What’s Going On With Offshore Safety?   Four Trends To Watch

In my last post I looked at the ways that the government agency overseeing offshore safety is addressing the challenge.  As a followup, here is a look at some of the trends impacting offshore safety.

The safety net is bumping into the bottom line in offshore oil and gas.  We are three years onto a truly savage downturn in prices and at least one Supermajor wonders if the phrase “lower for longer” should really be “lower forever.” Continue reading “What’s Going On With Offshore Safety?   Four Trends To Watch”

Did The U.S. Government Just Change The Game on Offshore Safety?

In the spring, the Bureau of Safety and Environmental Enforcement (BSEE) published its new rules on blowout preventers and well control for offshore oil and gas companies.    Most of the attention was focused on impacts to drilling operations through tighter regulation of blowout equipment, maintenance and mud densities.

However, a new analysis indicates that the impact may be much broader, forcing changes to the entire offshore oil and gas industry.   The analysis comes from the Van Ness Feldman law firm and it focuses on one small section of the rule.  

Under the section of 30 CFR 250.107 titled “What must I do to protect health, safety, property, and the environment,” BSSE added this:

(a)(3) Utilizing recognized engineering practices that reduce risks to the lowest level practicable when conducting design, fabrication, installation, operation, inspection, repair, and maintenance activities; 

The article points out three reasons why that is important:

  1. It applies to just about everything that happens on offshore leases.  Instead of specifically targeting activities which control hydrocarbons in drilling and production, the section of the regulations applies to the entire process of exploration and development.
  2. What does the term Lowest Level Practicable mean?  It doesn’t mean “lowest priced” and it may not even mean “reasonable.” One definition is “capable of being put into practice.” In BSEE regulations, a reference to “maximum extent practicable” means “within the limitations of available technology.”  Chances are the courts will have to weigh in on what practicable means here.
  3. It is now the law!  Industry experts will tell you they are always looking for ways to reduce risk and they are right.  The challenges of offshore work, the costs of making a mistake and the level of government oversight have driven industry to work at a high level of safety.  But now there is a regulation that says, if the decision is between two options, engineers needs to choose the one that presents the lowest level of risk and there are penalties for the operator and the contractor is that doesn’t happen.

How much offshore activity does this cover? Since almost all significant activities offshore take some level of engineering, it will impact a lot of activities.  How about well interventions?   Liftboat or crane operations? Pipelines that are regulated by BSEE?

What changes could it force?  Here is a partial list:

  • Construction and maintenance records.   No documentation, no proof the rule is being followed.
  • Documentation of engineering processes.  Engineering is usually focused on designs and processes.  Now it may need to look at how options were weighed in reaching decisions.
  • SEMS compliance, especially contractor oversight.  This has largely been performance-based, but this change could mean operators need to get into the decisionmaking process of their contractors.
  • Coordination.   What happens when an operator or contractor choice of the lowest risk option raises the risk for some other contractor or phase of a project?   For example, a larger BOP with redundant systems may be better for preventing a blowout, but it may be too big to be safely installed by the driller.   Who’s risk is more important?

This would be a good time to review your policies and decisionmaking processes, especially management of change.  If you want to make sure your safety management system addresses this new change, contact us at Info@lifelinestrategies.com.




BSEE Considers Risk-based Inspection Program

Logo & SEMSSmaller oil and gas companies operating in U.S. offshore waters need to pay close attention to the message that is coming out of Washington these days.   That message is that the government expects them to maintain high safety standards and focus on preventing incidents, regardless of their size or any unique types of hazards they may face on their facilities.  Now it looks like companies may face targeted inspections.

Here’s why. The government’s challenge in enforcing offshore safety and environmental laws is finding a way to even a very uneven playing field.  Offshore oil and gas operations are a world of contrasts.  Shelf and deepwater.  Drilling, production and decommissioning.  Old and new facilities. Large operators and small operators.  Each different type of operation has its own hazards and risks.

Yet BSEE must push for the safest and most environmentally sound approach for the entire industry.  The deepwater Macondo incident and the regulations that follow highlight the problem.   Macondo was a large-scale disaster, both in loss of life and environmental harm.  The goal of the post-Macondo initiatives was to prevent that kind of accident from happening again.   There may be little chance that a smaller facility could have an incident on a Macondo scale, may they do have more, smaller-scale incidents.

How can the agency address both large-scale and smaller-scale incidents?  Officials with the agency appear to be wrestling with just that problem.    Last month, BSEE Director Brian Salerno wrote in an online blog that there is a discrepancy in offshore safety.   The Center for Offshore Safety has released its second annual safety report and it shows that COS members did not experience any fatalities or and one loss of well control in 2013 and 2014.    However, Salerno points out that the overall safety statistics for the U.S. Outer Continental Shelf showed three fatalities and eight well control incidents in 2013 alone.  The Director also points out that in 2013, COS members reported 23 lifting incidents versus 197 for all operators.  He concludes that “The disparity in numbers demonstrates that the COS membership is comprised of companies that have made a real commitment to safety. It makes sense that their performance in preventing such incidents would exceed industry norms.”

He is not saying that other operators do not share the same commitment to safety, but it is implied.   COS’s members are generally deepwater operators who have larger and newer projects.  Many of them have sold off the shelf projects which carry the headaches of older, smaller and lower profit-margin shelf projects.  Who bought them? Generally the operators who are not members of COS.    Those operators need to pay close attention to the words of Director Salerno.  BSEE is holding them to the same standard as the largest, most financially sound operators.

But COS members also need to be careful about not resting on their safety record.  As we have seen deepwater incidents carry the potential for enormous consequences.

Where does BSEE go next?  The agency is sending signals that it wants to shift to a risk-based inspection program.  One of the bullet points raised by BSEE officials at the September COS forum was the potential to use “SEMS Maturity as a factor in the Risk Based Inspection program.”   That means BSEE could factor plan sophistication into its decisions on who to inspect and how often.   It could look at previous incidents, equipment maintenance or other factors and target companies that don’t have what Director Salerno calls “a real commitment to safety.”

This is not the time for either large or small operators to be complacent about their approach to safety.

Contractor SEMS Plans – Coming Soon/Not Here Yet

Logo & SEMS IIThe Center for Offshore Safety (COS) finished its third annual forum this past week.   As always it was a valuable event to gauge where the industry is on implementing the Safety and Environmental Management Systems (SEMS) rule.  One of the most prominent issues during the sessions was whether Contractors should have SEMS plans, which are currently only required for Operators.

The clear message was that operators would like their service companies to have SEMS plans that match up with their own plans and that they are ready to push for that to happen.  It is less clear how soon and under what conditions.

How is pushing for it?   The COS, which generally represents the largest Operators and Contractors, has two different committees working on the framework for a Contractor SEMS plan.  The first is looking at the audit protocols that would be used to measure a Contractor SEMS.  The second is looking at how it would be implemented. For example, would all Contractors be required to have a SEMS and would they all have to go through a COS-sanctioned audit?   Additionally, a separate industry group is rewriting the API RP 75 requirements that are the basis for the SEMS rule.  That group is leaning towards applying the RP 75 rule to Operators, Contractors and Subcontractors.   That makes it likely that Contractors (and possibly their subs) would need SEMS plans.

On a separate track, the Coast Guard is studying whether vessels should have SEMS plans.  BSEE has made it clear it thinks Contractors should have SEMS plans, but appears to be holding back on a requirement to see if industry does it voluntarily.

What would a Contractor SEMS look like?  At this point, two Contractors have voluntarily gone through a SEMS audit under the COS guidelines for Operators.   Schlumberger and Pacific Drilling followed the regulatory requirements for an Operator SEMS closely and simply adapted the parts that didn’t directly apply.

What are the sticking points?  One issue is what the plans would look like, but that appears to be a minor point.  Most of the elements of SEMS apply easily to Contractors, such as JSAs and Safe Work Practices.  Some parts would not apply, such as mechanical integrity for a Contractor that doesn’t take equipment offshore, and those could simply be left out of the plan.

The larger issue is how Operators would view a Contractor audit.   Some Contractors say the process simply shifts the audit costs from the Operator to them.  They say it only has value if the Operators agree to accept one universal audit.  Currently, they may have to undergo repeated audits from multiple Operators.

Cost is an issue.  For a large Contractor, the cost of a full  COS-approved audit may be reasonable, but smaller Contractors or ones that work in several industries may find the audit to be cost-prohibitive.   COS members are still wrestling with this and it may take a while to resolve.

What about other Operators?   COS represents about a dozen offshore oil and gas Operators, although they are some of the largest in the Gulf.  That leaves more than 60 other operators that are not in COS.  Most, but not all, of those would probably welcome a shared audit, partially because it takes much of the responsibility for audits off their shoulders and partially because it would represent an industry consensus on how compliance should be monitored.  However, how much faith they would put in a shared audit is still to be resolved.

What should Contractors do right now?   On the one hand, there is no immediate mandate for a Contractor to adopt a SEMS plan.  On the other hand, there are very good reasons why they should.  The first is that the requirement is clearly coming and experience has shown that it takes a year or two for a SEMS plan to fully take hold.  Starting now would help ensure that the company is ready.  The second reason is that the customer is starting to expect it.  None of these discussions are happening in a vacuum.  If there is a decision to require Contractor SEMS audits in a year or two, customers are going to start pushing for the framework soon.  It also makes good commercial sense at a time when Operators are paring down their Contractor lists.

If you need help developing a SEMS plan or performing the gap analysis to know how much work it would take to develop a SEMs plan, contact us at Lifeline Strategies.  We are here to help!

New Workshop Brings You Up-to-Date on SEMS

Logo & SEMS IIAs industry gets ready for the next round of offshore Safety and Environmental Management Systems (SEMS) audits, some clear trends are emerging.   While nothing is certain, here is a look at some of the changes that may be coming:

  • New audit rules will shift focus to safety systems – Beyond whether your company is complying with SEMS, auditors will want to know if Operators have systems to ensure compliance.   As a result, operators are likely to want to see a Contractor’s systems as well.
  • Major Operator expected to adopt red light/green light system – At least one of the largest operators in the Gulf is making plans to check every worker at the helipad or dock. If workers haven’t met all the system requirements, they could be turned away.
  • SEMS for Contractors – Industry is considering a program that would guide contractors in developing a SEMS approach that applies to their unique operations.
  • Focus on areas for improvement – Audits and data analysis have determined some of the areas that need to improve.  Watch for these to become focus areas in Contractor management.

Are you ready for the changes?  Managers and supervisors at both Operator and Contractor companies have responsibilities under SEMS.  How is your company making sure they have the skills and knowledge on SEMS to make sure the company is in compliance?  How do they keep up with the latest government interpretations and industry best practices?

The new SEMS for Managers workshop is specifically designed to do that.   This one-day, highly interactive workshop puts SEMS into plain English.   It presents both the regulatory requirements of SEMS and a plain-language look at how the programs is actually being interpreted in the field.

Two workshops are scheduled for the beginning of August:

Tuesday, August 4 – Lafayette, LAClick here for more information.

Thursday, August 6 – Houston, TXClick here for more information.

The SEMS for Managers Workshop can also be held at your facility for your staff.   For more information, email kenwells@lifelinestrategies.com or call 985-789-0577.

Offshore Vessel Odds & Ends

This one is for boat owners.  The rest of you can go on about your business.

Have they gone?  Ok, here are a few items that maritime companies need to stay on top of:

New training for OSVs and MODU personnel coming from Coast Guard  – The White House has finished its review and the Coast Guard is close to releasing a proposal that would ramp up training requirements for workers on MODUS and OSV’s for “responding to emergencies such as fire, personal injury, and abandon ship situations in hazardous environments.”

The Coast Guard hasn’t really explained what specific training is in this proposal  but it is significant that the background says it would apply to all personnel working on MODUS and OSVs.  Generally, USCG training requirements just apply to crewmembers; Think about how many people work on offshore vessels who are not a part of the crew, like the seismic crew on a survey boat or the drilling team on a MODU.  So this could be a dramatic change for the offshore world.

Add in last month’s proposal to require foreign vessels on the OCS to follow the same incident reporting requirements as U.S. vessels, plus last year’s proposal to require SEMS on vessels and it is clear the Coast Guard is following up on the recommendations that came out of its Deepwater Horizon investigation.

New STCW changes are here – They have been coming for some time, but the international STCW revisions are now in place.  The Coast Guard finalized the changes and published them in late December and last week it published nine Navigation and Vessel Inspection Circulars (NVICs) that detail how the changes will be implemented.   Much of it is highly technical, but the one dealing with basic training for seafarers is worth noting.     Under the new STCW rules, all seafarers need to renew their basic training every five years.  That means jumping in a pool, then swimming in a life preserver or immersion suit and going into a smoke room in firefighter gear.

No one can argue that these aren’t important skills on vessels, so what’s the problem? Well, one way industry has dealt with personnel shortages is by incentivizing older workers to stay on the job instead of retiring, in many cases working into their 70s.  We will be asking the group of workers with the highest medical risk to perform high stress tests.  Stay tuned.

Jones Act seaman liability – Vessel companies need to pay close attention to a recent Federal Appeals Court ruling concerning punitive damages in Jones Act court cases.    Under the Jones Act, when a mariner is injured, he is entitled to “maintenance and cure,”  living expenses until he is “cured,” which may last the rest of his life.   That can be a very expensive settlement, but in the past, boat companies were not on the hook for punitive penalties on top of that.

However, a recent ruling by the United States Court of Appeals for the Fifth Circuit found that the victims in a drilling rig accident on a Louisiana waterway may seek “punitive” damages in their Jones Act lawsuit against the company.  The case is named Haleigh J. McBride, et al v. Estis Well Service, is in line with some previous rulings, meaning that, unless the Supreme Court takes up the case, punitive damages are likely to become more common in Jones Act cases.  Read the ruling here.  Thanks to Chip Duncan of Duncan & Sevin, L.L.C. for raising this to my attention.