 So good morning and welcome. I'm Frank Verastro. I'm a Senior Vice President at CSIS. And I'm Director of the Energy and National Security Program. And it's certainly my pleasure to introduce our speakers this morning. We've had a series over the last several months on the offshore events from the summer. And we expect to continue that into next spring. We have bios of our two speakers today. But let me just tell you first that the Robin West I've known for quite some time. And Robin is a distinguished speaker and a good friend. He was former Secretary of the Interior that was responsible for offshore drilling. He's now the Chairman and Founder of PFC Energy and the Chairman of the Institute for Peace just to show how well-rounded he is. We've asked Robin to talk about this morning the implications, the impact of offshore drilling, what it means to the world and to the U.S. and some of the implications on how we go forward. I'm also extremely pleased that we have with us this morning Magna Uldendahl. He's the Director of the Safety Group in Norway. And we've heard a lot about safety case and different regulatory structures. And one of the things we want to talk about is how the U.S. goes forward. How do we make things safer, still have economically viable so that we can continue to produce? And how quick can we do that given the situation that we have in the United States? So let me just set up with a few slides here. Thank you all for coming. In this session we will have it available on our website with permission of our speakers. Robin, that will post these slides on our website as well. And let's get started. So today's event is the third actually in a series of offshore events that we've held, all of which are available on the CSIS website. We have two upcoming events that we'd like to talk to you about though. November 16th in the evening we're having Admiral Allen talk about the Joint Command, what was right and what went wrong during the Gulf Oil spill. And then on the 13th of January we have Director Bromwich from the Interior Department who's going to come and speak to us. We also plan to do a session on the Arctic. And I want to talk to Magna a little bit about that because I think the Arctic is a different set of circumstances. There's been a lot of discussion on safety case versus the kind of prescriptive regulations that we have in the United States. And while Norway's situation isn't exactly a safety case they do put a lot of emphasis on what companies do to look at the implications, look at the hazards and preventative measures at the beginning and then also lay out your contingency plans for what if, the what if situation that if something were to go wrong. This assumes that there's a lot of trust between the regulators and the operating companies to do that. And so it's a very different set of circumstances that we have in the United States. It's also different in the way that we approach things in terms of our regulatory structure here. So when people talk about this gradual move in that direction it'll be quite a while before we actually see that implemented or something like that in the United States but it may be a laudable goal. So with that let me turn you over to our first speaker this morning. I'm asking Robin West to come up and talk to you about the implications of the Gulf spill and how we go forward. Thanks very much. Thank you. I was getting worried. I thought Frank was going to get my speech here which is always at 9.30 in the morning on a Monday that can be a not a good start to the week. My topic is international regulatory approaches and I think that it's one of the things as we think through the whole question of how to manage the offshore. I think there's some very important lessons which we can learn from others. But before I begin I want to thank Frank and CSIS. There has been a lot of noise and heat and hot air on this subject since the Mccondo blowout and I think CSIS has played a virtually unique role in trying to inform this debate and the series of sessions they've had have been very substantive. As I say I've tried to inform the debate. This is a complicated subject which if you are engaged in it it's complicated enough and if you're not it's mind-numbing but it's starting to dawn on people that this is actually a big deal. I mean one of the questions is most people are shocked at how big a deal the U.S. Offshore industry really is. Offshore we produce about 23% of our oil and 10% of our natural gas. In the United States in Alaska production oil production is declining. Onshore oil production is declining. On the shelf oil production is declining and deep water production is declining. It's only in the ultra deep water that production is moving up and it's actually surging at about 15% a year and that's an enormous amount. So this is important. It's also very important economically. This is one of the largest and most efficient industries in the United States. We estimate that direct and indirect it's about $100 billion a year. It employs over 400,000 people. One of the examples I like to use is helicopters which are very active offshore. And the helicopter industry or the offshore industry is the largest purchaser of helicopters after the military. Helicopters are not built in Alabama, Mississippi, Louisiana. They're not built on the Gulf Coast. They're built in places like Connecticut and Pennsylvania and you have compressors. This is an industry which is one of the largest users of data processing of any industry in the world and so even Silicon Valley. This is a very, very high tech industry. It's one of the most capital intensive industries in the world so the stakes are very big and the stakes are big from an energy security standpoint but also in terms of the economy as a whole and if policymakers get this wrong in this country the cost as I say from both the general economic as well as an energy security standpoint can be very, very significant. Where is most offshore oil produced? Deepwater is really in the golden triangle which is North America, S.S. Africa which is Sub-Saharan Africa and Latin America. North America is the Gulf of Mexico. Latin America is Brazil and Sub-Saharan Africa is West Africa, Nigerian Angola in those places. So that's really where it's going on. That being said some of the most sophisticated places in the world with the most experience are places like the North Sea, Norway and the UK which have had a lot of experience and we'll talk about that experience today and you also have quite an active and growing offshore operation in Australia which is primarily natural gas. Now if you look at this you have offshore and you have deep offshore and the challenges of the deep water are really quite different than just offshore production shallow water depth and you can see that the North America plays a key role here and that also that the offshore is the key element of oil production in Sub-Saharan Africa and in Europe it's very little produced onshore. So you can see that different countries have different challenges and you'll see they've approached things quite differently. Now one of the things is that over the years there have been a number of very serious accidents. Two accidents that actually aren't on this were two accidents occurred in Norway the second of which led to the imposition of blowout preventers quite some time ago. In the United States there was the Santa Barbara blowout which led to an offshore ban for a number of years off California and it really was a national trauma and it frankly it created a deep hostility in A in California, B in coastal communities as a whole with the exception of the Gulf in the environmental community. Santa Barbara was a very important event in the perception of this industry over the years. A far bigger spill was the spill in Mexico Ixtok which you'll see question marks what were the consequences. We don't really know. The Mexicans didn't do anything and interestingly enough oil flowed from the Mexican portion of the Gulf into the U.S. portion of the Gulf but the U.S. really didn't do anything either. We had the Exxon Valdez OPA 1990 came through a number of laws were changed changing liability and requirement of double hold tankers. For the purposes of discussion today really I think the most important event was the one in the U.K. which was Piper Alpha. A hundred and sixty seven people were killed. This was a production platform not a drilling rig. This is an oxy that was the operator and it was a huge disaster at the time enormous liabilities and it led to a really transformation of how the British and I think how a lot of people started thinking about it and we'll come back to this but this this is the event if you want to understand sort of modern offshore regulation and where I think it's heading it really goes back to Piper Alpha. You then had events in Brazil and Australia and now Macondo. You'll see here on Macondo one thing that is different than any other country that's had a disaster before has been a moratorium and everybody else proceeded with their offshore programs. Middle that there was a lot of scrutiny but it went ahead in the United States. We declared the moratorium in the shallow water as well as the deep water although really the challenges of deep water are very different than shallow water. Now they're really a number of different approaches and if you go back to what happened in Piper Alpha Lord Cullen who is a a UK judge went through and looked at the UK system and he came to the conclusion that having tired kind of inspectors with clipboards climbing all over platforms looking to make sure valves were right or something was really not the way to do it and that what happened is that they they turned the whole system around and it's a system which is very different from our system which is prescriptive where still the industry has a series of boxes to check and if you check the boxes you have comply under safety case it works to say differently the burden is placed on the operator and on the service providers who work with the operator and the operator is challenged to demonstrate that they've anticipated all of the problems that could potentially lead to an accident. This is very different than just saying we've checked the box you asked us to do we're all right instead the burdens on the companies to think through and anticipate what the problems are and to keep anticipating it becomes a learning experience if there's experience on other operations either that companies or another company they're supposed to go through it and think it through and anticipate the problems and likewise under safety case in the UK system every five years you have to update the safety case the slide got a little screwed up I see but anyway yeah I've got a copy here the the key thing under safety case is that it's a couple points operators one must prove they have identified the risks designed equipment procedures accordingly and can respond to accidents emergencies the regulators approve and verify the compliance with the company identified safety cases with varying degrees of intrusiveness now one of the points certain companies that have good relations with the regulator they don't actually produce reports like the New York City telephone book sometimes it's if they have the trust and confidence the regulator and the regulator believes that the companies really understand again it's not a vast sort of reporting process but what they want to do is they say shift the burden to the companies and companies have to prove they're trusted they have to earn the trust of the regulator and this is an approach which is taken in Norway UK Australia Canada and Brazil more or less now I'm quick to point out that Norway does not have a formal safety case methods it's a term of art but in terms of a sort of mindset an approach to how you manage it again the American system which is a much more prescriptive system regulators play a more active role they set the requirements for operators and create a standard operating plans environmental impact statements must still be submitted and approved but the burden is largely on the regulator and this is a system however which permits can go more quickly which is important this is the approach that's taken the United States China Indonesia and Malaysia finally self regulation this is countries with minimal government capacity or just growing oil and gas sectors and the regulators lack the experience and resources to play a robust role in these environments the companies largely regulate themselves and surprise surprise these companies are often national champions the national oil company of these company countries this is the case in Mexico with Pemex Angola Nigeria and Ghana now if you look here again countries approach it differently they take different paths the regulators reflect the relationship in each state between the political system and the economic policymaking one of the points that the offshore industry in countries like Norway and the UK and Australia and Brazil these are huge these are national industries and how you regulate them is a source of national debate and highly visible much more so than in the United States under safety case the government is the capacity set and force regulations societies demands for regulation oversight they set a high standard in Norway they don't want any screw-ups and there's hell to pay if there are and quite frankly there's more skepticism of the private sector and the as I say the burden is on the private sector private sector to earn trust under the prescriptive system the US system particularly was a focus on efficiency avoiding delays and frankly there's a higher risk tolerance and self-regulation again it's weak government capacity very strong very influential often state enterprises and where the government and the private sector work very closely together but again this is a dynamic process one of the things I think that is very important to keep in mind is if you look at the offshore it's dawning on people I think this notion that the minerals management service was a you know somehow sort of corrupt buddy system with the industry I don't think that's fair but I do think it's unrealistic to ask frankly GS 12 or GS 14's on the Gulf Coast of Mississippi to be regulating one of the most complex capital intensive advanced industries on earth when a single platform can cost five billion dollars and you know they're just a handful of say GS 14's or 12's or something who are trying to do this it's simply beyond them and I think why safety case is interesting and it's where we should end up is that the we cannot ask government and I would argue whether it's in the regulating the offshore industry or regulating securities industry or some of these other industries where there are enormous stakes of great complexity enormous amounts of money are involved in some of the smartest most sophisticated people in the world are frankly on the private sector side I think it's very important to harness them to participate in this my last slide is really just kind of summarizing we believe it's very important to look at what a government safety regulation is trying to achieve and how it reflects the capacities and priorities of the government in the Gulf of Mexico frankly until Mccondo the view was the system work great you've got a lot of companies one of things people don't understand you keep hearing about Chevron and Exxon and Shell and BP but there are a great many companies medium-sized companies and independence it's a very complex kind of fabric of companies that have developed the Gulf of Mexico and frankly was extremely efficient but whether it was properly regulated is another question you can see on the upper right-hand corner that UK Canada Norway and Australia that the government has a very strong mandate approvals are pretty quick they're not as quick as in the United States but it's it's fairly predictable you can see as you get further away from the top right-hand box things either slow down or the government mandate is fairly weak one of the points though to keep in mind on safety cases this is complicated and that the bureaucrats or the politicians just can't sign a piece of paper and shift to safety case this will take a number of years to shift over so I think this is a way to go I think it's a logic of how approach it but it's complicated and it'll take time Frank thanks Robin our next speaker is Magna Agnandal he's director general of the petroleum safety authority in Norway but his experience starting with his petroleum engineer goes back to 1974 he served as director general since 2004 when the new safety authority was instituted and to be quite frank we actually scheduled this session around his availability because we thought it was so important to get his perspective so director be pleased to take your remarks well thank you very much a good morning everybody first of all I would like to thank the organizer for inviting me to come and talk a little bit about what we do in Norway and how we do it and I've been given 15 minutes to do it and so I have to be kind of brief but the petroleum history of Norway is round about 40 years started 68 69 round about that so it's a young sort of industry the regulator at the time was compiled by giving tasks to existing regulators in Norway like civil aviation director coast director etc etc etc and it was sort of a piecemeal setup I would say no proper coordination between the regulator at that point in time in 72 June 72 the Norwegian starting the parliament decided to establish a directorate Norwegian petroleum directorate and a national oil company Stator that was a decision in 72 and the regulator started work April 73 and that agency NPD Norwegian petroleum directorate was just one of several other directorates that had sort of been given task to overlook the petroleum industry offshore everything is offshore in Norway this system developed and we in the NPD saw that what we were doing the traditional way of going about things you know writing a prescriptive regulations inspecting offshore you went to one facility wrote down 90 points that needed to be fixed and then you went to the sister facility and you wrote a list of exactly the same 90 points etc. It was a sort of a you didn't achieve much and basically what we concluded with the run about 78 was that we were doing the job that the industry should do they should look at their own activity and not just sit back and wait for a regulator to come along and tell them what to fix and then they just fixed it and waited for the regulators next visit it was a hopeless system we thought so we started discussing what is the role of the regulator and what is the role of industry and through that discussion with the companies etc. We finally after year or two agreed on what the regulator role should be and what the industry roles should be. We then started talking about risk not valves and all of this but and pipe work but risk we started talking about risk a risk approach it's a risky business what does risk really mean well you have to deal with risk just walking out here you know it's risky there's traffic all of this so it's a risk approach developed. And then we had in the middle of all of these discussions we had the ecofisk bravo blowout no people killed we had the capsizing of a floating hotel 123 people killed and we had several other very bad accidents so learning a little bit from these accidents the government decided in 1985 to revamp the whole system regulatory system and produced a new petroleum law etc etc new regulations in gave a totally different new role to the Norwegian petroleum director and especially the safety part of it and it was sort of a tremendous shake up and in 1985 we decided because then the role of the NPD was totally different to what it had been so we decided to go for a goal setting regulatory regime or function functional requirements in the regulations. So we worked with that through the years and ended up with a set of totally new set of regulations and developing these regulations we did that by inviting industry in to participate in the discussions and also the labor unions were invited in so it was a tripartite way of going about it and that's typically Norway and came up with these regulations but then after discussion what is the role of the regulator and what does a goal setting regime require from a regulator? There was an obvious sort of answer to that we couldn't use inspectors anymore we had to get a totally different type of qualifications into the organization and we couldn't use inspectors anymore because we shouldn't inspect by inspecting you are measuring to a large degree and you are as I said earlier doing the job for the industry that the industry should do themselves etc. So the role discussion there some very clear conclusions and we therefore had to get a new kind of people into the organization lot of training etc. to be able to perform the function as a regulator based on the new way of thinking and we should audit company management systems and to be a good auditor you need to be trained to be an auditor not the economy not the money auditing but the organization auditing and verifications so audit and verification is the terminology we use not the inspection. This system has developed over the years the regulations have been read and worked as we gain experience as we learn for instance if there's something to learn from the catastrophe and the Gulf of Mexico here we will of course take that learning and put it into the regulations or whatever is necessary to do so we have to learn. Safety case is mentioned here and before I comment that a little bit what is safety? Well in the UK they have one definition of what safety is we have our definition of what safety is and the Norway here I can put it like this that the safety means prevention of harm to people to the external environment and to economic values. Those three elements so if there's an unmanned facility the two other issues are still relevant right? So it's different from country to country. Lotkallen recommended they came out with a hundred and six recommendations and one of them we needed to do something about the others they were okay as we saw it and this recommendation that the operator shall demonstrate that they can manage activity safely by describing it in a document send it or give it to the regulator for approval that was the recommendation that it should be approved this document. And after quite a bit of discussion the term acceptance came into being so our safety case is now accepted not approved. We saw the danger in having all of these documents landing on our desks in Norway so we've discussed that before how much information should be submitted to us for review and all of this kind of thing. So another new discussion should we also require information in a document called safety case and a decision was no we will not do that because our people will be bogged down in paper and forget to look at what is actually happening in the industry. And that we saw that in other countries happening they couldn't leave the office because they had to go through these documents and accept them. So we have never asked for information to be compiled in a book like that. We asked the companies in the regulations of course to demonstrate and write down how they do it, how they manage safety, how they do risk evaluations analysis and all of this stuff. So when we need it for a purpose we ask them for it. Then there's a purpose behind us asking. So that is basically our approach to this. And looking back in time I think it has functioned pretty well. We have challenges. Yeah, we have to do things because the industry is evolving all the time. But at least we are not in the situation we were when we had prescriptive regulations that these regulations were hindering new technology to be taken into views, new and better technology. The regulator was always behind the development in the industry when it comes to writing regulations. And you could never catch up and the maintenance load of it all to us, to just to maintain them and update them and so on was a tremendous task. In the PSA we are today as a new organization for five years old and it was decided to split it off from the NPD. It was a political reason for doing it and probably it was a reduced political risk if something went wrong. But the PSA now then is only still only 160 people, total. And I can't see any sign that we will grow. And that means that we have to do our job in a smarter way and evolve smarter ways of going about it as time goes on. Because the industry increases more and more facilities, pipelines, own show facilities. So that's a big workload but we the challenge is for us to be smarter all the time. Thank you. There's a reason why we invite these people. So three things strike me actually four things but I'll stay with the first three. Scale competition and people, people skills. I also have a question about liability but I'll say that. So for both of our speakers when Robin you talked about the track record of the industry. So there's 4,000 deep water wells in the United States and the Gulf. There's 14,000 worldwide. When we went back and looked at the top 10 spills and any spill is significant and disastrous. But of the top 10, six of the 10 were related to tankers. One was a pipeline break into Barren Sea. So that was seven. The two production facilities where Iq stock as you mentioned and it took a long time to cap the well and then Mekando and then Iraq pulling out of in Kuwait was obviously the biggest skill by orders of magnitude. So the track record actually has been pretty good but there's a heightened sensitivity going forward and how we do that. In the US it strikes me that competition numbers of companies bigger deals since the way we that we lease tracks in the Gulf of Mexico. But it strikes me on the people skills piece. So if we're asked to have government regulators approve or accept or review systems that the companies put forward that there has to be a basic trust that the companies are doing the right thing and in this political environment that's become extremely tricky. And then secondly what's the role of the regulator in terms of shared liability if something goes wrong? Is there any empirical evidence that suggests one or another of these systems is better than an alternative system? Just some thoughts on that and then we'll get started with questions. You asked a lot of questions. I know, that's what I do. The I think that the one of the things that was lost and sort of the hysteria around Wakanda and Wakanda was a mess was the safety record and basically that most oil in the water does not come from offshore operations and that I'm trying to remember I should have brought the statistic it's we've produced 23 billion barrels offshore in the United States and we have spilled something like 1400 barrels at some incredible statistic. That being said Wakanda happened something went wrong and something was wrong and as one dug into things it was clear that in a number of cases some things were just not up to standard. I think that the that the U.S. offshore system is you know frankly whether there was empirical evidence that one system was better than another I think is almost irrelevant at this point because I think that what happened is that as the record became clear and all I know is what I read in the newspapers but what you read in the newspapers didn't give people much confidence and so clearly something has to change. I think the public consists on it and so how are you going to change and I think that to me as I say the logic of safety case is that it shifts the burden and that to ask government to again if you've ever gone off one of these rigs or platforms you know and greater than 5000 feet of water I like to say it's as complicated as putting a man on the moon and then somebody pointed out well a man can actually walk on the moon a man cannot walk at 5000 feet of water so it's even more complicated and I think we have to find a new approach one of the things that director Bromwich commented on was when he met with some of the other regulators he was struck by the quality of the people and the resources they had available and one of the things I think that would be a serious mistake is if we approach this as a sort of typical bureaucratic budgeting exercise I mean the point I tried to make is that this you know something like a hundred billion dollars is at stake here and if we don't get it right it puts that at risk and it would be a false economy to be fiddling around about ten or twenty million dollars but I think also the role of everyone has to change and that again the sort of the prescriptive approach it won't work now where life gets complicated is the U.S. offshore system as Frank pointed out is very very different than any other ones and the number of independence and modest size companies changes everything and there's a question of financial liability but there's also how do independence meet certain standards that give the regulator confidence so the regulator can trust them and I think that's that's going to be a real challenge going forward aside from just the financial liability issue but I think the fact of the matter is the public is going to insist something change it has to change and the question is where do we go Magna is one system better than another well I think it's impossible to answer that a couple of things that I feel is important when designing a system you know a regulatory system that is what's the culture of the country how does the country function you know what are the working life rules in the country and that varies from country to country so any regulatory system in my mind has to fit what I just talked about the culture of the country and in Norway for instance we don't have an auction system when it comes to licensing the government say here there are some blocks that we would like to offer those interested apply for a license and they apply the government or the ministry of all-in-energy basically puts together the companies that will be in a license and they decide who the operator should be based on a proposal in that system it's possible to evaluate the competence of the licensees and also the operator in a system like that and to me the decision who is going to be the operator is the most significant decision that is ever taken in the lifespan of a license because that's a regulator you have to deal with the operator the next 20, 30, 40 years so it's a crucial decision in Norway too as I mentioned we have strong unions very competent people and they are also behind the safety delegates that are offshore on the facilities so the safety delegates have backing by the union and thereby the safety delegates are strong you can't fool them back with them right etc etc so it's just illustrates that the working life rules of a country is very important when you design a system can you comment about the skill set of the people where do you draw your people from? basically university degrees all our professional people have a university master's degree or something like that a lot come out of industry retirees or no? well we hire people from industry and industry hire people from us so it works both ways we know so the people we have they come from different types of industries and some also out of academic universities that sort of thing so it's the competence in the organization is very good and therefore dialogue with a competent operator is more or less on an equal basis right? so and that was one of the problems with what I just called traditional inspector you know to discuss a risk issue requires totally different competence than to discuss an issue related to a valve or a gauge or whatever thank you very much one of the reasons that we ask for participation of our audience is because it helps us learn as well we have a couple of simple rules if you can identify yourself when speaking and asking a question wait for the microphone second rule the third one is to the extent that you can pose your question in the form of a question that's always really helpful so please let's go ahead David Hi, David Goldwyn US Department of State we spent a lot of time giving advice to developing countries on how they should safely develop their oil and gas sectors but Robin I hear you saying essentially in the US we need civil service reform to be able to pay people at a scale that will be competitive with industry and Norway has a very sophisticated academic and industry complement of human resources to draw from what system do you advise for the Liberia, Sierra Leone, Ghana and other countries which have minimal pay scales and very thin capacity for governance in general is it the safety case is it better compliance is it some different form of self regulation what advice should we give them the first is that in the United States government there are exceptional organizations like the National Institute of Health which has a different compensation program and I would argue that if you want to get the best you're going to have to pay them properly and they're going to have to have those kinds of skills and I think that you're going to need the equivalent of brain surgeons to understand some of the stuff this is very complicated and very sophisticated so to the United States I think that's one of the things to keep in mind I think that in terms of countries again I couldn't agree more with Magden I tried to make the point on my chart part of it is how the countries themselves work you were saying what is the fabric what are the role of labor unions what is the competency of the government you know what is the educational level I think one of the things that would be very helpful is if frankly there was an international program that some of the more advanced countries such as US, Norway, UK, Australia and Brazil provided some services I would point out that you know for example countries small countries have air traffic controllers and they're competent well the way they do it is it's all tied into a global system now oil is very fundamental to the sovereignty of countries and they're not going to give up their sovereignty but I think by the same token to create a pool and some standards the other thing of course is that national oil companies are those of us who have been in this racket they're completely different animals and they're very unlikely to give up any of their sovereignty so how do you make it easy for people to understand and how do you make it clear what best practices are there's an organization of regulators but I think that what you need to do is to start getting companies and service companies one of the things that's happening in the industry is there's a lot of local content and you'll see that they're particularly in shallow water indigenous drilling companies, boat companies a number of different service companies that just don't operate at global standards but the fact of the matter is that the oceans particularly you know they're really one massive ecosystem and it would make sense to have some kind of they may be voluntary but uniform standards and make it easy for them to do it. Any questions? We have a microphone coming. Sorry, Ken Friedman, U.S. Department of Energy. How much dialogue do you have with other countries in Europe relative to this issue and also how do you measure your success? I mean given the history you can go five years, ten years and not have a major incident does that mean you've been successful? Do you have other ways of measuring it? Thank you. We have very good dialogue with our fellow regulators in Europe so we have a group called NSOAF North Sea Offshore Authorities Forum and we also have a group of regulators called the International Regulators Forum and in IRF the U.S. with the former BOEM is with us there, Brazil, Australia, two or three countries in Europe, etc. So it's more an international group. So we work, we have initiated work working groups, working different issues both in Europe, NSOAF but also in IRF. We recently organized an IRF conference in Vancouver and there of course the two blowouts were on the agenda, etc. So the cooperation between regulators that is getting better all the time I would say and it's necessary because typically the regulator sits in his or her corner in a country while the industry is international they have groups, OGP, all of these organizations so they regulate the needs to get organized a little bit along the same lines therefore these two groups are mentioned. Success, how do you measure success? I said we are risk based. So what is our goal in life is to reduce risk and how do we know if we manage together with industry to reduce risk? Well, we have to measure the risk picture in the industry and we do that and together with industry and again the unions we develop a yearly report painting the risk picture in the Norwegian industry and there based on trends you can see how the risk is moving for certain elements up, down or whatever and it's easy to initiate action when you have a negative risk trend in an area. So that's the way we do it and but again it's resource demanding it's very sophisticated methodology it's no easy thing to do but this report is that we publish, it's public you'll find it on our website, it's public but that's on the industry level the companies can go in and look at company level and we can of course too and we can also look at the platform level so you break it all the way down but what we produce and make public that is the industry picture, not the rest but we use the rest to put priority where should we use our resources what should we look at, who should we talk to, all of this so it's a very good document for us when we put priority to issues we can't do everything, we have to prioritize so it helps us a lot in that and thereby you also get information about are you successful or not we had a negative development in the hydrocarbon releases gas releases and gas, free gas is a dangerous thing should be inside pipes and vessels and all of this not on the outside so we had a lot of negative development and then pointed this out to industry and said look at this this is unacceptable, this development there who is the problem owner, that's the industry the industry, you have to fix this problem and they did, started a project and we set up 50% reduction in three years and industry achieved it so then we suggested to industry why not another 50% in three years and they managed to do that in two years actually but the third year it was higher again thus illustrates, it needs continuous attention excuse me, my sense also that again with the concept of safety case of the burden shifting the companies for continuous improvement and if there's a lesson that can be learned somewhere else and it can be applied and that's, as I say, that's very different than the prescriptive just check the box and the companies themselves are very used to the concept of continuous improvement but how do you make things more efficient and say, I mean, that's the way they think governments don't think that way and they don't in the past haven't thought this way and this is the way to shift it around I think for me as a regulator there are two key words and you just mentioned them it's prevention and it's improvement those are the two key words okay you both alluded to the Arctic a special set of circumstances given the length of the drilling season the ice, the ecological, environmental conditions is there a separate approach or thought that you would give to that or experience you have with that? the activity in Norway is moving north but not into ice yet so it's colder, it's dark, all of this so what one is looking at now is evaluate the standards that are being used for steel or whatever and they take the temperature, etc. etc. and also protect the clothing for the workers there are all of these more soft issues that comes along with dark and cold weather so all of that is being looked at now the basic regulations will not change because they are functional so they are just as well and they are risk based, right? so you don't need to change the regulations but you may have to do changes to supporting documentation like codes and standards and guidelines and that sort of thing but the formal framework, you don't need to change Robin I think there's a feeling you have the sort of offshore and Arctic waters which is sort of the Norwegian case and then you get the true high Arctic above the Arctic Circle Beaufort Sea kind of thing and that's really very different and I think there's first the question of drilling activity and how disruptive it is to migration routes of bowhead whales and things like this and what kind of damage which is really not well understood the second thing you then have is the prevention of spills but then you get into also then the area of spill containment and cleanup and what it would be like cleaning up a spill in negative 40 degrees when it's dark 24 hours a day and people can't go outside more than 15 minutes I don't know how you do that obviously you just prevent it but it's so I think the challenges as I say for the Syharktik are the burden on the companies will be very high and I know that some companies are very sensitive to this they want to proceed and they're spending a lot of time and money and thought to be able to anticipate these but I think that the the challenge is seen as really on a different order of magnitude Bruce Everett Georgetown University Robin touched on the airline industry and it seems to me that we have a pretty good regulatory structure for the airline industry with high degree of government expertise strong industry government cooperation very international cooperation do our speakers think that that's a possible model for the US to use for offshore regulation I think the challenge so far is that people have got to stop kind of pointing fingers at each other and get to what it is they really want to try and achieve and the one thing about the airline industry is that planes literally take off in one country and landed another across through it so it's it's a different kind of an approach but I think that we've got to take a more sophisticated approach and I think the first thing that politicians and policy make to do is figure out what it is they really want to achieve and they haven't figured that out and I think to change the the system that I know some high-powered lawyers here this morning that if you start changing the system we have a very prescriptive system in everything and to change the legal system offshore oil which gets into lots of different other laws is very complicated and but I think I just I don't see how you can regulate any advanced industry now given a prescriptive system where people check the boxes I just don't and I don't care what it is and somehow we've got to change it and I would argue that that the offshore industry given the experience of places like Norway which have been relatively successful and there's a real logic to it and it it harnesses the enormous ability of these companies again I cannot emphasize for those of you who have a chance go see the scale of this thing in the Gulf of Mexico it's really unbelievable and how do you get that working for you rather than against you it's it's got to be collegial it's got to be sort of a team approach it can't be adversary whether the airline industry I don't know enough about the airline there are other people who know more about the airline industry than I do I can't say Robert thank you so I'm Robert Grant from the British Embassy here in Washington clearly the prescriptive approach hasn't got a particularly good reputation amongst you two gentlemen and my question really is if the US is going to move in direction closer to the UK and and to Norway for the various reasons that you've outlined because of the technology because of the capacity and the regulators to actually inspect in a way that was perhaps the case previously how you're actually going to do that I mean despite the fact that you two gentlemen seem to think that a prescriptive regulatory approach is not ideal clearly the culture here is is somewhat different you just have exactly as you just described the attitude towards companies towards the oil industry particularly since Macondo is is not particularly positive I think we should probably just say that but you said more broadly that industry in general are treated as a body that needs to be watched and observed and held to account so I just wonder if assuming one does agree that a prescriptive approach is perhaps not the most ideal approach and that we could do better perhaps by moving to something closer to what is done in Norway and in the North Sea how on earth do you get there and how you bring the people along with you? If I may make a suggestion I would take a safety case approach to this and I would go back to the fact of the matter is that the the biggest operators in the Gulf of Mexico are Shell and BP and Chevron and Anadarko they all operate under safety case and they you start with the number of companies that know how to work with safety case and if you went to them and said okay how do we make this work just I mean to shift the burden rather than again people writing things sit down with the company say how do we make this work there are a couple of things we want to achieve as policy makers and then the companies had to do it I think if you again if you leave it to bureaucrats to write something out the size of the New York City telephone book I think you know what you're going to get which I don't really think in the end is going to solve the problem does that make sense? Again a couple of factors that I think is very important to evaluate because one has to evaluate as I indicated earlier what is the smart move to make so first of all what's around us right well we have the petroleum industry I don't know too much about the petroleum industry in the US in the Gulf but I hear there are many small operators there so there may be a competence issue maybe a capacity issue with the companies and needs to be looked at etc etc so to get a good understanding of what the industry is all about and then ask the question what is the smart way for regulator in the US not in Norway but in the US to go about regulating this kind of industry that has a tremendous span possibly competence-wide and all of this it's there's no easy solution to this because if one selects one model safety case then one has to look before decision is made one has to define what competence the regulator have to have in order to be able to operate such a system and also the industry the industry must have competence in this they must understand the risk approach and many companies don't do that they don't understand the former say good risk approach so that's a lot of issues and questions and I think a thorough discussion around these things before any decision is made I think it's vital that one does do that point briefly is that our system of advocacy in the American petroleum system is kind of lowest common denominator and I don't think it's going to be acceptable this time around and I think one of the real challenges is going to be for independent companies to be able to demonstrate just your point that they're capable or to find a system a collective system as on liability issues so that they can participate and from our standpoint in the golf as we look at it we've modeled the golf and everything like this the independence play a very important role in developing this yeah and just Robert to put it in context too you have a specific perspective from the UK on this specific instance it struck me that that one of the things that that did happen over the course of time over the last six months right so there was a range of legally compliant guidelines for well-designed equipment use operational standards that kind of stuff that's been compressed now to down to kind of best practices when you agree with that and I actually think the collaboration so once the president made the decision earlier in the spring to continue with the offshore development it was in part based on as Robin said the need for this is one point six million barrels a day right so it's jobs it's the economy it's national security it's homegrown resources right I can tell you from conversations we've had that the White House was both surprised and annoyed if that's the right word that thirty days after that we have a spill this magnitude after being assured that it was a relatively safe the track record historically was great and all of this happened we know how to deal with it so then there's this kind of learning curve in the pendulum swung back my sense is that over the course of the summer that the collaboration and it started out being very confrontational but the collaboration whether it was with Exxon or Shell or slumber jay or Chevron in addition to BP there was a lot of discussion at interior at the White House in a number of different places about how the best ways to approach this and I think there's a new found respect on both sides now sorting that out in the political process setting out the liability that's going to be a way forward that we're going to have to figure out but this notion of demonizing industry whether it's the financial industry or the oil industry you know the insurance companies we've got to figure out a way to do that better over the next two years or we've got nothing going forward I will come back to that thought about the election Sally cornfield department of energy I have a question regarding the applications that come in in Norway and I know that that you accept them rather than approve them but how do you work to make sure that the that paper work that doesn't become a phone book and doesn't become something that is just regurgitated as boilerplate but actually is meaningful to improve safety as you go forward that each one is really looked at at a risk basis and takes in appropriate considerations we operate the consensus and that means that companies that won't have instance to the drill exploratory well they have to apply for consent to do so and we say yes or no to to that application basically it's no it's nothing to do with approval or anything like that but through the application they demonstrate to us that they are capable of doing the job safely so we say yes I can't tell you but the content no way the example I took exploration well they they have to refer to the rig they are going to use and the rig contractor has to have from us and an AOC as it's called that this acknowledgement of compliance that the rig complies with Norwegian regulations and that the crew on board are competent and all of this stuff so that AOC system is valid for all say floating rigs that are flagged in a ship register somewhere so that's a system that we operate and it's a very thorough system because the drilling contractors in Norway they did not understand the regulations properly there were a lot of difficulties with that so the decision was made to go for an AOC system it's not the safety case system it's much wider in scope it has all working environment issues noise what have you living quality facilities all of it in there then in the consent application the operator then refers to the rig he's going to use demonstrate to us that the rig is capable to do the job that is planned to do that the work scope for the rig you know water depth loads what have you all of that is within the envelope of the rig and then of course come up with our inform us how the well will be drilled the design of the well and we say yes on all of this and we have different types of consents at milestones in the industry activity so for instance to take a facility into use build a new one take it into use offshore requires a consent this consent system then gives us the ability to work with the word prevent and now we have a lot of new smaller companies in Norway too some of them are brand new they hardly have any experience brand new and we as a regulator from a safety point of view has now had to say no to consent applications from such companies because we have decided after studying the companies and all of this that they are not competent and they do not have necessary capacity to to handle the job so that's a new situation for us will never be earlier use those arguments to say no but from a prevention point of view we can't just can't take the risk so therefore it's no so when you talk about competency and ability does that extend also to liability in the event that there were something to occur? we do not look at liability if you are in economics we don't look at that that's another minus way that looks at those issues okay fair enough Lou Watts ex-PFC Energy I want to say something about culture and then ask a separate link question to both of the speakers I sit on the board of the largest crisis management company in Europe since the Macondo spill almost all the requests we've had for audit and assurance have come in from boards of directors investors in the insurance industry and when we go in and look at these and it's not just in the oil industry the single thing that you can pick up which is common across all is problems with culture now I'll tell you a little story and you'll see why I'm asking this question I worked for 25 years for a super major I actually worked in Norway and Norway is in my experience unique in as much as there's total respect between the operator and the service industry and I'm going to ask a question about that in a moment I had the misfortune to manage one of the biggest blowouts which is not on Robin's list in Nigeria we lost 18 people in 1990 so you can add that to the list as well what was one of the major problems? Culture I've also worked in the service industry and when I went across to the service industry I was absolutely horrified in the way that the majors and the operators treated the service industry and it made me reflect on my career and Robin knows this I hang my head in shame the way I treated the service industry so my question is this and by the way the reason this is important you can have the best safety case in the world but what actually happens with an incident on the rig is down to individuals so my question to Magna is first of all the good dog is what is unique about Norway that allows that to happen and my question to Robin is in the context of what we're discussing and the US is one of the worst countries for this what needs to change from a cultural point of view? It's a challenging word and certainly as I've indicated there are differences in culture back in the 1980s based on the prescriptive approach there was sort of no trust between us as a regulator and the industry there was a sort of arguing trying to... well, there were clashes, hard words that sort of thing so that did not facilitate improvement discussion around how can we together go about changing things in order to improve it was as I indicated in my little talk it was a very difficult hopeless situation and it needed to change so therefore we certainly based on this discussion the role was the role of the regulator was the role of industry after clarifying that and agreeing on a role description we were able to start working together because it was obvious at the time if we as a regulator are going to achieve our goal namely to improve continuously improve safety in the weeds and waters we need to have the industry along because we can't do it as a regulator we are not out managing safety every day that's the industry that does that so just to recognize these that we as a regulator totally dependent upon the industry and all participants in the industry not just the operator the dwelling contract of service companies all of them and of course all of these have their very important role in the industry and that role should be respected fully and they also have duties the individual participants of a service company have duties that they have to take on board they are put in the regulations applicable to them etc so at least we ended up with that we need to start the fresh and we started based on this role discussion to change the working relationship between ourselves and industry and within industry and a simple thing why is it so that the contractor a person working for a contractor shall have the worst room in the living quarters because he is employed by a contractor you know situations like that it goes back to mutual respect for the different parties all of this and create a working relationship because basically industry is not in the industry for safety reasons they are operating a business but when it comes to safety in that business the goal of industry and the goal of the regulator are more or less overlapping because an accident like we have seen here in the States now it's so expensive it's a company of reputation you know all of this you know makes a company I hope to do its best to be the best safety company in the world so if we can recognize this together the regulator the industry work together etc in our case also with the worker unions and safety delegates everybody is on board that is a situation we have in Norway to a large extent we disagree oh yeah we are not agreeing on everything but at least we work together Lou I think your point is a very very good one one of the big differences between Norway and a lot of other places is one going back to Magnus earlier comment of how a society functions it's a very high consensus society secondly it's a very high cost operating environment so you know frankly if you have more costs related to safety the government ends up paying for a lot of it and third you have very powerful labor unions and the offshore and they insist on safety for obvious reasons and the offshore in the United States isn't organized at all so you have something really sort of cultural structures unique in Norway I think that your point is very well taken that the relationship between the operators in the service companies is very adversarial the discussion is generally just about cost and safety costs and people don't want to bother with it and obviously that's unacceptable I think one of the virtues of safety case is that the operator and the contractors are meant to be all in this together and they are meant to collectively have anticipated the problems whereas in the current system it's just the operator the operator you know provides the environmental impact statements and things like that and so if you make it collective so if the drilling companies and everybody are in it together and it's not you and it's not us versus them it's we're all in this it's us together but I think the system is the way it's structured now I mean it has led to a lot of I think it's deeply flawed makes us all think about low cost spitters Nate you had a question Nate T. Tai from Statoil just a question with regard to you know assuming or if we do move in a safety case direction Robin there are also a lot of structural differences between Norway and the US for example the governing laws for example the Arakanalschev Lands Act and other implementing laws there it takes a less holistic approach than the Norwegian laws with respect to from the as Magna referred to the leasing rounds and it's a very much they put the burden on the operators to explain how they're going to develop fields and projects and in the US it's it's a very money based system how you are awarded a lease so there seem to be some procedures and processes before you even get to a safety case that you that you either could choose to revisit or do they make sense given a safety case type of environment it's kind of like putting a round peg through a square hole will this fit and that's in this type of environment given the structural kind of dynamics the US already has because those would have to be revisited in a political process by Congress potentially and we all know how that could potentially go I think that the this really isn't that complicated an issue for larger companies because they operate under safety case around the world they have track records I think where life gets really interesting is with the independence and that a system has to be found for the independence to be able to either singly or collectively and I honestly believe it's going to be a collective answer otherwise these companies just can't afford it of ways to deal with the number of these issues but as I say the the majors know how to operate under this and I don't think it's that complicated but it's it's for companies that this is something new and and you have some independence are very very smart people they went to Wall Street they raised a couple billion dollars and went out got some leases and and I assume the lady who does health safety environment also does the quarterly earnings releases and hands out parking permits you know the 30 people in the company and they you know by the seismic data from Schlumberger they do this this there's no it's a virtual company but when there's a spill again say what you like about BP but the resources that BP put into this thing are just almost unimaginable and so somehow the independence have got to be able to respond to this okay since this is a political town and we're still suffering through the aftermath of last week's activity you want to comment about the impact the election I will give you a pass on this list you want to weigh in on the politics of Washington but I think that the with the Republicans getting the House and Democratic leverage reduced in the Senate I think the the chances of a sweeping overhaul in Congress anytime soon or highly unlikely and I think the whole game is going to shift to the administrative side of the House ticket interior and EPA but there are a lot of agencies involved in this that you'd be surprised but I would argue that what would be very helpful if all of the agencies had a consistent theory of management of the offshore so there's a real logic to what they're doing otherwise you could have OSHA going in one direction people going all these different directions and that just because you've lifted a moratorium doesn't mean drilling activity will start and all you need is one administrative agency to say no and that's a moratorium and so I think this is a real challenge to the administration is going to require some real leadership because different organizations have different areas but if you want to get this going and this is the point I tried to make right at the beginning this is a big deal there is real money here a lot of money and that frankly if this if this industry is permitted to founder it'll be a you know there'll be hundreds of thousands of high-paying jobs at risk which in 2012 I don't I wouldn't want to be responsible for losing those jobs we've been doing this for quite a while I let me just tell you I this has been one of the more substantive discussions and it's in part because of your thoughtful questions and in part because our excellent selection of speakers made by you now actually there was Lee and Lisa and Max and Scott and others let me just take one final question then I just want comment to make go ahead please yes I'm I'm Pete Johnson with the National Academy of Engineering and I would just like to ask the speakers to address the the subject of creeping risk that comes into operation such as the Macondo well problem because I think both speakers have have mentioned the the the good record of the oil industry in the Gulf but the good record of the oil industry in the Gulf was is sort of based on much less risky operations in the past and as we get into deeper and deeper water where we're reaching the limits of some of the technologies and we have to anticipate that risk rather than go back to saying how good we did in the past and some examples of this are that I noticed in Norway that there is some organizations that have evaluated deep offshore blowouts on a on a worldwide basis look at the North Sea looked at the Gulf of Mexico and and there are good indicators there about what kind of risky operations we need to look out for and you know and and Mac the Macondo well operations was just on the edge of that but nobody really recognized it because nobody paid much attention to these looks at past indicators and and and those past indicators were available there you know they were out there everyone had them but but no one paid much attention to them so I I wonder how any kind of a safety case or whatever kind of regulator can can pay attention to this problem of as we get into more and more risky operations how do I identify the future risks rather than based on the past past operations try this but I would say that the trick in this is don't have the government trying to anticipate future risk get the companies to anticipate future risk well we had a system which didn't encourage them to do that I mean if you check the box you're okay and clearly that can't work in the future and and it's if the the to me the fundamental problem was that the the money the technology that went into exploration and production believe me every possible advance every possible risk to the success of those operations was thought through very very carefully safety was the area that people said the record's okay don't worry we know how to do it people are sure to do it and they really hadn't and what you need is the same level of care and preparation and thought to go into the safety side of the house that goes into the sort of business side of the house every business whether you're making jelly donuts or whatever there's always a tension between production and safety and I think frankly the became very heavily weighted on the production side and the safety side when they were using straw and stockings and golf balls clearly we weren't at the state of the art here and frankly in nine months the level of earning went up enormously and so anyway that would be my comment. I think the risk talking about that is that is a risk that needs to be managed by the companies that are exposed to the risk and but to be able to do that they need to know about it that it is there and that could be a role for regulator to ask a question there's a risk here it looks like this how are you managing that and who is managing that who has the competence and if you get into a more sort of cultural area that is very difficult to you know to dig into and it's it's challenging and therefore you need well qualified people both in the operating company and contractors if that is relevant but also in the regulators organization because they are most important thing a regulator also can do is ask questions not give answers but ask questions have you thought about so once have you started so once do you know the technical condition of your separators how do you know etc. you ask questions you don't say you do so you do so because as a regulator you are not an expert in operating petroleum facilities that's that's why we have companies they should be expert in this and therefore competence capacity and all of these questions are so very important but talking about risk just a one final moment for me is that the bow tie you showed on the board here if there is one regulator that deals with the left hand side of the bow tie that is of tremendous help when approaching the issues from a risk point of view. Absolutely so we all share slightly different perspectives on this and I take your point we were one of the largest operators in the Gulf. I was with pens well for 20 years and our track record was pretty good. I would argue with the number of wells. It's not that companies didn't know that deeper wells and more difficult wells and high pressure wells bring different risks. It's your approach and my earlier point about compacting down what was legally compliant to a set of best practices that are now more narrowly defined. I actually think one of the holes in this whole thing there were a lot of gaps exposed by my condo right but one of them was on containment and capture that because the track record and maybe the overconfidence with things like blowout prevention were so significant that a lot of the things that we saw on the surface whether it was burning or you know booms or skimming to that extent that these are really kind of 1980s that have moved a little bit because we haven't had a deal with that I think the industry as Robin said has learned tremendously but more importantly has applied what they've known over the last six or eight months to increase that capability. So we still have things to learn things will continue to change but it's how to mesh up the regulator with the operator. That was 1979. Yes. And so in 30 years we learned nothing from that because you know the biggest problem with Exoc was that it kept flowing for 10 months and nobody knew how much was flowing but it flowed at the rate of you know many thousands of of barrels a day but but the problem with Exoc was that there was no containment system that worked and the exact same problem with Macondo what there's no containment system that that worked for a long time. Yeah. So I think the difference is right so that over the 30 year period prevention and operational safety got better but if the holes in the cheese were to be aligned you're right. This is the containment and capture didn't work. The success on relief wells is 100% right. So the fact that it takes three months is not acceptable and I think that's one of the things that's being worked on to get a more expedited view but the left side of the bow ties prevention side better well designed anticipating a wider range of instances where things could go wrong and then having the capability to respond to do something intervention at this point. So on one side this is a bias here but on one side you might say that so you saw the vision of the flowing well for 90 days. That was extraordinary that you even saw that but the fact that you can actually intervene a mile down with that temperature and that pressure now using remotely operated vehicles with handhole controllers to do what they do we still need to improve but things have moved a lot since that stock I would argue so let me thank you all for two things there's a number of people that actually showed up at CSIS that obviously didn't read but you all did so thank you much for paying attention to that thank you for joining us for the series because it's been a learning experience for all of us and please join me in thanking our speakers this has been terrific.