DEPARTMENT OF THE INTERIOR

INCREASED SAFETY MEASURES FOR ENERGY DEVELOPMENT

ON THE OUTER CONTINENTAL SHELF


MAY 27, 2010

INCREASED SAFETY MEASURES FOR ENERGY DEVELOPMENT ON THE OUTER CONTINENTAL
SHELF


EXECUTIVE SUMMARY

Overview

On April 20, 2010, an explosion and fire erupted on an offshore drilling rig in the Gulf of
Mexico called the Deepwater Horizon, which had just completed an exploratory well 52 miles
from shore in 4,992 feet of water. Eleven members of the crew are missing and presumed dead.
The remainder of the crew abandoned the rig and was rescued by a nearby supply vessel, the
Damon Bankston. The fire destroyed the rig, which sank on April 22, 2010. The resulting oil
spill has been declared a spill of national significance and could become one of the oil
industrys gravest disasters. Crude oil continues to flow from a broken pipe on the seafloor, has
spread across thousands of square miles, and is damaging local economies, sensitive coastlines
and wildlife throughout the Gulf region. On April 30,

2010, the President directed the Secretary
of the Interior to conduct a thorough review of this event and to report, within 30 days, on what,
if any, additional precautions and technologies should be required to improve the safety of oil
and gas exploration and production operations on the outer continental shelf. This report
responds to the Presidents directive.

Recommendations

The Secretary recommends a series of steps immediately to improve the safety of offshore oil
and gas drilling operations in Federal waters and a moratorium on certain permitting and drilling
activities until the safety measures can be implemented and further analyses completed.

The report recommends a number of specific measures designed to ensure sufficient redundancy
in the blowout preventers (BOPs), to promote the integrity of the well and enhance well control,
and to facilitate a culture of safety through operational and personnel management (see Table
ES-1). Recommended actions include prescriptive near-term requirements, longer-term
performance-based safety measures, and one or more Department-led working groups to evaluate
longer-term safety issues. The recommendations take into account that drilling activities
conducted in the deepwater environment create increased risks and challenges.

Key recommendations on BOPs and related safety equipment used on floating drilling operations
include:

Mandatory inspection of each BOP to be used on floating drilling operations to ensure
that the BOP: meets manufacturer design specifications, taking into account any
modifications that have been made; is compatible with the specific drilling equipment on
the rig it is to be used on, including that the shear ram is compatible with the drill pipe to
be used; has not been compromised or damaged from previous service; is designed to
operate at the planned operating depth. Certification of these requirements will be made
publicly available.


Requirement of new safety features on BOPs and related backup and safety equipment
including: a requirement that BOPs have two sets of blind shear rams spaced at least four
feet apart to prevent BOP failure if a drill pipe or drill tool is across on set of rams during
an emergency; requirements for emergency back-up control systems; and requirements
for remote operating vehicle capabilities. The Department will develop new surface and
subsea testing requirements to verify reliability of these capabilities.

Overhaul of the testing, inspection and reporting requirements for BOP and related
backup and safety equipment to ensure proper functioning, including new means of
improving transparency and providing public access to the results of inspections and
routine reporting.

Key recommendations on well control systems include:

Development of enhanced deepwater well-control procedures.

Verification of a set of new safeguards that must be in place prior to displacement of kill-
weight drilling fluid from the wellbore.

New design, installation, testing, operations, and training requirements relating to
casing, cement or other elements that comprise an exploratory well.

A comprehensive study of methods for more rapid and effective response to deepwater
blowouts.

Key recommendations on a systems-based approach to safety:

Immediate, enhanced enforcement of current regulations through verification within 30
days of compliance with the April 30, 2010, National Safety Alert.

Enhanced requirements to improve organizational and safety management for companies
operating offshore drilling rigs.

New rules requiring that offshore operators have in place a comprehensive, systems-
based approach to safety and environmental management.

The Secretary also recommends temporarily halting certain permitting and drilling activities.
First, the Secretary recommends a six-month moratorium on permits for new wells being drilled
using floating rigs. The moratorium would allow for implementation of the measures proposed
in this report and for consideration of the findings from ongoing investigations, including the
bipartisan National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling.

The Secretary further recommends an immediate halt to drilling operations on the 33 permitted
wells, not including the relief wells currently being drilled by BP, that are currently being drilled
using floating rigs in the Gulf of Mexico. Drilling operations should cease as soon as safely

practicable for a 6-month period.

The recommendations contained in this report have been peer-reviewed by seven experts
identified by the National Academy of Engineering. Those experts, who volunteered their time
and expertise, are identified in Appendix 1. The Department also consulted with a wide range of
experts from government, academia and industry.

Relationship to Ongoing I nvestigations

This 30-day review has been conducted without the benefit of the findings from the ongoing
investigations into the root causes of the explosions and fire on the Deepwater Horizon and the
resulting oil spill (collectively BP Oil Spill) including if there were any violations of existing
safety or construction law, gross negligence, or willful misconduct. In the coming months, those
investigations will likely suggest refinements to some of this reports recommendations, as well
as additional safety measures. Nevertheless, the information currently available points to a
number of specific interim recommendations regarding equipment, systems, procedures, and
practices needed for safe operation of offshore drilling activities.

Furthermore, because the purpose of this review is to recommend immediate measures to
improve the safety of offshore drilling activities, nothing in this report should be used to
influence or prejudice any ongoing investigations, or impact any current or future litigation.



Table ES-1. Recommendations for Increased Safety Measures
Recommendations Key Components (with implementation plan)
Blowout Preventer (BOP)
Equipment and Emergency
Systems
Order re-certification of subsea BOP stacks (immediately)
Order BOP equipment compatibility verification
(immediately)
Establish formal equipment certification requirements
(rulemaking)
New Safety Equipment
Requirements and
Operating Procedures
Develop new BOP and remote operated vehicle (ROV)
testing requirements (immediately)
Develop new inspection procedures and reporting
requirements (immediately)
Develop secondary control system requirements (emergency
rulemaking)
Establish new blind shear ram redundancy requirements
(emergency rulemaking)
Develop new ROV operating capabilities (rulemaking)
Well-Control Guidelines
and Fluid Displacement
Procedures
Establish new fluid displacement procedures (immediately)
Establish new deepwater well-control procedure
requirements (emergency rulemaking)
Well Design and
Construction Casing and
Cementing
Establish new casing and cementing design requirements
two independent tested barriers (immediately)
Establish new casing installation procedures (immediately)
Develop formal personnel training requirements for casing
and cementing operations (rulemaking)
Develop additional requirements for casing installation
(rulemaking)
Enforce tighter primary cementing practices (rulemaking)
Develop additional requirements for evaluation of cement
integrity (immediately)
Study Wild-Well intervention techniques and capabilities
(immediately)
Increased Enforcement of
Existing Safety Regulations
and Procedures
Order compliance verification for existing regulations and
April 30, 2010, National Safety Alert (immediately)
Adopt safety case requirements for floating drilling
operations on the Outer Continental Shelf (emergency
rulemaking)
Adopt final rule to require operators to adopt a robust safety
and environmental management system for offshore drilling
operations (rulemaking)
Study additional safety training and certification
requirements (rulemaking)





CONTENTS

PAGE


I. INTRODUCTION 1


II. OFFSHORE OIL AND GAS PRODUCTION 3


III. EXISTING WELL CONTROL STUDIES 6


IV. LEGAL FRAMEWORK, INSPECTIONS, AND ENFORCEMENT 9


V. REGULATORY AUTHORITY AND REQUIREMENTS IN OTHER NATIONS 14


VI. RECOMMENDATIONS FOR IMMEDIATE ACTION TO IMPROVE OFFSHORE DRILLING
SAFETY 17


VII. CONCLUSION 28



EXPERT CONSULTATIONS APPENDIX 1

BRIEF PRIMER ON OFFSHORE DRILLING TECHNOLOGY AND SYSTEMS APPENDIX 2








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I. INTRODUCTION
On April 20, 2010, the crew of the Transocean drilling rig Deepwater Horizon was preparing to
temporarily abandon BPs discovery well at the Macondo prospect 52 miles from shore in 4,992
feet of water in the Gulf of Mexico. An explosion and subsequent fire on the rig caused 11
fatalities and several injuries. The rig sank two days later, resulting in an uncontrolled release of
oil that has been declared a spill of national significance. The Nation faces a potentially massive
and unprecedented environmental disaster, which has already resulted in the tragic loss of life
and personal injuries as well as significant harm to wildlife, coastal ecosystems, and other natural
resources. The disaster is commanding the Department of the Interiors resources as we work to
ensure that the spill is stopped and the well permanently plugged; that our natural resources
along the Gulf Coast are protected and restored; and that we get to the bottom of what happened
and hold those responsible accountable.
On April 30, 2010, the President ordered the Secretary of the Interior to evaluate what, if any,
additional precautions and technologies should be required to improve the safety of oil and gas
exploration and production operations on the Outer Continental Shelf (OCS). In addition to this
review of the OCS regulatory structure, the President recently created the bipartisan National
Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling. The President
established the National Commission to examine the relevant facts and circumstances concerning
the root causes of the BP Oil Spill, to develop options for guarding against, and mitigating the
impact of, oil spills associated with offshore drilling, and to submit a final public report to him
with its findings and options for consideration within six months of the date of the Commissions
first meeting.

In addition, the Departments of the Interior and Homeland Security are undertaking a joint
investigation into the causes of the BP Oil Spill, including holding public hearings, calling
witnesses, and taking any other steps necessary to determine the cause of the spill. Several
committees in Congress have held and will continue to hold hearings on the events associated
with the BP Oil Spill. Respecting the ongoing investigations, this report does not speculate as to
the possible causes of the BP Oil Spill. This report is intended to identify an initial set of safety
measures that can and will be implemented as soon as practicable to improve the safety of
offshore oil and gas development.

To provide context for the safety recommendations, this report presents a history of OCS
production, spills, and blowouts, a review of the existing U.S. regulatory and enforcement
structure, a survey of other countries regulatory approaches, and a summary of existing
Minerals Management Service (MMS)-sponsored studies on technologies that could reduce the
risk of blowouts.

In compiling the recommendations presented in this report, the Department has drawn from
expertise within the Federal Government, academia, professional engineers, industry, and other
governments regulatory programs. In particular, seven members of the National Academy of
Engineering peer reviewed the recommendations in this report. The Department received ideas
from the Department of Energy National Laboratories on ways to improve offshore safety.
Appendix 1 lists expert consultations for this report.

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This report examines all aspects of drilling operations, including equipment, procedures,
personnel management, and inspections and verification in an effort to identify safety and
environmental protection measures that would reduce the risk of a catastrophic event. (A brief
primer on offshore drilling technology and systems is included in Appendix 2). In particular,
this report examines several issues highlighted by the BP Oil Spill regarding operational and
personnel safety while conducting drilling operations in deepwater environments.

While technological progress has enabled the pursuit of deeper oil and gas deposits in deeper
water, the risks associated with operating in water depths in excess of 1,000 feet are significantly
more complex than in shallow water. This report describes safety and environmental issues
involved in offshore drilling, including the unique challenges associated with drilling operations
in deepwater.

The recommendations address well-control and well abandonment operations; specific
requirements for devices, such as blowout preventers (BOPs) and their testing; industry
practices; worker training; inspection protocol and operator oversight; and the responsibility of
the Department for safety and enforcement.

In developing the recommendations contained in this report, the Department has been guided by
the principle that feasible measures that materially and undeniably reduce the risk of a loss-of-
well-control event should be pursued. Therefore, some recommended measuresparticularly
those the Department intends to implement immediatelyare necessarily prescriptive. At the
same time, the Department is examining innovative ways to promote a culture of safety for
offshore operations by addressing the human element of operations. The Department is
committed to moving to finalize a rulemaking that would require operators to adopt a systems-
based approach to safety and environmental management. This rule would require operators to
incorporate global best practices regarding environmental and safety management on offshore
platforms into their operating plans and procedures. In finalizing this rulemaking, the
Department will analyze carefully the current circumstances in the Gulf of Mexico and lessons
learned from the ongoing investigation into the causes of the BP Oil Spill.

To realize an improved margin of safety associated with the recommended equipment standards
and operating procedures, the report proposes new inspection and verification measures, which
the Department will implement. Several of these efforts will also allow the public to access
information about the inspection and verification structures, to promote confidence that: (1) the
Federal Government undertakes appropriate actions to review, audit, and confirm industry
performance; and (2) industry follows the best possible practices and the new set of regulatory
requirements.

A comprehensive set of reforms encompassing all aspects of oil and gas development on the
OCS simply could not be fully developed in the 30-day timeframe of this report. With respect to
some safety measures, the Department will undertake further studywith appropriate input from
independent experts, academia, industry, and other stakeholdersto develop new regulations
and other appropriate steps to promote drilling safety. These Department-led strike teams will
also help to inform the work of the Presidents new bipartisan National Commission. Finally,
this report does not address several important issues associated with the safety of offshore

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drilling that implicate shared responsibilities with other departments and agencies. For example,
the Department will work in close cooperation with the Department of Homeland Security,
including the United States Coast Guard, the Environmental Protection Agency, and other
agencies to evaluate and improve oil spill response capabilities and industry responsibilities.

II. OFFSHORE OIL AND GAS PRODUCTION

A. Federal OCS Oil and Gas Activities

The Gulf of Mexico provides 97 percent of Federal OCS production. The Gulf of Mexico has
nearly 7,000 active leases (see Figure 1), 64 percent of which are in deepwater. The Pacific OCS
has 49 active leases off the coast of Southern California, 43 of which are producing. There have
been no Pacific OCS lease sales since 1984. Alaska has 675 active leases and production from a
single joint State-Federal field. The Atlantic does not have any active leases or production.

Figure 1
Gulf of Mexico OCS Active Leases

Source: Minerals Management Service Database, 2010.

Since 1947, more than 50,000 wells have been drilled in the Federal Gulf of Mexico, and there
are now approximately 3,600 structures in the Gulf. In 2009, production from these structures
accounted for 31 percent of total domestic oil production and 11 percent of total domestic,
marketed natural gas production. Oil production in 2009 represented the second highest annual
production for the Gulf of Mexico OCS (see Figure 2). Minerals Management Service Database,
2010.

Since the first major deepwater leasing boom in 1995 and 1996, a sustained and robust expansion
of deepwater drilling activity has occurred, largely enabled by major advances in drilling

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technology. In 2001, U.S. deepwater offshore oil production surpassed shallow water offshore
oil production for the first time. By 2009, 80 percent of offshore oil production and 45 percent
of natural gas production occurred in water depths in excess of 1,000 feet, and industry had
drilled nearly 4,000 wells to those depths. In 2007, a record 15 rigs were drilling for oil and gas
in water depths of 5,000 feet or more in the Gulf of Mexico. Operators have drilled about 700
wells in water depths of 5,000 feet or greater in the OCS. While fewer wells are drilled in the
OCS today, they tend to be more sophisticated with higher per-well production levels than those
in the past.

Figure 2
Gulf of Mexico OCS Oil and Gas Production

Source: Minerals Management Service Database, 2010.

Since 1953, the Federal Government has received approximately $200 billion in lease bonuses,
fees, and royalty payments from OCS oil and gas operators. Last year, the Federal OCS leasing
revenue was $6 billion. The OCS oil and gas industry provides relatively high-paying jobs in
drilling and production activities, as well as employment in supporting industries. Offshore
operations provide direct employment estimated at 150,000 jobs. Minerals Management Service
Database, 2010.


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B. OCS Petroleum Spills

Since the 1969 Santa Barbara, California, oil spill, there have been relatively few major oil spills
from offshore oil and gas operations in the U.S. and around the world. Yet several notable
blowouts have occurred, including one in June 1979, when the Ixtoc I exploratory well located
about 50 miles off the Yucatan Peninsula blew out and was not brought under control until
March 1980, releasing over three million barrels of oil off the coast of the Mexican state of
Campeche. In 2009, the Australian Montara well in the Timor Sea blew out and was not brought
under control for more than 10 weeks, releasing oil into the open ocean and forming a thin sheen
covering up to 10,000 square miles. Nevertheless, the relatively infrequent occurrence of a
major oil spill from an offshore drilling operation has led many to view these operations as safe.
From 1964 to 2009, operators in the Federal OCS produced about 17.5 billion barrels of oil
(crude oil and condensate). Over this same time, the total estimated petroleum volume spilled
from OCS activities was approximately 532,000 barrels, or 30.3 barrels spilled per million
barrels produced. The spill rates from OCS platform and rig activities improved each decade
from the 1960s through the 1990s, although the past decade reversed this trend (see Table 1).
The oil spilled from OCS rigs and platforms over the past 30 years totaled about 27,000 barrels,
illustrating how a catastrophic spill like the current BP Oil Spill can vastly exceed the impacts of
typical spills on the OCS.

Table 1
Crude Oil Spills from Platform and Rigs from Federal OCS Activities, 1960-2009
Time
Period
OCS Oil
Production
(Thousand Barrels)
Number
of Spills
Barrels Spilled
(Thousand
Barrels)
Thousand Barrels
Produced per Barrel
Spilled
1960-1969 1,460,000 13 99 15
1970-1979 3,455,000 32 106 33
1980-1989 3,387,000 38 7 473
1990-1999 4,051,000 15 2 1,592
2000-2009 5,450,000 72 18 296
Note: Only covers spills of 50 barrels or more.
Source: Minerals Management Service Database, 2010.

Blowouts represent a type of loss of well control event that can result in large discharges of oil
into the natural environment. Since 1970, the number of blowouts per number of wells drilled
has varied significantly from year to year. From 1964 through 1970, a total of approximately
178,000 barrels of oil was spilled on the Federal OCS as a result of blowout events (see Table 2).
Of this total, about 13,000 barrels resulted from blowouts related to external forces, such as
hurricanes and ship collisions. An additional 30,000 barrels were released when a production
fire resulted in the loss of well control of 12 wells on a production platform. The remaining

6

135,000 barrels that were released during blowouts occurred during drilling, well completion, or
workover operations.

Table 2
Blowout Events Exceeding 1,000 Barrels on the Federal Outer Continental Shelf, 1964-2009
Year Description of Event
1964 Two blowouts associated with a hurricane event that destroyed four platforms.
Total of 10,280 barrels crude oil spilled.
1965 One blowout associated with drilling.
1,688 barrels condensate spilled.
1969 One blowout that occurred when a supply vessel collided with a drilling rig during a
storm and sheared the wellhead.
2,500 barrels crude oil spilled.
1969 One blowout (Santa Barbara, California) was associated with drilling.
80,000 barrels spilled.
1970 One blowout was caused by a fire in the production area that resulted in the loss of
control of 12 wells on the platform.
30,000 barrels crude oil spilled.
1970 One blowout associated with wireline work during workover operations.
53,000 barrels spilled.
Source: Minerals Management Service Database, 2010.

After these blowouts, in the period from 1971 through 2009, a total of approximately 1,800
barrels was spilled on the Federal OCS as a result of blowout events. Of that amount, 425
barrels were blowouts resulting from hurricane damage. An additional 450 barrels occurred at
an oil pump during production operations. Since 1956, 15 blowouts resulted in at least one
fatality; three of these events occurred after 1986.

While the rate of blowouts per well drilled has not increased, even as more activity has moved
into deeper water, the experience with the BP Oil Spill illustrates the significant challenges in
containing a blowout in deepwater, as compared to containing a blowout in shallower water.

III. EXISTING WELL CONTROL STUDIES

The Department has conducted research related to offshore oil and gas exploration, development,
and production for two purposes: (1) to augment the overall knowledge base in the field, and (2)
to identify information supporting new or modified requirements in a regulation or recommended
practices. The Department maintains interagency agreements and working arrangements for
research with other Federal agencies who share responsibility for regulatory oversight of OCS
operations, including the Departments of Commerce, Energy, and Transportation.

Through the Technical Assessment & Research (TA&R) Program, the Department studies the
operational safety, technology, and the pollution prevention and spill response capabilities

7

associated with offshore operations. The TA&R Program serves to promote new technology
and safety through the funding of collective research with industry, academia, and other
government agencies and disseminate findings through a variety of public forums. Minerals
Management Service Engineering and Research Branch 2008-2012 Strategic Plan. This
program has funded or co-funded numerous studies investigating the use of well control
techniques and equipment, including those associated with drilling fluid of a specified weight
and circulation, cement with a specific bond and integrity, casing with a specific design, pressure
control safety valves, and BOPs (see Table 3 for a list of well control studies funded by the
Department since 1990). These studies have led to offshore drilling safety improvements around
the world.

Table 3
TA&R Funded Well Control Research, 1990-2010
Study
No.
Title of Study Completion Date
8 Blowout Prevention Procedures for Deepwater Drilling
1978 to 2003
150 Floating Vessel Blowout Control
December 1991
151 Investigation of Simulated Oil Well Blowout Fires 1989 to 1993
170 Improved Means of Offshore Platform Fire Resistance 1991 and 1994
220 Study of Human Factors in Offshore Operations 1995 to 1997
253 Blowout Preventer Study
December 1996
264
Development of Improved Drill String Safety Valve Design and
Specifications
1996 and 1998
319
Reliability of Subsea Blowout Preventer Systems for Deepwater
ApplicationsPhase II
November 1999
382 Experimental Validation of Well Control Procedures in Deepwater December 2005
383
Performance of Deepwater BOP Equipment During Well Control
Events
July 2001
403
Repeatability and Effectiveness of Subsurface-Controlled Safety
Valves
March 2003
408
Development of a Blowout Intervention Method and Dynamic Kill
Simulated for Blowouts in Ultra-Deepwater
December 2004
431 Evaluation of Secondary Intervention Methods in Well Control March 2003
440
Development and Assessment of Well Control Procedures for
Extended Reach and Multilateral Wells
December 2004
455 Review of Shear Ram Capabilities December 2004

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463 Evaluation of Sheer Ram Capabilities September 2004
519
Drilling and Completion Gaps for High Temperature and High
Pressure In Deep Water
June 2006
540
Risk Assessment of Surface vs. Subsurface BOP's on Mobile
Offshore Drilling Units
August 2006
541 Application of Dual Gradient Technology to Top Hole Drilling November 2006
566
Using Equipment, Particularly BOP and Wellhead Components in
Excess of the Rated Working Pressure
October 2006
582
A Probabilistic Approach to Risk Assessment of Managed
Pressure Drilling in Offshore Drilling Applications
October 2008
631 Risk Profile of Dual Gradient Drilling
Estimated
completion in
September 2010
640 Risk Analysis of Using a Surface Blow Out Preventer April 2010
Note: This report includes hyperlinks to the reports via the study numbers.
Source: Minerals Management Service Database, 2010.

These studies have examined, among other things, blind shear ram capabilities, back-up BOP
systems, and drilling and cementing design and operations, which have informed the setting of
Department regulations. For example, the 1999 Reliability of Subsea BOP systems for
Deepwater Applications (study number 319) recommended modifying testing regulations to
ensure that the testing of variable pipe rams appropriately account for the diameters of all the
sizes of pipe in use in a given drilling project. The Department used this recommendation in
revising its 2003 final drilling regulations.

The 2002 Review of Shear Ram Capabilities (study number 455) identified issues associated
with the cutting power of shear rams, which are intended to cut through drill pipe when the well
must be secured in an emergency situation. The Department adopted the reports
recommendation that the BOP must be capable of shearing pipe planned for use in current
drilling programs under 30 CFR 250.416(e). This regulation requires the submittal of
information demonstrating that shear rams on the proposed BOP stack can cut drill pipe under
maximum anticipated surface pressure.

The 2004 Evaluation of Sheer Ram Capabilities (study number 463) expanded on the analysis in
study number 455 through an evaluation of BOP shear rams under the most demanding
conditions. In this study, 214 pipe samples were tested against various ram models, and 16
(7.5 percent) were unsuccessful in shearing the pipe below a certain pressure (3,000 pounds per
square inch). All 16 of these cases involved a particular combination of shear ram and pipe,
which was found unsuitable for actual drilling operations. The results of this study confirmed
the regulatory decision to require operators to submit documentation that shows the shear rams
are capable of shearing the pipe in the hole under maximum anticipated surface pressures.

9


The 2003 Evaluation of Secondary Intervention Methods in Well Control (study number 431)
reviewed the design and capabilities of various secondary BOP intervention systems used in
practice. Secondary intervention represents an alternate means to operate BOP functions in the
event of total loss of the primary control system or a means to assist personnel during situations
involving imminent equipment failure or well-control problems. This study discusses the
possible use of acoustic systems in the Gulf of Mexico. According to the report, there remain
significant doubts about the ability of an acoustic control system to provide a reliable emergency
back-up to the primary control system during an actual well flow event.

IV. LEGAL FRAMEWORK, INSPECTIONS, AND ENFORCEMENT

A. Statutory Authority

In 1953, the Congress passed the Outer Continental Shelf Lands Act (OCSLA) that defines the
OCS as any submerged land outside state jurisdiction and established Federal jurisdiction over
these waters and all resources they contain. The OCSLA also set Federal responsibilities for
managing and maintaining the OCS subject to environmental constraints and safety concerns.
The legislation authorized the Department to lease areas of the OCS for development and to
regulate offshore operations and development. Since then, the OCSLA has been amended to
address changing issues, including the 1978 requirement for the Department to develop 5-year
leasing program schedules after consideration of environmental, social, and economic effects of
natural gas and oil activity on OCS resources, location-specific risks, energy needs, laws, and
stakeholder interests. This amendment also requires the Department to seek a balance between
potential damage to the environment and coastal areas and potential energy supply. The first
5-year leasing program started in 1980 and the current 5-year plan ends in 2012.

Congress has also enacted laws to promote production in frontier areas like the Gulf of Mexico
deepwater. For example, the 1995 Deepwater Royalty Relief Act encouraged oil and gas
development in the Gulf of Mexico in water depths greater than 200 meters (656 feet) through
royalty relief. Royalty relief incentives were also offered to encourage production from wells
drilled for deep natural gas (greater than 15,000 feet or 4,572 meters total depth) on new leases
located in shallow waters (less than 200 meters). The Energy Policy Act of 2005 included
additional incentives for oil and gas development in offshore areas to stimulate production in
deepwater and expanded the OSCLA to include the areas offshore Alaska for royalty suspension.

Oil and gas leasing and operations are subject to environmental reviews under the National
Environmental Policy Act (NEPA). On May 14, 2010, Secretary of the Interior Ken Salazar and
the Council on Environmental Quality Chair Nancy Sutley announced a full review of NEPA
compliance for oil and gas activities on the OCS, and accordingly, NEPA will not be covered in
this report.






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B. Regulations

Under the OCSLA, the Secretary of the Interior, through the MMS, manages and regulates
leasing, exploration, development, and production of resources on the OCS. Current regulations
are a combination of prescriptive and performance-based measures.

Prescriptive regulations specify rules or courses of action that must be explicitly followed in
order to comply with regulation. A prescriptive approach sets clear rules for industry to follow.
Performance-based regulations, in contrast, specify objectives for industry to achieve but allow
flexibility in the technology and approaches used to meet these objectives. This approach allows
improved technologies and methodologies to be incorporated into industry practices without
major revisions to regulations and puts the onus on industry to develop systems for continuous
improvement of safety and environmental protection practices. Internationally, many countries
(e.g., United Kingdom, Norway, and Australia) are moving toward more performance-based
regulations. The Department also incorporates by reference recommended practices and
standards from industry associations and technical standard setting groups such as the American
National Standards Institute, API standards and recommended practice documents, and National
Association of Corrosion Engineers documents. The Department also issues Notice to Lessees
(NTLs) to clarify and provide direction on regulatory requirements.

The regulations in 30 CFR 250 govern important drilling operations on the OCS. Subpart D
covers all aspects of the drilling operation including permitting, casing requirements, cementing
requirements, diverter systems, BOP systems, drilling fluids requirements, equipment testing,
and reporting. The minimum requirements for BOPs are stated in detail, including system
components, surface and subsea BOP stacks, associated systems and equipment, choke
manifolds, kelly valves, drill-string safety valves, maintenance and inspections, pressure tests
and additional testing, and recordkeeping. Subpart Q covers decommissioning, which includes
temporary abandonment of wells. These regulations are mainly prescriptive in nature, and
convey the minimum requirements for safe operations.

While regulations governing OCS exploration, development, and production activities have been
largely prescriptive, the Department has been considering more performance-based approaches.
For example, the 2002 Subpart O (30 CFR 250.1500) training rule is a performance-based
regulation. In addition, the Department has incorporated by reference nearly 100 consensus
standards into current offshore operating regulations. In this way, the Department imposes a
responsibility on operators to ensure safe operations through compliance with prescribed
standards as well as compliance with performance-based, overarching measures. As such, it is
the responsibility of operators to meet the requirements of 30 CFR 250.401:

What must I do to keep wells under control? You must take necessary precautions to
keep wells under control at all times. You must: (a) Use the best available and safest
drilling technology to monitor and evaluate well conditions and to minimize the potential
for the well to flow or kick and(e) Use and maintain equipment and materials
necessary to ensure the safety and protection of personnel, equipment, natural resources,
and the environment.


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Review of Applications for Permit to Drill (APDs)

Upon receipt of an APD, the Department reviews the approval documents for the Exploration or
Development Plans for conditions that apply to the APD or the wells proposed location. The
Department also assesses whether the applicant has oil spill financial responsibility coverage.

The Department conducts an engineering review of the APD, to check the proposed drilling rigs
maximum operating limits for drilling depth and water depth to ensure appropriateness for the
proposed well program. The review consists of, but is not limited to, the proposed procedure,
well location and directional program, geological and geophysical hazards, subsurface
environment for pore pressure and fracture gradient, wellbore design and schematic, design
calculations for pressure containment during drilling and completion, cement volumes, and
testing pressures for the well control equipment, casing and casing shoe. This review is
performed for shallow and deepwater drilling operations, and a hurricane risk assessment is
performed during hurricane season. The Department reviews APDs to determine how the
proposed operation satisfies the regulations in meeting its objective of safely reaching a targeted
depth. This review includes an assessment of:

well casing setting depths determined by formation strength, predicted formation fluid
pressure, drilling mud weight limits, any anticipated subsurface hazards;

effectiveness of well casing strength for pressure containment at its specified depth;

effectiveness of cementing the well casing after successfully securing and isolating the
hydrocarbon zones or any encountered subsurface hazards; and

maintaining well control by adjusting drilling mud properties and the use of well control
equipment such as diverters and BOPs.

The Department reviews the operators plans and APDs to verify the use of best available and
safest technology (BAST), and inspections verify the use of approved equipment and
maintenance thereof.

Upon completing the engineering review, the Department may approve the APD with conditions
if warranted, return it to the operator for modifications, or deny it. If the applicant makes
changes to the drilling application, the Department must grant approval before the applicant
performs its work.

C. Inspections
The Department maintains a comprehensive inspection program to promote the safety of
offshore oil and gas operations on the OCS. This program places inspectors offshore on drilling
rigs and production platforms to enforce operator compliance with Federal safety and
environmental protection requirements. When a drilling rig enters Federal waters to drill a well,
Federal inspectors will meet the rig where it is moored to provide training to the rig operators
about the Federal regulatory structure. At this time, inspectors will conduct a drilling inspection

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of the equipment. It is Departmental policy for inspectors to inspect the rig once on location
every 30 days.
For production platforms, it is practice for initial inspections to take place during the fabrication
of the platform at a shipyard. Federal inspectors and engineers review the flow diagrams and
charts to determine if the specific facility meets regulatory requirements. A complete production
inspection of the facility occurs typically about 30 to 45 days after a production platform is
installed.

After operations begin, the Department conducts additional announced and unannounced
inspections. Inspectors typically give the operator a few days notice for announced inspections.
Inspectors also fly to platforms or rigs unannounced, and in such cases, inspectors contact the
operator as they approach the facility. These unannounced inspections foster a climate of safe
operations, maintain an inspector presence, and allow regulators to focus on operators with a
poor performance record. They are also conducted after a critical safety feature has previously
been found defective during previous inspections or by operator reporting.

During a drilling inspection an inspector typically conducts the following:

a general safety walk through of the facility looking for general housekeeping hazards
related to slips/trips/falls/railings/open gratings;

verification of the location of gas detectors/hydrogen sulfide detectors/mud volume
detectors;

verification that the mud trip tank is operational and properly marked (graduated), that
appropriate quantities of a mud weighting material are onboard (barite), and that the
drilling mud currently in use has been periodically tested and is of the proper density as
indicated in the APD (viewing mud loggers report);

verification that proper well control data relative to the well depth and type of tubulars
(drill pipe, casing) in the well is clearly marked and posted on the rig floor and that there
are remote BOP and Diverter control panels on the facility;

verification that equipment is properly grounded and that drill string safety valves with
proper wrenches for the diameter of drill pipe or casing currently in the well are located
on the drill floor in an open position and within easy access to rig personnel;

verification that the crown block safety device is installed and operational and that fresh
air intakes are properly located on the rig;

verification that diesel engines have required shut down devices, that breathing air is
properly labeled, that engine exhaust is insulated;


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verification that crane load charts on platform rigs have been recorded, that all equipment
has proper catch basins/drains/curbs/gutters/drip pans, that the facility is properly marked
as to location, that the facility is properly lighted;

if drilling is being conducted on a production facility, verification that there is an
operational Emergency Shut Down device on the rig floor;

verification of the status/switch position of the BOP pumps that the stand-by pump
operates in an automatic fashion, that the accumulator bottles are in service;

review the BOP tests records;

checks the Subpart O well control status of contractor and lessee employees;

checks for certain Potential Incidents of Noncompliance, which allow the inspector to
check for general competency related to drilling operations; and

inspectors may test, randomly or as a result of a safety concern, an offshore employees
competency with various safety devices.

The records check and documentation components of a drilling inspection apply to equipment,
procedures, and operations that were conducted prior to the inspector boarding the facility,
including but not limited to casing, cement, diverter, and BOP pressure testing results, casing
setting depths, cement volumes, proper wait on cement time, formation pressure integrity tests,
formation evaluation tests, required well control drills, hydrogen sulfide training certifications,
and gas detector and hydrogen sulfide detector calibration records. Furthermore, the inspector
confirms that proper paperwork is available in regard to any granted departures approved during
the drilling of the well which were not previously approved in the APD.
During 2009, industry drilled a total of 331 wells in the Gulf of Mexico, and the MMS Gulf of
Mexico Region conducted the following types and numbers of inspections:
561 drilling inspections;
3,678 production inspections;
268 well workover and well completion inspections;
6,804 meter inspections;
82 abandonment inspections;
4,837 pipelines inspections; and
3,342 personal safety inspections, on behalf of the U.S. Coast Guard.

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E. Enforcement

The Secretary of the Interior, the Secretary of the Army, and the U.S. Coast Guard have the
authority to pursue civil and criminal enforcement actions against persons who violate the
OCSLA, the regulations created to implement the OCSLA, and the terms of any lease, license, or
permit issued under OCSLA. The Department maintains a National Potential Incident of
Noncompliance (PINC) List to help inspectors carry out enforcement actions: it contains a
checklist of requirements for specific installations or procedures and prescribed enforcement
actions consisting of written warnings, shut-in of a component, including wells, equipment, or
pipelines, or shut-in of an entire platform if noncompliance with the National PINC is detected.
If the violation does not impose an immediate danger to personnel or equipment, a warning
Incident of Noncompliance (INC) is issued. An INC must be corrected within 14 days from the
time specified on the INC, and the operator may not continue the activity in question until it has
corrected the INC.

The OCSLA (43 U.S.C. 1334(a)(2)) and regulations at 30 CFR 250.181-188 authorize the
Secretary to cancel a lease or permit if, after opportunity and notice for a hearing, it is
determined that: (1) continued activity would probably cause serious harm or damage to life,
property, the environment, minerals, or national security or defense; (2) the threat of harm or
damage will not disappear or decrease to an acceptable extent within a reasonable time; (3) the
advantages of cancellation outweigh the advantages of continued activity; and (4) a suspension
has been in effect for at least five years or the termination of suspension and lease cancellation
are at the request of the lessee.

Regulations appearing in 30 CFR 250.135-136 provide for a disqualification process for
operators exhibiting chronic poor compliance. This procedure allows operators to be placed on
probation and requires that they submit Performance Improvement Plans. This gives the
operator an opportunity to improve their performance. Should it not improve during a specified
time, the operator may be disqualified from operating a given facility, including up to any and all
facilities. Ultimately, an operator can go through Departmental debarment procedures that
would prevent it from transacting any business with the Federal Government.

Under 43 U.S.C. 1350(b) of the OCSLA, as amended, and regulations appearing at 30 CFR
250.200-206, civil penalties can be assessed for failure to comply with responsibilities under the
law, a lease, a license, a permit, or any regulation or order issued pursuant to the Act. In addition
to the enforcement actions specified above, civil penalty of up to $35,000 per violation per day
may be assessed if: (1) the operator fails to correct the violation in the amount of time specified
on the INC; or (2) the violation resulted in a threat of serious, irreparable, or immediate harm or
damage to life, property, minerals, or the environment. On a drilling rig, for example, 160 items
are checked for potential violations. If significant enough, the violation may call for the
particular well component or the entire complex to be shut in. In 2009, drilling operations of 20
facilities were shut-in.





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V. REGULATORY AUTHORITY AND REQUIREMENTS IN OTHER NATIONS

There have been and continue to be a number of approaches for regulating offshore drilling
activity. Some countries have adopted a prescriptive approach directing offshore oil and gas
activities through detailed regulations and requirements, while other regulatory bodies have
adopted a performance-based approach. Some regulators have adopted a hybrid approach by
being prescriptive in areas deemed critical, while also establishing broad performance parameters
where they deem industry needs the latitude to meet particular objectives.

There is a major difference among offshore oil and gas regulators in the number of technical
standards referenced within their regulations, and the effect of referenced standards. For
example, in the United Kingdom, the standards are not compulsory, while in the United States,
referenced standards have the same status as regulations. A standard is a formal document that
establishes or defines a method or practice; these may also be called recommended practices.
Some of the standards developing organizations, referenced in the regulations, include API,
American Society of Mechanical Engineers, and American National Standards Institute. The
following summarizes the regulatory structures in Norway, the United Kingdom, Australia, and
Canada.

Norway

Over the past 40 years, Norway has moved from a prescriptive to a performance-based approach
for regulating offshore oil and gas. Like the United States today with joint regulatory oversight
of mobile drilling rigs by the Department and the U.S. Coast Guard, Norway originally regulated
mobile units through its maritime authority and fixed installations by the Norwegian Petroleum
Directorate (NPD).

Over time, the NPD has developed new approaches, including compliance responsibility that
required companies to verify that their business was run acceptably and in line with the rules.
The NPD eliminated the concept of inspection and replaced it with the concept of supervision.
They also replaced the term approvals with consents. Supervision spans audits, verification,
investigations, and most significantly, interaction with industry in the form of studies,
professional seminars, and the development of regulations. These changes transformed the
earlier approvals system that had the effect of the NPD being a virtual guarantor that company
activities were acceptable into one centered on the concept of consent.

Since this major change in 1985, the trend has been away from prescription towards a regulatory
approach based more on performance and risk management. Also, a series of reforms has
resulted in regulations that are aligned with the changes in regulatory approach. Norways
regulatory requirements are general and primarily specify the conditions or functions that must
be achieved to be compliant. Within this framework, companies have the freedom to choose
practical solutions along with the responsibility to ensure compliance. To avoid
misunderstandings about requirements for complying with the regulations, non-binding
recommendations and guidelines have also been issued that reference reputable Norwegian
and/or international industrial standards for structures, equipment, or procedures. These
recommendations and guidelines rely primarily on Det Norske Veritas Offshore Standards that

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provide technical requirements and acceptance criteria and Recommended Practices for proven
technology and sound engineering practice.

This approach also means that the regulator must keep abreast of and participate in developing
and revising industry standards to ensure that they remain relevant and reflect best practice.
Supervision by the regulator involves checking whether the administrative management systems
at the companies ensure acceptable operation. This auditing must be conducted by personnel
who have special technical and management expertise and experience.

The NPD acknowledges that the requirements for successfully delivering performance-based
regulations demands extensive participation from industry, employees, and the regulator in terms
of expertise, management and flexibility. To achieve a safe and environmentally responsible
offshore work environment, strategic, and operational plans must be drawn up, selected
development measures implemented, progress monitored and corrective action taken when
problems arise.

The Petroleum Safety Authority Norway (PSA) was established as an independent government
regulator in 2004. It took over the safety department of the NPD and continued its role. Its
authority was also extended to cover supervision of safety, emergency preparedness, and the
working environment for petroleum-related plants and associated pipeline systems on land.
Norway is working toward harmonizing their regulations for offshore and land-based petroleum
operations under the PSA.

United Kingdom

The UK safety regulation is predominantly performance-based. Indeed, the safety case concept
for offshore oil and gas operation began after the 1988 explosion and resulting fire of a North
Sea oil production platform called Piper Alpha, which killed 167 men. The subsequent
investigation led to the issuance of the Public Inquiry into the Piper Alpha Disaster (the Lord
Cullen report) and the reorganization of the UK offshore safety laws from prescriptive to a safety
case approach. UK standards describe objectives, and operators can select the methods and
equipment used to achieve these objectives and meet their statutory obligations. Complementing
the safety case regulations are approved codes of practice and guidance documents.

The UK regulates offshore oil and gas through the Health and Safety Executive (HSE). The core
activities of HSE are safety case assessment, verification, inspection, investigation, and
enforcement. The approval process for the HSE is case-specific, and each case must be accepted
and approved before offshore installation operates. A government inspectorate is in place as an
assurance mechanism. The HSE oversight includes over 300 installations including, production
platforms, Floating Production Storage and Offloading units, and mobile offshore drilling units.
Other legislation is applied offshore on an activity basis. In 1992, the Offshore Installation
(Safety Case) Regulations were introduced into the UK sector. These require all fixed and
mobile offshore installations operating in UK waters to have a safety case which must be
reviewed and approved by the Health and Safety Executive.


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Australia

The organization responsible for regulating Australias oil and gas industry is The National
Offshore Petroleum Safety Authority, an independent statutory agency designated under the
Commonwealth Offshore Petroleum and Greenhouse Gas Storage Act 2006. This organization
implements a performance-based regulatory approach. The regulator is responsible for providing
assurance that the operators address risks identified by a safety case. The organization includes a
joint government inspectorate, and requires third party validations for regulatory assurance.
Each manned facility is inspected at least once every year. The inspections are planned and
usually take several days. The subject of planned inspections includes both control and
management of major equipment and occupational health and safety.

The primary features of the Australian regulatory system are:

Duties of care: Specific categories of persons (operators, employers, etc.) who are
involved in offshore petroleum activities at facilities are required to "take all reasonably
practicable steps" to protect the health and safety of the facility workforce and of any
other persons who may be affected.

Consultation provisions: Mechanisms are set out that will enable effective consultation
between each facility operator, relevant employers, and the workforce regarding
occupational health and safety.

Powers of inspectors: Inspectors are granted powers to enter offshore facilities or other
relevant premises, conduct inspections, interview people, seize evidence and otherwise
take action to ensure compliance by parties with legal obligations.

Standards and best practices are based on a safety case approach, similar to that specified
in the UK regulatory system.

Canada

The Canada-Nova Scotia Offshore Petroleum Board (C-NSOPB) and the Canada Newfoundland
& Labrador Offshore Petroleum Board (C-NLOPB) are responsible for the regulation of
petroleum activities in the Nova Scotia, Newfoundland, and Labrador offshore areas. Their
principle responsibilities include ensuring health and safety for offshore workers, protection of
the environment, conservation of offshore petroleum resources, compliance with legislative
provisions regarding employment and industrial benefits, issuance of licenses for offshore
exploration and development, and resource evaluation. Both boards are independent joint
agencies of the Government of Canada and their respective provinces. Each work activity
proposed in the offshore area related to exploration, drilling, production, conservation,
processing, or transportation of petroleum requires the authorization of the responsible board.
Assurance mechanisms include board inspections, audits and investigations programs, and
industry self inspections. Operators are required to submit reports detailing the status of their
work programs on an ongoing basis, along with other documentation to demonstrate compliance
with regulatory requirements. The C-NSOPB oversees one operational natural gas project

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comprised of five production platforms and one 26-inch pipeline. The C-NLOPB oversees three
oil projects comprised of Floating Production Storage and Offloading units and one integrated
drilling/production accommodation installation.

VI. RECOMMENDATIONS FOR IMMEDIATE ACTION TO IMPROVE OFFSHORE DRILLING SAFETY

The BP Oil Spill demonstrates the possibility of a catastrophic event (or multiple catastrophic
failures) and, therefore, the need to ensure that oil and gas development on the Outer Continental
Shelf can be conducted safely and that another event like the BP Oil Spill never occurs again.

This 30-day review has of necessity been conducted without the results of the ongoing
investigations into the precise causes of the event. A series of other investigations will determine
those causes in the coming months. Nevertheless, this report makes a set of interim
recommendations based upon what is known about the equipment, systems, and practices
necessary for safe operation. For example, the BP Oil Spill has underscored that as drilling
activity moves increasingly into very deep water environments, it is important to reevaluate
whether the best practices for safe drilling operations developed over the years need to be
bolstered to account for the unique challenges of drilling in deepwater. In addition, the
presumed failure of the BOP points to a need to examine standards specifically related to BOP
safety.

With that context in mind, the recommendations are designed to address specific policies,
practices, and procedures, which the Department has identified as important for workplace and
environmental safety, even before completion of the investigation into the event. Many of the
near-term recommendations are prescriptive in nature, reflecting the importance of addressing
immediate needs while the Department conducts a more comprehensive examination of the
entire regulatory program and determines whether additional performance-based standards are
necessary.

Implementation of these recommendations is expected to improve safety of offshore drilling
operations. In the coming months, these measures will be refined and supplemented based on
recommendations from other reviews and investigations, including from continuing work at the
Department as described below, from the Joint Investigation and from the independent bipartisan
commission established by the President.

Each recommendation below is accompanied by a brief discussion of the context of the
recommendations and an explanation of how it will enhance the safety of future OCS drilling
activities. Each is also identified with regard to priority of expected implementation. Certain
measures are intended for immediate implementation (within the next 30 days), through issuance
of either a NTL, internal Departmental guidance, or in the case of a safety and environmental
rule, through publication of the final rulemaking.

Other recommendations will be addressed through emergency rulemaking, where appropriate. It
is the intent of the Department to issue expeditiously interim final rules to implement these
recommendations. Such rules will become effective immediately upon issuance, but will also be

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opened for public review and comment and may be adjusted after comments are received
through the appropriate process.

Finally, several recommendations require further study and, therefore, will be addressed through
notice and comment rulemaking. The Department will immediately establish strike teams within
the Department to further develop these measures. These strike teams will address the highly
technical and complex issues raised and will seek input as appropriate from academia, industry,
and other technical experts and stakeholders. The teams will present their recommendations for
additional environmental protection and safety measures within six months. Recommendations
will be implemented as expeditiously as possible through formal rulemaking. The
recommendations from these strike teams may also inform the efforts of the Presidents new
bipartisan National Commission.

A primer on offshore drilling technology and systems describes many of the terms used in the
below recommendations (see Appendix 2).

The specific recommendations of the Department follow:

I. Blowout Preventer Equipment and Emergency Systems

BOPs and Emergency Systems: BOPs are used to control the release of oil and gas in the event
of loss of well control. Current drilling regulations impose specific requirements addressing
BOP systems, including requirements for annular preventers and the primary systems that
control those preventers, as well as pipe and blind-shear rams.

Although the regulations do not require specific secondary control systems (back-up systems)
including subsea BOP safety systems, which are designed to shut-in the wellbore automatically
during emergency events the Department only approves permits for which they are secondary
control systems. These safety systems include autoshear and deadman systems. Emergency
events could include the loss of communication and power between the surface and the BOP
stack or an unplanned disconnect of the marine riser from the BOP stack. In addition, all Gulf of
Mexico drilling rigs are currently equipped to use a remote operated vehicle (ROV) to provide
secondary control of the subsea BOP stack, and most provide other tertiary control systems as
well. The ROV intervention capability is limited on some subsea BOP stacks while others have
the ability to control multiple functions.

A. Certification of Subsea BOP Stack

Recommendation 1 Order Immediate Re-certification of All BOP Equipment Used in
New Floating Drilling Operations

Prior to spudding any new well from a floating vessel, the operator will be required to obtain a
written and signed certification from an independent third party attesting that, on or after the date
of this report, a detailed physical inspection and design review of the BOP has been conducted in
accordance with the Original Equipment Manufacturer specifications and that: (i) the BOP will
operate as originally designed, and (ii) any modifications or upgrades to the BOP stack

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conducted after delivery have not compromised the design or operation of the BOP. This
certification must be submitted to the Department and made publicly available. Prior to
deploying the BOP, the operator must also verify that any modifications or upgrades to the BOP
are approved by the Department and that documentation showing that the BOP has been
maintained and inspected according to the requirements in 30 CFR 250.446(a) and other
applicable standards and is on file with the Department and available for inspection.

Recommendation 2 Order BOP Equipment Compatibility Verification for Each Floating
Vessel and for Each New Well

For each new well, the Department will require, as part of a structured risk management process,
the operator to obtain an independent third party verification that:

The BOP stack is designed for the specific drilling equipment on the rig and for the
specific well design including certification that the shear ram is appropriate for the
drilling project.

The BOP stack has not been compromised or damaged from previous service.

The BOP stack will operate in the water depth in which it will be deployed.

Recommendation 3 Develop Formal Equipment Certification Requirements

The Department will investigate new certification requirements for BOP equipment and other
components of the BOP stack such as control panels, communication pods, accumulator systems,
and choke and kill lines. In addition, the Department will develop a system to make BOP
certifications publicly available in order to increase transparency and accountability.

B. New Safety Equipment Requirements and Operating Procedures

Recommendation 4 New Blind Shear Ram Redundancy Requirement

The BOPs used in all floating drilling operations will be required to have two sets of blind shear
rams spaced at least four feet apart (to prevent system failure if drill pipe joint or drill tool is
across one set of rams during an emergency).

Recommendation 5 Secondary Control System Requirements and Guidelines

The Department will establish clear requirements for secondary BOP control systems on all
subsea BOPs and for systems that address well-control emergencies. These requirements will
include:

ROV intervention capabilities for secondary control of all subsea BOP stacks, including
the ability to close all shear and pipe rams, close the choke and kill valves and unlatch the
lower marine riser package (LMRP).


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Requirements for an emergency back-up BOP control system, e.g., autoshear, deadman,
emergency disconnect system, and/or an acoustic activation system that is powered by a
separate and independent accumulator bank with sufficient capacity to open and close
one annular-type preventer and all ram-type preventers, including the blind shear ram.

Guidelines for arming and disarming the secondary BOP control system.

Requirements for documentation of BOP maintenance and repair (including any
modifications to the BOP stack and control systems).

Recommendation 6 New ROV Operating Capabilities

The Department will develop requirements for ROV operating capabilities including the
following:

Standardized intervention ports for all subsea BOP stacks to ensure compatibility with
any available ROV.

Visible mechanical indicator or redundant telemetry channel for BOP rams to give
positive indication of proper functioning (e.g., a position indicator).

ROV testing requirements, including subsea function testing with external hydraulic
supply.

An ROV interface with dual valves below the lowest ram on the BOP stack to allow well-
killing operations.


C. New Testing Guidelines and Inspection Procedures

Recommendation 7 Develop New Testing Requirements

The Department will develop surface and subsea testing of ROV and BOP stack capabilities.
These will include:

Surface and subsea function and pressure testing requirements to ensure full operability
of all functions (emergency disconnect of the LMRP and loss of communication with the
surface control pods (e.g., electric and hydraulic power)).

Third party verification that blind-shear rams will function and are capable of shearing
the drill pipe that is in use on the rig.

ROV performance standards, including surface and subsea function testing of ROV
intervention ports and ROV pumps, to ensure that the ROV can close all shear and pipe
rams, close the choke and kill valves, and unlatch the LMRP.


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Protocols for function testing autoshear, deadman, emergency disconnect systems, and
acoustic activation systems.

Mandatory inspection and testing of BOP stack if any components are used in an
emergency (e.g., use of pipe or casing shear rams or circulating out a well kick). This
testing must involve a full pressure test of the BOP after the situation is fully controlled,
with the BOP on the wellhead.

Recommendation 8 Develop New Inspection Procedures and Reporting Requirements

The Department will evaluate and revise the manner in which it conducts its drilling
inspections. Revised drilling inspections will include the witnessing of actual tests of
BOP equipment, including the new requirements and guidance that address the surface
and subsea testing of ROV and BOP stack capabilities. The Department will also
develop methods to increase transparency and public availability of the results of
inspections as well as routine reporting. The Department will work with Congress to
obtain the necessary resources to implement these recommendations.

Within 15 days of the date of this report, all operators of floating drilling equipment will
report to the Department the following: (i) BOP and well control system configuration;
(ii) BOP and well control system test results, including any anomalies in testing or
operation of critical BOP components; (iii) BOP and loss of well control events; and (iv)
BOP and well control system downtime for the last three years of drilling operations.

The electronic log from the BOP control system must be transmitted online to a secure
location onshore and made available for inspection by the Department.


II. Procedures to Ensure Adequate Physical Barriers and Well Control Systems are in
Place to Prevent Oil and Gas from Escaping into the Environment

Minimizing Risk of Uncontrolled Flow: A well creates a conduit for subsurface formations to
potentially flow uncontrolled to the surface. There are multiple methods that can be utilized to
minimize the risk of the occurrence of uncontrolled flow. Those methods include the installation
of rigid physical barriers such as cement plugs or mechanical plugs, well casing design and
securing of the casing, and well control equipment. An appropriate well safety program must
account for many factors unique to the drill location and dictates the installation of plugs and
casing at strategic points to maintain well control and to enable drilling to the desired depth.
Current Department regulations require that well-control equipment be in place at all times
during the drilling operation to mitigate against failure of a plug or casing. Other, more specific
standards may be appropriate to improve physical barriers and well-control systems. Well-
control procedures must be revisited for deepwater operations because of the complexity of the
equipment design in deepwater and the location of the BOP stack on the seafloor. Enhanced
training for rig personnel will complement new well-control requirements.



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A. Well-Control Guidelines and Fluid Displacement Procedures

Recommendation 1 Establish Deepwater Well-Control Procedure Guidelines

As expeditiously as possible, the Department will establish new requirements for deepwater
well-control procedures no later than 120 days of the date of this report.

Recommendation 2 New Fluid Displacement Procedures

Prior to displacement of kill-weight drilling fluid from the wellbore, the operator must
independently verify that:

The BOPs are closed during displacement to underbalanced fluid columns to prevent gas
entry into the riser should a seal failure occur during displacement.

Two independent barriers, including one mechanical barrier, are in place for each flow
path (i.e., casing and annulus), except that a single barrier is allowable between the top of
the wellhead housing and the top of the BOP.

If the shoe track (the cement plug and check valves that remain inside the bottom of
casing after cementing) is to be used as one of these barriers, it is negatively pressure
tested prior to the setting of the subsequent casing barrier. A negative pressure test must
also be performed prior to setting the surface plug.

Negative pressure tests are made to a differential pressure equal to or greater than the
anticipated pressure after displacement. Each casing barrier is positively tested to a
pressure that exceeds the highest estimated integrity of the casing shoes below the barrier.

Displacement of the riser and casing to fluid columns that are underbalanced to the
formation pressure in the wellbore is conducted in separate operations. In both cases,
BOPs must be closed on the drill string and circulation established through the choke line
to isolate the riser, which is not a rated barrier. During displacement, volumes in and out
must be accurately monitored.

Drill pipe components positioned in the shear rams during displacement must be capable
of being sheared by the blind-shear rams in the BOP stack.

B. Well Design and Construction

1. Requirements for Both Casing and Cementing

Recommendation 3 New Casing and Cement Design Requirements: Two Independent
Tested Barriers

Before spudding any new floating drilling operation, all well casing and cement designs must be
certified by a Professional Engineer, who verifies that there will be at least two independent

24

tested barriers, including one mechanical barrier, across each flow path during well completion
and abandonment activities and that the casing design is appropriate for the purpose for which it
is intended under reasonably expected wellbore conditions.

Recommendation 4 Study Formal Personnel Training Requirements for Casing and
Cementing Operations

The Department will immediately establish a technical workgroup to evaluate new training and
certification requirements for rig personnel specifically related to casing and cementing
operations.


2. Casing Requirements

Recommendation 5 New Casing Installation Procedures

The Department will ensure the requirement of the following BAST practices:

Casing hanger latching mechanisms or lock down mechanisms must be engaged at the
time the casing is installed in the subsea wellhead.

For the final casing string, the operator must verify the installation of dual mechanical
barriers (e.g., dual floats or one float and a mechanical plug) in addition to cement, to
prevent flow in the event of a failure in the cement.

Recommendation 6 Develop Additional Requirements or Guidelines for Casing
Installation

The Department will establish specific requirements for the following procedures and practices:

Positive and negative test procedures and use of test results for evaluation of casing
integrity.

Use of float valves and other mechanical plugs in the final casing string or liner.


3. Cementing Requirements

Recommendation 7 Enforce Tighter Primary Cementing Practices

The Department will institute a rulemaking address previously identified gaps in primary
cementing practices).

The Department, with input from independent experts will determine specific cementing
requirements.


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Recommendation 8 Develop Additional Requirements or Guidelines for Evaluation of
Cement Integrity

The Department will immediately evaluate whether and under what circumstances the use of
cement bond logs is feasible and practical and will increase safety.

Discussion of Recommendations 3-8

Recommendations 3-8 are intended to result in better well control. Requiring a Professional
Engineer to review and certify the well design will add another level of review to the current
well design requirements. The Departments review new training requirements for casing and
cementing operations helps focus industry and rig personnel on the importance of proper casing
and cementing operations. Additional operational requirements for casing installation and
cementing operations will add new assurances that adequate barriers are in place before
continuing on to new drilling activities. Incorporation of the new cementing standard will bring
all of industry up to state-of-art cementing practicesthis means less chance of a well blowout
due to a poor cement job.


C. Wild-Well Intervention

Recommendation 9 Increase Federal Government Wild-Well Intervention Capabilities

Blown out, or wild wells, involve the uncontrolled release of crude oil or natural gas from an
oil well where pressure control systems have failed. The Federal Government must develop a
plan to increase its capabilities for direct wild-well intervention to be better prepared for future
emergencies, particularly in deepwater. Development of the plan should consider existing
methods to stop a blowout and handle escaping wellbore fluids, including but not limited to
coffer dams, highly-capable ROVs, portable hydraulic line hook-ups, and pressure-reading tools,
as well as appropriate sources of funding for such capabilities.

Recommendation 10 Study Innovative Wild-Well Intervention, Response Techniques,
and Response Planning

The Department will investigate new methods to stop a blowout and handle escaping wellbore
fluids. A technical workgroup will take a fresh look at how to deal with a deepwater blowout. In
particular, the workgroup will evaluate new, faster ways of stopping blowouts in deepwater. The
technical workgroup will also address operators responsibility, on a regional or industry-wide
basis, to develop and procure a response package for deepwater events, to include diagnostic and
measurement equipment, pre-fabricated systems for deepwater oil capture, logistical and
communications support, and plans and concepts of operations that can be deployed in the event
of an unanticipated blowout, as well as assess and certify potential options (e.g., deepwater
dispersant injection).




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III. Organizational and Safety Management

A. Increased Enforcement of Existing Safety Regulations and Procedures

Enforcing Existing Regulations: Immediately following the BP Oil Spill, the MMS and the
U.S. Coast Guard issued a joint Safety Alert to compel operators and drilling contractors to
inspect their drilling equipment (both surface and subsea), review their procedures to ensure the
safety of personnel and protection of the environment, and review all emergency shutdown and
dynamic positioning procedures. Inspections began immediately to verify that all active
deepwater drilling activities complied with these recommendations and all other regulations.
Following the completion of the drilling inspections, inspections of all deepwater production
facilities began immediately to ensure compliance by those facilities with the regulations.
Reconfirmation of adherence to this Safety Alert and all existing regulations will heighten safety
awareness.

Recommendation 1 Compliance Verification for Existing Regulations and April 30, 2010,
National Safety Alert

Within 30 days of the date of this report, the Department, in conjunction with the Department of
Homeland Security, verify compliance by operators with existing regulations and National
Safety Alert (issued April 30, 2010), which issued the following safety recommendations to
operators and drilling contractors:

Examine all well-control equipment (both surface and subsea) currently being used to
ensure that it has been properly maintained and is capable of shutting in the well during
emergency operations. Ensure that the ROV hot-stabs are function-tested and are capable
of actuating the BOP.

Review all rig drilling/casing/completion practices to ensure that well-control
contingencies are not compromised at any point while the BOP is installed on the
wellhead.

Review all emergency shutdown and dynamic positioning procedures that interface with
emergency well control operations.

Inspect lifesaving and firefighting equipment for compliance with Federal requirements.

Ensure that all crew members are familiar with emergency/firefighting equipment, as
well as participate in an abandon ship drill. Operators are reminded that the review of
emergency equipment and drills must be conducted after each crew change out.

Exercise emergency power equipment to ensure proper operation.

Ensure that all personnel involved in well operations are properly trained and capable of
performing their tasks under both normal drilling and emergency well-control operations.


27

After the 30-day compliance period, the Department will provide a public report on operator
verification, including any cases of non-compliance.


B. Organizational Management

Organizational Safety Case Documentation: A safety case is a comprehensive and structured
set of safety documentation to ensure the safety of a specific vessel or equipment. This
documentation is essentially a body of evidence that provides a basis for determining whether a
system is adequately safe for a given application in a given environment. In response to the 1988
Piper Alpha disaster in the UK, the Lord Cullen investigation and report advanced the safety case
concept for offshore oil and gas operations.

The use of a formal safety case for drilling operations is an important component in regulating
drilling activities in many countries. The International Association of Drilling Contractors
(IADC) has developed guidelines that can be applied to any drilling unit regardless of geographic
location. The use of these guidelines can assist both the operator and regulatory authorities when
evaluating a drilling contractors safety management program by providing them assurance that
the program encompasses a series of best industry practices designed to minimize operating
risks. The Department will undertake an evaluation of requiring the application of all or part of
these guidelines to OCS oil and gas operations.

Recommendation 2 The Department Will Adopt Safety Case Requirements for Floating
Drilling Operations on the OCS

The Department will assure the adoption of appropriate safety case requirements based on IADC
Health, Safety and Environmental Case Guidelines for Mobile Offshore Drilling Units (2009),
which will include well construction safety assessment prior to approval of APD. This safety
case must establish risk assessment and mitigation processes to manage a drilling contractors
controls related to the health, safety, and environmental aspects of their operations. In addition
to the safety case, a separate bridging document will be required to connect the safety case to
existing well design and construction documents. Such a proposed Well Construction Interfacing
Document will include all of the elements in a conventional bridging document plus alignment of
the drilling contractors management of change (MOC) and risk assessment to the lease
operators MOC and well execution risk assessments. The use of the IADCs Health, Safety, and
Environmental Case Guidelines for Mobile Offshore Drilling Units will help operators and
drilling contractors demonstrate their ability to operate safely and handle the risks associated
with drilling on the OCS.








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C. Personnel Accountability Procedures for Operational Safety (Risk, Injury, and Spill
Prevention)

Recommendation 3 Finalize a Rule that Would Require Operators to Develop a Robust
Safety and Environmental Management System for Offshore Drilling Operations

Department investigation findings and reports indicate that unsafe offshore drilling operations
often result from human error. The Department is proceeding with the rulemaking process to
finalize a regulation to require operators on the OCS to adopt a comprehensive, systems-based
approach to safety and environmental management that incorporates best practices from around
the globe. The Department believes that requiring operators to implement robust and
comprehensive safety and environmental management plans could reduce the risk and number of
injuries and spills during OCS activities. The Department will finalize a rule that is informed by
current operational conditions in the Gulf and the events and related investigation surrounding
the BP Oil Spill.

Recommendation 4 Study Additional Safety Training and Certification Requirements

The Department will immediately establish a workgroup to investigate safety training
requirements for floating drilling rig personnel and possible requirements for independent or
more frequent certification and testing of personnel and safety systems.

Establish an oil production safety program or institute similar to U.S. Nuclear Regulatory
Commission (NRC) reactor safety program.

Establish a formalized analytical methodology to assess performance of safety systems in
the event of multiple component failure or excursions outside normal environmental
ranges.

Strengthen technical support to the Department and other regulatory authorities,
including the resources necessary to obtain independent technical review of regulations
and standards.

Charter a longer-term technical review of BOP equipment and emergency backup system
reliability.

Review and adopt as appropriate best practices from other agencies with similar
responsibility for safety regulation of technically complex systems (e.g., Federal Aviation
Administration, NRC, Chemical Safety Board, and National Transportation Safety
Board).


VII. CONCLUSION

The Department developed these recommendations with input and suggestions from experts
from across the field and reviewed by members of the National Academy of Engineering. The

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Department has presented new requirements for well design, construction and operation and for
the quality and sufficient redundancy of fail-safes, so as to promote better well control and
ensure the efficacy of the BOPs. The Secretary of the Interior has directed the Department to
develop measures to increase the frequency, thoroughness, and transparency of inspections, such
as for testing of BOPs and associated back-up systems. The Secretary has also directed the
Department to look at innovative ways of promoting a greater culture of safety through a new
rule that would require all rig operators to develop enhanced operational, safety, and
environmental management plans, which would include more extensive worker training to
enable them to adapt and respond effectively to events when something unexpected happens on a
drilling rig.

The Departments approach to implementing these recommendations will follow a continuum
from near-term prescriptive regulations, which are required to increase immediately the margin
of safety in offshore oil and gas development, to longer-term actions designed to facilitate an
environment where the absolute highest standard of performance is demanded of industry. This
approach puts the onus on industry to perform safely, with the Government focusing on
aggressive verification and enforcement. The majority of the specific recommendations
contained in this report fall within the category of near-term prescriptive actions necessary to
increase offshore energy production safety immediately.
At the same time, the Secretary has directed a fundamental restructuring of the MMS to bring
greater clarity to the roles and responsibilities of the Department while strengthening oversight
of the companies that develop energy in our Nations waters. This restructuring, the latest in a
series of reforms to the MMS that the Secretary began in January 2009, will establish:

Bureau of Ocean Energy Management: A new bureau under the supervision of the
Assistant Secretary for Land and Minerals Management that will be responsible for the
sustainable development of OCS conventional and renewable energy resources, including
resource evaluation, planning, and other activities related to leasing.

Bureau of Safety and Environmental Enforcement: A bureau under the supervision of the
Assistant Secretary for Land and Minerals Management that will be responsible for
ensuring comprehensive oversight, safety, and environmental protection in all offshore
energy activities.

Office of Natural Resources Revenue: An office under the supervision of the Assistant
Secretary for Policy, Management and Budget that will be responsible for the royalty and
revenue management function including the collection and distribution of revenue,
auditing and compliance, and asset management.

Another critical part of the ongoing effort to reform the MMS began in September 2009 when
the Secretary asked the National Marine Board, an arm of the highly respected National
Academy of Sciences, to direct an independent review of MMSs inspection program for
offshore facilities. That review is on-going.
The Secretary is committed to implementing the changes recommended in this report at the same
time this and other reviews are ongoing and at the same time that the Department undertakes

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fundamental change in its OCS oversight. The Secretary established by Secretarial Order 3298
the OCS Safety Oversight Board. The OCS Safety Oversight Board is a high-level team, led by
the Assistant Secretary for Land and Minerals Management, the Assistant Secretary for Policy,
Management and Budget, and the Inspector General, that reviews and oversees OCS operations
to support reasoned and fact-based recommendations for potential improvements.
The success of the Departments longer-term objective of creating a more dynamic and effective
regulatory environment for offshore energy production overall is very much the focus of the
efforts to restructure the MMS. Specifically, the persons responsible for designing the new
Bureau of Safety and Environmental Enforcement have been tasked to create a structure,
operational processes, and culture that supports both the longer-term recommendations contained
in this report, as well as a continuously evolving set of additional policies and practices that
provide the highest assurance of safety in offshore energy operations.
As the Presidential Commission completes its review and as the Department and the U.S. Coast
Guard finish the root cause investigation, the Department will know more and will respond
accordingly. The measures contained in this report will increase the safety in offshore oil and
gas development, but represent only the beginning of the Departments work.


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Appendix 1: Expert Consultations

The Department consulted with a wide range of experts in state and Federal governments,
academic institutions, and industry and advocacy organizations. In addition, draft
recommendations were peer reviewed by seven experts identified by the National Academy of
Engineering.

Expert Reviewers of the National Academy of Engineering

Bea, Robert holds a Bachelor of Science in Civil Engineering and a Master of Science in
Engineering both from the University of Florida. Dr. Bea has done post-graduate studies
at Tulane University, Rice University, Texas A&M University, Bakersfield College,
University of Houston, and the Technical and Scientific University of Norway. Dr. Bea
received a PhD from the University of Western Australia. He is a registered Professional
Civil Engineer (retired) in Louisiana, Texas, Florida, Alaska, Washington, Oregon and
California. He is a registered Professional Geotechnical Engineer (retired) in California.
He is a member of the American Society of Civil Engineers, the American Society of
Mechanical Engineers, and the National Academy of Engineering. Dr. Bea has 55 years
of experience in engineering and management of design, construction, maintenance,
operation and decommissioning engineered systems, including offshore platforms,
pipelines and floating facilities. Dr. Bea has worked for the U.S. Army Corp of
Engineers, Shell Oil Company, the Ocean Services Division of Woodward-Clyde
Consultants, PMB Engineering Bechtel Inc., and the University of California at
Berkeley where he is currently a professor. In 2009, he was honored by the Offshore
Technology Hall of Fame.

Brett, Ford holds a Bachelor of Science in mechanical engineering and physics from
Duke University as well as a Master of Science in Engineering from Stanford University
and a Masters of Business Administration from Oklahoma State University. Mr. Brett is
recognized as a leader in the area of Petroleum Project Management. He has consulted
more than 25 countries in the area of petroleum project and process management.
Formerly, Mr. Brett worked with Amoco Production Company where he specialized in
drilling projects in the Bering Sea, North Slope of Alaska, Gulf of Mexico, offshore
Trinidad and Wyoming. In 1996, Mr. Brett was nominated for the National Medal of
Technology, the U.S. Governments highest technology award. Mr. Brett has been
granted over 25 U.S. patents.

Baugh, Benton holds a Bachelor of Science in Mechanical Engineering from the
University of Houston; a Master of Science in Mechanical Engineering and PhD in
Mechanical Engineering from Kennedy Western University. Additionally, Dr. Baugh
graduated from the Army Machinist School. Dr. Baugh has been employed by Bowen,
Camco, Cameron, Vetco, Brown Oil Tools, and Baugh Consulting Engineers. Dr. Baugh
is the owner and President of Radoil, Inc., which designs and manufactures oilfield and
subsea products. Dr. Baugh has received over 100 U.S. patents for his tool and solution
designs, consulting and management. Dr. Baugh has over 50 years of oilfield machine
design, manufacturing, management, consulting, and expert witness experience.

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Chenevert, Martin holds a Bachelor of Science in Petroleum Engineering from
Louisiana State University as well as a Master of Science in Petroleum Engineering and a
Doctor of Philosophy in Petroleum Engineering, both from the University of Texas at
Austin. Dr. Chenevert has over ten years of industrial experience with Exxon Production
Research and Exxon USA and over 30 years of teaching experience from Oklahoma State
University, the University of Houston, and the University of Texas. Dr. Chenevert has
published over 120 articles on well control, wellbore stability, rock mechanics, drilling
fluids, and cementing.

Holand, Per graduated from Norwegian University of Science and Technology in 1982
with a Master of Science in Mechanical Engineering. He has 18 years experience from
safety and reliability engineering at SINTEF, prior to joining ExproSoft on May 1, 2001.
His main work focus in SINTEF and ExproSoft has been on the reliability of drilling
equipment, offshore blowout experience, subsea and well reliability analyses. Dr. Holand
carried out numerous subsea BOP reliability studies on behalf of clients in Norway,
Brazil, the United States, and Italy. Since 1990 he has been responsible for maintaining
the SINTEF Offshore Blowout Database, which serves as the key information in
connection with blowout risk analyses in the North Sea area. Dr. Holand holds a PhD
(1996) in safety and reliability engineering from the Norwegian University of Science
and Technology in Trondheim, Norway. His PhD was later reworked and published as a
book at the Gulf Publishing Company in 1997 (Title: Offshore Blowouts, Causes and
Control).

Juvkam-Wold, Hans holds a Bachelor of Science, Master of Science, and a Doctor of
Science in Mechanical Engineering from the Massachusetts Institute of Technology. His
area of expertise is buckling of tubular in horizontal drilling, well control, Arctic and
offshore drilling, and dual-gradient drilling in ultra-deep water. Dr. Juvkam-Wold is a
Registered Professional Engineer in Texas. Prior to his 24 years of teaching drilling
experience at the University of Texas A&M, Dr. Juvkam-Wold has 20 additional years
of oil industry experience: Juvkam-Wold has served as a Consultant for the National
Institute of Standards & Technology; Frontier and Offshore Technology Co.; Western
Irrigation Supply House; Oil & Gas Consultants Inc.; Ocean Drilling Program; Unocal
E&P. He has served as the Gulf Mineral Resources Companys Representative on the
industrys advisory committee on mine shaft drilling as well as manager of technical
services and section supervisor of production engineering. Dr. Juvkam-Wold joined
Texas A&M in 1985 with his main area of teaching and research in drilling; he is now a
Professor Emeritus of Petroleum Engineering. Dr. Juvkam-Wold holds seven drill-
related U.S. patents.

Stancell, Arnold holds a Doctor of Science in Chemical Engineering from the
Massachusetts Institute of Technology. Dr. Stancell is the retired Vice president of Mobil
Oil, Exploration and Production, and Professor Emeritus, Chemical Engineering, Georgia
Tech. Dr. Stancell was awarded nine U.S. patents and was inducted into the National
Academy of Engineering and received the AIChE's National Award in Chemical

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Engineering Practice. He is a licensed Professional Engineer in New York and
Connecticut.

Other Experts Consultations

Arnold, Ken holds a Bachelor of Science in Civil Engineering from Cornell University
and a Master of Science in Civil Engineering from Tulane University. Mr. Arnold is
currently a registered Professional Engineer in the State of Texas, is a member of the
Marine Board of the National Research Council, Society of Petroleum Engineers, the
Texas Society of Professional Engineers, was elected to the National Academy of
Engineers in 2005 due to his work on offshore safety and is a member of the Academy of
Medicine, Engineering and Science of Texas.

Danenberger, Elmer Bud holds a Bachelor of Science degree in Petroleum and
Natural Gas Engineering and a Masters degree in Environmental Pollution Control, both
from Pennsylvania State University. After a 38-year career, Mr. Danenberger retired
from the Department of the Interiors offshore oil and gas program in January 2010.
During his career, Mr. Danenberger served as a staff engineer in the Gulf of Mexico
regional office, Chief of the Technical Advisory Section at the headquarters office of the
U.S. Geological Survey, District Supervisor for several MMS offices, and Chief of the
Engineering and Operations Division at MMS Headquarters. For the last five years of his
tenure at the Department, he served as Chief, Offshore Regulating Programs with
responsibilities for safety and pollution prevention research, investigations, regulations
and standards, and inspection and enforcement programs.

Epstein, Lois holds a Bachelor of Science in Mechanical Engineering from
Massachusetts Institute of Technology and a Master of Science in Mechanical
Engineering from Stanford University. Ms. Epstein is currently a licensed engineer in
Maryland. Ms. Epstein is a former Senior Engineer, Cook Inlet Keeper. Ms. Epstein is
the President of LNE Engineering and Policy, which provides technical and policy
consultant to non-profit organizations on oil/gas issues. Ms. Epstein was a public
member of the Office of Pipeline Safety Federal Advisory Committee on Hazardous
Liquid Pipelines from 1995 through 2007.

OReilly, David J. is the retired Chairman and Chief Executive Officer of Chevron
Corporation. Mr. OReilly is a native of Dublin, Ireland, where he earned his Bachelors
degree in Chemical Engineering from the University College, Dublin. Mr. OReilly
started as a process engineer with Chevron Research Co in 1968 and after several decades
and earning positions of increasing responsibility he was elected Senior Vice President
and Chief Operating Officer of Chevron Chemical Company in 1989. Mr. OReilly was
named Chairman and Chief Executive Office of Chevron Corporation on January 1,
2000, and he held that position until his retirement on December 31, 2009. Mr. OReilly
is the Vice Chairman of the National Petroleum Council. He is a director of Bechtel
Group, Inc., a member of The Business Council, the World Economic Forums
International Business Council, and the American Society of Corporate Executives. He
also serves on the San Francisco Symphony Board of Governors.

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Regg, Jim holds a Bachelor of Science in Petroleum and Natural Gas Engineering from
Pennsylvania State University as well as a Bachelor of Art in Math/Science from
Edinboro State University. Mr. Regg worked for the Minerals Management Service Field
Operations for almost 20 years where his primary focus was technology assessment.
Currently Mr. Regg is a Senior Petroleum Engineer for the Alaska Oil & Gas
Conservation Commission where he is responsible for managing the compliance
inspection program (including investigations and enforcement); well integrity and
regulation development.

Ward, E.G. Skip holds a Bachelor of Science in Mechanical Engineering from Lamar
University and a Masters and Doctorate in Mechanical Engineering from the University
of Houston. Dr. Ward spent 30 years with Shell Oil Co. beginning in Shell
Developments E&P Research Division in 1968 as a researcher. From 1981 to 1985, he
supervised the Oceanographic Engineering section. From 1985 through 1994, he
managed the Offshore Engineering Research Department. In 1994, Dr. Ward became the
technology manager of Shell Offshore Incs Deepwater Division where he was
responsible for a group that designed deepwater structures and developed new structural
concepts and components for deepwater production systems. Dr. Ward has been a
member of the American Petroleum Institute since 1976 and received APIs 30+ Years of
Service Recognition Award in 2006. Dr. Ward served on the Marine Board of the
National Academies for nine years. Dr. Ward is currently the Associate Director of the
Texas Engineering Experiment Stations Offshore Technology Research Center.

West, Robin is the current Chairman, Founder, and Chief Executive Officer of PFC
Energy where he advises chief executives of leading international oil and gas companies
and national oil companies on corporate strategy, portfolio management, acquisitions,
divestitures, and investor relations. Before founding PFC Energy in 1984, Mr. West was
the Assistant Secretary of Policy, Management and Budget at the Department of the
Interior from 1981 through 1983. While there, he conceived of and implemented the
Outer Continental Shelf Leasing Schedule and managed the $14 billion per year OCS
budget policy. Mr. West also served as the Deputy Assistant Secretary of Defense for
International Economic Affairs during the Ford Administration. Mr. West has served on
several boards and commissions including a Presidential appointment to the National
Advisory Committee on Oceans and Atmosphere in 1977. Mr. West is also a member of
the National Petroleum Council; Director of the Magellan Petroleum Corporation;
Director of Key Energy Services, Inc and Director of Cheniere Energy. He earned his
Bachelor of Arts from the University of North Carolina at Chapel Hill and a Juris
Doctorate from Temple University.

Williams, Tom has been in the energy business for over 28 years. He is currently the
Managing Director of Nautilus International LLC. Mr. Williams served as President of
Maurer Technology Inc, a leading drilling research and development and engineering
technology company. From 1993 through 2000, he was Business Director at Westport
Technology Center, a leading upstream oil and gas research company. Mr. Williams held
senior executive positions at the Departments of the Interior and Energy during the Bush

35

Administration from 1989 through 1993. He owned and operated an oil and gas
exploration, production and consulting company prior to joining the Department of
Energy. Mr. Williams is currently on the Board of Directors of Far East Energy
Corporation, a public oil and gas company with operations in China; Board of Directors
of Petris Technology, Inc, TerraPlatforms LLC; The Research Partnership to Restore
Energy for America; The Contributor Committee Co-Chair of DeepStar Consortium; The
Society of Petroleum Engineers; The Independent Petroleum Association of America;
The International Association of Drilling Contractors; the American Association of
Drilling Engineers. Mr. Williams Environmentally Friendly Drilling Project was
awarded the Environmental Stewardship Award by the Interstate Oil and Gas Compact
Commission in May of 2010.

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Appendix 2: Brief Primer on Offshore Drilling Technology and Systems

The process for an offshore oil and gas exploratory well begins by positioning a drill rig above
the intended leasing tract for exploration (see Figure A1).

Figure A1
Schematic of Offshore Drilling


Source: Minerals Management Service Database, 2010.


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The rig lowers drill pipe (also known as a drill string) with a drill bit attached to its end to the
seafloor where it commences to drill. The borehole created by the drill is then set with casing.
At the seafloor, conductor casing is normally set to stabilize the soft sediments at the top of the
borehole to ensure that continued drilling does not precipitate a borehole collapse. Once the
conductor is in place, the drill rig lowers to the seafloor a marine riser (a large pipe that
surrounds the drill pipe) that connects the conductor casing to the drill rig. As drilling proceeds,
a blowout preventer (BOP) is lowered to the seafloor and sits atop the wellhead.

As drilling progresses with depth, additional casings (sections of pipe) that are slightly narrower
in diameter than the hole created by the drill bit are inserted into the borehole and bonded into
place by cement. This process ensures that the borehole does not collapse on itself, and it
isolates the borehole from any pockets of gas or water in the strata that the borehole passes
through. A series of casings of equal diameter that are connected together and run down the
borehole is a string and a string may be hundreds to thousands of feet long with a threaded
connector between each 30-foot segment of casing. Deeper into the borehole, narrower casings
are inserted one into the other resulting in strings of casing that are enclosed and cemented into
the previous, slightly wider-diameter string of casing. The outermost casing can be up to four
feet in diameter with the innermost string of casing less than six inches in diameter in some
cases. The initial and final casing diameters, the types of casing, and type of cement used are
determined by the profile (depth, temperature, pressure, etc.) of the well being drilled. Once the
well is in production, the hydrocarbons will come to the surface through the production casing
that is run down through the middle of the narrowest casing string.

During the process of drilling, drill fluid, referred to as mud, is pumped down the drill pipe
through drill bit nozzles. The muds primary function is maintaining well control, but it also
cools the drill bit and carries the drill cuttings away from the bottom of the borehole and returns
to the surface through the space (the annulus) between the drill pipe and the walls of the casing
strings. To maintain well control, the pressure created by the weight of the mud in the drill pipe
and annulus must be maintained equal to or greater than the pressures encountered in the
borehole. Various indicators of well pressure measures allow the mud engineer on the rig to
maintain the well bore fluid pressure equal to or slightly greater than the pressures from the
deepest formation. This type of pressure balance is called overbalanced.

The pockets of oil, gas, or water that are encountered in porous layers during the drilling process
can suddenly push the mud through the annulus with considerable pressurewhat is referred to
as a kick. When a kick occurs there are various bypass mechanisms, such as diverters and
BOPs, to shunt the pressure away from the well bore (diverter) or prevent the pressure from
rising to the ocean surface (BOP), thereby maintaining well control. If a kick overwhelms the
control mechanisms, a blowout can occur.

A BOP consists of a series of ram and annular preventers that sits atop the wellhead and connects
to one of the outermost casing strings, allowing the narrower casing strings and drill pipe to be
lowered down the borehole through the center of the BOP. In the event of significant loss of
well control, one or more of the preventers can be activated from the drill rig. The annular
preventer is typically the first to be utilized when an influx from a formation is experienced, but
is not usually used with pressures above 3,500 pounds per square inch (psi). The pipe (variable

38

bore) rams are utilized for pressures above 3,500 psi. A pipe ram and/or annular preventer will
be closed around the drill pipe shutting off the upward movement of mud and pressure through
the annulus between the drill pipe and the casing string. A blind-shear ram can be used to cut
through the entire drill pipe and seal the borehole. In the event that activation from the drill rig
fails, BOPs may have one or more back-up means for activating the rams. Remote operated
vehicles (ROVs) can trigger closure of the rams working at the BOP. Other redundant control
systems include acoustic switch technology which can activate the BOP with an acoustic
signal from the rig through the water. Another device called a deadman switch automatically
closes rams if the BOP loses connection electronic or hydraulic communication with the drill rig
for any reason.

The BOPs are a hydraulically activated device. The hydraulics are supplied by the accumulator
system located on the rig through lines that run down the riser and connect to the BOP. The
BOP contains control devices called pods which are blue and yellow. The hydraulic fluid is
distributed by the pod to the desired components of the BOP. The communication system to the
pod may either be a pilot hydraulic system or an electro-hydraulic system. The pilot hydraulic
system uses hydraulic pressure to function the pod and the electro-hydraulic system uses
electrical signals to communicate with the pod. All commands for the system are sent from the
control panel on the rig. The subsea BOP also contains pre-charged bottles that provide
hydraulic fluid to activate the BOPs auto shear or deadman devices in the event of disconnects.
The BOP is also equipped with an ROV hot stab panel that allows the hydraulic line(s) from
the accumulator system to be isolated in order for the ROV to stab in a separate control line
and directly pump into the BOP to function the rams via a pump mounted on the ROV. The
panel for the ROV to stab into may be capable of activating all rams or only designated ram(s).