 If I could get y'all to sit down, we've got a full house here this morning, a couple of administrative items to begin with. If you haven't already turned off your cell phones out of courtesy for the folks next to you, that would be a great time to do that. And since we're going to be talking about, among other things, workplace safety, in the unlikely event of an evacuation, the exit signs to your right take you to the stairwells. We're one level below the ground floor, so you've got two choices. One level up, you go out to the foyer, exit on K Street, one level down, takes you to the parking garage, follow the ramp up, that brings you to 18th Street. Okay? So we're good. So good morning and welcome. I'm Frank Verrastro, I'm Senior Vice President here at the Center, but for the purposes of today, I'm Director of the Energy and National Security Program, and it's my great pleasure to have with us this morning Michael Bromwich, the Director of the Bureau of... I'm going to screw this up. I have faith in you, you can do it. I know. Ocean Energy Management, Regulation and Enforcement. You got it. Thank you very much. Okay. A bunch of things, for those of you that have followed the offshore industry, and I can see a lot of folks in the crowd have throughout the summer, for us the last eight months or so have been really kind of a tumultuous time, and it's been a bit of a roller coaster ride. For the folks that came out of the industry, when you listened to the new administration coming in in 2009, the situation was transitioning to a green, low carbon economy, not a lot of discussion about conventional fuels. As the situation evolved and we got into the beginning of 2010, you started seeing it more and more, in part because David Goldwyn and others from the administration started talking about keeping the conventional system robust. If you want the trains to run on time and the lights to stay on, even as we transitioned to this new economy, it was really important that we keep the conventional system active and strong. In March of 2010, the President actually came out and acknowledged that oil and gas are part of our future and said, in no small part because of the success of the industry in the past, in terms of their safety record and performance in the Gulf of Mexico, that we should expand leasing in the Gulf. And then less than a few weeks later, we were all confronted with the horrid news of the Macondo accident and explosion and the tragic loss of 11 people. And throughout the summer, we dealt with the oil spill. And we watched on YouTube every day the flow rate and looked at capture and containment and prayed that it wouldn't hit the beaches. Over the course of that summer, Secretary Salazar in May announced a reorganization of the Bureau, what was formerly MMS, and on May 21, our speaker today, Michael Brown, which was sworn in as the first new director. And I've got to tell you, over those last six months, you've been a very busy boy. Since that time, assuming this new position, the Bureau has, among other things, launched an aggressive reorganization effort, began a major recruitment campaign to enhance the capabilities of the organization and expand government's inspection. They've developed and put in place new drilling and workplace safety rules. They've begun a comprehensive new analysis of the Gulf of Mexico and the Arctic so that we can better inform future leasing decisions, begun worst on the first programmatic G&G EIS for the Mid-Atlantic and South Atlantic, initiated leasing activity for commercial offshore wind projects, and most recently issued guidance for idle iron in the Gulf. So that's been kind of an effective six-month period. Prior to his appointment as bureau director, over the course of the past 30 years, Mr. Bromwich has had a distinguished career in both the public and private sectors. He's been a partner, a litigation partner at Freed-Frank and a partner at Mayor Brown and Platt. In the government, he served as associate counsel in the office of the independent counsel investigating Iran-Contra. He served as assistant U.S. attorney in the state of New York and most recently as inspector general in the Justice Department. He reportedly bleeds Crimson, having got his undergraduate degree at Harvard College and his master's at the Kennedy School and also he's a graduate of Harvard Law School. Last fall, when we initially contacted Director Bromwich's office, and we were just talking about this, we looked at a mid-October date to have him come. And about a week before the expected date, we got a call from the interior department and said, well, maybe we'll postpone this till January because about the time that we were going to have that session is when they announced the suspension of the moratorium. Instead, we talked about a safety case, so we did run a session in mid-October. When we scheduled this date, we looked at mid-January with the full expectation that on January 11th, the oil spill commission report would be out. And that was in no small part, so we would have something to talk about just in case we ran out of topics. So join me in welcoming Michael Bromwich. It's certainly our pleasure. The turnout today is a testament to how interesting this topic is. Michael's going to read from preparatory marks. He has some preparatory marks in them. We're going to take some questions and answers at the end. And thank you very much for coming. Thanks, Michael. Thank you very much, Frank, for that warm introduction. And good morning to all of you. It's a real pleasure and a privilege to be here with you to discuss the profound changes that are taking place that involve oil and gas drilling and development in the waters off our country's shores. These changes are long overdue. And as is so often the case, when it comes to serious reform anywhere and in any field, they're being spurred by a major catastrophe. The unprecedented deep water blowout of the Macondo Well, the explosion and sinking of the Deepwater Horizon drilling rig, the tragic deaths of 11 workers, and a spill of nearly 5 million barrels of oil into the waters of the Gulf of Mexico. The Deepwater Horizon tragedy has shaken government and I hope and trust shaken industry out of a complacency and overconfidence that had developed over the past several decades. That complacency and overconfidence, hubris is not too strong a word, created a circumstance in which the dangers of deep water drilling were not matched by the increased vigilance and concern for the safety of those operations. This morning I want to discuss the steps that our agency is taking to renew its commitment to the responsible stewardship of our nation's resources on the Outer Continental Shelf. I'll also discuss the reforms that are necessary both in government and in the oil and gas industry to ensure that this activity, vital to our economy and security, is conducted safely. Not quite seven months ago, I became the director of the Bureau of Ocean Energy Management Regulation and Enforcement, the offshore energy regulator that was created by Ken Salazar soon after the Deepwater Horizon accident to replace the former Minerals Management Service. The mandate that I received from President Obama and Secretary Salazar was as daunting and ambitious as it was urgent to reform offshore energy development, starting with the agency responsible for overseeing it. Since that time, we have been working to make the changes that are necessary to restore the public's confidence that offshore oil and gas drilling and production are being conducted safely and with appropriate protections for marine and coastal environments. My remarks today will address the changes that have occurred and are ongoing in the oversight of oil and gas operations on the outer continental shelf. This topic, of course, could not be more timely. As you know, and as Frank has mentioned, the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling released its findings and recommendations earlier this week. The Commission's report is a thoughtful and comprehensive analysis of not only the spill itself, but of the history and development of offshore drilling and of the regulation of offshore drilling. I want to commend the Commission and its staff for their hard work, their professionalism, and their willingness to cooperate with us and listen to different points of view. I encourage each of you to read the report. For our part, even though we had many discussions with the Commission and its staff over the past six months, we are thoroughly reviewing and analyzing the report and its recommendations. As the Commission describes in its report, regulatory and industry reform in the wake of a significant offshore disaster has happened before. The U.K. and Norway substantially changed their oversight of offshore drilling and production following the Piper Alfa and Alexander Keeland incidents. Australia is currently facing many of the same issues we are confronting following the Monterra blowout, which occurred only eight months before Deepwater Horizon. The specific challenges facing us, however, are unique in many significant respects. The scale of the offshore oil and gas operations in U.S. waters, particularly in the Gulf of Mexico, is vastly greater than those in the North Sea. The economies of many of the Gulf Coast states, particularly Louisiana, are closely tied to offshore industry. The Gulf accounts for more than 25 percent of domestic oil production and approximately 12 percent of domestic gas production. One of the key problems that we are addressing and that cannot be avoided is this. How will government and industry make the fundamental reforms necessary to improve the safety and environmental protection in this massive industry while at the same time allowing for the continuity of operations and production? To illustrate the problem, consider this. UK offshore production, which again, is at a much smaller level than in the Gulf, dropped off substantially for two years following the Piper-Alpha incident. The major challenge facing us and the industry is to dramatically improve the safety of drilling in the Gulf of Mexico, particularly in Deepwater, while continuing with operations, keeping production flowing and keeping people working. While the Commission has been doing its work, we at Bowmer have been working to address many of the issues identified by the Commission in its report. Let me be specific about what we have already done and what we plan to do in the future. Together with Secretary Salazar, we have undertaken the most aggressive and comprehensive reform of offshore oil and gas regulation and oversight in U.S. history. This includes the reorganization, as Frank mentioned, of the former MMS to establish mission clarity and to strengthen oversight. And it also includes the development and implementation of heightened standards for drilling practices, safety equipment, and environmental safeguards. These new rules set forth prescriptive standards that industry must meet, but they also establish, for the first time in the U.S. offshore regulatory system, performance-based standards focused on the identification and mitigation of specific risks associated with offshore operations. These changes are substantial, and more work is being done to ensure that these changes are both lasting and effective. The ultimate goal is to establish an industry-wide culture of safety and to have well-equipped and professional regulators. Both elements are necessary to keep pace with the challenges and risks of offshore drilling, particularly as those operations push into new frontiers and face increased technical challenges. Let me outline for you the main elements of our fundamental reorganization and reform of the former MMS. As has been previously announced, and as Frank alluded to, in the place of the former MMS and in the place of Bohmer, the direct and temporary descendant of MMS, we are creating three strong independent agencies with clearly defined roles and missions. MMS, with its conflicting missions of promoting resource development, enforcing safety regulations, and maximizing revenues from offshore operations, could not keep pace with the challenges of overseeing industry operating in U.S. waters. The reorganization of the former MMS is designed to remove those conflicts by clarifying and separating missions across three agencies and providing each of the new agencies with clear missions and new resources necessary to fulfill those missions. We are designing and implementing these organizational changes while we fully take into account the crucial need for information sharing and the other linkages and interdependencies among the functions of the former MMS. This is critical to ensure that the regulatory process is related to offshore leasing, plan approval, and permitting do not succumb to bureaucratic paralysis. On October 1 of last year, the revenue collection arm of the former MMS became the Office of Natural Resources Revenue. Over the next year, the offshore resource management and enforcement programs will also become separate independent organizations. The next steps in the reorganization are truthfully more difficult, but also more important. They involve separating the energy development functions from the safety and environmental enforcement functions. On the one hand, we will have the new Bureau of Ocean Energy Management that will be responsible for managing development of the nation's offshore resources in an environmentally and economically responsible way. On the other hand, we will have the Bureau of Safety and Environmental Enforcement, or BESI as we are calling it, that will enforce safety and environmental regulations. Now, over the past several months, we have been gathering the facts that are necessary to complete the reorganization in the most rational and sensible way. We have been busy interviewing agency employees in all of our regional offices, collecting and analyzing data relating to the Bureau's processes, systems, and regulatory metrics, and developing various models and solutions for restructuring and reforming the Bureau. This work has been painstaking and time-consuming, but it is critical in informing the decision-making regarding the transformation of the Bureau. Now, we are close, very close, to being ready to lay out the detailed framework for the reorganization. Our design will be shaped by the following concepts. First, we will separate resource management from safety oversight to allow our permitting engineers and inspectors greater independence, more budgetary autonomy, and clearer senior leadership focus. The goal is to create an aggressive and tough-minded but fair regulator that can effectively evaluate the risks of offshore drilling, will promote the development of safety cultures and offshore operators, and will keep pace with technological advances. We will provide a structure that ensures that thorough environmental analyses are conducted and that the potential environmental effects of proposed operations are given appropriate weight during decision-making related to resource management in BOEM. That structure must ensure that leasing and plan approval activities are properly balanced. These processes must be both rigorous and efficient so that operations can go forward in a timely way, but they must be based on a complete understanding of the potential environmental effects of those operations. We must also ensure that appropriate mitigation of those potential environmental effects are in place. Final principle, we will also strengthen the role of environmental review and analysis in both organizations through various structural and organizational mechanisms. Now, these reforms are in general alignment with the recommendations of the oil spill commission, and as we continue moving forward, we will continue to take the commission's recommendations into account in designing the final reorganization structure. Now, let me next discuss the important substantive work that is going on within the agency to provide the tools, the training, and changes to the culture to make sure that the reorganization will have the effects that we seek. As part of our broad and continuing reform efforts, we have created 11 implementation teams that have been hard at work for several months. They are the central focus of our efforts to analyze critical aspects of boomer structures, functions, and processes, and to implement our reform agenda. These teams are integral to the reorganization effort and are considering the various recommendations for improvement that we have received from several sources, including the oil spill commission, the National Academy of Engineering, and the Safety Oversight Board commissioned by Secretary Salazar. In short, these teams are laying the foundation for lasting change to the way that boomer currently does business and the way its successor agencies, Bohem and Bessie, will do business in the future. Let me briefly describe the key areas and issues that these teams are working on, first, permitting. We have a team devoted to reviewing and improving boomer's drilling permit review and approval process. This process is central to ensuring that proposed drilling operations will be conducted safely. This review and evaluation process must be rigorous, but may it also be efficient so that proposed operations are not unduly delayed by the process. This team has been working on plans to address the permitting workload in light of current resources. The team is also developing a comprehensive handbook of policies and practices, which will be designed to assist permit reviewers to reflect their responsibilities and ensure greater consistency across our offices and clarity for industry. Second, inspections. We have a number of teams that are focused on the various issues associated with developing effective risk-based approaches to our offshore inspections program. Among other things, these teams are focusing on, first, analysis of alternative organizational structures, development of risk-based inspections programs and target risks posed by specific types of operations, the appropriate distribution of inspections personnel throughout the organization and internal management and oversight structures. Next, defining near and long-term strategies for inspecting industry compliance with safety and environmental regulatory requirements, including the safety measures imposed by the drilling safety rule published last fall. We are also developing the infrastructure to be recruiting the expert personnel necessary to conduct real-time monitoring of the highest-risk operations, such as deep-water drilling operations. Such monitoring of industry performance during critical phases of drilling operations is a capacity that we feel strongly must be developed and is consistent with the findings and recommendations of a review by the National Academy of Engineering that Secretary Salazar commissioned. Next, on inspections, there are two programs in curricula for inspectors, supervisory inspectors and engineers involved in our safety compliance and enforcement programs. As I recognize, very soon after arriving at the agency and is discussed in the commission's report, substantial improvements in our training programs are absolutely critical. The design and implementation of BOMR's training and professional development programs are central to our reform agenda. This team is working on evaluating the process necessary to develop an appropriate in-house training program, which we currently don't have. The development of both new recruit and refresher training curricula and programs, the development of a formal field training program, the creation of individual professional development plans for these personnel, and programs to ensure that government personnel keep up with technological developments related to offshore operations. Still with inspections, we are evaluating how to provide our personnel with better inspections and enforcement tools, including technological solutions for increasing inspections coverage and efficiency, and for improving the bureau's ability to conduct real-time monitoring of offshore drilling activities. We are evaluating the increased use of laptop computers and digital tablets by inspectors and environmental enforcement personnel. We are also beginning to analyze the potential of satellite imagery, e-inspection software, and live data feeds from offshore facilities to enhance our inspection's capacity and effectiveness. Finally, on inspections, we have introduced for the first time in the U.S. regulatory system performance-based standards for the identification of safety and environmental risks, and the development of systems and personnel requirements to address those risks. These performance standards are embodied in our workplace safety rules, as well as the SEMS rule that we published last fall. We have a team devoted to designing an oversight program for reviewing and evaluating operators' compliance with these new safety performance requirements. The third category of implementation team, the third implementation team, once you get from the inspections, multiple inspections teams, is regulatory enforcement. We are currently evaluating the adequacy of the enforcement tools that are available to us, including the system for documenting and tracking incidents of noncompliance with prescriptive regulations, the adequacy and use of civil penalties, and the process for evaluating operator qualifications, as well as the system for debarring unsafe operators. We are reviewing potential gaps in our regulations, including a thorough review of the regulatory standards used by other countries. We are also looking for ways to enhance the civil penalties available for violations of our safety and environmental regulations. Although our view is that legislation is required to make these more meaningful. The current enforcement framework, which permits maximum fines of only $35,000 per day per incident, is patently inadequate to deter violations. The next team is environmental compliance and enforcement. We have a team that is focused on designing new inspections and enforcement programs relating to environmental compliance, which has not existed to this point in the agency. This team is developing staffing plans, analyzing support requirements and systems for obtaining information necessary to support environmental enforcement. Next team, incident investigations. We have an incident investigations team that is, among other things, evaluating and developing investigative procedures relating to specific categories of accidents and incidents, including industrial accidents on rigs and platforms, fires and spills. We are identifying the types of expertise necessary to support our investigations programs and designing systems for tracking the status of investigations, the imposition of sanctions based on investigative findings, and the implementation of improvements to safety and environmental regulations and practices recommended as a result of investigations. Finally, final implementation team, oil spill response. We have a team that is conducting a comprehensive review of oil spill response and the adequacy of operators' oil spill response plans. This team is working closely with the Coast Guard and other federal agencies on developing enhanced spill response plans and more effective reviews of those plans in light of lessons learned from the Deepwater Horizon oil spill response. As you can tell, the goals of these implementation teams are ambitious. The teams have become the main engine of our reform efforts. In addition to the important work and implementation teams, I want to briefly mention a number of other significant internal reforms that we have implemented. We are in the midst of a review of our application of NEPA, including in particular the use of categorical exclusions. We have obtained public comments on our NEPA policy, and we are in the process of reviewing and analyzing the comments we have received. We are working closely with the Council on Environmental Quality and, in the meantime, we have announced a policy that will require that site-specific environmental assessments, as opposed to the categorical exclusion reviews performed in the past, will be conducted for all new and revised exploration and development plans in Deepwater. To address conflicts of interest, we have issued a tough new recusal policy that will reduce the potential for real or perceived conflicts of interest. Employees in our district offices must notify their supervisors about any potential conflict of interest, and request to be recused from performing any official duty in which such a conflict exists or may exist. Thus, our inspectors are required to recuse themselves from performing inspections at the facilities of their former employers. Also, our inspectors must report any attempt by industry or by other agency personnel to inappropriately influence pressure or interfere with their official duties. Soon, we will be issuing a broader version of the policy that applies these ethical standards across the agencies, and not just to personnel in our district offices. I know that this policy will present operational challenges for some of our district offices in the Gulf region, which are located in small communities where the primary employers are offshore companies. But the need for tough rules defining the boundaries between regulators is both necessary and compelling. These rules are necessary to assure the public that our inspections and enforcement programs are effective, aggressive, and independent. Finally, we will continue to recruit internal and external candidates for the new investigations and review unit, a team of professionals with law enforcement backgrounds or technical expertise whose mission is to do several very important things. First, to promptly and credibly respond to allegations or evidence of misconduct and unethical behavior by bureau employees. Second, to pursue allegations of misconduct against oil and gas companies involved in offshore energy projects. And third, to provide the bureau with the ability to respond swiftly to emerging issues and crises, including significant incidents such as spills and accidents. All of these measures will help us ensure the rigorous and independent oversight of offshore drilling. Now, I have discussed many of the reformers that we are pursuing to improve the effectiveness of government oversight of offshore energy development and drilling. These challenges and changes are both substantial and necessary. However, as the commission's report makes abundantly clear, industry must change as well. My agency has a clear and important role in helping to spur that change. And we are doing so through the promulgation of new prescriptive regulations to bolster safety and to enhance the evaluation and mitigation of environmental risks. We have raised the bar for equipment, safety, and environmental safeguards in the drilling and production stages of offshore operations. And we will continue to do so in open and transparent ways in the coming months and years. We have also introduced, for the first time, performance-based standards similar to those used by regulators in the North Sea. And all of this through the development and implementation of two new rules announced last fall that raise standards for the oil and gas industry's operations on the OCS. The first rule, the drilling safety rule, is an emergency rule prompted by Deepwater Horizon that has put in place tough new standards for well-designed casing and cementing and well-controlled equipment, including blow-up preventers. For the first time, operators are now required to obtain independent third-party inspection and certification of each stage of the proposed drilling process. In addition, an engineer must certify that blow-up preventers meet new standards for testing and maintenance and are capable of severing the drill pipe under anticipated well pressures. The second rule we implemented is the workplace safety rule, or the SEMS rule, which aims to reduce the human and organizational errors that lie at the heart of many accidents and oil spills. The settlement of this rule was in process well before Deepwater Horizon, but as described in the commission's report, the promulgation of these performance-based standards was frustrated for a variety of reasons. Unfortunately, as was the case in other countries, including the UK and Norway, it took a major accident to provide the impetus necessary for these standards to be imposed. Operators now are required to develop a comprehensive safety and environmental management program that identifies the potential hazards and risk reduction strategy for all phases of activity, from well-designed in construction to operation and maintenance, and finally to the decommissioning of platforms. Although many companies had developed such SEMS systems on a voluntary basis in the past, many had not. And our reviews had demonstrated that the percentage of offshore operators that had adopted such programs voluntarily was declining. In addition to the new rules, we have issued what we call Notices to Lessise, or NTLs, that provide additional guidance to operators on complying with existing regulations. In June, we issued NTL 6, which requires that operators oil spill response plans include a well-specific blowout and worst-case discharge scenario, and that operators also provide the assumptions and calculations behind those scenarios. And last month, we issued NTL 10, which establishes informational requirements, including a corporate statement from the operator that it will conduct the applied for drilling operations in compliance with all applicable agency regulations, including the new drilling safety rule. The NTL also confirms that our agency will be evaluating whether each operator has submitted adequate information to demonstrate that it has access to and can deploy subsea containment resources that would be sufficient to promptly respond to a deepwater blowout or other loss of well-control. This information will help us evaluate operators' compliance with current spill response regulations. Now, these changes and regulatory enhancements have been rapid, and there have been understandably a number of questions from industry and others about our new regulations, about the NTLs, and about how we will apply NEPA going forward with respected deepwater drilling operations. We have held dozens of meetings, both in the Gulf region and in Washington, D.C., as recently as yesterday, with federal and state representatives, industry groups, non-governmental organizations, and individual operators to answer questions about the new rules and to provide clarity about the post-deepwater horizon regulatory environment. Last month, we also issued a guidance document which provides a comprehensive and detailed outline of the way forward permitting in deepwater. We have discussed the contents of the guidance with a number of companies and have received input on the guidance from them and from industry. Now, we know that this guidance will not resolve every question that an operator may have about the deepwater permitting process, but we intended it to address the significant questions that we have heard to date and to provide answers to help operators move forward with the resumption of work in deepwater. The fact that continuing guidance is necessary is completely unsurprising. With the volume of new rules and formal guidance we have issued in recent months, the need for additional clarification was inevitable and necessary. It reflects no more than the fact that these are complex issues to work through, which is exactly what we've been doing. We hope and trust that this guidance has substantially clarified some of the difficult and complex issues that have arisen in recent months. We are committed to working with industry to provide additional guidance on these and other issues as that becomes necessary. That said, the one thing that the Secretary and I firmly believe and that it's reinforced and supported by the Commission's report is that a retreat on drilling safety is simply not an option. As you can see, we have already put in place significant pieces of our comprehensive reform agenda. But our work is far from complete. The technology associated with offshore drilling will continue to evolve as will the complexities and risks of those operations, particularly in frontier environments such as ultra deepwater and the Arctic. We will proceed through the standard notice and comment rulemaking process to implement further safety measures, including features of the next generation of subsea containment equipment such as blowout preventers and remotely operated vehicles. As we've already said, the Bureau will also promulgate additional workplace safety reforms through the rulemaking process, including requirements for independent third party verification of Operator's CEMS programs. We also will continue to evaluate the regulatory standards used by other countries to ensure that the standards as well as the agency that enforces those standards are world-class. These are among the issues discussed in the Commission's report and the Commission provides useful insights about all of these issues. Now over the past few months, especially since our new rules were announced at the end of September, we have heard from countless companies, trade associations and members of Congress about the significant anxiety that currently exists in the industry that we will soon change the rules of the permitting process significantly, thereby creating further uncertainty about what is required to conduct business on the OCS. The phrases we hear repeatedly are that we are changing the rules, that we are moving the goalposts. The implication is that we have other regulatory requirements up our sleeve that we have not yet unveiled. This is simply not the case. Barring significant unanticipated revelations from investigations that are ongoing into the root causes of the Deepwater Horizon explosion, I do not anticipate further emergency rule makings, period. At the same time, we can no longer accept the view that the appropriate response to rapidly evolving, developing and changing industry, which employs increasingly sophisticated technologies, is for the regulatory framework and the applicable rules to remain frozen in time. Over time, the regulatory framework and the specific requirements must keep pace with advances in the industry and with industry ambitions to drill in deeper water in geological formations that have greater pressures. We will continue to analyze information that becomes available and we will implement reforms necessary to make offshore oil and gas production safer, smarter and with stronger protections for workers and for the environment. In developing these reforms, we will balance the need for regulatory certainty, whose importance we well recognize, against the need to act on new insights and adapt to changing technology. And importantly, the processing of drilling permit applications and proposed drilling plans will not be delayed while these additional reforms are developed. You all know as well as I do that we can always do better to remain open to improvements in our regulations to develop the necessary culture of safety. In the past, industry has in many instances, reflexively opposed new regulations. That is no more responsible than the mindless multiplication of new requirements for their own sake. We must strike a new balance that fully involves industry in the regulatory process, but that recognizes the need for us to exercise independent judgment. Our challenge in the months and years ahead is to ensure that we do not once again become complacent, but rather that we continue to make progress in developing state-of-the-art safety containment and response capabilities. Government, industry and the best minds in our universities must collaborate on ongoing research and development to create cutting-edge technologies in areas such as well-conditioned sensor capabilities and remote BOP activation, among others. Government and industry must also work together to establish the necessary procedures and structures to address containment in the case of a blow-up. It is critical, for example, to ensure that in the event of a loss of well control, containment resources are immediately available, regardless of the owner or operator involved. These are goals that we must pursue aggressively. Now, as an important step in this effort, the Department of the Interior is establishing an Ocean Energy Safety Institute. You have heard about the Institute from Secretary Salazar and from me, and its form continues to take shape. The Institute will foster collaboration among all key stakeholders to increase offshore energy safety. The Institute will provide recommendations on matters and actions relating to offshore energy safety, including drilling and workplace safety, well intervention in containment and oil spill response, as well as collaborative research and development, training and execution in these and other areas relating to offshore energy safety. Among the Institute's objectives will be first, developing a collaborative research and development strategy in the areas of drilling, safety, containment and spill response. Second, recommending research to develop advanced drilling technology testing and implementation protocols. Third, understanding full system risk and reliability analyses for the development. Fourth, developing an enduring research and development capability and a knowledge base useful both for preventing and responding to accidents. Fifth, recommending joint training and emergency response exercises, and finally increasing opportunities for communication and coordination among industry, government, academia and the scientific community. Most importantly, this Institute is a key component of a long-term strategy to address on an ongoing basis the technological needs and inherent risks associated with offshore drilling and deep water drilling in particular. A final but very important part of our long-term strategy includes continuing our collaboration with our international counterparts. The commission's recommendations stress the importance of sharing experiences across different international systems and establishing global standards and best practices. We agree wholeheartedly with that. The U.S. regulator can and should play a leading role in establishing those standards and elevating the safety of offshore operations around the world. We have already taken positive steps in this direction. Bomer is one of the founding members of the International Regulators Forum and regularly works with its counterparts in that institutional context. This summer we hosted a special meeting of the IRF in Herndon, Virginia to share our experiences on drilling safety. We're also a substantial player in the Department of State's Energy Governance and Capacity Initiative, a multi-agency global effort to provide a range of technical and capacity-building assistance to the government and institutions of select countries that are expected to become emerging oil and gas producers. We've also increased our bilateral outreach to our foreign counterparts. In October I delivered a keynote speech at the IRF Conference in Vancouver, Canada, and prior to the conference I met with my counterparts from Norway, the UK, Canada, and Australia. Later this month I'll be meeting with foreign officials from Australia and the UK to discuss our offshore regulatory programs. Going forward, it's my hope that we will continue to collaborate with our foreign counterparts in developing safer, more environmentally responsible drilling on the OCS. If I have learned nothing else in seven months, I have learned that passions run deep with respect to offshore energy exploration. I am committed to continuing the dialogue with industry, environmental organizations, and other stakeholders, improving the safety of offshore energy operations, and helping to strike the appropriate balance among the many legitimate concerns and interests that lie at the heart of offshore energy. I thank you very much for your time and attention, and I'm happy to take questions with Frank's help. That was terrific, Michael. Thank you. That was the best and most comprehensive walkthrough from rationale to programmatic change to next steps. I'm very informative, and I appreciate it very much. Thanks very much, Frank. Let me just start. We have a couple of rules here in terms of questions, and those of you who have been here before are familiar with those. Because of the size of the crowd, we ask that you wait for a microphone. If you identify yourselves and your affiliation, and then to the extent you can pose your question in the form of a question, it would be most helpful. Let me just start by asking, so the collaboration piece, I think, is extremely important. We can talk about budget and funding, because I think that will be an obvious question that people will raise. The commission report challenge boasts the government and the industry to kind of step up their game on this, recognizing the importance and the need to go forward. Over the course of the summer, as you've outlined, the department has been very ambitious and forward looking on the steps that they've taken. The industry has done, I would argue, equally ambitious steps with the joint industry task force, so they look at well-designed containment, as we discussed earlier. We've kind of moved from a range of legally compliant operations to more streamlined best practices grouping. The Marine Well Containment Corporation has been set up. To what extent, when companies now apply for permits and they identify their capability to intervene in the deep water well and also to contain a spill if that were to occur, how does the sequence of these pieces, do you have to have already signed up or initiated a contract with the Helix or their containment corporation before that goes forward, what is safe enough to get the permitting process going again? It's a very topical question. It's actually one that I discussed with an industry group yesterday. What companies, what operators are required to do is to demonstrate that they have access to adequate subsea and surface containment resources and that they're able to deploy those resources in the event of a blow up. There is no magic formula for that. They can sign up with the Marine Well Containment Corporation, they can sign up with Helix, they can sign up with both, or they can designate other resources that they believe are capable of doing what needs to be done to intervene. So there is no magic solution. We will look carefully and closely at all applications. Obviously we have a higher level of knowledge about those two institutional solutions than about ad hoc solutions but we're not going to exclude even ad hoc solutions. Let's take some questions from the audience. Please go ahead. The budget. We'll bring a mic right up here. Right up front here. Thanks. Thank you. It's Jeff Johnson with Chemical and Engineering News. The budget question is what I was curious about in terms of, these changes are huge in terms of personnel and also really cost for hardware, software, all the other things you've done are huge change in terms of the role of science. I'm just curious about what it's going to cost and who's going to pay as they're going to be in the middle of tax on industry. Will it come out of the budget? Can you help me understand that? Well, we're exploring all alternatives and we're obviously involving in those discussions the relevant committees of Congress, other staff within the Department of Interior and so forth. I care far less where it comes from than we get what we need. And as you probably know the President put in a request for $100 million supplemental from the Department of Interior and my agency are still operating on a continuing resolution, we have realized very little of that additional money. So that unfortunately has stymied us in terms of building the capabilities that we need to build and that I outlined in my remarks. I'm hopeful that we can get some greater clarity to the budget process and we can get firmer and stronger commitments of resources so that we can build up the capabilities that are essential. But unfortunately after some very encouraging to signals last summer and early this fall the whole budget process got stymied and unfortunately the expansion of our resources was stymied with it. And that's where we are right now. Right here in the back. If you stand so they can find your microphone. It's coming right behind you. There you go, right there. Thank you. All right, Earth Chappers from Bloomberg Radio. I just want to comment that the economies of many of the Gulf Coast states, particularly Louisiana, are closely tied to the offshore industry. They're all complaining, of course, that all rigs are deserting them to go to more friendly climes. So what is your evaluation of how things are going with that? And also more generally, your report card for the industry, are they doing what they need to do or are they pushing back? The fact is that things have not, activity has not resumed as quickly as industry participants would like, as employees in the industry would like, and frankly, as I would like. The fact is, though, we have some demanding new requirements and rules that need to be met in order for drilling to resume, both in the shallow water, and in the deep water. We're hopeful that through the consultation that we continue to undertake, with operators, with trade associations, and so forth, that we will accelerate the process by which people are going to be able to get back to work and that activity will resume. So I think we've heard before the concern that there is the outpouring of rigs from the Gulf. So far, and my hope is certainly that that does not happen. And I think by providing greater certainty, further guidance, greater clarification of what the rules mean and how we're applying them, that's providing the certainty that operators need in order to make decisions as to when they think they will be able to get back to work. But much of this is a black box to us. We don't know how the decisions are being made by individual companies, what things they are taking into account. The only part of it that we can control is being responsive to the questions and concerns that are articulated to us. And I think we are doing a very diligent and professional job of getting back to the industry on those. I think industry has been cooperative. I think that we have a good dialogue going with them. I think they obviously have more interest than we do. In the past, those interests have been less clearly separate than I think they are now. We're determined to be objective, independent, tough, and aggressive. And so some of the things that industry may have been accustomed to in the past, including the very rapid processing of permits, is not happening anymore. And I think that is a source of frustration. Just as you're on the redeployment, I think there was initial concern when the moratorium was announced. A lot of companies took the government forward for kind of a six-month piece. And it all depends also on whether you have drill-ready prospects around the world before you up and mobilize. By our understanding, there's at least two rigs in 2011 that would have been dedicated to the Gulf that are moving. And if the prospect of this third quarter or fourth quarter, then other companies will consider. But if it really is around the corner, just a little bit longer block, then it will stay in the U.S. Gulf. I think it's fairer to say that it's just a longer block than it is that we're going to be deferring any deep water permits. I would be stunned if we waited until the third or fourth quarter. Thank you very much. Given the extensive reforms that are needed, I was wondering, do you give consideration, have you had discussions about the alternatives to deep water production and maybe security issues from importing more crude or the environmental issues of tankers? Is that the opportunity cost of deep water drilling? Is that factor into your safety calculus? No, it really isn't explicitly factored into it. Our job is to regulate offshore drilling, both in shallow and in deep water. And now to make it as safe and environmentally responsible as possible. We certainly don't intend to impose impossible or overly onerous costs on the industry. But when I meet with operators, I actually explicitly ask them whether any of the rules we've imposed are unreasonable or misguided. And to an operator, none has said that any of them is inappropriate or misguided. They all say they make sense. So I think there is general agreement that we were not where we should have been, that we're getting to be where we should be. But inevitably that's going to change the pace of the approval process, both with respect to plans and with respect to permits. I think industry understands that. There's somewhat frustrated by it. I think the fact is, as we are applying our new rules, regulations, and guidance, and as industry is learning about those new rules, regulations, and guidance, it's harder at the beginning. I think once we get more accustomed to it, and more importantly, once industry gets more accustomed to it, the pace will speed up. I've frequently asked, when will the pace of granting permits return to the pre-April 20th level? And the honest answer is probably never. Over here on this side. General Rickman with the Energy Daily. Director, I didn't hear you speak about Congress's role today. I wanted to ask you about that. The Commission's report is criticism of Congress and its various committees that claim to have jurisdiction over offshore oil and gas drilling. The report suggested there are too many cooks in the kitchen, and that the current situation creates confusion for government, for government regulators. Do you agree? Do you think Congress should streamline its oversight of offshore OCS issues? The truth is, I've been around a relatively short period of time, and so I have not had a deep immersion in dealing with multiple committees. I would say so if I had experienced confusion and problems. The Commission studied this question very closely, and they are almost surely have a basis for that. But in terms of my personal experience, I have not yet seen it. I think if you come back in two months, I may have experienced it and may have a different answer. But I have not, after the first few weeks that I was in office in which I testified a number of times, I have not had a lot of contact with the various committees, so I don't know whether that's going to be a problem for me or not. So one of the reasons we're able to get speakers like Michael to come here is we kind of agree to set timetables. So in the interest of time, let me do this. So we'll take three questions kind of grouping together and then maybe you can answer and we'll still get you on the road. Gary, we'll take one from the side here. Second row on this side. And Mitzi, right in front. I'm Mitzi Worth. I'm with the Naval Postgraduate School. This was an unbelievably impressive story, and you've told it really well and I find storytelling very important in this city. Thank you so much. Well, you're standing out compared to a great many other leaders in this city. I guess I think that with massive changes like this, the devil is in the detail. And part of my question is, as things aren't quite right, will people be rewarded or punished for saying we ought to be looking at this? Is there a mechanism in place which says we want people to let us know what's not happening? I mean, I think the cultural aspects on that can make or break what you're trying to do. So I guess my question is, how are you doing that? Let me just go ahead and answer that. It's a very perceptive question. I think that the most difficult challenges one faces when you try to remake an agency are the cultural changes that you're talking about, particularly when the locus of our operations is over a thousand miles away in the Gulf of Mexico. I think the best that one can do is to continue to communicate with people in the organization, let them know that whatever their past experience has been, that the leadership of the organization is open to their insights and their observations and welcomes them. One of the key guiding principles behind developing the implementation teams that I talked about is their experience in these areas. And to let them know in the clearest possible terms, there were no limits to their thinking, their suggestions, the things that we would consider. And so I think and hope that inclusiveness in that process has made people feel that their views are truly welcomed, that their voices are being heard, and that the changes that they are suggesting in the areas of our operations that they know best have a decent chance of being adopted. I have spoken live to all of the members of the implementation teams, letting them know that these, this is my highest priority. That's the way we're going to change the way we do business in our operations. And the teams have been very responsive on the whole in making progress, meeting milestones, and showing that they're engaged in the process. Excellent. Gary, so third row, right here. I'll help you out. Dr. Gary Gentile with PLATS. You mentioned here one of the teams is working on regulatory enforcement, specifically the process for evaluating operator qualifications and the system for debarring unsafe operators. The commission has said that a company's safety record ought to be considered when the government is considering leasing them public lands for offshore oil development. And a bill that passed the House last year specifically would have barred companies with poor safety records from bidding on leases. Can you give a little more detail about what you're considering here? Well, we're considering the full range of options. Certainly among those is considering the safety record of companies. But it's a much more comprehensive examination than that. We really don't have a coherent consistent enforcement program, nor one that to my mind is sufficiently aggressive. And so what we're doing is really looking at things from soup to nuts and figuring how we configure an enforcement program that realizes and achieves regulatory objectives. And certainly figuring out whether there ought to be consequences and what kinds of consequences for serious regulatory violations is on the menu. And the second one right here. Hi, Spencer Gray with FPR Capital Markets. I'm wondering if you can update us on the status of the site-specific environmental assessments for the deep water that the Bureau, as I understand, has been working on in December? Well, they're ongoing. We have a number of them that are in process right now. I don't recall the number. I think it's well over a dozen that we're currently working on. Let me take one more. Go ahead. Right here in the back from the middle. As soon as we... Hi, my name is Nancy Peele with Jones Walker, and I was wondering is there any update on the increase of the number of inspectors that you're going to put on the industry? As I think some of you know, we had a very aggressive recruitment tour that I did in October and early November. Went to a number of engineering schools in Texas and Louisiana. We had a job posting that was open that was time to coincide with that recruiting tour. And quite surprisingly, we got 550 applications, not just for inspectors, for inspectors and petroleum engineers. So unfortunately, the personnel process always takes too long and longer than I would like, but we are already well into the process of reviewing those applications, setting up interviews, and so forth. So again, our ability to proceed full speed ahead is stymied by the uncertainty of our budget situation, but we are doing the best that we can with the resources that we know are going to be available. Michael, thank you so much. Maybe we can have you back and check on the progress. So if you all join me in thanking Michael Bromwich. And thanks for coming.