Strengthening the Safety Culture of the Offshore Oil and Gas Industry (2016)

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1 The offshore oil and gas industry in the Gulf of Mexico is among the most developed in the world; it provides thousands of jobs in the Gulf Coast region and meets a sizable portion of the energy requirements of the United States. In the Gulf of Mexico as of November 2015, 33 mobile offshore drilling units (MODUs)1 were operating in water at depths of up to 10,000 feet, and more than 2,500 platforms2 were operating in shallow water. In 2013, federal offshore oil and natural gas production in the Gulf of Mexico accounted for 17 percent and 5 percent of total U.S. crude oil and dry gas produc- tion, respectively. According to a February 2016 report of the U.S. Energy Information Administration (EIA), oil production in the Gulf is expected to account for 18 percent and 21 percent of total forecast U.S. crude oil production in 2016 and 2017, respectively, even as oil prices remain low. The EIA projects that the Gulf of Mexico will produce an average of 1.63 million barrels per day (b/d) in 2016 and 1.79 million b/d in 2017. Although drilling and producing oil and gas are intrinsically haz- ardous activities, the early history of the offshore oil and gas industry demonstrates priority given to production over safety as a result of con- stant pressure to recoup the huge investments made in leases, struc- tures, equipment, and personnel as rapidly as possible. It was only in the late 1960s, after a string of high-profile disasters, a growing number of injury lawsuits, and increased media scrutiny and public demand for worker and environmental safety, that the industry and the government decided to make offshore operations safer by way of improved work practices, technologies, designs, and regulations. 1 MODUs are facilities used for drilling and exploration activities. The term refers to drilling vessels, semi- submersibles, submersibles, jack-ups, and similar facilities that can be moved without substantial effort. 2 A platform (also referred to as an oil platform, offshore platform, or oil rig) is a large structure equipped with facilities and equipment for drilling wells, extracting and processing oil and natural gas, or temporarily storing oil prior to its transfer to shore for refining and marketing. Most platforms also have facilities to house workers. Summary

2 Strengthening the Safety Culture of the Offshore Oil and Gas Industry Inconsistencies in the collection and reporting of information about accidents and injuries in the early days of the industry make it difficult to determine accurately whether incident rates and safety culture improved after these changes were instituted. However, reports based on incomplete data appear to indicate that the intro- duction of new regulations and practices in the 1960s and 1970s improved the offshore industry’s occupational safety record in the Gulf of Mexico. Between the late 1990s and 2009, the offshore industry suffered damages due to hurricanes, and nonfatal and fatal accidents continued to occur, but the industry had not experienced a catastrophic accident in many years. This trend ended in April 2010 when the Macondo well blew out, leading to an explosion and fire on the Deepwater Horizon drilling rig. This incident resulted in 11 deaths and 17 injuries and spilled an estimated 3.19 million barrels of oil into the Gulf of Mexico, causing immense marine and coastal damage. The economic impact of the incident totaled $8.7 billion in lost revenue, profits, and wages, as well as the loss of about 22,000 jobs; BP also had to pay at least $30 billion to cover fines, penalties, operational response, and liabili- ties. The blowout and spill, which caused the worst oil pollution in U.S. history, also put the safety of offshore drilling and production under tremendous public scrutiny. The Chemical Safety Board attributed the accident to a complex combination of deficiencies: process safety safeguards and inadequate management systems and processes meant to ensure safe- guard effectiveness, human and organizational factors that created an environment ripe for error, organizational culture focused more on personal safety and behavioral observations than on major accident prevention, and a regulatory regime unable to deliver the necessary oversight for the high-risk activities involved in deepwater exploration, drilling, and production. Other reviews of the accident—performed by the National Com- mission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, the National Academy of Engineering and National Research Council, the U.S. Coast Guard, and the Bureau of Ocean Energy Management, Regulation and Enforcement Joint Investigation Team—also identified the need for reforms to transform the safety culture of the offshore oil and gas industry.

Summary 3 DEFINITION OF SAFETY CULTURE The term safety culture was coined by the International Nuclear Safety Advisory Group during its investigation of the Chernobyl power plant accident in 1986. Since then, the definition of safety culture and the iden- tification of the factors that strengthen such a culture have evolved. At its core, however, safety culture remains an aspect of the larger organiza- tional culture, encompassing the organization’s values, beliefs, attitudes, norms, practices, competencies, and behaviors regarding safety. The U.S. Nuclear Regulatory Commission defines safety culture as “the core values and behaviors resulting from a collective commitment by lead- ers and individuals to emphasize safety over competing goals to ensure protection of people and the environment.” Based on this definition, the Bureau of Safety and Environmental Enforcement (BSEE), one of the regulators of the offshore oil and gas industry, issued its Safety Culture Policy Statement in May 2013 to promote safety culture in the industry. The policy defined safety culture as “the core values and behaviors of all members of an organization that reflect a commitment to conduct business in a manner that protects people and the environment” and articulated nine characteristics or elements of a robust safety culture: • Leadership commitment to safety values and actions, • Respectful work environment, • Environment for raising concerns, • Effective safety and environmental communication, • Personal accountability, • Inquiring attitude, • Hazard identification and risk management, • Work processes, and • Continuous improvement. Although there exists no single definitive set of elements that consti- tute safety culture, the various versions of those elements overlap con- siderably. Those articulated by BSEE mirror those identified in major scholarly reviews of safety culture research and leading frameworks in other industries and are grounded in empirical research. Given their theoretical and research foundations, these elements represent the best available information about effective strategies for establishing and

4 Strengthening the Safety Culture of the Offshore Oil and Gas Industry strengthening a safety culture and thus are particularly useful for the offshore industry. Recommendation 2.13: The committee recommends that the offshore industry and government regulators adopt the BSEE definition of safety culture and its essential elements as a guide for assessment and practice. BARRIERS TO STRENGTHENING A SAFETY CULTURE Immediately after the 2010 Deepwater Horizon blowout and oil spill, the American Petroleum Institute (API) created the Center for Off- shore Safety (COS), whose focus is on improving safety in the U.S. Outer Continental Shelf and addressing the offshore industry’s need to strengthen its safety culture. BSEE also made compliance with the Safety and Environmental Management Systems (SEMS) rule, which previously had been voluntary, compulsory, and subsequently released its Safety Culture Policy Statement. As a result of several barriers, how- ever, these and other recent initiatives are not sufficient to transform the industry’s safety culture. Leadership commitment to strengthening and sustaining safety culture varies among organizations in the offshore industry. Senior leaders and owners of organizations vary in their understanding of, commitment to, and engagement with the need to strengthen and sustain a strong safety culture. Leaders who reward productivity but do not consistently recog- nize safety performance or send intentional or unintentional messages that safety is not a priority, is too expensive, or is an effort made only to comply with regulations create an environment in which a strong safety culture (and safety) cannot be properly maintained or strengthened. The offshore industry is fragmented and diverse. Complex off- shore operations take place under many different organizational arrangements involving a mix of large and small companies that vary as to their internal resources for safety initiatives and their cultural values around safety. In addition, many segments of the industry have a diverse and multicultural workforce composed of employees 3 The committee’s recommendations are numbered according to the chapter of the main text in which they appear.

Summary 5 with differing safety attitudes and practices and varied educational backgrounds. Moreover, the cyclic nature of the offshore oil and gas industry translates to frequent reductions in experienced staff during downturns and subsequent employment and training of relatively in- experienced workers during upturns. Multiple relationships also exist among operators, contractors, and subcontractors on offshore rigs and platforms that can diffuse responsibility for safety and make consis- tent practices difficult to implement. Because of their differing safety perspectives and economic interests, offshore oil and gas companies do not all belong to a single industry association that speaks with one voice regarding safety. The fragmented nature of the industry, het- erogeneity among companies, and diversity among employees make it a challenge to set consistent goals and implement them through industry-wide agreements. The offshore industry’s safety culture is still developing. The offshore industry is gradually changing from one with a risk-taking attitude to one in which anyone can raise a safety concern or stop work on a job because of safety issues. As with many industries, however, a blaming culture still exists in the offshore industry, as well as a lack of systems thinking that results in focusing on the immediate proximal causes of a safety failure (such as human error) rather than system causes, includ- ing culture. Regulators need competence in safety culture. For BSEE and other regulators, traditional safety oversight has consisted of inspecting offshore installations to ensure compliance with a set of prescribed regulations. However, merely being in regulatory compliance will not ensure safe offshore operations. Responsible companies and pro- gressive regulators realize the need to go beyond regulatory compli- ance by embracing safety in a holistic manner. One challenge for all regulators is changing the mind-set of inspectors from inspecting for compliance to advocating for safety culture. To this end, inspectors’ skill set will need to be developed such that they are able to help off- shore companies implement a safety culture philosophy. The SEMS requirements instituted after the Deepwater Horizon accident are intended to shift the focus of the industry’s safety efforts from meet- ing minimum standards to striving for continuous improvement—a shift that is proving to be challenging for industry and regulators alike.

6 Strengthening the Safety Culture of the Offshore Oil and Gas Industry RECOMMENDATIONS FOR STRENGTHENING AND SUSTAINING A SAFETY CULTURE IN THE OFFSHORE OIL AND GAS INDUSTRY In response to its charge, the committee offers the following recom- mendations for strengthening and sustaining a safety culture in the off- shore oil and gas industry, along with a list of topics on which further research is needed to fill knowledge gaps with respect to strengthening, assessing, improving, and sustaining safety culture. Recommendations for the Industry Collective and Collaborative Actions Recommendation 6.2.1: Industry leaders should encourage col- lective and collaborative actions to effect change in an industry as fragmented as the offshore oil and gas industry. Historically, the industry has not offered its vision for the type of regu- latory system it supports. The industry should begin with a vision state- ment and a strategy for safety leadership. This vision should include a description of the regulatory system that best enables the accomplish- ment of these objectives, encourages continuous improvement, and enhances safety culture. While each company is responsible for its own safety performance, the industry as a whole should be collectively com- mitted to a culture that provides the best opportunity for maintaining a safe working environment. Recommendation 4.1: The offshore oil and gas industry, in con- cert with federal regulators, should take steps to define the optimal mix of regulations and voluntary activities needed to foster a strong safety culture throughout the industry, including contractors. To this end, the following specific steps should be taken: required par- ticipation in an independent industry organization dedicated to safety leadership and achievement; collaboration between regulators and opera- tors, contractors, and subcontractors in designing a safety system for all levels of all organizations in the offshore industry; and adaptation or implementation of an evidence-based decision-making process regard- ing safety that entails reporting of accurate and complete data, analysis of

Summary 7 causes as well as trends, and sharing of data across the industry and the regulators. In these efforts, it is essential that the industry and regulators go beyond ideas and possibilities to develop concrete plans for execution. Recommendation 6.3.1: The industry as a whole should create additional guidance for establishing safety culture expectations and responsibilities among operators, contractors, and subcontractors. Regulators should assist in these efforts and ensure consistency. Once the industry has agreed upon steps to take to achieve safety and environmental goals, all organizations involved, including operators, contractors, and subcontractors, should be responsible for developing their own strategies for executing this overall plan. In addition, the industry should decide which guidelines should be made mandatory for participants in offshore oil and gas exploration and production. To set industry-wide safety goals and expectations, the industry will first need to determine how operators, contractors, and subcontrac- tors can best be represented in an independent safety organization and what membership requirements should be imposed for working offshore. An Independent Entity Dedicated Solely to Offshore Safety Safety is included in the charters of a number of industry associations, but advocacy to support and promote their members is their primary focus, not identifying weaknesses and concerns relative to safety. Some associations have actively opposed past efforts to enhance offshore safety. Hence, the public may not always trust their claim that promot- ing safety or assessing safety performance is their first priority. Recommendation 4.4: The U.S. offshore industry should imple- ment the recommendation of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling for an indepen- dent organization whose sole focus would be safety and protection against pollution, with no advocacy role. COS, although a strong, pos- itive step in this direction, is nonetheless organized within API and therefore not independent of that organization’s industry-advocacy role. COS should be independent of API, and membership in COS should be a key element of the fitness-to-operate criteria for all

8 Strengthening the Safety Culture of the Offshore Oil and Gas Industry organizations, including operators, contractors, and subcontractors, working in the offshore industry. Regulatory agencies should support this requirement for participation in a single industry-wide safety organization. This would be one way for an independent COS, whose membership currently includes the larger offshore operators, independent drillers, and service companies, to expand its base of participants, engage the entire offshore indus- try, and secure sufficient financial resources to pursue safety culture initiatives. Safety Management Systems Recently, API’s Recommended Practice (RP) 1173 was revised by the pipeline industry with participation from the pipeline safety regulator, and it now includes elements that encourage companies to fully inte- grate safety culture considerations into their management programs. Recommendation 4.7: API’s RP 75 Committee should include a chapter on safety culture in the revised edition of this document, which is currently being drafted. Assessment of Safety Culture Assessment of safety culture is important because it helps companies identify strengths, weaknesses and gaps, and potential improvements. Without assessment, it is virtually impossible to detect and reinforce gradual changes that may be beneficial to safety. Recommendation 5.1.1: Operators and contractors should assess their safety cultures regularly as part of a safety management system. Recommendation 5.1.2: The committee strongly recommends that companies use multiple assessment methods, including, in par- ticular, the application of both leading and lagging indicators and both quantitative and qualitative indicators of safety culture. Com- panies should also apply a mix of indicators, including some that are more standard across the industry to facilitate ease of use and comparison across organizations and some that are tailored to the specific needs and concerns of their organization.

Summary 9 Assessment of safety culture requires objectivity, expertise, and sensitiv- ity to context. For some organizations, the process may require outside help initially, but having self-assessment and self-reflection capabilities is ideal as it creates a sense of ownership and accountability and encour- ages broad participation in the safety assessment process. Recommendation 5.2.1: Organizations that operate in the Outer Continental Shelf should consider their capabilities and priorities in determining to what extent they will rely on internal versus exter- nal expertise for assessment of safety culture. When feasible, orga- nizations should seek to acquire internal expertise over time so they can manage the process, interpret results, and increase their owner- ship and the relevance of the assessments and their results. Implementation of Change Successful culture change is a long-term effort, entailing considerable uncertainties and investments. Recommendation 6.1: Company senior leadership should com- mit to and be personally engaged in a long and uncertain safety cul- ture journey. Senior leaders should ensure that their organizations take advantage of resources available from other companies, industry groups, and regulators in strengthening their own safety cultures. Recommendations for Regulators Use of Safety Management Principles to Improve Safety Performance The regulators of the offshore industry (i.e., the Minerals Management Service/BSEE, the U.S. Coast Guard) and some industry representa- tives recognized in the 1990s that offshore industry safety programs needed to go beyond detailed prescriptive equipment regulations. Yet most offshore inspectors continue to focus on prescriptive equipment regulations, following a standard checklist and inspecting all operators in the same manner regardless of their safety records. Recommendation 4.3: Regulators should make greater use of risk principles in determining inspection frequencies and methods, such that operators with good performance records are subject to

10 Strengthening the Safety Culture of the Offshore Oil and Gas Industry less frequent or less detailed inspections. Inspectors should consider shifting from traditional compliance inspections to inspections that follow the safety management approach outlined in the SEMS rule. Audit results should be considered in developing inspection pro- grams and their schedules. Data Collection and Availability A commonly noted problem in studying accidents in the offshore oil and gas industry is the lack of complete and accurate data related to accidents and near misses. Recommendation 4.2.1: Regulators, with help from industry, should define the critical factors necessary for understanding the precursors to accidents, determine what data need to be submitted to which regulatory agencies, and establish mechanisms for regular collection of those data. Currently, BSEE accident and incident data are available to the public, but inspection data are not publicly accessible. Recommendation 4.2.2: Because accident, incident, and inspection data all are needed to identify and understand safety risks and correc- tive actions, the committee recommends full transparency such that regulators make all these data readily available to the public in a timely way, taking into consideration applicable confidentiality requirements. Summaries of voluntarily reported near misses or hazardous events, absent information that should be kept confidential, such as company names and facility identifiers, should also be released. Safety Culture Champions The nine characteristics or elements of an effective safety culture that BSEE released in 2013 are not well known in the industry, and BSEE lacks the means to move the entire offshore industry closer to these desired characteristics. Recommendation 4.5: The Secretary of the Interior, in coopera- tion with the Commandant of the U.S. Coast Guard, should seek prominent leaders in the offshore industry to champion the nine

Summary 11 characteristics of an effective safety culture identified by BSEE, develop guidance for safety culture assessment and improvement, and facilitate information exchange and sharing of experiences in promoting safety culture. Memorandums of Understanding on Promoting Safety Culture The three regulatory agencies that oversee aspects of the offshore oil and gas industry—BSEE, the U.S. Coast Guard, and the Pipeline and Hazardous Materials Safety Administration—all have initiatives related to promoting and enhancing safety culture but have no formal agreement to work cooperatively on such efforts. Recommendation 4.8: BSEE, the U.S. Coast Guard, and the Pipeline and Hazardous Materials Safety Administration should develop memorandums of understanding specifically addressing the concepts of and implementation plans for offshore safety culture and defining accountabilities among the three regulators. Assessment and Improvement of Safety Culture Currently, a considerable imbalance favors traditional compliance activ- ities by regulators rather than activities designed to help strengthen offshore safety culture, and the current offshore compliance culture reflects this imbalance. Influencing safety culture in positive ways will require new and different initiatives by regulators. Goals for offshore safety culture shared between the industry and regulators would help define new safety culture activities, such as coaching, sharing lessons learned, and independently assessing offshore safety culture. Recommendation 5.1.4: The committee recommends that BSEE and other regulators of the offshore industry strengthen their capa- bilities in the area of safety culture assessment by bolstering their expertise in safety culture through appropriate hiring and training and/or partnering with industry or third-party organizations. These bolstered capabilities would enable regulators to offer advice, train- ing, tools, and guidelines to the industry as it conducts self-analysis. Recommendation 5.1.5: The offshore industry should work collec- tively on the challenges of strengthening safety culture. BSEE should

12 Strengthening the Safety Culture of the Offshore Oil and Gas Industry support this effort by serving as a clearinghouse for and facilitator of industry-level exchanges of lessons learned and benchmarking. Future Research Directions Regulatory agencies, industry organizations, and other participants in the offshore industry need to work together to facilitate research and information sharing so as to advance knowledge and practice. The com- mittee’s detailed recommendations for specific areas of research illus- trate knowledge gaps in • Ensuring sufficient competence in an organization’s leadership and workforce to create and sustain an effective safety culture; • Assessing and sustaining safety culture in different types of offshore organizations (e.g., smaller operators, contractors, regulators); • Developing industry-level data on safety outcomes, near misses, and safety culture measures that can be shared and compared across orga- nizations over time; • Sharing information and lessons learned across companies in a frag- mented and diverse industry; • Encouraging decision makers to enhance safety efforts; and • Developing or identifying strategies for enhancing safety culture and determining the features of safety culture that have the greatest impact on safety outcomes.