified or too expensive. That is not what the BAST mandate means. Nor is it best for our nation’s offshore oil and gas industry, our oceans, and shorelines. I believe the secretary should seek and have the resources to determine BAST and constantly guard the ocean coop.

Short-term, short-sighted incremental cost savings to DOI and industry stemming from the secretary’s failure to independently examine technologies and decide on BAST risks another DWH. At the very least, BSEE must make every effort to keep reviewing what should constitute BAST—not just say that compliance with the regulations written years ago constitutes BAST.

Granted, with limited resources and budget, BSEE has a herculean task to sort through all the cutting-edge offshore technology, especially for ultra-deep water and high-pressure drilling zones. It’s much easier and cheaper to depend on SIP and API. Current efforts to roll back regulations, enforcement, and budgets make it even easier. But, in the long term, it is not best. And it’s not what the statute mandates.

DOI’s newest five-year program proposes to lease every U.S. offshore area off every coast in the United States. It would be best that drillers do not find another Macondo-type well that they can’t kill because they can’t afford or are not required to use BAST. And unlike Waldo, BAST is not hiding in plain sight. It is not there. It is missing and AWOL.

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Milo C. Mason

Mr. Mason is a retired 34-year veteran of the U.S. Department of the Interior’s Solicitor’s Office and former assistant solicitor of Offshore Minerals who helped conduct the federal depositions to discover the cause and responsibility of the Deepwater Horizon explosion and oil spill. He has been a member of the editorial board of Natural Resources & Environment and the interview editor for the magazine for over 25 years. He may be reached at milomason@aol.com.