API is “Compromised” Says Deepwater Report

We know that BP was to blame for the Deepwater Horizon. So too was Transocean and Halliburton.

So too was the failed regulatory regime, which was tasked with maximising revenues for drilling at the same time as being responsible for oversight of the operations.

You can’t do both, and that is the reason that former regulator, the Minerals Management Service, has been changed into the Bureau of Ocean Energy Management, Regulation and Enforcement which has no responsibility for revenue collection.

But the industry lobby group, the American Petroleum Institute, is similarly “compromised” as the MMS was, according to the official Commission, whose report was published yesterday.

Because as well as being a lobby group pushing to promote offshore drilling, it also runs technical committees that write safety standards for the offshore industry.

This is what the report says:

“Based on this Commission’s multiple meetings and discussions with leading members of the oil and gas industry, however, it is clear that API’s ability to serve as a reliable standard-setter for drilling safety is compromised by its role as the industry’s principal lobbyist and public policy advocate.”

The report shows why the API is compromised: “Because they would make oil and gas industry operations potentially more costly, API regularly resists agency rulemakings that government regulators believe would make those operations safer, and API favors rulemaking that promotes industry autonomy from government oversight.”

Due to this compromised role, the API’s safety standards were flawed and therefore regulatory standards were flawed too.

It is worth reading the report in detail:

“According to statements made by industry officials to the Commission, API’s proffered safety and technical standards were a major casualty of this conflicted role. As described by one representative, API-proposed safety standards have increasingly failed to reflect “best industry practices” and have instead expressed the “lowest common denominator”—in other words, a standard that almost all operators could readily achieve.”

The report continues: “Because the Interior Department has in turn relied on API in developing its own regulatory safety standards, API’s shortfalls have undermined the entire federal regulatory system. As described in Chapter 4, the inadequacies of the resulting federal standards are evident in the decisions that led to the Macondo well blowout.”

For years the API led industry efforts into preventing further regulatory reform, asking the regulators to instead to rely on self-regulation by the API. The Oil Spill Commission’s report argues that historically the oil industry served as “an initial impediment” to the reforms being proposed by the MMS in the early nineties “and has largely remained so”.

Even after the Piper Alpha disaster in the North Sea in the late eighties that led to radical regulatory and safety reform in the UK, the API and other trade bodies continued to resist safety reform in the US.

The Commission continues: “In late 1991, the American Petroleum Institute asked the agency to postpone action in order to allow the institute itself to develop an offshore safety standard. MMS agreed, and actively participated in the institute’s committee-based process over the next two years.”

In May 1993, the API’s “recommended practice” guidance document was published; however missing from the first edition was a key element of standard process safety management. And unbelievably, according to the Commission’s report, “nor did it even cover drilling rigs, clearly an integral element in operating offshore.”

It was not until after the Deepwater Horizon disaster that “the Department of the Interior was finally able to announce a new, mandatory Safety and Environmental Management System almost two decades after the approach was adopted in the United Kingdom, where it is called the “safety case.””

Moreover, the report argues, the “API opposed revisions to the incident reporting rule that would have helped better identify safety risks.”

It is worth reading what the API says about its “consensus standards” on its website: “The development of consensus standards is one of API’s oldest and most successful programs. Beginning with its first standards in 1924, API now maintains some 500 standards covering all segments of the oil and gas industry.”

But, in contrast, the Commission argues that “As a consensus-based organization, the American Petroleum Institute is culturally ill-suited to drive a safety revolution in the industry. For this reason, it is essential that the safety enterprise operate apart from the API … the API’s longstanding role as an industry lobbyist and policy advocate—with an established record of opposing reform and modernization of safety regulations—renders it inappropriate to serve a self-policing function.”

To be credible, argues the Commission “any industry-created safety institute would need to have complete command of technical expertise available through industry sources—and complete freedom from any suggestion that its operations are compromised by multiple other interests and agendas.”

Therefore to be credible, all safety oversight must be moved away from the API.