Designing Safety Regulations for High-Hazard Industries (2018) / Chapter Skim
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3 Applications of the Conceptual Framework: Case Studies from the Pipeline and Offshore Oil and Gas Sectors
3 Applications of the Conceptual Framework: Case Studies from the Pipeline and Offshore Oil and Gas Sectors
Pages 34-88
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From page 34... ...
A similar structure is followed for the offshore sector. A general survey of the offshore oil and gas industry is provided, and then the U.S., UK, and Norwegian regulatory regimes are reviewed.
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From page 35... ...
Among them are the characteristics of the industry and activities being regulated, the resources and competencies of the regulatory agency, and the broader policy and legal environment. The case studies are offered for these illustrative purposes, with no preconceptions about, or intention to assess, the safety performance of the two industries or relative effectiveness of the five regulatory regimes.
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From page 36... ...
General Characteristics of the North American Pipeline Industry A vast network of pipelines transports most of the natural gas and hazardous liquids, including crude oil and refined petroleum, shipped within the United States and Canada. As shown in Figure 3-1, the network consists of several system types that vary in size, physical properties, and use characteristics.
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From page 37... ...
On the other end are numerous gas distribution systems owned by individual municipalities and 3 Supervisory control and data acquisition. 3-1 3-2 FIGURE 3-1 Types of hazardous liquid and gas pipeline systems.
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From page 38... ...
For example, some older transmission pipelines cannot accommodate in-line cleaning and inspection devices known as "pigs" because their pipe geometries are incompatible. Some older gas distribution systems, which can date to the early 1900s, still contain iron pipe.
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From page 39... ...
The 2011 rupture of a corroded gas distribution main in Allentown, Pennsylvania, killed 5 people, damaged 50 buildings, and caused the evacuation of 500 people.5 The 2010 rupture of a natural gas transmission line in San Bruno, California, caused an explosion that killed 8 people and damaged more than 100 homes.6 Releases from gathering and transmission lines that do not result in fires and explosions can also be harmful to the environment, especially when lines pass through or near environmentally sensitive areas. For example, the release of more than 800,000 gallons of crude oil from a ruptured transmission pipeline in Marshall, Michigan, into a tributary of the Kalamazoo River resulted in the country's most expensive onshore oil spill cleanup.7 4 See Figure 1, https://fas.org/sgp/crs/misc/R44201.pdf.
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From page 40... ...
States cannot establish regulations for intrastate systems that are weaker than or incompatible with the federal requirements, but they can adopt more stringent requirements. Most states have opted to regulate their intrastate gas transmission and distribution systems by imposing requirements that are compatible with and sometimes more stringent than those imposed at the federal level.8 Only about one-third of states have sought certification to regulate intrastate hazardous liquid transmission pipelines, and therefore responsibility for regulating these systems and enforcing compliance rests largely with the federal government.9 More than 90 percent of the country's 240,000 8 Except for Alaska and Hawaii, all states, as well as Washington, D.C., and Puerto Rico, participate in the program (http://www.napsr.org/About-NAPSR)
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From page 41... ...
About two dozen of them own more than 1,000 miles of transmission pipeline and account for 80 percent of all gas transmission pipeline mileage.12 However, most gas pipeline operators are local utilities. The United States has about 1,500 gas distribution systems, most of which are operated by utilities.13 About 120 of these systems serve more than 1 million customers, and about 600 serve fewer than 1,000.
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From page 42... ...
In this capacity, it establishes the regulatory agenda, administers an enforcement program, provides technical assistance to state pipeline safety programs, sponsors safety-related research, investigates incidents, and collects and analyzes reports on releases. OPS is funded by user fees assessed on each regulated transmission pipeline operator on a per mile basis.15 For fiscal year 2016, OPS's total budget was approximately $150 million, an increase of about 40 percent since 2010.16 In 2016, OPS had a staff of about 270, approximately half of whom were inspectors.17 According to the Congressional Research Service, annual PHMSA budget requests have indicated an OPS staffing shortfall averaging about 25 employees per year from 2000 to 2016, with most of the gap occurring among inspector positions.18 PHMSA has reported that its ability to recruit inspectors with the array of engineering competencies it needs to enforce all of its regulations has been hampered because of competition with the higher-paying private industry.19 PHMSA estimates that about 80 percent of all pipeline inspections are conducted by state personnel.20 A reason for this large state enforcement role is that some states not only inspect intrastate gas distribution and transmission pipelines for compliance with federal and state regulations but have also been delegated authority by PHMSA to inspect interstate transmission pipelines.
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From page 43... ...
Since passage of the National Technology Transfer and Advancement Act of 1995, federal policy has favored the use of consensus standards.24 More than 60 consensus standards have been "incorporated by reference" in federal pipeline safety regulations, which means that these otherwise nongovernmental standards have been adopted by regulators, placed in binding federal rules, and now must be followed in the same manner as any other governmentissued regulation.25 Box 3-1 shows the breadth of the subject matter addressed by hundreds of regulations that make up the federal safety regime for hazardous liquid pipelines. The regime for gas pipeline systems covers many of the same topics.
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From page 44... ...
Also contains requirements for risk-based alternatives to pressure testing of older pipelines. Subpart F -- Operations and Maintenance §195.400 to §195.452 Includes requirements for an operations, maintenance, and emergency response manual; maximum operating pressure; inspections of breakout tanks and rights-of-way; valve maintenance; pipe repairs; line markers and signs; public awareness and damage prevention programs; leak detection and control room management; and integrity management in high-consequence areas.
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From page 45... ...
Some regulations do not reference consensus standards but instead directly specify a means to be used or a procedure to be followed. For example, copper pipe used in gas distribution mains must have a minimum wall thickness of 0.065 inch,29 gas service lines must have a shutoff valve in a readily accessible location outside the served building,30 and operators must inspect their mainline valves at least twice per year.31 Other PHMSA regulations with a micro-level orientation can be characterized as having an ends-based design because they provide the operator with latitude for selecting compliant pipe designs, materials, and installation procedures as long as pipelines and their installation procedures pass certain tests or have certain qualities.
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From page 46... ...
Macro-Level (Management-Based and Liability) Regulations A number of federal pipeline regulations can be characterized as means-based but at a macro-level because they require operators to establish certain plans, procedures, and management programs.
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From page 47... ...
They were extended to gas transmission pipelines in 2003. In 2006, Congress required PHMSA to extend IM program regulations to all gas distribution systems.41 However, as discussed above, the distribution sector differs in many fundamental ways, such as in the presence of many small pipeline operators, from the transmission sector.
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From page 48... ...
Implementation, Compliance, and Enforcement Challenges Micro-level regulations, including most references to industry consensus standards, can create a number of implementation challenges for regulators and compliance challenges for industry. In briefings to the committee, PHMSA officials acknowledged the difficulty of keeping references to consensus standards current because of their sheer number (consensus standards sometimes incorporate other consensus standards)
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PHMSA also cooperated with the pipeline industry in the development of API Recommended Practice 1173 (Pipeline Safety Management Systems) , which provides guidance on the development of a pipeline safety management system.
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State regulators also reported that local gas distribution systems differ in their ability to develop and follow IM programs, an indication of variability in the complexity, size, and staffing of these systems. This problem was confirmed by a representative from a small municipal system.54 The representative also pointed out that PHMSA has been working to help operators of small systems comply, most notably by supporting the development of software that guides smaller systems in the creation of an IM plan.
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From page 51... ...
After the 2010 San Bruno explosion, the Office of the Secretary of Transportation commissioned its own evaluation of the effectiveness of the IM regulations in assuring pipeline safety.56 The report, which was released in April 2016, concluded that there has been no clear evidence of the positive safety outcomes expected when the IM rules were first introduced, particularly for gas transmission pipelines. The report attributed safety gains to the effect of other regulations, especially requirements for operators to establish damage prevention programs.
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The federal government regulates about 45,000 miles of pipelines crossing provincial or international borders.60 They typically consist of larger-diameter transmission pipelines that carry oil and natural gas long distances. Provincial governments regulate pipelines operating exclusively within their borders.
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Funds for NEB's regulatory regime are appropriated by the federal government; however, industry levies based on company traffic activity recover about 90 percent.66 For intraprovincial pipelines, regulatory oversight is the responsibility 62 See https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/energy/files/pdf/14-0277-%20PS_ pipelines_across_canada_e.pdf. 63 See https://www.nrcan.gc.ca/sites/www.nrcan.gc.ca/files/www/pdf/publications/emmc/140177_Pipeline%20Safety_e.pdf.
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From page 54... ...
for oil and gas pipeline systems is developed and maintained under the direction of a joint committee composed of federal and provincial regulatory authorities, pipeline operators, oil and gas producers, suppliers, fabricators, contractors, and general interest participants.69 Because of this involvement by government authorities, CSA standards have traditionally been referenced by Canadian federal and provincial regulators. Types of Regulation Although federal and provincial pipeline regulatory regimes are distinct, they share a common foundation through the adoption in whole or in part of the pipeline standards developed by CSA.
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From page 55... ...
For example, the regulation requiring an IM program states that a company "shall develop, implement and maintain an integrity management program that anticipates, prevents, manages and mitigates conditions that could adversely affect safety or environment during the design, construction, operation, maintenance or abandonment of a pipeline."73 NEB's Guidance Notes cover management system requirements, condition monitoring, mitigation, and record-keeping expectations in substantial detail.74 CSA standards now also require pipeline operators to establish a number of macro-means, management-based programs. By referencing these standards, provincial regulators have joined NEB in requiring operators to establish programs for IM, damage prevention, emergency management, and the like.
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The committee did not have an opportunity to meet with provincial regulators or with operators of intraprovincial pipelines, such as Canadian gas distribution systems. As a result, the challenges they face in implementing, enforcing, and complying with pipeline safety regulations were not documented.
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Regulatory regimes in both the United States and Canada use a combination of highly targeted micro-level standards and more generalized macro-means requirements for management programs. Both countries' regimes reference consensus standards for technical aspects of pipeline construction, operations, and maintenance.
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From page 58... ...
However, both have acknowledged that when major incidents do occur, the rationale for these regulations may be difficult to explain to legislators and the public, who may demand more detailed or extensive regulatory prescription as a result. OFFSHORE SAFETY REGULATION IN THE UNITED STATES AND THE NORTH SEA REGION The offshore oil and gas industries of the United States and North Sea countries share many characteristics and are both regulated to prevent routine harms and rarer catastrophic events.
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From page 59... ...
Characteristics such as reservoir attributes, water depth, distance from shore, and marine and weather conditions combine with projected yield, profitability calculations, and hydrocarbon storage and transportation requirements to influence specific technology choices. Despite this heterogeneity, certain elements are common to each offshore oil and gas activity.
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From page 60... ...
A production platform, or a man-made island with production equipment, is usually located above or near the well.80 A number of processes take place on the platform or on ancillary facilities, sometimes including the separation and processing of the oil and natural gas, treatment and disposal of extracted water and gases, and storage of the extracted product before it is exported by underwater pipeline or shuttle tanker. The specific design and configuration of the production installation depend on considerations such as water depth, marine and weather conditions, expected recovery volumes, distance from shore, and the need for oil and gas storage.
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Earlier disasters, including the 1988 explosion of the Piper Alpha platform in the UK sector of the North Sea (killing 167) and the 1980 capsizing of the Alexander L
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From page 62... ...
data. Similarities and differences with regard to the offshore sectors of the United States and the North Sea region and to the design and enforcement of their safety regulatory regimes are discussed after presentation of the case studies below.
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From page 63... ...
Thus, they are more likely to have personnel on board 24 hours per day and to provide living quarters. Despite the much larger number of shallow-water platforms, the 50 or so deepwater installations account for most of country's offshore oil and gas production.
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From page 64... ...
The high cost of owning and operating increasingly sophisticated rigs and the technological demands of designing, drilling, and completing wells in deep water have been factors in a trend toward industry consolidation. Industry statistics show that 10 companies accounted for about 75 percent of the rigs drilling wells in the Gulf of Mexico during 2015.89 The Regulator When it was created in 2011, BSEE inherited responsibility for the offshore safety program from MMS, which had earlier inherited the program from the U.S.
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From page 65... ...
Inspectors use helicopters stationed at BSEE district offices to travel to offshore facilities. After the Deepwater Horizon disaster, BSEE's budget was doubled and the agency was authorized to hire more inspectors.94 In its fiscal year 2017 budget request BSEE reported that because of a significant pay gap between the federal government and private industry, the agency has had difficulty in recruiting and retaining qualified engineers and inspectors.95 Types of Regulation BSEE regulations pertain to all phases of offshore oil and gas development.96 Thus, major parts of the regulatory regime address drilling operations (e.g., casing, cementing, and drilling fluid requirements, as well as special Arctic requirements)
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From page 66... ...
An example is the requirement that all platforms and related structures be designed to ensure their structural integrity, with consideration given to "the specific environmental conditions at the platform location."105 Ends-based regulations often state that a given practice or component must possess a certain capability. Welding, for example, must be done "in a manner that ensures resistance to sulfide stress cracking."106 In its 2016 Well Control rule, BSEE states that an operator's casing and cementing program must provide "adequate centralization" to ensure proper cementation around the casing.107 The regulation implies that operators can use conventional bow-type centralizers as recommended in referenced industry consensus standards but does not specify or limit how centralization should be achieved.
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From page 67... ...
Regulations The fact that most offshore safety regulations are micro-level led to criticism after the 2010 Deepwater Horizon explosion. The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling characterized the regulatory regime as "consisting of hundreds of pages of technical requirements that could not adequately address the risks generated by the offshore industry's new technologies and exploration and production activities."110 A National Academy of Sciences study questioned whether the technical regulations were capable of keeping up with the rapid advances that had enabled a large increase in deepwater drilling in the Gulf of Mexico (National Academy of Engineering and National Research Council 2012)
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From page 68... ...
Perhaps the most significant form of macro-ends regulation, not formally part of BSEE's program, is the strict liability and penalty regime created by OPA 1990 and referenced earlier with regard to pipelines. Implementation, Compliance, and Enforcement Challenges While BSEE has relied increasingly on regulations that require management programs to fill gaps in its regulatory content and coverage, the regulatory regime within which offshore oil and gas development takes place remains one that is oriented toward micro-level, technical regulations.
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From page 69... ...
For example, a drilling application will be reviewed to ensure that cementing and drilling fluid programs are designed to conform to applicable requirements.113 Most enforcement resources go to the inspection of existing facilities to check compliance with the agency's many detailed regulations. Inspections usually consist of a facility visit, announced or unannounced, in which the inspection team follows a set of guidelines from the National Office Potential Incident of Noncompliance (PINC)
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From page 70... ...
The agency found that its original requirement for self-auditing of SEMS programs was insufficient for ensuring compliance. Operators reportedly exhibited more interest in program documentation than in application, as evidenced by a tendency to adopt standardized SEMS programs as opposed to "fit for purpose" ones.119 To address this problem, BSEE replaced the provision for self-audits with a requirement for third-party audits.120 The agency has been working with the offshore industry through API's Center for Offshore Safety (COS)
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From page 71... ...
Evaluation Challenges MMS first proposed requiring all operators to establish SEMS programs to address safety issues that the agency believed were not being addressed by the regulatory regime's many detailed regulatory requirements.124 On the basis of incident investigations and evaluations of inspection records, MMS concluded that the latter regulations were not effective in ensuring good communications among operators and contractors, the systematic analysis of job hazards, the development of safe work procedural guidelines, or the rigorous maintenance of facilities and equipment. The first SEMS regulation to address these regulatory shortcomings, also known as the workplace safety rule, was eventually promulgated by BSEE, but not until 6 months after the April 2010 Deepwater Horizon explosion.
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From page 72... ...
This case study contains information on the offshore safety regulatory regimes of the United Kingdom and Norway, which account for most of the region's oil and gas production.128 The Regulated Industry Offshore operations in Norway produce about 600 million barrels of oil and 115 billion cubic meters of natural gas per year.129 This output is comparable with that from the Gulf of Mexico. The second-largest North Sea producer, the United Kingdom, extracts about 350 million barrels of oil and 40 billion cubic meters of natural gas per year.130 Total North Sea oil and gas output is higher than the output from the Gulf of Mexico but far below the North Sea's peak production periods during the 1990s and early 2000s.
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From page 73... ...
132 See http://www.npd.no/en/Publications/Reports/Unmanned-wellhead-platforms/ Location-of-platforms. FIGURE 3-2 Oil and gas fields in the North Sea and nearby waters.
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From page 74... ...
Project complexities and capital requirements have also increased as more fields have been developed in deeper, high-pressure zones. Because of the investment and technology demands of North Sea production, global oil and gas companies account for most of the region's development activity.
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From page 75... ...
Like those of PSA, HSE managers and inspectors have a range of professional expertise, including well engineering, electrical control, diving operations, emergency preparedness, and human and organizational factors. Types of Regulations The offshore safety regulatory regimes of the North Sea region have their origins in reforms introduced in response to major incidents, when investigations led authorities to question the effectiveness of their traditional regulations.
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From page 76... ...
The regulations simply state that operators must ensure that suitable well control equipment is provided to protect against blowouts.148 However, HSE offers more detailed compliance guidance in A Guide to the Well Aspects of the Offshore Installations and Wells Regulations.149 Documents outline the "particulars to be included" in a well control system. Among them are a listing of the equip142 Offshore Installations (Offshore Safety Directive)
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From page 77... ...
Regulations In the belief that offshore operators should assume full responsibility for safety assurance, UK and Norwegian regulators demand that firms follow systematic risk management procedures, the essential elements of which are defined in regulation. Duty holders must establish and follow a set of management plans and practices that the regulator confirms will allow them to identify, assess, and manage their operations- and facility-specific risks.
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From page 78... ...
The safety case document must contain a summary of worker involvement in the preparation of the safety case and explain the arrangements that have been made to enable ongoing dialogue and cooperation among managers and worker representatives. The law requires duty holders to consult worker safety representatives in the preparation of a safety case.
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From page 79... ...
The regulation's workforce guidance states that duty holders are not obliged to accept any proposals made during this consultation, but they must consider them properly.159 157 See http://www.hse.gov.uk/offshore/is2-2006.pdf. 158 The study committee was able to obtain a safety case document for a decommissioned drilling rig that had been prepared for another North Sea country.
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From page 80... ...
The PSA guidelines, for example, state that NORSOK Z-013 and ISO 31000 (Risk Management Principles and Guidelines) should be used to meet the requirements for risk and emergency preparedness analyses and that Norwegian Oil and Gas Guideline 070 should be used as a basis for establishing performance requirements for safety barriers.163 PSA refers to its approval of an AOC as "consent." A grant of consent indicates that the agency has confidence that the operator can execute the planned activity within regulatory parameters and in accordance with the promises provided in the application.164 Implementation, Compliance, and Enforcement Challenges According to the UK and Norwegian regulators, industry representatives, and a labor union official who briefed the committee, implementation of the North Sea region's goal-based regulatory regimes is made possible by trust160 See http://www.psa.no/consents/category890.html.
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From page 81... ...
In turn, HSE and PSA officials assist industry by developing guidelines for preparing safety cases and AOC applications and by collaborating in the development of tools for risk-related decision making. Certain relationships that were cited by UK and Norwegian officials resemble those found in some U.S.
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From page 82... ...
Inspected installations are rated by HSE as being fully compliant, broadly compliant, or poor or very poor in compliance.166 Duty holders with poor performance ratings are inspected more frequently and in greater depth than duty holders with stronger compliance ratings. In 2015, HSE conducted 135 planned inspections on 104 offshore installations involving 47 duty holders.167 The inspections, as well as 92 investigations, found more than 750 noncompliance issues, but enforcement notices were issued in only 35 instances because other mechanisms were used to resolve the issues.
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From page 83... ...
Such steps were seen by some as necessary to increase public trust. An invited speaker from a coastal community on the North Sea expressed concern that offshore operators may be given too much responsibility to prioritize risks and make risk control decisions under the ALARP concept.
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From page 84... ...
Because major offshore incidents are rare, empirical assessment of the effectiveness of the program requirements in preventing major incidents can be difficult. PSA's safety data program, referred to as RNNP,172 uses a formula for weighting certain types of reported incidents (e.g., well control, fires and explosions, gas leaks)
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From page 85... ...
Neither the United States nor the North Sea countries have abandoned micro-level regulation. The offshore regulatory regimes depend heavily on such regulations.
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From page 86... ...
BSEE's structuring and implementation of its safety management regulations have occurred under legal and institutional conditions different from those of the North Sea countries. In comparison with these countries, the
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From page 87... ...
As illustrated by these differences in the macro-means regulations of BSEE and the North Sea offshore regulators, regulations of the same basic design may be structured and applied in various ways that accommodate a particular set of conditions. In the next chapter, further consideration is given to the choices that regulators face in deciding on the basic design of their regulations as well as the regulation's structural details in response to underlying circumstances.
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From page 88... ...
2016. Special Report 322: Application of Remote Real-Time Monitoring to Offshore Oil and Gas Operations.
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