House of Commons Energy and Climate Change Committee UK Deepwater Drilling—Implications of the Gulf of Mexico Oil Spill Second Report of Session 2010–11 Volume I Volume I: Report, together with formal minutes, oral and written evidence Additional written evidence is contained in Volume II, available on the Committee website at www.parliament.uk/ecc Ordered by the House of Commons to be printed 14 December 2010 HC 450-I Published on 6 January 2011 by authority of the House of Commons London: The Stationery Office Limited £22.00 The Energy and Climate Change Committee The Energy and Climate Change Committee is appointed by the House of Commons to examine the expenditure, administration, and policy of the Department of Energy and Climate Change and associated public bodies. Current membership Mr Tim Yeo MP (Conservative, South Suffolk) (Chair) Dan Byles MP (Conservative, North Warwickshire) Barry Gardiner MP (Labour, Brent North) Ian Lavery MP (Labour, Wansbeck) Dr Phillip Lee MP (Conservative, Bracknell) Albert Owen MP (Labour, Ynys Môn) Christopher Pincher MP (Conservative, Tamworth) John Robertson MP (Labour, Glasgow North West) Laura Sandys MP (Conservative, South Thanet) Sir Robert Smith MP (Liberal Democrat, West Aberdeenshire and Kincardine) Dr Alan Whitehead MP (Labour, Southampton Test) The following members were also members of the committee during the parliament: Gemma Doyle MP (Labour/Co-operative, West Dunbartonshire) Tom Greatrex MP (Labour, Rutherglen and Hamilton West) Powers The committee is one of the departmental select committees, the powers of which are set out in House of Commons Standing Orders, principally in SO No 152. These are available on the Internet via www.parliament.uk. Publication The Reports and evidence of the Committee are published by The Stationery Office by Order of the House. All publications of the Committee (including press notices) are on the internet at www.parliament.uk/parliament.uk/ecc. A list of Reports of the Committee in the present Parliament is at the back of this volume. The Report of the Committee, the formal minutes relating to that report, oral evidence taken and some or all written evidence are available in a printed volume. Additional written evidence may be published on the internet only. Committee staff The current staff of the Committee are Nerys Welfoot (Clerk), Richard Benwell (Second Clerk), Dr Michael H. O’Brien (Committee Specialist), Jenny Bird (Committee Specialist), Francene Graham (Senior Committee Assistant), Jonathan Olivier Wright (Committee Assistant), Emily Harrisson (Committee Support Assistant), Estelita Manalo (Office Support Assistant), and Nick Davies (Media Officer). Contacts All correspondence should be addressed to the Clerk of the Energy and Climate Change Committee, House of Commons, 7 Millbank, London SW1P 3JA. The telephone number for general enquiries is 020 7219 2569; the Committee’s email address is [email protected] 1 Contents Report Page Summary 3 1 Introduction 5 2 Challenges of Deepwater Drilling 6 UK Deepwater Drilling Activity 7 Operations on the UK Continental Shelf 7 3 Offshore Regulation 9 UK Offshore Regulatory Regime 9 US and UK Offshore Regulations 10 Environmental Regulation and Inspection 11 Emergency Response 12 Changes since Macondo 12 Authority to Stop Operations Offshore 13 Catastrophic Failure of the BOP 14 The Importance of Simple Checks 17 Independence of ICPs 17 Protection of Whistle-blowers 19 Contractor Oversight 20 Operating in Different Regulatory Regimes 20 Licensing 21 Controversy over the Bly Report 22 4 Liability and Compensation 24 Cost of the Deepwater Horizon Incident 24 Offshore Pollution Liability Association 24 Insurance 27 5 UK Oil Spill Response 28 Oil Pollution Emergency Plans 28 Dealing with an Oil Spill in the UK 29 The Role of SOSREP 30 UK Spill Statistics 30 Methods of Dealing with Spills 31 Use of Sub-sea Dispersant 31 Capping and Containment Systems 32 The West of Shetland Environment 33 6 EU Regulatory Role 35 Environmental Legislation 35 European Commission Calls for a Moratorium 36 2 7 Impacts of a Moratorium 38 Impact of the US Moratorium 38 Evidence on a UK Moratorium 38 8 Conclusions and Recommendations 41 Annex 1—Chronology of the Deepwater Horizon Incident 45 The Macondo Well in the Gulf of Mexico 45 The Deepwater Horizon Drilling Rig 45 Factors Identified as Contributing to the Incident 47 Casing 47 Cement 48 Negative Pressure Test 49 BP’s Attempts to Kill the Macondo Well 49 BP’s Gulf of Mexico Clean-up Operations 50 Environmental Impacts in the Gulf of Mexico 51 Formal Minutes 52 Witnesses 53 List of printed written evidence 54 List of additional written evidence 54 List of unprinted evidence 54 List of Reports from the Committee during the current Parliament 55 3 Summary On 20 April 2010, a blowout of BP’s Macondo well in the Gulf of Mexico led to the deaths of 11 workers on Transocean’s Deepwater Horizon drilling rig, and the release of an estimated 4.9 million barrels of oil. The wellhead was located in a depth of water over 1,500m. In the aftermath of this incident the United States observed a moratorium on deepwater drilling until 12 October 2010. Despite calls for a moratorium from the European Commission, the UK Government has decided that the UK regulatory regime is “fit for purpose”. Even so, in the Annual Energy Statement to Parliament on 27 July 2010 the Secretary of State, Rt Hon Chris Huhne MP, announced that the UK would, “undertake a full review of the oil and gas environmental regulatory regime” following the outcome of investigations into the causes of the Gulf of Mexico incident. We believe that the UK has high regulatory standards—as exemplified by the Safety Case Regime that was set up in response to the 1988 Piper Alpha tragedy—and the flexible, goal- setting approach adopted by the Health and Safety Executive’s Offshore Safety Division is superior to the regulatory regime under which the Deepwater Horizon incident occurred. However, we welcome the Government’s review. As demonstrated by BP’s response to the blowout in the Gulf of Mexico, the offshore oil and gas industry was clearly not prepared for a sub-sea blowout of a well. The industry felt that it had mitigated away the risks associated with high-impact, low-probability events and so did not need to plan for them— it needs to revisit scenarios that it thought were too unlikely to occur. The Government needs to ensure that offshore oil and gas exploration companies have considered such outcomes as part of the process by which they obtain a licence to drill. The blowout in the Gulf of Mexico could have been prevented if the last-line of defence— the blind shear ram on the blowout preventer, located at the well head on the ocean floor— had activated and crushed the drill pipe. Given the importance of this equipment, and the evident dangers of relying on a single device, we urge the HSE to consider prescribing specifically that blowout preventers on the UK Continental Shelf should have two blind shear rams. The blind shear ram on the Macondo Well appears to have failed in part due to the absence of simple checks—such as whether the batteries had sufficient charge. The UK’s offshore inspection regime should never allow such simple, potential failures to go unchecked. BP’s internal investigation into the incident in the Gulf of Mexico—the “Bly Report”— contains controversial conclusions surrounding the design of the well. We recommend the Government consider the Bly Report’s conclusions in parallel with the observations of other companies involved, and alongside recommendations of US agencies. We believe that should an oil spill resulting from drilling activities occur in the UK, there needs to be absolute clarity as to the identity of the responsible party, and liability legislation needs to ensure that those affected are compensated as soon as possible. Given the high costs of the Gulf of Mexico incident, we believe that the Offshore Pollution Liability Association (OPOL) limit of $250 million is insufficient. We are also concerned that the voluntary requirement of OPOL membership—despite it being a pre-requisite of the licensing process—weakens any legal control over it, allowing polluters to claim that 4 any damages to biodiversity and ecosystems are “indirect”, and therefore do not qualify for compensation. Oil spill response procedures in the UK are robust, rightly focussing on prevention, followed by containment and then clean-up. While we welcome the development of devices to respond to a deepwater blowout in the UK, we urge the Government to recognise that oil spill response equipment is not a substitute for a fully functioning blowout preventer. Furthermore, we are concerned about the ability of oil spill response equipment to function in the challenging environment found in the seas West of Shetland. Given the evidence available to us, we conclude that there should not be a moratorium on deepwater drilling in the UK Continental Shelf. Such a moratorium would increase the UK’s reliance on imports of oil and gas, potentially decreasing our security of supply. We conclude that any calls for increased oversight of the UK offshore industry by the European Commission should be rejected in favour of multilateral approaches to regulation and oil spill response amongst those countries with a coastline that could be affected by an oil spill. 5 1 Introduction 1. On 20 April 2010 an explosion on the Deepwater Horizon drilling rig—operated by Transocean in the Gulf of Mexico, under contract to BP—led to the deaths of 11 workers and an oil leak at an unprecedented depth. The full extent of the environmental impact and the effect on communities is not yet known. In light of the incident, the Department of Energy and Climate Change (DECC) conducted a review of the existing safety and environmental regulatory regimes in the UK and found them to be “fit for purpose”.