 Okay, so good morning and welcome. I'm Frank Verastro. I'm a Senior Vice President here at CSIS. But for today's session, it's more important than I'm Director of the Energy and National Security Program. I'd like to welcome you here today. In this town, its commodity timing is a very valuable commodity. So with yesterday's announcement, while it caused several of our presenters to revise slides at the last minute, just moderate changes, we thought it was appropriate to kind of get a number of things on the record. We've been working on the oil spill series, God, since April, since about the week after it started. We've held, this is the second in a series of what we hope to be four or five public sessions. We had the Director General of the National Hydrocarbon Commission from Mexico up here about a month ago where we talked about, you know, once you get by Chicantepec, the offshore for Mexico is their future, so we have to figure out how to get it right. A month from now, we're looking at doing international best practices, including safety case, so we compare what the U.S. is doing with what other areas are on the world. When you look at Brazil, look at Australia, look at Norway. And then we invited, actually, Director Bromwich to be here today, interesting developments. When we contacted him a couple of weeks ago, he said, well, middle of October, maybe a good time, may not be a good time, but let me see what we can do. That was on a Wednesday on Friday. We got an email back that said, maybe we'll wait until January, but your timing is pretty good. So, when yesterday's announcement, even though we had conceptualized what we wanted to cover today, we were actually heartened by the fact that a lot of the same issues are really the focus of attention around this town. Couple of announcements. We do have a change in our program. In the earlier announcement, we had Gary Lucchett here from Chevron who was gonna represent the Joint Industry Task Force. Gary was called away on other business, and so we scrambled over a three-day weekend and with the help of Team Chevron, and I thank you very much for that, we were able to find knowledgeable and competent replacements, and they also provided some of their slides set. And so, Albi Modiano will be taking the place of Gary for today's presentation. Albi's a familiar face to many of you. He runs the US Oil and Gas Association here in Washington. But again, for purposes of today, he also serves on the governing board of the Joint Industry Task Force. Charlie Williams has joined us today from Shell. Charlie is the chief scientist. He deals with well technology and drilling. And what we asked him to basically do today was kinda go through a drilling 101. Initially, we didn't think that that was necessary, but the more that you saw the complexity of the drilling technologies, when you look at well intervention and containment, there's only two ways for oil and gas to come up from a well, right? So it comes up through the middle of the casing and that's what you have drill mud and plugs for, or it comes up around the outside and that's why your cementing is extremely important and seals are really important. So to understand the basics of that is important as you go forward to see how you might revise well designed, better equipment, protocols for intervention, how you train your people and how you deal with containment, capture, and then safety and spill response. And then we actually have Lloyd here this afternoon from Exxon. Exxon has been in charge of the Marine Well Containment Corporation, which was four companies that started this idea of putting up a billion dollars to develop this extra capability to be able to intervene in wells at depth and then to provide quick response. And this is one of those instances both with the Joint Industry Task Force and with the containment company where the basic standards don't work anymore. So lowest common denominator is not what we need going forward and it's time for companies that are leaders to step forward and I'm actually heartened after spending a good portion of my career in industry that we actually have companies willing to do that now. This was a mind changing event for the industry. The notion that if we can't continue to go on the offshore, the development could be stymied, there was gaps exposed in what we had been doing even though the safety record in offshore development is actually pretty good. 4,000 wells in the Gulf of Mexico, 14,000 wells globally, and only a couple of incidents. But this accident I think exposed things that really needed to be addressed. And so we're really pleased that you're here with us today. We think we have a really good panel. Part of it is getting the issues right, part of it's getting the people right and we look for kind of an animated and interesting discussion. Administratively, just two quick things. First, in the interest of low probability, high impact events in the event that we have to evacuate today. Out the door to your left, there's exit signs. There's a stairway going up that takes you to the lobby and the exit is on K Street, a stairway going down that will take you to the garage level, follow up the ramp and that exits on 18th Street. So there's two ways to go. This would also be a great time to turn off your cell phones in the interest of courtesy to the folks around you and also to our panelists. And with that, let me get started. So the first thing we wanted to talk about was the offshore industry and offshore resource development. And the title on when is the moratorium really over? One of the concerns that we have, and you heard Michael Bromwich and Secretary Salazar say it yesterday, that there's a good likelihood that even when the moratorium is lifted and they talked about kind of a removal of the drilling suspension, which was an interesting turn of phrase. But when the moratorium is lifted, there won't be permits tomorrow, there won't be permits next week. And so the question is, what's gonna be an acceptable level of risk? And when the new hurdles are set in place, how long is it gonna take for new permits to be developed, prepared, submitted, and then approved on interior side? Because they need people and inspectors and regulatory folks to look at these things. The impact of the moratorium, you've seen some of this before. This is just a snapshot, but the Gulf of Mexico represents about 30% of US oil output and about 13% of natural gas. The deep water represents 80% of our Gulf of Mexico oil output and it's a growing volume. So if you look at the profile for the Gulf of Mexico, the deep water is increasingly important, not only here, but also around the world. A moratorium represents loss of royalties, taxes, and you can debate about the impact of affiliated jobs. The range is between 23,000 and 150,000. Robin West of PFC is fond of noting that the offshore industry is the second largest purchaser of helicopters after the military. And those are produced in Pennsylvania and Connecticut, so not necessarily in the Gulf Coast. The six month moratorium, the delays in expected output, the range, and that's all really it was. If you take the interior at its word, it was a pause. And so the pause in six months means the projects that would have come online in the third and fourth quarters of this year are necessarily pushed into 2011. So the range of production loss is between 30 and 80,000 barrels a day depending on whose estimates you use for 2010. But the number increases in 2011. And if the moratorium and permits are delayed, that number also increases maybe exponentially. And at $80 a barrel, the loss for six months of 200,000 barrels a day means that we're paying three billion more for oil imports. This is a Wood McKenzie slide. This is one of the estimates that shows the impacts in 2010 and 2011. I think it's worth noting that as you get out to 2015, the potential production loss is on the order of 300,000 barrels a day. So as you go forward, you start stacking up the delays. When you look at global deep water, and this is also an interesting phenomenon, in 2005, or in 2000 rather, the impact globally, non-US, was about a million and a half barrels a day. By 2009, that was almost six, and the projections are by 2015, it'll be between eight and nine million barrels a day. And this is from places like, it's the Gulf of Mexico, but it's also Malaysia, Australia, the UK, Norway, China, Angola, Nigeria, it's a bunch of places. And the implications are pretty far-reaching. Significantly, it's a big source for the international oil companies, because increasingly now with the national oil companies, the IOCs have been forced to go to technologically more challenging zones, necessarily more expensive, and they're using their technology to develop the sub-salt, the lower tertiary, these deep well formations in the ultra deep water. The loss would increase reliance on OPEC and the NOC supply. And as the surplus erodes, because right now we have a global surplus capacity of about five million barrels a day, if you take OPEC's depletion rate at 30 million barrels a day capacity, it's roughly at 5% million and a half barrels a day a year. So over a three-year period, you erode the capacity and that's not even counting new demand growth. So conceivably, if you're looking forward to 2012, if we don't bring production online as demand increases, we could get into a tighter situation where prices rise. So the conclusion of all this, and I think the administration is in the same place, is that you must get back to deep water drilling. But the question is, how do you do it in an environmentally responsible way with new safety standards, new accountability, and the ability to intervene and contain problem wells? There's an issue of the NTLs are the notice to lessees, 05 and 06 were the two that dealt with workplace safety and drilling safety rules. But there's the prospect of other regulations, whether it's through the oil spill commission or the Congress, and even Director Brown, which has talked about how this needs to be a dynamic system. So the more we learn, we may change the regulations. And the NEPA interpretation, the question that is out there looming and looming large is whether or not you have to do an environmental impact assessment that sites specific for every well as opposed to an area. And so actually the first applications will be tested against whatever this new standard is and that'll determine how fast these applications are approved. We talk about what level of enhanced prevention, readiness and response is actually enough. And so this is like proving a negative. And we're gonna have Charlie talk today about the drilling aspect. When Albie deals with the issues on the joint task force, we'll talk about well prevention, blowout prevention, better equipment, standards, intervention and containment and capture. And then Lloyd's gonna talk about the Marine Well Containment System. And what new capabilities the industry has actually developed as a result of Macondo. And in a lot of ways, this was kind of on the shelf because there was such overconfidence in blowout preventers, no one really looked at the idea of what you had to do with containment and capture of spill at depth. And there's still things we need to learn about the water column. There was always this assumption that oils lighter than water, it flows to the surface. But when you use dispersants and you emulsify over time, there is actually subsea currents that you have to deal with. So there's a lot more to explore but we're making great headway. How long to prepare and submit a new permit application? So if the ground is shifting and there's guidance that's giving, as these companies prepare their applications, develop the applications that are gonna be accepted by the new regulators at the bureau, what constitutes an acceptable application that meets this new standard, this higher standard that actually the industry and the environmental community and the public at large will all seek because we had to reduce the risk. And then there's the threat of losing rigs and expertise. So one of the concerns early on in the administration in addition to the jobs in an election year was this notion of redeployment of rigs, right? So if the gulf was shut down, would rigs that were actually operating in the gulf pick up and move offshore? So this wasn't an issue for the jackup rigs that were operating in 500 feet of water or less because they actually can't pick up and go a lot of other places. But the notion that the deep water rigs, if they were stymied and actually had to wait in place over time to the extent that you had drill ready prospects around the world that some of these rigs would actually move. They would take the crews and the jobs with them. I think the industry by and large took the administration at its word that this was a pause, not a stop. And we lost four or five rigs over the course of the summer. Mostly they were independents that decided that the risk was too high. And so they redeployed the rigs or gave them to their partners. There was two rigs that were scheduled to come online in 2011 that were commissioned and initially dedicated to the Gulf of Mexico than are now going elsewhere. But that loss has been insubstantial at this point. The concern I think going forward is that if this turns into an eight month delay or a nine month delay, if there are other prospects around the world, if the regulatory system seems to be shifting without a lack of certainty, what does that do going forward? Final point is on spill liability and actually the risk. There is in my estimation that there's no risk-free energy alternative, whether it's cyber security on a renewable energy grid, or you're dealing with nuclear coal, with mine disasters, oil, or natural gas. And I think the president has recognized this. So this notion that we have to get back to drilling because it's gonna be decades, you can still make the transformation to a clean energy future, but you damn well better keep the conventional system robust as you make that transition. When you start looking at actually the concerns about offshore drilling and some of the development of the top 10 spills around the world, and Wakanda was a horrific accident in many ways, starting with the loss of life. But six out of the top 10 were more related to tankers. There was one that was a pipeline in the Barren Sea that was left undetected for eight or nine months. There was two spills from drilling. So there was the X-Tocwell over 30 years ago in the Gulf of Mexico, and then there was the Meccando spill. And of course the mother of all spills was the result of the Iraq War in the early 1990s and the Kuwait, and that was like six to 11 million barrels depending on what flow rates you account for. But the notion here is we have to move forward, we have to reduce the risk, we have to be better equipped to deal with well intervention in the event of a problematic well, and that's part of the discussion for today. So I will turn this over to Charlie Williams to talk about drilling 101, and I hope this is both educational for all of you, and I look forward to a great discussion. Thanks very much. So thank you very much. I'm Charlie Williams with Shell, and I'm gonna talk about some of the basics of how we drill, but I'm gonna try to have the focus really on deep water. And the first thing I wanted to talk about was just a little bit about the scale of what we do and really what we drill with, and sometimes there's a lot of confusion even about what we drill with in deep water. So here's three things that we drill with in deep water. There's the semi-submersible rigs that you see in the middle. Now these are the rigs that float and either have a mooring system, mooring lines that go to the bottom of the ocean, or they have dynamically positioning, which means they have propellas that run all the time to keep those rigs in place, and they move around from well to well as they drill. And then the drill ships that you see on the right are similar, except that they're ship-shaped instead of being shaped like these semi-submersibles that float. But the other point I wanted to make, as you see on the left, that looks just like a semi-submersible, but that's actually a production facility, so that facility doesn't move. It's actually attached to the bottom with tendons. That's a tension-leg platform. It has a drilling rig on there, and we drill wells from there in deep water, but they're development wells, and the drilling rig is more like, more similar to a rig that would be on land. And a lot of times, when you hear people talk about drilling in the deep water, they get mixed up between these production facilities, like the one on the left, and these drilling rigs that actually move around, and we drill wells from all three. And then the next thing I wanted to talk about a little bit was scale, and just to give you an idea of the scale of what we do. So this is a picture, actually this is a tension-leg platform, but it would be the same if you had a semi-submersible. This is over the city of New Orleans. This would be equivalent to 3,000 feet of water. So you can see the scale of what we're dealing with in deep water, and these yellow lines going out are the mooring lines that are going to the anchor pattern. So you can see the scale of the anchor pattern. You can see the scale of the water depth and really the magnitude of the challenge of doing this activity in deep water. And here's another view of the challenge. Again, we're using New Orleans. So people that are familiar with the map of the city, this is the whole crescent of the crescent city. And this is a well that we drilled off of one of our tension-leg platforms. So this wasn't from a semi-submersible, but you can see that this well, if you measure the depth of this well, it's 31,000 feet. And so it doesn't go down completely vertically. You know, these wells now, almost all wells now accept exploration wells are drilling at an angle, so it goes at an angle. And it also, and so it ends up going a great distance away besides a great depth. And this shows you starting at one shell square, that's where the rig would be that's drilling. And the bottom of the well is over there where it shows TD for total depth, and that's six miles away. So you can see that these wells, not only are they really deep, they go great distances away from where you start drilling. And now I was gonna switch, talk a little bit about scale, and talk about drilling. And I just wanted to show this. I think everybody's pretty familiar now. Everybody's seen a lot of diagrams in the paper about what a well looks like. And as you can see, a well looks like this upside-down telescope. So the way you drill wells is you drill, and then you'll set a string of pipe, and you'll cement that in the ground, and the cement is the seal on this piece of pipe that you put in the ground. You'll drill again, and then you'll set another piece of pipe, and you cement it. And obviously it has to be a smaller pipe because it goes inside the bigger pipe. And you continue this process till you get to the total depth, and you finally have a string of casing that goes all the way back to the surface. And this is the string of casing that's intended to contain the production system for the well. And all wells in deep water get produced back through and yet another tubing string, which goes inside this production string. But this production string is the pressure backup containment for the production. And I wanted to show this because now I'm gonna talk about, I mean a great question would be, well why don't we just drill the total depth and run one string of pipe and we'd be done with this. And what I want to talk about now is the most fundamental thing, or at least in my view, and I apologize, I don't want that into the fonts, but it doesn't matter, I wasn't gonna read the words anyway. The most fundamental thing about drilling is the hydraulics of drilling. And so a lot of people don't realize it, but in the earth, the entire subsurface of the earth is filled with fluid. Usually salt water, but hopefully lots of times hydrocarbons, which is what we're looking for, but it's filled with a fluid. And this fluid has a weight, has a density, just like the pressure's high at the bottom of a dam. And so the deeper you go, the higher the pressure gets just because of the density and the weight of this fluid system. So you start out at the surface of the earth and the pressure's the same as atmospheric. But the deeper you go, the higher the pressure gets. And this happens everywhere because of all this fluid in the earth. And it's a fairly linear relationship over a certain distance. But when you get to around 10,000 feet, things start to change and the pressure's still there. But what happens is, is these pockets of fluid get trapped and they get squeezed and they get squeezed by the weight of the earth. And you can have much, much higher pressures than what you expected up in the earlier part of the hole. And that's called geopressure drilling. And when people talk about high pressure drilling, that's the reason the pressures are high. So why is this important? Well, this is important because the way you maintain primary well control in a well is you have to have it a weight of fluid, a density of fluid inside your well that's higher than the pressure that's from the fluid that's in the formation you're drilling through. So you always have to have this mud system, they call it, that overcomes the pressure in the subsurface and so as you go down, the pressures keep increasing so you have to keep increasing the weight so that you got more pressure from this mud system to hold back the pressure. So this pressure wants to flow into the well, you have to keep holding it back with this density of fluid and the density of that fluid has to keep going up. The problem is, is that the formations you drilled through earlier, you know, are relatively weak and if you keep just making your fluid heavier and heavier, all of a sudden it's gonna fracture out into these shallower formations because they're, you know, they can't contain this pressure. So that's why we have to keep putting these strings of pipe in here. So we drill as far as we can that where the formation can stand the weight of this fluid and then we'll put pipe in the ground to protect that shallower formation and then we drill some more and we keep raising the mud weight and raising the mud weight and then we'll have to set another string of pipe to protect the next formation. So that's why we have to keep doing these, you know, strings of pipe, you know, one after another and finally, you know, have this final string at the bottom and that's why they have to all be cemented and isolated. And the other, you know, thing about this then is that, so you know, the drilling normally, when the blowout preventers aren't closed, it's an open system. I mean, there's nothing closed at the top of the well, you know, while you're drilling. And so, again, the prevention is the mud and the mud that you're circulating while you're drilling and that's what's keeping the formation back. So these fluids in the ground, like the hydrocarbons, you know, want to try to flow into the well if the pressure was lower. And when you get really deep, when you get down to the high pressures below 10,000 feet, these things, you know, are very, you know, I mean, the expansion ratio, if you have, you know, a small bubble of gas that comes in your well at, say, 18,000 feet, it's gonna get 400 times bigger if it's unconstrained when it gets to the surface. So if you allow a small bubble to get in, it comes up with the mud and the higher it gets in the well, the faster it goes and the bigger it expands. And by the time it gets to the surface, it's, you know, really huge and it's moving at a high rate of speed. So you can see the importance, you know, of maintaining this mud weight and maintaining, you know, not allowing things to flow into the well bore. And in addition, the mud system, you know, lubricates the bit and moves the cuttings out of the well. And it's, you know, the kind of the fundamental function about doing well control and making drilling possible. Now, as you go down and you drill, you know, sometimes you obviously have to predict these pressures because you wanna predict when you're gonna have to put pipe in the hole. And so we predict that and we have different ways of predicting that. Sometimes, you know, it's different, especially on an exploration well, you'll get into a pressure regime that's a little bit different than you expected. And so you might actually get some of these bubbles that come into the well, but that's okay. We deal with that every day because then what we do, if you're aware of the fact that they've come in the well, then you circulate them out. You know, you wanna close your blowout preventors, circulate them out and then raise your mud weight so they don't come in anymore. And so only a small amount, you know, came into the well. And so, you know, people talk about these well, you know, well control events. And that's a well control event. It's not a blowout. And, you know, it's not infrequent that you have to change your mud weight to deal with these small bubbles that get into the well. But what you have to do is monitor all the time to make sure that you know they're getting in the well and to make sure that you control them when they do. And the way you do that is since we're circulating mud all the time, we know how much mud we put in. We know how much mud's coming out. If more mud's coming out than you're putting in, that's bad, huh? Well, that means the well's flowing, huh? If less mud's coming out than you're putting in, that's bad too, because that means that you fractured the formation and the mud's going out into the earth and it's not staying inside the well. And if you let that happen too long, you know, then you also have a problem because you don't have this density and column of fluid to hold back the production. So fundamentally every day, well design is really about this density and making sure that you have your mud system right. Primary well control is around density of this fluid and making sure you have your mud system right. So I think it's, you know, people talk about bits and blow up preventers and lots of other things. This is really the fundamental issue around drilling and drilling design. And you can see when you end up on a lot of these wells starting out with a 36 inch pipe and at the bottom it's a seven inch pipe because we've had to put all of these strings to protect these previous, you know, shallow formations. And this is just another, you know, picture of that from another angle, but it adds a little bit, you know, more dimension on there than I show. So this is showing the subsurface of the earth and it's showing these layers that we drill through. On top of this, you know, of the well is the blowout preventer. So this yellow looking device, there's the blowout preventer. I'm gonna talk a little bit more about them in a minute. And then above that is the riser. And the riser is the thing that goes from the blowout preventer up to the rig. And this is what you put your drill string through. And this allows you to be attached to and drill, you know, inside the well, but the riser goes with the rig. It's really part of the rig equipment. I guess the other thing I'd like to say about mud, you know, I think there's a lot of unfortunate terms in the oil field because, you know, we started drilling a long time ago. And everybody talks about mud, you know, mud used to actually be mud. I mean, when it started out, I mean, it was mud. That's when people, you know, drilled in the earth and the earth mixed with the water and they had mud. Now, you know, mud's actually an engineered drilling fluid and it can be several hundred dollars a barrel. You know, and we would still call it mud, but it has fluid loss additives. It has density additives so we can vary the density so we can get this pressure control we're talking about. It has additives to prevent the interaction with the formations. There's clays in these formations and you don't want the clays to swell. And there's all kinds of chemical interactions you want to prevent. So these are really highly engineered and really expensive fluids and we use them over and over again. You know, we desire not to lose them into the formation for lots of reasons, but for one reason they're expensive and this is really an engineered part of the design. I didn't know I had all these fly-ins, but anyway. So this, what this showed was, so you can see again this yellow section. So this yellow section again is just showing you, so we have the well on the ocean bottom that starts at the ocean bottom. And then we have the blowout preventers, which are the large device there that's installed on the well. And it's important to know, some people aren't aware that blowout preventers also go with the rig. They don't stay with the well. They go with the rig as part of the rig equipment and they're attached to the top of the well. And then above that again is the riser and you can see a picture of a riser on the right. Again, this riser is in sections that can be put back on the rig and it goes with the rig. And the other purpose of the riser, besides giving you access to the well, is your control system. Your control lines go down to your blowout preventers. Your hydraulic, in some rigs, your hydraulic fluid controlling your blowout preventers goes down your riser. Your fiber optics, if you've got a fiber optic control blowout preventer goes down the riser. So this riser also conducts power and control systems to what's on the ocean floor and also allows you access to the well. So the riser is an important device that the riser stays with the rig. So now I'm gonna talk a little bit about blowout preventers. And it's really hard to see, I think, but if you look in the right hand side of this picture, you can see this white hard hat, maybe. It's a really small down next to this yellow roof. Well, that's one of the rig people. And so you can see the scale of a blowout preventer. So this is a blowout preventer on a deep water rig and this is the scale of that equipment. And it's important, I think, to know that the blowout preventer is in many different sections. So this blowout preventer, the bottom part of the preventer is where the rams are. And a lot of people have talked about shear rams and other kinds of rams. I'll talk about them in a minute. That's where these RAM devices are. Above there is what we call the LMRP, which is the lower marine riser package. Usually, on rigs, in that package is another kind of well-controlled device. It's like a big donut that can close around the pipe. And that can be removed from the top of the blowout preventers. And it actually is intended to be part of the riser system. And then the riser connects onto the top of that. And so that's what this looks like. And I think it's important. So another thing that I think is a misperception, as you talk about blowout preventer, certainly an important function, obviously, of a blowout preventer is preventing a blowout. But we actually use these devices all the time in drilling. We close these devices and do tests. And if we get this small bubble into the well, we close these devices and circulate out these small bubbles using these devices. So actually, there's only one set of shear ram usually in a ram stack, which is the ultimate device that you'd shut in an emergency. The rest of these devices are used routinely as a normal part of drilling. And in fact, these devices at the top that look like donuts around the drill string that you can squeeze around the drill string are particularly used all the time in normal drilling operations. So there's a lot of functions of this device besides preventing blowouts. And this is just another picture. And this looks more like what you'd see on a land rig, but it gives you a view of what a ram looks like. So these things that are in the middle of this red device here are the ram. So the hydraulic fluid goes in there and moves these devices to close around the drill string. And so there's going to, I'll wait. I've got another picture that'd be easier to explain in a minute. So those are the ram kinds of devices. And that's what they look like outside. And there's two kinds of control systems. There's direct hydraulic, which means it's just like the brakes on your car. And then there's a electro-hydraulic. And when you get into really deep water, you actually send down an electrical signal that tells the hydraulic system to activate. So you can have both direct hydraulic and electro-hydraulic. So I wanted to show this. So this is the inside. So we saw the ram. This is the inside of the ram. This is the inside of a shear ram. And so there's these two big plates that you see on the left. And when this is activated, these two big plates move in and they seal the well and they cut the pipe into. Now, this pipe they're cutting into is the drill string. This is the thing that has the drill bit on the end of it. Well, it could be the casing, but ordinarily it's the drill string. And it cuts that and seals the well. So that's what a shear ram does. The rest of the devices in one of these blowout preventers actually has a small hole in the middle that's sized for the drill string. And it's intended to close around the pipe and seal the well, but to leave the drill string open. And what that does is that allows you then to circulate fluids and do normal operations in the well. And so not all of them are shear rams, usually just one set. And I just wanted to show this real quick. And what this is is a connector, and I'd say just a typical connector. And so this is two pieces. So there's this big piece on the outside. This is a cross section that looks like this big circular device. And then there's the piece on the inside. So this is like you'd plug in. If you've plugged in a hydraulic hose or an air hose or whatever, this is similar to that. The reason I wanted to show that is because these kinds of connectors are what connects the blowout preventers to the well. And these kind of devices are what connects the lower marine riser package to the well. And these connections are made on wells routinely in subsea every day. And these things can be activated, and they can also be deactivated. So that allows you to install the blowout preventers, remove the blowout preventers, install the lower marine riser package, remove the lower marine riser package. So there's a lot of these mechanical connections that are used routinely to make all these connections on the well. And I had one graph here that gets a little bit complicated. But it was just showing on a well, if you're doing a two-step well, and there's been some discussion around people's design philosophy around deep water wells. The one on the left shows the situation where you'd be installing a liner. And the one on the right shows a situation where you'd be running one continuous string. Now, this is the production casing string, and you have a design choice or a choice driven by the conditions of the well about which one you do. The one on the left, you run this small piece of pipe in the bottom and cement it, and then you run the rest of your production casing above it. And the case on the right, you take all of your production casing and you run it in one sequence and then cement it. And I thought I'd show that. So another aspect that I wanted to mention about deep water drilling is most people now that are drilling in deep water have a real time operation capability. And this was a picture of a real time operation center. And what that allows is that you have real time data that flows onshore to these centers from the rigs all the time. Well, if you have a 24 hour day center, it flows there 24 hours a day. And generally, and in the case of Shell, we have experts that sit there and watch this data as an additional set of eyes on what's going on on the rig. And this additional set of eyes can then advise the rig. And particularly what they watch, as you might imagine, is the mud system and the pressure in the well. And do we need to change mud weight and what's going on with the flow in and the well and the flow out of the well is the number one thing they watch. And they help the rig and advise the rig if they see changes that the rig hadn't noticed in the rig as the same kind of information. The next thing I wanted to talk about was safety case. There's been a lot of discussion about safety case. I thought this might be interesting. And so a safety case, and there's this little picture that's up there that tries to describe a safety case. What happens in a safety case is you go in on a well and you describe all the hazards in this well. What are the major hazards? And then you put barriers in place to protect you from the hazards. And so this is called a bow tie. And this is one way of doing it. I mean, there's other ways of doing safety cases. But you do this bow tie analysis. And then what you do is on the right, on the right is if you had a failure. And that's the consequences. And so on consequences, you try to put controls in place to mitigate what happens if you had a barrier failure. But the key work here is identifying all these barriers that are needed. And these barriers are like the casing. And these things generally are barriers to allowing the well to flow. And identifying those barriers, making sure you have the right number of barriers, and making sure that you maintain those barriers over the life of the well while you're drilling it. And that's fundamentally what a safety case is. And it's a great piece of dialogue so that everybody knows what the hazards are and everybody knows what the barriers are. And you can explain to people on the rig what their job is relative to the barriers, that your job is to maintain this barrier. And it's really helpful in having people understand what they have to do about primary well control. And so we had the discussion about safety case. Generally right now, the safety cases are done by the rig contractors. But the people like Shell, the contract with the rig contractors, we have a safety management system. And we have our own safety cases. And so what you want to be sure and do is build a bridging document. And that's what, I won't go through this in a lot of detail, but that's what this is intended to show is you've got the safety case on the left. You have the person that's contracting the rig on the right. And you build an interfacing document so that your safety management system and the contractor safety management system and the safety case are linked together. And everybody understands the responsibilities and how these systems work together. And there's actually a lot of training going on right now that are writing a new recommended, or we're writing a new recommended practice in the industry on deep water well design. And one of the training parts of that is to talk about this safety case and how you create safety cases. And that was really it for my comments. So thank you very much. Well, thank you very much. I'm very pleased to be here. I'm standing in, as you know, for Gary Laquette. And that's a very hard thing to do. He really is one of the jewels in our industry. And I hope he has an opportunity at some point in the future to come and talk to you. But also, you know, Chevron was very generous and I want to thank Ed Spaulding. I want to thank Lisa Barron. I want to thank Greg Washington, who coordinated everything that I'm able to present today. So I'm happy to do that. The title is the Activity of the Joint Industry Task Force, the JITF. It's a new creation from the industry. It started in the summer following the McCondo accident. And a little bit of history to it is that, in fact, the acorn for the idea started at a hearing on the hill. Pretty soon, the industry was asked to come up to the hill. And at that time, Randall Luthi was giving a presentation. And he said, you know, we have a lot of expertise in our industry. Why don't we make sure that we put all that expertise into the same box and have it available to those who want to need it? Because we know we have a lot of work to do. And that sort of got picked up and became a joint industry task force. And the groups that are part of this task force are many, many hundreds of companies. But also at the top that we were able to coordinate, and Gary was the captain, was ourselves at US All-In-Gas Association, the independent producers, IPAA, NOAA, National Ocean Industries Association, and US All-In-Gas. So we sat down, and as we were very, very clear, that we had to sit down and take a look at how do you reduce this risk. You know, the industry was comfortable at some level. We did have a series. You know, an accident is always a series of things that happens in the right order. So how do you take the risk out of those series of things in the right order? How do you squeeze down the probability of those events? And at the same time, we have a need to begin to go back to drilling in the deported Gulf of Mexico. Just before I get to this slide a little bit of personal privilege, I had an opportunity to be at MMS for a while and to help lead it. And the most important thing that we carried with us was the culture of safety. And I know I had an opportunity, as we all do, when administrations change, to go back into the old agency you worked with and talk with them for a little bit. And I did. And basically, my concerns were three things. And it wasn't present. We had the extraordinary privilege of working in the offshore, but we weren't working in as deep of waters as they work in today. But one of the things that I made important in terms of priorities of MMS before it was BOM was Indian royalties. There's a special relationship to collecting on Indian royalties and Indian lands. Royalty collection itself and safety. I didn't bring up leasing or access because that's such a big political issue that it wasn't really a management issue. But safety is a culture, and that's something that they need to continue to work on. So we decided that we had this culture of safety within our industry, and how do we bring it forward? And here, the idea is you have to prevent another blowout. That's the goal. Clear and simple. Hopefully you get there. Hopefully it is another 50, 60 years in which we continually improve and we never see another one. That's the best of all worlds. To demonstrate the increased intervention capability. When we had the Macondo blowout, everybody was working off of plans and rule books. We began to intervene. Things were created on the spot. Now, how do we institutionalize them for this ultra-deep and deep water environment? And at the same time, as my next speaker will talk, we'll have an increased spill capability and response. And that is definitely going to happen. We created this task force. And the three reasons are prevention. And they have two subcommittees under them. Operating procedures, equipment. Intervention with Charlie Williams, chairs that, ruined his summer. Subsea intervention and containment, and spill response. So those are the three large areas. I'm very proud of our industry. There are very few industries that literally when an accident happens is so willing to drop the business activities that they have and join together in a group. And we don't get enough credit for that. Here, we took people that were very senior, working on very senior business plans, and took them off for several months at a time, several hundred. And to put them together, to work on documents, to be helpful to industry, to movement of industry, and to the government. That's exceptional. It's at a cost of many millions of dollars. The cost being secondary to the idea that we had this extraordinary expertise that Gary could put together. So we did that. And I want to talk a little bit about the bullet number 2, because that's a very sensitive bullet, where the Bureau, the new MMS, Bureau of Energy Management, we were supposed to go to them and give them these recommendations and talk with them. And there's a lot of sensitivity about that. Because in the press, there had been a host of stories about the relationship, quote, cozy relationship between industry and its regulators. And again, a point of personal privilege, having been a regulator. It's not that cozy. In fact, you have to work hard to prevent and to put a wall between you and your lessy. And we all do it. That's the role we take on when we become regulators. I believe it makes a wonderful story, but it's not true. The people in the service that go out to these rigs, to do the inspections, they work in the interest of public safety, environmental safety. This is very serious. So we were concerned that we had all this talent, but we wanted to make sure that the talent and opportunity and expertise are received in an environment in which they're accepted and not dismissed because they come from the industry that's looking upon itself. Some of the best new procedures in medicine happen through postmortems. And so this is in some sense a postmortem plus going forward. We did have a report. I have it over here on September 3 that we did make public. And as you can see, the different parts of the prevention, the intervention in the spill response group did move forward and issued a lot of recommendations. As part of this, API had already been working on two practices, the recommended practice on cementing, which was issued over the summer. And we have the new API recommended practice on well construction that we were just talking about. So the idea is also that I think, again, the industry stepped up. Talk about that in a second. And they created the Marine Well Containment Company, committing billions of dollars, making sure that all the lessons that we've learned over the summer are incorporated and institutionalized. Again, I think this is to the industry's credit. And there are very few industries that would have taken those large sums of financial resources and put them to this use. We're very proud of it. This is an ongoing activity. People have come and gone a little bit in the subcommittees. But the amazing thing is it was a joint effort of what reflects US long gases membership, IPAA's membership, Noia's membership, API's membership. The major companies, you'd say, oh, yeah, they have time and effort. They can run out and give people. But when I went to the larger independence and asked for people, and when IPAA went to larger its independence and asked for people to participate, there wasn't a second doubt about it. They stood up, raised their hands, and contributed people. And that's even more significant when you might have an engineering staff of 100 and not 1,000 that you're willing to let people, again, take from their normal duties and work on these activities. And it's an open-ended process that this is something that we will continue. And in the three important areas, you'll see that we're already working on things for prevention, well-construction, recommended practices, we talked about. I think now secured the equipment. I think it's with your group from Macondo, and I think we'll have to find that out. But I think it was just given over recently, transfer. Now, the idea on meeting these requirements of NTL-6 and moving forward on recommendations, this will be very critical to be helping to us and to BOEM, so that we don't get caught in what I call, and many in this room probably understand, is get a rock theory. Well, you have managers that tell you, we have a display case and your job is to get a rock. Well, NTL-6 and what we're talking about now about leasing and fulfilling leasing requirements and the manner in which yesterday they pulled the moratorium still leads us to believe that it's a possibly get a rock type of management. So we as industry go out and we get a rock, we come back and the regulators say, well, that's not really the rock I wanted. I wanted a bigger rock. Okay, I'll go get you a bigger rock. We go out back and get another rock. Come back and say, well, that rock's too gray. We really wanted one that was browner. You know, this could be the forever get a rock theory. It would be much better at the beginning if they said, you know, I'd like a rock about six to eight inches. Have it be somewhat tinged brown and about, you know, squarish, but that's not the case. So I hope that moving forward in the delays that could be caused by not defining as specifically as we can, we'll find ourselves into what I call get the rock management. And so I hope that doesn't happen. And now, even some specifics on just the task forces themselves. The operating procedures task force, that was drilling and completion. And you can see what they were focusing on against the cementing practices. These were all critical concerns over the summer, mechanical loads, cementing practices, and all of what Charlie was talking of the barriers and health and health and safety case that Charlie was talking about. We had 25 different groups working on it, 25 different groups and over 70 people through the summer working on that. The offshore equipment task force, again, is BOP centered protocols regulation. I guess Charlie has explained to you that I think it was misunderstood in most people's minds, it's BOP thing while it was this five story building the crushed pipe. And you never really got beyond that. And so I think that we had a much better understanding of it here today and we hope to continue it, but there's a lot of issues within the BOP system that this group is working on. Especially the idea of remote operated vehicles, what we found during the summer was that there are not many vehicles that can go that deep and they're spread around the world. And once they get down there, it was interesting environment to work in when you're that deep under that pressure. So there'll be a lot more done about the physical ability to get down, to where you have to work. Again, we had over 60 people and 30 organizations in that. The work groups for the sharing work group, we share our data. They're the original equipment manufacturers themselves. They're looking, they're gonna help us on the access to their websites so that we can have their data. Remote operating vehicle work group, how do you get standards? How do we make sure that we can get down there? How to make sure that current technology continues to arise with them. Part of this was that we hadn't been developing technology for these environments so that we were adapting technology from others that routinely use it as a scientific piece of machinery. We were now using it for operating machinery and an acoustics work group. The subsea well-controlled containment task force. Again, this was a subsea intervention and containment. When you have a BOP failure, what do you have to do? We were talking about hydraulic, we were talking about electrical thing. There was a question of how do you shut it out? How do you not shut off these devices? And so that was a, this will be a continuing issue with this group. Again, 30 participants, 20 organizations. This is not a small effort. The subsea well-controlled containment task force has subgroups. Well containment on the seafloor, self-explanatory, intervention and containment within the subsea well. How do you do dynamic kill? Incredibly important. Direct mechanical intervention from the outside when you don't have access to your primary. Subsea collection and surface processing and storage. How do you make sure that when you get it back to the surface, you know what you're doing? How do you, and the idea is dispersed flow from the seabed floor. How do you manage that? And that's incredibly important because we kept seeing that picture day after day after day, things bubbling off to seabed floor. The subsea well containment task force we focused in five areas. Well containment at the seabed. Fundamental. Intervention and containment within the subsea wall. Subsea collection, which we talked about a little bit. And we will obviously continue research and development and relief wells. Well, we know more about relief wells than we thought we'd know before. Let me just turn my own page here. The Osville Response Task Force, which is actually the fourth of the four groups, addresses the following. The Osville Response Plans, that came up a lot. You know, the idea that over time we did have a cookie cutter type of response plan. We did not do as good a job as we probably should have could've will do in the future with Osville Response Plans. But again, in developing Osville Response Plans, one of my concerns is that we have an accurate understanding about the kind of cases that we're responding to. What is a worst case scenario now? And this will have to be worked out. At what point does a worst case scenario really reflect that you're down to de minimis risk? You know, anybody could build a worst case scenario that's unrealistic, but it's still worst case. And so there has to be an understanding of how we get there, oil sensing and tracking. How do we know where it's going and able to contain it? Disbursement use, this is a public issue. Were we using the right disbursements? Are we developing new disbursements? Did we have disbursements that were 10 or 15 years old? Institute burning, that's one of my personal favorites. Because when I first got to the MMS, we had an accident literally about a week after I arrived in March of 1989 up in Alaska. Some of you remember that one. And we were called into the secretary's emergency conference room when we were working away. And one of the more brilliant engineers said, light a match. That's probably what we should do, is light a match. And then EPA came back and said, you can't light a match. You're going to have air pollution. And we said, well, the oil won't go anywhere if we light a match. And they said, yeah, but the smoke will. And so by the time that kept going around and around the room within the agency between Interior and EPA, it didn't happen. And oil kept flowing. So I think that we need to know more about Institute burning. We need to have the environmental work with very close to its environmental groups about how we do Institute burning, that that really, in fact, does take at least part of the surface problem out. And we could talk about the disbursements in the column later on and what happens with that. Mechanical recovery capabilities, a lot of work to be done. Everybody had a better mousetrap. Well, now's the time to figure out who doesn't. Who doesn't? Shoreline protection and cleanup. Again, the only pictures that the public saw were the booms that busted, not the booms that worked. And so we need to make sure that shoreline protection and cleanup actually does move into current technology with current materials and understanding of currents and wave actions. And what different response technologies might be in the future. Again, we had 60 participants, 30 organizations we're working on that. Summary is that we have significant progress to be made. So all we always do is on an accelerated time frame, there's great urgency, public expects it. We have early recommendations to DOI in the 30 day safety report that came out earlier in the summer. Now we have to go beyond that. Drilling contractors are subject to and must comply with these new higher standards. We're all in this together, ourselves and our contractors. And we're committed to making future progress. And you can see that we're committed because we do have the people. We have the company expertise. We have the publics demanding it, and rightfully so, that we operate in a safe way and protect the environment. So thank you very much. Good morning. First, I want to say we appreciate the opportunity to continue public dialogue on marine well containment and thank CSIS for doing that. I feel like with the comments that Frank made, Charlie May and Abby May, this is well set up to have this discussion. This is unprecedented. Never before in my career have I seen companies come together in a leadership proactive initiative such as this to develop something to help response. And we should be proud of it, as Abby said, which we are. This is a system that will be used to contain and capture oil in the event of a subsea well blowout. I want to talk not only about the system today, but about the project efforts that are underway to build the system and then the marine well containment company that is set up to take custody of the assets and respond in an incident. First of all, to frame well containment, and you've seen this picture before, but to frame well containment within safe drilling operations, along with industry drilling standards and the ability to respond to a spill, containment offers that third leg of a stool, if you will, for safe drilling practices. If any of you have read the decision memorandum yesterday, that's very obvious now, that the expectation is that we have containment capability. This system will build that capability. The initiative is aligned with the administration and congressional expectations, and that's obvious after yesterday's decision memorandum. So let's talk a little bit about the system and the project efforts. As you know, it's been mentioned Chevron, Conoco Phillips, and Shell, along with the leadership of Excel Mobile is developing the system. It will fully contain oil flow. It is designed for various scenarios in the Gulf of Mexico, and we'll get into some of those details in a few minutes. It will be ready for rapid response. Instead of taking weeks to prepare a response, this system can be deployed within 24 hours and be operational within weeks. Some of the functional requirements of the system, as you see there, it will be able to operate in water depths up to 10,000 feet and on leak rates up to 100,000 barrels a day, far exceeding the incident this past summer. The initial investment for the system is expected to be $1 billion, and that's for the assets that you'll see in the concept slide next. But that also, in addition to the $1 billion, it will take annual operating expenses going forward to maintain the system and to run the Marine Well Containment Company. So let's take a look at the system now. We'll take just a brief overview. First of all, you see the subsea containment assembly on top of the BOP. Now your BOP experts at the Charlie's talk. That containment cap will be able to shut in the flow if we have well-born integrity. If we want to reduce the wellhead pressure and allow the fluids to flow, we have the capture system that comes from the containment assembly. And through flow lines and through the production and up through risers, fluids will be captured, stored, and safely offloaded to shuttle tankers from two Marine capture vessels that are shown there on the surface. We'll get into some of the details of the system next. First of all, the subsea containment assembly, it will be able to adapt to connect to various scenarios, connect to the BOP, connect to the Lower Marine Riser Package, connect to the high pressure wellhead casing, to the wellhead itself, through connectors or flange connections, some of the connectors you saw in Charlie's presentation. From the subsea containment assembly, if we do not shut in with that assembly, we can flow through flow lines, uprisers, to the capture vessels. If we have a situation where we may have well-born integrity problems and near well-born leakage, we're developing a system that uses common standard technology, suction power technology, that could fit over the BOP and around the well-born to contain those fluids and capture them and flow them to the Marine capture vessels. And that's shown here. The fluids would leave either the case on that you saw in the previous slide or the marine or the subsea containment assembly, flow through flow lines and up through riser systems. These riser systems are common technology. They're called self-standing risers with buoyancy elements at the top, as you see. And the advantage of this system is that it can be designed or installed in various water depths up to 10,000 feet of water or as low as, perhaps, 1,000 feet of water. And that flexibility is why we've selected the design. It will be connected to marine capture vessels through flexible flow lines. And those flexible flow lines have the ability to be disconnected in the event of a hurricane in a controlled manner. And after the hurricane passes, these marine capture vessels can return to the site and quickly reconnect to continue capture operations. The marine capture vessels will have modular processing equipment that will be installed during the response. As you can see here, the notion right now is that we'd have two by 25,000 barrel trains, two trains per marine capture vessel. And you can see also where the flexible flow lines come up to the turret there. It's the red module on the side of the ship. When these ships are not responding, and we hope that they never are responding, they'll be used in a lightening service in the Gulf of Mexico. So in summary on the system, it improves safety and environmental protection. It does have the potential to shut in the well. The subsea containment assembly can come out within days. If we have well-born integrity and can confirm it, it can actually shut in the well at that point. If it needs to continue to flow, the subsea kit and the marine capture vessels, because of the capacity, reduces congestion at the surface. And that's a big advantage of the design. It will be pre-designed, have the ability to be deployed within hours and set up within weeks. And it's flexible for various water depths and various flow rates. So again, the idea of the system, it's expandable. It can be rapidly deployed. It has flexibility on water depths and rates, and will be fully tested. So over the first six months, what we're planning to do now is we start to man the project, which we now have a staff of close to 100. We are working with BP to assess current equipment and capability in the industry and get that capability under the Marine Well Containment Company. We will continue to work over the 18 months to build a new expanding system and have that system operational in the first months of 2012. And then as the Marine Well Containment Company becomes formed, it will continue to look at technology advancements and continue to adapt the system as technology advances in the future. A little bit more on project progress. As I've said, we staffed the team. All companies have provided staffing. We have a very dynamic team, a lot of experience. And currently, we're about 70 folks full time, about 60 or so half time for an equivalent team of about 100. The engineering and design work has begun. We've awarded contracts just this past week to start early engineering and procurement activities on the concept. We've started discussions with ship owners for the Marine Capture Vessels. And those discussions are continuing, mainly with NARSI shuttle tanker suppliers that have dynamic position capability with their vessels. And that's what we need. And as I've said, we've initiated a ward of contracts. Again, the design is to be flexible. We talked about the BP equipment and that we're assessing that equipment with BP. We don't quite have it all assessed yet, as Alby mentioned to. But we're very close and expect to have that by early November. We continue our engagement with government and agencies. In that discussion, obviously, we'll continue going forward. Let's talk now about the Marine Well Containment Company. The notion of the Marine Well Containment Company is that it will take custody of this asset and be able to deploy it rapidly with train crews. It will ensure that the equipment is maintained, which is critical, and have operating procedures ready if a deployment was required. The structure of the company is that it will be open to all U.S. operators. There's two types of membership expected. Membership where we have membership in the company itself, and those members will share, a pro-rata share of development cost. And then for those operators that don't have as much activity and are less active, there'll be a non-member fee opportunity to join. Both will require standard service contracts from members and non-members. And there will be a mutual aid component of membership, which is very important conceptually that increases the capability to respond. And the idea of mutual aid is each company that may have equipment or assets back in their operations that could help the response, they would commit to provide those assets, complimenting the new systems capabilities in the event of an incident. We've started discussion with operators. We had our first information meeting September 29th. We have another one scheduled October 14th tomorrow. At the first meeting, we had about 25 companies, about 70 representatives. We expect about 20 companies tomorrow with about 50 representatives. And that dialogue will continue. And in fact, it will accelerate here in early November where we continue our discussions with operators on membership and non-membership agreements. Lastly, in summary, we're committed to develop this system. Again, it's an unprecedented activity. On a personal note, I've had many projects around the world, North Sea, Africa, Asia. I've never built a system that I hope is never used, but this is one of them. We expect this system would never be used if safe drilling operations are practiced. And that's the expectation. So it's funny to lead a project where you expect it never to be used, but that is the goal. The system will significantly exceed the capacity that was built this past summer. It will be expandable. It will be able to be deployed more rapidly and in greater water depth with higher rates. Lastly, the Marine Well Containment Company will operate this system. Its formation will be concluded by the end of October. Membership discussions will continue through November. And lastly, again, we hope that the system is never used. Thanks very much. Thanks, Lloyd. The purpose today was twofold. So part of it is just public education. A lot's happened since early May. And why don't you all to be aware about what's going on? There's still some gaps to close. And the second part is kind of the intention of dialogue because I know there's a bunch of questions. Let me just exercise the prerogative here. So yesterday, a short question for Lloyd. Director Bromwich made a statement yesterday about the expectation that participants in drilling ventures in the Gulf of Mexico would participate in like the Marine Containment System, right? So it's voluntary at this stage and so that the non-member fee understand how that works. So the first question is the people that will man this. Secundis are hires for the corporation. And then the second page is when you get to the point where it actually is, if it is mandatory to participate, right, so that that is available to meet one of the hurdles that Albie talked about. So the drilling to go forward, how fast can you be operational? Yeah, just press the button. Well, Frank, the timeline that we're on right now, as I said, was to have the company formed by the end of October and to begin and really, to continue the discussion of membership in early November. We will be open for membership in the November, December timeframe and continue discussions with operators all through that period. I mean, that's the timeline that we're on right now. And the staffing? Yeah, from a staffing standpoint, the company itself at first will have an interim management team. And that management team will be named in November. And we will continue to build staffing from that point on. And eventually, when the 18 month system is developed, we'll have a full staff and operational personnel to operate the equipment if deployed. We will have to build up to that point from November on. When we have the early response system, really, when the assets are collected, we'll be around January. And we will begin to build a capacity to operate that equipment first through vendors and vendor support, slowly building operational capacity inside the company. So that's the current plan right now. Okay, terrific. All right, second question is for all of the panelists. So any surprises from yesterday's announcement and general reactions? Charlie, you wanna go first? Well, I guess we were surprised it was yesterday. No, actually, it was not. And it was back to this question about the containment company, which I've already been working on it. As you know, in cleanup, the obligation is people have to demonstrate they have the capability. And usually, well, that's usually by having a contract with a company that provides that service. And so I think it's gonna be similar for marine well containment. But I'd say, no, we were pleased and it was what we expected. Excellent. Thanks. No, there were no surprises. There was a bit, I think that there was a bit of concern that you see expressed in the industry that throughout the time that it's taken to evaluate how we do business on the OCS, that maybe perhaps we would like to have stronger definitions to the structure of how these decisions are gonna be made when we still have references to developing a mechanical process or the mechanisms to get to how we decide. I know the industry wants to stand up and be counted and get the very specific definitions that we can that we need to proceed with as soon as we can. So that the idea that people are saying that there'll be a moratorium through process doesn't happen because as you first showed in your first chart with each passing month, you have a double or triple impact in the out years. And so now that we're committed to being back there in a way that everybody reexamines its own risks of production and what it needs to do for environment and safety, let's get on with the business very clearly defining what the needs are. So we know what the hurdles are, so they don't keep having to up and down and up and down. And just to put you on notice, with that tribution, I will use the get a rock. I like that. Lloyd, go ahead. Obviously we're pleased that government recognized a guest industry's commitment to increase safety standards. I think the Marine Well Containment Company is testimony to that. And again, it's unprecedented. We're proud of it, proud to be a part of it. But one clarification, I think, Frank, that you may need to say is it wasn't mandated that everyone joined the company. It was an expectation that they have containment response capability. Now we hope that all operators come and join the company and I'll make that plug, but I just wanted to clarify. We'll have a sign up sheet. Exactly, they'll be in the back. All right, we have a couple of simple rules here for questions with the size audience. We will have microphones available. Two things, identify yourself and your affiliation and then if you can, pose your question in the form of a question. So go ahead, we can start. Interesting, okay, let me start in the back here. Hello, Lisa Epifani with the law from Van Ness Feldman. My question is for Charlie Williams. Can you please explain the relationship between the final rule, the safety and environmental management system rule that the DOI just put out and the safety case that you described? Okay, the main difference, and we actually haven't seen the final, the complete final rule, but the basis of the rule is RP 75, which is a safety management system and the safety management system has hazard identification in it. So it has part of what's in the safety case. It has the hazard identification part of it. What's different about a safety case really is that you systematically take all the hazards and then build barriers for each hazard and you actually assess the risk around each one of these hazards. So actually, RP 75 is a big first step to moving to a safety case and it actually helps you develop the rest of the safety case. And the other thing I'd say about that is that you know, that had been a violent, RP 75 had been voluntary before it was put into regulation and most people had safety management systems that actually exceeded the requirements of that already in place. Based on your discussions with the administration, is there a sense that some of these issues through continued dialogue will be cleared up as ahead of time? I mean, most of the recommendations were accepted or put in the report. Some of the recommendations that showed up in the notice to lessee is five and six were actually industry's recommendations. So this notion, there has to be an understanding on the government side that there's still areas that need to be further clarified in order to comply. Otherwise you're gonna go back and forth on how do you prepare and develop an application that passes muster? So you fully expect that to continue. You know, definitely. I think we're gonna be working hard on how to make that process. You know, even more effective and efficient. And I think there's commitment to everybody to make that happen and continue. Okay, that's another question back here. Go ahead. John Lyman, the Atlantic Council, previously with Amaco. Two part question, really. What has to do with your rules which have all been focused on the golf right now? Is there any reason or any thought being given to whether or not the new standards being applied could vary or would vary at other locations in the U.S. waters? Clearly, that's one question. And two is on the containment and spill response system that you're building, you're building it for the golf, but we're talking about drilling in Alaska waters, east coast, et cetera. What is the flexibility to move if necessary, or are similar systems gonna be needed to build for elsewhere? And thirdly, I just noticed that somebody just announced they wanted to drill a well over 10,000 feet. So that's my question. Thanks, Senator. Maybe I can take the second part of the question first. Okay. Obviously, the system has been designed for the Gulf of Mexico. However, if there's similar environments on the east coast and so forth, obviously the system could potentially be deployed in those areas in the U.S. waters. Where we get out into arctic areas and those types of things, some of the subsea components could be used. When you think about the capture vessels and those things, it becomes a little bit more problematic. And so currently that's the state of the affairs for the system. Basically, that's how the system will work. Charlie? I just was gonna follow on to that a little bit. As far as the rules themselves, at least I haven't seen any of the rules that really were too much area specific. I think they were applicable everywhere. As far as the containment system, I was just gonna add the difference on the containment system. When you get into shallow water depths, the way that you have to access the well because of the water depth is different. So the way that you'd install things on the well in shallow water would be different than you do it in 500 to 10,000 feet of water. So, but as Lloyd said, the well, we have to all remember, at least it's important to me, to remember that the containment device, the well cap that puts on the well is rapidly deployable. And the first thing we'd do is send it out and install it on a well. And if the well has integrity, simply shut the well in and we wouldn't have to install the rest of the system. So it's a two step process. Try to cap first and then install the flow system. If the cap, for whatever reason, we have to continue the flow of the well. And so on these shallow waters, like Arctic systems, people, the industry is already looking at the kinds of systems that would work for containment in the Arctic and in shallower waters. Albie? I like the optimism of talking about the East Coast. I mean, let me address one part of the question to you if I could, the deeper than 10,000. The containment cap that we've got really is, it's designed for 15,000 and it could potentially go a little bit deeper than 10,000 if the containment assembly alone was used to contain and shut in the flow, as Charlie mentioned. As you get to some of the other components as water depth increases, we'd have to increase the capability of the system consistent with technology and as technology advances to go to those deeper water depths, that technology will be available to enhance the system. So it will be lockstep as the industry steps out. I should also add that we are actually examining the idea of doing a separate session on the Arctic because I think it does present a different case of circumstances. I had a question, Charlie. So when you start looking at well containment and you look at depth, right? So this whole notion of the ability, do you think in the future as the system evolves that blowout preventers next generation will have the Christmas tree attachment than all you have to do is start attaching hoses? Whether you evacuate oil or plug-in drill nut, would that accelerate the time, the response time? You know, I think that, well, I think the focus is gonna be on obviously figuring out the root cause of what happened with the blowout preventers in this particular case, which none of us know now. And if there are things that we can address about quickly, effectively closing the blowout preventers and preventing whatever this root cause turns out to be, it will actually function as the well cap. So I think the focus is gonna be around that. And once we know what the issue is, the second part of the question is I do, we are, as part of my task force, gonna look at would it be useful to have additional places on blowout preventers to connect devices? And having additional connection points and devices on the blowout preventers might well be a good feature that would improve response time. Yeah, because going back to Albie's point about the get a rock, right? So if the first person puts in an application that they have this availability of this containment system, and the second application comes in, they have the same availability, the same system, right? So are you setting yourself up in a situation where if you have something that's more universally available? Okay. Can I just make one comment? You know, the focus of this morning, we really have focused on the technology, the application of the technology by these companies, the recognition that these companies actually, advancing technology, it's unique in the world. But most importantly, and the single thing that we want to do from the start is to prevent it from happening at all. Let's not forget that, even though we've talked a lot about steel and metal and shutting in, that's the hardest of all. The psychology of making sure that people on a daily basis understand that the job one is to prevent it from happening, to not having to use the equipment that the industry is so rightfully having as its insurance. And it's critically important because it's as simple as making sure that in your everyday lives, when you're picking up a heavy object, you have your legs, not your back. How many times do we just slip and forget about that? And so the idea is that it's as much a psychological challenge as it is the engineering feat and both are on a grand scale. Every company, every person who's operating has to remember to be safe and to protect the environment, to protect company assets. Most importantly, at the end of the day, what does all this give you when you add it up? Protection of life and marine resources. So that's the baseline, but I'm glad we're talking about the technology today. Yeah, I was struck actually, and this is a point that Gary had made on numerous occasions, but the whole notion that historically, there's been a range of unwell design and operational even best practices, legally compliant practices, right? So what the new proposal does is basically streamlines it and compresses what's legally compliant into more of a range of what best practices should look like, which is certainly a step in the right direction. Any other questions here? Please go ahead. And then Bill will pick you up next. Thanks. I'm Neela Banerjee with the LA Times. I had a couple of questions. The first is about this notion of a de facto moratorium. And obviously we've seen what's happened with permits being issued for shallow water and that seems to be what has the industry concerned from discussions I had yesterday and before that. So I guess what I'm asking is, what do you think is an acceptable rate? I mean, obviously there's gonna be much more back and forth, each side has to get used to things. But when do you not worry about a de facto moratorium? What is it that you need to see? Is it a number of permits being, is there a sort of magical number out there of a number of permits that are approved every month for deep water, for you to feel comfortable going forward? And my second question is about safety case. And I've heard different things that in NTL-6, which it seems to be the more problematic of the two NTLs for oil companies that nonetheless, there's seeds of safety case there. I mean, how problematic is it for oil companies to adhere to NTL-6 when so many of them are already operating in the North Sea and are used to a safety case regime? So those are my two questions. Thanks. Gentlemen. Sure. I'll take the first part of the question. I think that when you're running a race, it's hard to see how fast you're going. But you know that you're in a race. There won't be a time when we say we either have a de facto moratorium or we don't have a de facto moratorium. That's not gonna happen. What has to happen is there has to be a relationship built up between the industry and the government with the understanding that the rules of the road encompass the environmental expectations, the safety expectations, the commitment to reduce risk. And that these are all swirling around in the same liquid. And then people have a commitment to drink. That the mixture is now acceptable. And once we start sipping, then I think you'll see that things will move forward. People understand what the process is. It's transparent. It matches public expectations. There's a trust between the industry and the government, between the government and the industry that we're moving forward and making progress. We can't define it in the number of leases, but we can define it in commitment, a commitment to move forward. If it's hijacked, if this process of mutual compatibility is hijacked for things other than getting the job done, which is assessing leases and improving them, then in fact, you'll be placing a moratorium on it because it's external to the process that you're trying to complete. So my concern is you'll have a de facto moratorium if it becomes hijacked for other reasons, external to what we're trying to do. At what? Well, if there are those who say, I can't find any other reason to prevent drilling, but to slow this process down, and then it becomes a political issue, not an issue of we have a way to proceed, that those who wanna use it as a megaphone to make statements about fossil fuel development, that's not helpful to the process. If this is a process in where there's a commitment that certain resources can be used, can be developed, and that these resources can be used and developed when we all agree to what's in the cup, then I think it should proceed. I have a slightly different take on that. I agree with what you said. I think the sense is that once you get to the point where you've established an acceptable template, so the first application that's approved that sets the bar at an acceptable level, I think it's that clarity, and maybe you'll get the clarity so it's not in one permit or four permits, but if the dialogue keeps going on so that there's clarity and understanding of what the rock's supposed to look like that you bring to the table, then I think meeting those expectations are a lot easier. The problem comes in the vague expectation, and then you're throwing things against the wall to see if they stick. And I think there's gonna be a little toing and froing in that. So Bromwich said yesterday that he doesn't expect a permit approved today or by the end of the week, hopefully by the end of the year. So we're 60 days away. This was step one was removing the moratorium. Step two is working on the permit process, right? Okay, please go ahead. You want me to say something? Yeah, sure. Well, it was about safety case, which was a second part. I'll try to make it brief, but my view on safety case, as you know, when they put them in the North Sea, it was after Piper Alpha. And it was about a four year process to actually implement that. So it didn't happen quickly. And in my view on safety cases, I mean, the most important thing is actually not the piece of paper, it's the dialogue. And it's making it a living document. I mean, the people that are involved in the project, I mean, the key is is they understand the hazards and they understand the barriers and they understand their role in maintaining these barriers. And so it's really around the dialogue. And the reason I make the point of that is that when people started out thinking about safety cases, they made these really huge documents. And it was so huge that it was cumbersome and you couldn't really have a dialogue around it. And it wasn't easy to modify as things changed. Now, in the intervening period, people have scaled these down to really focus documents, to focus on the key barriers and allow a real dialogue and allow it to be a living document. And so the answer to your question is, is that I think with all the experience that people have had in making safety cases, that it isn't a big step to go from RP-75 to a safety case in my view. And the large operators already operate in safety case areas, sorry. Bill. With Conoco Phillips. Charlie, I wanted to ask if you could go a little bit deeper into an issue you alluded to. A lot of technology involved. You well described the technology and the systems. But I was wondering if you could talk a little bit about the electronics and all the sensor technology that goes into the well-designed and how that fits with the whole interface and the protocols that you were talking about. Well, the bulk of the instrumentation right now is really around the BOPs. I mean the really sophisticated part. And like I said, when you get into the really deep water depths, it takes time for a hydraulic signal to go over that distance. And so we switch to electronic signals because they're faster. And there is a requirement by us and by the regulators around how fast you can activate blowout preventers and all that. So we have to have a rapid response system. And so essentially these more modern blowout preventers have these small computers there that receive the signals and then tell the blowout preventer what to do. And so they're pretty sophisticated, state-of-the-art type of devices. There's been a lot of discussion, as you know, around should we be able to collect more data? In particular, it's around, should we be able to collect more data from blowout preventers? And I think that's gonna be an important part of the task force on equipment is to look into that and see what other, if there is other important data, and should we do it? And we can add it to that system. Hi, my name is Tricia Curtis. I'm with the Energy Policy Research Foundation. And my question is kind of a scenario. So let's just pretend that the moratorium's been lifted. We have this permit delay tomorrow and then the day after tomorrow, somebody gets permits and we have a spill. What is the response gonna look like? I know that Albert mentioned that, you know, he likes this institute burning, but we're not gonna be able to do it. Is the structure gonna be smooth? How's it gonna look like? So just a mini scenario, how would it actually effectively work if this happened tomorrow? Well, it somewhat does rely, depend on the scenario. But if the scenario was to require containment, for example, and similar to an incident this past summer, capability exists today in the industry to respond. Obviously, we've got the equipment fabricated over the summer. We've got a lot more experience now in the industry to respond. That equipment is available today and the response would be much more rapid than it was, with the exception that it may not have full flexibility on some of the, you know, all the areas that we might see in our operations. And that's what the expanded system expects to do over 18 months. But the industry has the ability to respond today and that equipment would be used to respond. As well as contractors and other capacity in the industry just like it was used this summer. What's the liability of the company, right? So if you become the red-a-deer of offshore oil spills. I never thought of it that way. Well, no, so I'm just wondering. Well, the way it's gonna work is the Marine World Containment Company exists to maintain that equipment and be ready to deploy that equipment to the incident company when an incident occurred. It would come under unified command and the liability for the use of that equipment would be with the incident company. That's the way the model will work. So I've answered part of your question, perhaps. Well, a lot of those in a crisis situation, which any spill of that magnitude again would be obviously, a lot of it depends upon the ability and the knowledge of people working with each other. So in the short term, we do have people who have worked well with each other have gone through this drill in the government and private industry. And remember, it wasn't just the one company that had the incident. There were people secundered from all over the industry to help work in response so that the expertise doesn't reside just in one company in one spill. Friend from Norway is here. They sent people to help us. So we had worldwide help and people who understand and who know each other. We don't have to sit around a room wondering who the person is sitting across from them and both the government and the industry. That's a plus. The trick will be over time to institutionalize that relationship so that we can a year from now, two years from now, when these people move on to other activities for them to have trust in the procedures that were left by the people before them. And if they have trust in the procedures and policies left by people before them and they implement them, then you've saved a lot of time and you've actually increased your efficiency with which to attack the problem. Yeah, I was just gonna say, one of the things that I think was underreported was the amount of collaboration. So if you talk to either the government or the industry side, the shells, the exons, the chevrons, the slumber jays, the halibut and stat oil, people were on the scene and talking about this, whether it was with Secretary Chu or with the unified command. Second piece is roles and responsibilities. And I venture to guess that if you were to ask Admiral Allen what he would do differently, there's a list of things, right? So BP said that they had a higher people to walk the beaches. Well maybe if the governors were involved on the shore clean up, the National Guard could have been called up, right? There was domestic political constraints about what you use the fishermen for, right? So we outfitted 1200 fishing vessels with skimmers. Ventured to guess that some of those operated correctly, some of those did not operate correctly. So there should be lessons learned and I think I've post-mortem on this whole exercise would probably be completed at some point and there should be lessons learned going forward. We can take one or two more questions. Go ahead, we'll go in the back here. Hello, Alexandre Poulierté, EDF, Electricité de France. I was just wondering to enhance this cooperation, do you think of the industry self-regulation body modeled on something like the INPO as the Presidential Oil Spear Commission mentioned or proposed during the summer, INPO being the Institute for Nuclear Power Operations? Thank you. Well, the model of the company is really modeled around this, that it's gonna exist to have these assets and to be able to have assets that can respond to subsea containment and to have crews to operate those assets and that those assets would be available to member and through non-member fee operators the use of that equipment to respond to an incident. And so the company, it's not an insurance company, it's really a company to provide those assets to an incident company and that's the model that we have right now. I think the question is, are you talking about the INPO model? Yes. So I think it's more on the watchdog piece, not the containment corporation, whether or not any of that is applicable to a competitive industry with this many members as opposed to what we see with the nuclear industry. Again, the company is just to provide assets, it's not to be a watchdog for well-designed, if I'm understanding the question correctly, or any other review of design integrity and those types of things, that's not the core competency that's gonna be provided in the company, so no. But I guess the other thing I'd say about that is that, there's already around safety and safety procedures and technology for safety, we absolutely don't compete, we absolutely share that because it's in the best interest of everybody that we do that. So there's a lot of sharing on that. I think, back to your question, and we also have a lot of opportunity to work together and the standards that are created in the US are national consensus standards and that are done by a broad group of the industry, including contractors and small operators and academia and all, but certainly I think it's gonna be studied that you can always improve those kinds of things, you can always improve the way you collaborate and you can always improve the way you communicate together. And I think that's, I'm quite sure that's gonna be looked at and maybe we want to really enhance things so that we have even better collaboration and cooperation around that. Can I, let me just make one other comment. You know, I wanna just emphasize what Charlie just said in a little bit different way and also reinforced how much collaboration there was on the response this summer. To me, I'm very proud really of being in an industry where there's so much collaboration and focus on safety and I think sometimes that's not recognized enough on how the industry comes together and everyone is focused on safety. I think that's a very important point to remember. David. I'm David Bardeen. I used to be with the energy department, but I'm retired. I have a question from Lord Guillory, but in light of Alvin Modiano's goal, okay, all of our goal is this never happening again. If we're successful, we'll get back to a very positive record, but your containment company has gotta be on its toes. If months go by, years go by, more than years go by with no call on these assets, how are you gonna keep those people? I don't understand if it's hundreds of people or how many people the containment company will hire, how do you keep them on their toes? How do you keep those assets readily available? If it's 10 years from now or 20 years from now or 30 years from now, we see another spill. So this is the Maytag Repairman analogy. Yeah, that is the correct way to frame it too. You know, you hope the phone never rains, but it's a great question. And it's core to really how do we do that because that's a fundamental question. Let me start with the marine capture vessels because this is one of the things that we wanted to do in the model of how we're gonna procure the ships and I'll talk to the other parts of the system after. Having those marine capture vessels come over and continue to be in lightening surface, we think does a number of things. It keeps that ship running, which you know is important. The worst thing you can do with equipment is to not use it and have it held up. If you ever owned a boat and never used a boat for a year and then get in it and hope that you can come back that day from a fishing trip, you know, sometimes you get worried. So that's one thing. The marine capture vessel model is built around trying to allow those ships to continue working. The rest of the kit, you have an excellent point and the expectation is that through drills and through equipment maintenance, we'll be able to keep that system ready and how those drills are conducted, how we keep the people fresh and they're ready to respond is gonna be a critical part of that company. And you know, we're gonna have to pay attention to that going forward but really since we're not gonna use the equipment, we have to look at how do we test the equipment, maintain the equipment and ensure the people are ready to respond through operational drills. That's the focus of what we're gonna have. But it is something that we need to work on, I agree. Yes, final thoughts, gentlemen. Comments, I think we've covered this topic. Just one final thought. I think that everybody witnessed during the summer the cooperative nature of the oil and gas industry to respond to a common threat, an environmental threat and a safety threat. And I would hope that they understand that this is the way that business is done and will be done. And that there is a commitment to time and effort through all the things we've talked about this morning through Lloyd's continuing work over the setting up place over the years that in each boardroom and with each CEO of all companies, whether they be the largest of the largest, mid-size or the smaller, if there's an understanding that there's an obligation as good corporate citizen, as good citizen, as environmental steward to continue these activities. We wanna be out there drilling for oil and gas but we wanna do it safely and we're improving our ability to reduce the risk so that it is not an environmental issue at all. That's the commitment and you saw it happen when we needed to be there and we'll be there tomorrow if it happens and we'll be there four years ago from now if it happens. The point is to try not to make it happen but yes, we'll be there. That's the commitment by this industry. The formation of the Marine Well Containment Company I think shows that commitment and the leadership of the four companies, the sponsor companies to come forward and invest a billion dollars to have a company where we're inviting membership across the operators in the Gulf of Mexico to have those assets ready to respond and hope to never use them. To me, the leadership that's shown there is something that's indicative of the industry and the collaboration in the industry around coming together to solve problems. I'm proud to be part of an industry that has that collaboration. I don't think sometimes as I mentioned we get enough credit for it but the Marine Well Containment Company should help to be able to respond and it shows that commitment to enhanced response capability. Charlie? I guess that the thing I'd say in closing is that I, and I hope you saw it a little bit in my presentation, I think we have a really significant amount of technology and technology that's really on the leading edge. Certainly it can always be better. Certainly we can improve things and particularly if there's any possibility we can improve things that will make, reduce our risk even lower and make incidences even less likely. That's a good thing, but I think it's got mentioned earlier that Albert was talking about. So we have to have the technology and we have to have the systems and the people and it's about being diligent every day, understanding your barriers, making sure you have your barriers in place and making sure you understand the data and then respond to the data appropriately. And so, I think we've got actually a great record on being able to achieve that with the 14,000 Deepwater Wells and 4,000 Deepwater Wells in the US, but it's an everyday, every minute, every hour job to have this vigilance and have the capability and the training and the knowledge to respond and prevent escalation and that's the job and that's the job we intend to do and want to do. Let me in closing just thank you all for your attention and participation. It heartens me the fact that the more technical decisions that we have here and we've done a couple on natural gas the same way that the audiences get bigger and they tend to stay longer so that the information is actually getting out there and then please join me in thanking our panelists. It's been a great session.