(These comments were submitted by Nick Loris, energy policy analyst for The Heritage Foundation.)

Mr. Bromwich deserves credit for asking the right question: What can the private sector do to reduce the risks of offshore drilling? His question not only frames the debate well, it also reveals an implicit recognition that government regulations and involvement are not the only means available (and can be counterproductive) to address this issue. The private sector has an integral role to play.

It’s first important to recognize that the private sector has developed a rigorous culture of safety and continues to improve upon that culture because the industry knows an accident like the BP oil spill will jeopardize production of the entire industry. Additionally, one of the important takeaways from chapter 4 of the President’s oil spill commission report was that the BP oil spill was not a systemic problem but rather a sequence of missteps that led to the blowout. Even so, we can further improve upon culture of safety by fixing the broken oil spill liability.

The law currently caps liability at $75 million for the secondary costs associated with an oil spill (i.e., paying affected fishermen and restaurants). Both Republicans and Democrats offered knee-jerk responses after the Macondo blowout, either removing the cap or lifting it to another arbitrary number ($10 billion the most commonly floated), but neither idea fixes the problems with the current system. The liability structure in place does not sufficiently align risk and liability with individual behavior. The result is a system that socializes risk by spreading the costs across the entire industry, creating a divide between behavior and financial risk.

We need oil spill liability reform which rectifies the shortcomings of the current system and provides for increased safety in drilling operations. Private risk assessors not bureaucrats and politicians should determine the liability associated with offshore oil operations. Such a system should rely on market-based mechanisms and be built around private insurers and professional risk assessors who could provide objectivity and specialized knowledge. Just like a bad driver has to pay a higher insurance premium, those companies that neglect safety rules would see their premiums increase.

Government regulatory oversight is necessary, but liability insurance must be privately managed, with claims assessed and paid out by an independent administrator. Safety and preparedness measures must also be independently reviewed and approved. Above all, taxpayers must be protected from footing the liability costs for industry-caused disasters.

This system will hold operators fully liable for their actions and allows victims to be fully compensated while protecting companies from frivolous lawsuits.

Additional regulations and delays to the permitting process won’t solve the problem. We need a transformation of government oversight and industry management of the current broken system into one which can regulate safely and effectively assess risks and liability through private insurance. In order to reshape the industry we need a stable framework comprised of three elements: a multi-tiered insurance and liability system, an industry-funded organization which sets and maintains safety standards and inspections, and an industry-funded network of preparation and response which is capable of quickly and effectively managing accidents should they arise.

If Congress properly fixes the broken liability system, we won’t need overregulation, drilling moratoriums, permitoriums, and other needless delays that prevent us from accessing our domestic energy supply. What the oil and gas industry needs is not more regulation, but smarter regulation that implements market-based mechanisms.

I want to thank everyone who participated in this discussion over the past week, and those who paid attention even if they did not participate. It is imperative that the private sector and the government continue to focus --over the long term -- on enhancing safety through reducing the risk of offshore operations. I spent a day this week at the Offshore Technology Conference in Houston, Texas, which this year attracted close to 90,000 people, a 30-year high. I came away with two impressions. First, there are truly impressive ongoing efforts to enhance the safety of offshore operations through the development of new technologies, and the application of older technologies. But the attitudes I saw displayed at a panel discussion by several industry representatives and by a U.S. Congressman, all of whom have rewritten the post-Deepwater Horizon actions of the federal government for partisan political purposes, caused me to conclude that some people learned very little from that event. We need to continue pushing forward the frontiers of offshore safety, but we can only do so if we are honest about the past.

Contrary to Mr. Bromwich’s assertion, I did answer the question, although he may not have liked the response:

Industry and government should cooperate on achieving continuous improvements in operating practices and equipment standards. The expertise is with the industry and the government should identify what it can contribute without being heavy handed. Inspections should be more effective than they were and that is fully within the government’s control.

Companies that operate safely and employ state of the art technology should be rewarded with lower compliance requirements and greater operating flexibility. Those that have poor records and citations for non or poor compliance should face higher costs and more rigorous inspection and reporting requirements. If the incentives are structured properly and good performance rewarded, risks will be reduced and overall performance improved.

... BP’s negligence tainted the reputation of all the other companies operating in the Gulf. So the industry has to find ways to bring all companies to a higher level of performance and compliance. Some companies regularly report their environmental and safety performance along with information on their operating management systems. Perhaps a standard reporting system should be used by all companies with public recognition rewards for the best performers.

My problem with Mr. Bromwich’s question and his comment regarding my response is that he has chosen to ignore the offshore record of the industry between 1969 and 2010. Over that 41 year period there were NO significant production accidents. He also chose to ignore my point about action the industry took after Valdez as well as the $1billion commitment to enhanced containment technology and equipment deployment.

Indicting an industry, implicitly or explicitly, is just wrong. Context is critical. Shortly after the Deep Horizon accident, I addressed the subject of context in a Houston Chronicle blog post:

If long term safety is our shared goal (and indeed, it should be), then isolated incidents — like BP’s April 20^th explosion — should not disproportionately determine future policy. Risk analysts like David Ropiek warn against knee-jerk regulatory responses to catastrophes, since these events distort the way we perceive overall risk of a particular activity. Just as the FAA doesn’t halt all air travel after one tragic crash and local police wouldn’t shut down all travel after one car accident, fossil fuel regulators should not impose sweeping restrictions on all U.S. drillers due to the poor choices of a single actor.

More can be done to improve safety and more is being done. It will either be done wisely or wastefully. My concern is that DOI perspective and perceptions will lead to a waste and misallocation of resources.

The magnitude of risk in offshore drilling is so great that the needed solutions may be quickly dismissed by some. In fact, I did suggest some solutions like redesigning flawed blowout preventers and pre-drilling relief wells. Perhaps these were not the solutions Mr. Bromwich was looking for. But due to the magnitude and nature of the problem, real solutions are costly and take time. Obviously, industry won’t do these things voluntarily. On the other hand, the easy solutions often don’t provide much security.

This is why we believe we should consider scaling back on offshore drilling, and beginning to replace our oil use with alternatives. One approach is described in detail in our report, Breaking the Habit. There may be other approaches and we hope that this report can begin that conversation. Sadly, it seems that BOEM does not share this view, as it has continued to sell new leases in the Gulf of Mexico in spite of lingering questions about drilling safety, and in spite of the lack of a full assessment of the environmental impacts of the DWH.

Finally, my commentary below is based on an in-depth fact-based and heavily referenced analysis published by Oceana on drilling safety. This report evaluates the new offshore drilling safety requirements in great detail including the Interim Drilling Safety Rule, Safety and Environmental Management Systems (“SEMS”), additions to SEMS, and two Notices to Lessees (“NTLs”). What we found is that these actions largely mandated activities that were being done already, even on the Deepwater Horizon, which is a case in point that they did not suffice. We also found that systematic problems undermine the few requirements that might otherwise be helpful. These include inadequate fines for violations, limited inspection, and the like. Our analysis is based on the observations and opinions of many respected organizations including the National Commission on the Oil Spill, the Joint Investigation Team which included BOEMRE and the U.S. Coast Guard, and even the American Petroleum Institute.

The suggestion that offshore drilling is risky may not be popular among those in the industry, but increasingly the public recognizes that more needs to be done and that moving away from offshore drilling is a pragmatic approach to lowering risks and beginning to address climate change. It will not happen overnight. But it is time to start. In the meantime, we should be honest and frank about the fact that another offshore drilling disaster could happen at any time.

I am pleased to see that my question – what should the private sector be doing, and what is it doing, to reduce the risks of offshore drilling? – has provoked some spirited and interesting responses. Many of the responses are thoughtful and interesting; all of them express strong points of view. I wish that more of them actually sought to answer the question, which was designed to elicit information about what industry’s safety agenda currently is, and constructive reflections on what that agenda should be. We want more specific information about what is currently being worked on relating to safety, and what needs to be addressed in both the short run and the long run.

Let me respond to some of the specific points made in the comments:

· William O’Keefe creates a straw man by suggesting that the question I asked assumed that offshore drilling was risk-free. Quite the contrary. I agree that there is risk, I accept some level of risk, and asked what can be done to reduce it. That is the question I asked but not the question he chooses to answer. Most segments of the industry have stepped up to the plate and acknowledged that Deepwater Horizon was a tragic but important wake-up call to the entire industry. By contrast, Mr. O’Keefe’s claims that “offshore drilling is currently safe and was so before” Deepwater Horizon; the response to that is, “Not safe enough.” If we needed further evidence of that, we need only look at the recent oil and natural gas spills around the world. These events make clear that Mr. O’Keefe’s bad actor explanation for Deepwater Horizon misses the point, and understates the risk. That is why the steps taken by both industry and by government regulators to reduce risk are so important. It is neither helpful nor accurate to explain away the historical failure to develop subsea containment capabilities or significantly improve spill response capabilities. Industry has, in fact, acknowledged those same shortcomings.

· Jacqueline Savitz provides a bookend to Mr. O’Keefe. He seeks to minimize the risk of offshore drilling and mount a defense for all elements of the industry’s historical behavior; she refuses to acknowledge the progress that has been made both by industry and the government over the past two years. Her claim that “safeguards have not changed” is simply not true, and her cynicism about the genuine efforts being made by industry and the government to reduce the risk of offshore drilling is not supported by the facts. I would hope that Oceana and other environmental groups, in response to my question, would take the opportunity to lay out specific elements of an offshore drilling safety agenda for industry, perhaps in the next round of responses. We simply need to accept that offshore drilling will remain, for the foreseeable future, an important element of this country’s energy mix.

· Jack Gerard responds directly to the question, lays out what the industry did to promote safety and study the relevant problems in the immediate aftermath of Deepwater Horizon, and what it is doing now. The task forces that were formed in the summer of 2010 on prevention, containment and spill response reflected a high-level of commitment by companies and individuals and made valuable contributions to the discussion. Mr. Gerard and I have disagreed about many things – for example, whether his (and API’s) sustained, and increasingly factually inaccurate, criticism of the government for a slower pace of permitting after Deepwater Horizon was helpful in advancing the safety agenda – but we agree about that. My concern is whether the energy and resources devoted to safety issues have waned, and will wane further in the future. The report card issued last month by the members of the President’s oil spill commission found that the Center for Offshore Safety has been slow off the mark. Mr. Gerard isright to herald the recent arrival of Charlie Williams as the Executive Director. I have enormously high regard for Mr. Williams, whom I found to be among the most knowledgeable people in the industry about safety issues, and who is fully committed personally and professionally to raising the bar on safety. But I don’t think the Center is enough, and I don’t understand Mr. Gerard to be saying that it is enough. Individual companies must not outsource safety improvements to the Center; they must continue to explore ways to enhance safety through technological innovation and improvements in process and system safety. My question was designed to get at what individual companies are –and should be – doing to reduce the risks associated with offshore drilling. I am hoping that in the next round, we will hear more about that.

· Marilyn Heiman and Conrad Schneider address the special risks of drilling in the Arctic, and make some very valid points. And I believe that the government has taken into account many of those points in its review of the various components of Shell’s proposal to drill in the Chukchi and Beaufort Seas this summer. I would be very interested in hearing from them about specific items that should be on the private sector safety agenda.

So, we are off to a good start in this discussion, but let’s see if we can get some additional responses, including from representatives of specific companies, on what safety enhancements they are currently working on, and from a wide range of people on what items should be placed on the private sector’s safety agenda in the future.

Thanks very much.

The Gulf of Mexico disaster should have brought all the stakeholders together to better prevent and respond to future spills, whether in deep water or in frontier areas such as the Arctic Ocean. Immediately after a disaster, it is easier to get reform than it is years later, when complacency begins to set in. Unfortunately, Congress failed to adopt any reforms, so federal agencies have had to do the majority of the work on safety and prevention.

Although the Obama administration has taken steps toward shoring up drilling safety, improvements to oil spill response planning remain untouched. So here we are, two years after the Deepwater Horizon oil spill and with drilling likely to occur this summer in America’s Arctic Ocean, and no new response regulations have been adopted.

The extreme, remote and fragile Arctic Ocean is one of the most difficult places on Earth to mount a rescue operation or spill response. The region has no major roads, ports, or airports. The nearest Coast Guard base is more than 1,000 miles away. Hurricane-force winds, subzero temperatures, high seas, shifting sea ice, and long periods of fog and darkness are the norm and could shut down a response altogether.

The Interior Department should work with stakeholders–including industry, government, Native organizations, scientists, and conservation groups—to ensure that strong safety and spill-response standards apply to all companies that plan to drill in the Arctic Ocean. For example:

• Seasonal restrictions are needed so that operators have finished drilling by the time ice starts to form in October. No proven methods exist to clean up oil in broken ice.
• The faster a cleanup operation is mounted, the better. Poor weather could impede delivery and response time. Key equipment, such as a well-capping device and a Polar-class relief well rig, need to be stationed in the Arctic region.
• A long-term, comprehensive science and monitoring program should be developed to better guide decisions about if, where, when, and how drilling can take place safely.
• Finally, there should be heightened protection of sensitive areas that are important to the marine ecosystem and the Inupiat people who depend on it for their traditional way of life.

To put strong protections in place will require everyone to work collaboratively. That is the only way to help safeguard the Arctic from a disastrous oil spill.

Safe, dependable offshore oil and natural gas production in the Gulf of Mexico and off our coasts is vitally important to our economy and daily lives. The Gulf alone accounted for 27 percent of our country’s domestic production in 2011, and the amount should have been much higher. Every drop of oil produced here in the United States helps reduce imports, so ensuring reliable, environmentally responsible offshore production is in everyone’s interest.

In response to Mr. Bromwich’s question, the industry has actively moved forward since the spill with concrete, effective measures to enhance offshore operations. Right after the accident industry went to work, examining every aspect of offshore drilling safety – including equipment, operating practices, sub-sea well control and containment and oil spill response – to see that another Macondo doesn’t happen.

This effort is embodied in the creation and launch of the Center of Offshore Safety, which welcomed veteran Shell scientist Charlie Williams as its first executive director. Williams brings 40-plus years of experience in well engineering and offshore operations, with an emphasis in developing world-class standards to global operations. The center’s chief mission is prevention, with a strong focus on the establishment of robust offshore safety and environmental management systems.

Let me describe what already has been done through the center and efforts across the industry, including API, the International Association of Drilling Contractors, the National Ocean Industries Association, the Offshore Operators Committee and individual companies:

• Industry task forces have recommended multiple operational reforms, including requirements for maintaining multiple barriers during well construction and the implementation of testing requirements during drilling operations, to make sure everything is done properly.

• •API has updated the part of its industry standards regimen that establishes the benchmark for cementing operations and isolating potential flow zones in drilling operations, an integral element in maintaining well integrity.
• •Industry has invested significant resources in new and improved equipment to cap and contain blowouts and to quickly stop oil from leaking, in the unlikely event that happens.


• •Meanwhile, among other things, API is preparing new standards on designing deep water wells and safety management systems, and is revising standards covering the design, development, operation and maintenance of blowout preventers.


• •Right now, the Center for Offshore Safety is working with industry and regulators to establish strong safety and environmental management systems, as required by government regulations. These will be certified through a third-party audit.


• •Working with U.S. and international stakeholders, industry continues to assess the tools in the oil spill response toolkit – studying dispersants, in-situ burning and mechanical recovery, and working on enhanced planning documents.


• •These are just some of the measures that have been taken or that are under way – first, to prevent an offshore accident, second, to intervene and contain a spill at the wellhead and third, to be well-prepared in terms of planning, equipment, technical know-how and training to respond if an accident occurs.

All demonstrate industry’s strong commitment to safe and responsible operations. In the 2010 spill’s aftermath, the bar for safety, prevention and accident response was necessarily raised. Industry has worked to enhance operational capabilities and move forward with a continuous commitment to safety. The industry understands that responsible stewardship must accompany the nation’s growing energy demands. Industry’s shared concern for both has driven its efforts to date and will do so going forward.

For more on industry and government changes post Macondo, please see this presentation by Mr. Williams to Oil Spill Commission Action in April.

It’s quite fitting that we’re spending this week examining private sector developments in offshore safety. Tens of thousands of energy professionals from around the world have converged on Houston to answer the same question: How do we minimize the inherent risk present in offshore drilling?

The Offshore Technology Conference nicely illustrates just how far the industry has come since the Deepwater Horizon tragedy. From state-of-the-art capping technology to the development of new “safety and environmental management systems,” the private sector and federal regulators have made significant progress to bolster the safety of offshore drilling. And, as OTC demonstrates, additional technologies are in the works.

But, what’s really missing from this question is how we, as a nation, balance risk with reward. The risk of a catastrophic blowout remains very, very small. In over forty years of offshore drilling, the United States has suffered two very large oil spills resulting from a blowout – the Santa Barbara blowout in 1969 and Deepwater Horizon in 2010. In fact, since 1979, for every 130 billion barrels of oil produced worldwide, one well incident resulting in a large oil spill has occurred. Of these incidents, one-third was the result of military action. In the United States, from 1971-2009, over 41,500 wells (exploratory and production wells) were drilled in the Outer Continental Shelf (OCS), producing nearly 16 billion barrels of oil. Of these 41,500 wells, fifty well control incidents caused the release of oil. In effect, out of the billions of oil produced from the U.S. OCS, about 0.00001147% of the volume was spilled. For comparison sake, natural seeps account for approximately 63 percent of oil in the oceans while another 33 percent of oil in the ocean comes from cars, boats and planes.

However, low-risk does not mean the consequences are also small. The Deepwater Horizon tragedy took 11 lives and resulted in the release of millions of gallons of oil. Tragedies like these compel the oil & gas industry and federal regulators to advance technologies and practices that mitigate risk as much as possible.

A good case in point: the planned drilling in the U.S. Chukchi and Beaufort Seas north of Alaska this summer. The operator, Shell, has devoted hundreds of millions of dollars and years of studying, planning and coordinating to ensure its operations proceed safely. Recently, some have called into question whether the risk of this operation is too high. Yet, in all of these deliberations, little focus has been paid to the level of risk management that the operator and the federal government have devoted to this endeavor. Both the federal Bureau of Ocean Energy Management and the U.S. Coast Guard have signaled that, given the level of coordination between the operator and federal agencies, they are confident operations can and will proceed safely off Alaska this summer. This should set the example for the right path forward. Hastily shutting down areas of the OCS out of fear is not only damaging to our economy; it sends the wrong signal to the world that we are not serious about our nation’s energy policy.

In advancing a sound dialogue on acceptable risk and private sector preparedness, we must also remember to account for the high rewards that come from offshore drilling. The United States possesses abundant oil & natural gas resources in its OCS. The federal government estimates that the OCS could contain anywhere from 66.6 to 115.3 billion barrels of oil and anywhere from 326.4 to 565.9 trillion cubic feet of natural gas. Turning our back on this vital resource base is simply not a choice. By developing these resources soundly, we can create jobs, generate revenue, and provide a stable source of fuel for our nation for decades to come.

Jacqueline Savitz's commentary brings to mind the late Senator Monihan's comment about all of us being entitlted to our own opinions, just not our own facts. Her comments are inconsistent with a strong record of safety that spans 41 years and 14000 offshore wells. If she expects a world where there are no accidents, she will be disappointed. Should efforts be made to get even better? Of course, industry should always be committed to improvement. But, the record is sound.

(These comments were submitted by two Center for American Progress experts: Michael Conathan, Director of Ocean Policy; and Kiley Kroh, Associate Director for Ocean Communications.)

In the two years since the Gulf of Mexico was left drowning in BP’s spilled oil, we have failed to capitalize on the imperative to act created by this eye-opening tragedy. The Obama administration largely did its part, using a temporary moratorium on offshore drilling to completely overhaul the structure of offshore drilling regulation. The 112^th Congress, on the other hand, has done nothing. And the industry has done little more than complain about the unfair hardship it has faced while raking in record profits—the top five oil companies pocketed more than $137 billion in 2011. It’s time to use some of those profits to put teeth behind the “never again” mantra repeated ad nauseam in the spring and summer of 2010.

The oil and gas industry took the necessary yet insufficient step of establishing a new Center for Offshore Safety, but it is not independent from the industry’s chief advocacy and lobbying association, the American Petroleum Institute. This is an inherent conflict of interest that the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling explicitly warned would threaten its credibility. For example, a recent report from the National Academy of Engineering and National Research Council found that the oil industry and the federal government have a “misplaced trust” in the effectiveness of blowout preventers. Future assertions from the American Petroleum Institute that its research arm has solved this problem will not be sufficient to restore the public’s trust in this inherently flawed equipment.

We must act more aggressively to develop new, state-of-the art response technology before the next major spill occurs. The technologies we relied on to contain the Macondo well and mop up the spilled oil—from the “top hat” to the “junk shot” to the application of the dispersant Corexit—represented methodology that was decades old.

Like the Aesop’s Fable of the irresponsible grasshopper and the diligent ant, the oil industry played the role of grasshopper. It spent the years between Exxon Valdez and BP Deepwater Horizon singing during the fair weather times without preparing for the next crisis. It’s time for Congress and Big Oil to take the part of the ant by developing safer, more effective means of responding to oil disasters.

In the aftermath of Macondo, BP repeated endlessly its commitment to “make it right” in the Gulf. A real solution would be to get it right before the next catastrophe occurs.

The idea that offshore drilling safety and spill response have substantially improved is little more than a figment of some people’s imagination. In the question above, Michael Bromwich acknowledges that during the Deepwater Horizon disaster (DWH) safeguards were not effective, preparation was not adequate, and response tools were little better than they were 20 years ago. But what has really changed in the past two years? Sadly, not enough.

Even the question itself, what the industry (private sector) can do to reduce risks, misses the point because it sidelines the needed government action to scale back drilling given the lack of sufficient safety and response options. Not to mention the lack of private sector solutions.

Let’s look at the categories on the list: safeguards, preparations and response tools.

Safeguards have barely changed. The last line of defense at the wellhead, the heavily relied upon blowout preventer (BOP), turns out to be flawed by design according to Det Norsk Veritas – not just the one on the Deepwater Horizon, but possibly the rest. Did the private sector fix that problem? Have BOPs been redesigned to be effective and replaced? No and no. So, there’s something the private sector could do, or rather should have done before resuming drilling. But it hasn’t been required and dangerous deep water drilling is already back in full swing. There are new testing and maintenance regulations for BOPs, but they don’t fix the underlying design flaw.

So that means we need real improvements in the second category: preparations. Is industry more prepared now? Of course they are, just ask them. Their exploration plans brag about response times in days now, rather than the months that we are accustomed to. According to BP, if DWH happened again, it could plug a well in 2-3 weeks, much faster than the 3 months it took them last time. But what changed?

Well, this time we are to assume the capping device will work -- except we really don’t know that. Just because it eventually worked on DWH doesn’t mean it will work next time on a different blowout with a differently oriented pipe or even a damaged wellhead. Maybe if the companies offered to pre-drill relief wells, then they could credibly promise a faster response. But the private sector isn’t offering that, and again, government hasn’t required it. So be ready for another 3-month ordeal.

That takes us to response. It’s impossible to fully respond to a major spill. The DWH caused tremendous impacts on marine life and coastal economies. And the response tools are not much better now than they were 2 or even 20 years ago. We still rely on booms that don’t really work, and surface burns that may remove about 5% of the oil. And then there are always toxic dispersants that can be used to hide the problem, though they create new problems. As a result, the next spill will look like 2010 all over again. Response is little more than damage control.

To be clear, Oceana doesn’t agree that safety, preparations or response capabilities have been measurably improved or that the private sector will take the initiative to make meaningful changes without government mandates. When the magnitude of risks are as large as those of offshore oil and gas drilling, the investments in safety have to be equally large otherwise drilling will simply continue to be unsafe. That is why we believe we can’t rely on the goodness of corporations, and that we need to move away from offshore drilling and start now to replace its contribution to our energy mix with options that are safer and offer us a better future.

Two years ago the world turned its attention to the Gulf of Mexico and the tragedy that was unfolding there, with the explosion of the Deepwater Horizon drilling platform. This disaster brought a reinvigorated focus to the safety of offshore drilling, but the term safety must now be understood to not just cover spills and leaks, but also the impacts that drilling has on the climate, especially when done in the fragile environment of the Arctic.

It is well understood that carbon dioxide emissions from fossil fuel combustion in our cars and power plants are responsible for the majority of earth’s global warming. Less appreciated, though, is that methane emissions account for nearly half as much of the warming we are currently experiencing as carbon dioxide. The oil and natural gas industries are the largest source of methane emissions from the US. Oil and gas extraction can also be significant sources of black carbon, another potent climate pollutant.

Changing technology and climate change itself, with receding Arctic ice, have made oil and gas production activities in the Arctic region more feasible. This trend is expected to accelerate, with the potential for vastly more methane and black carbon emissions. According to the United States Geological Survey (USGS), the Arctic holds one-fifth of the world’s undiscovered, recoverable oil and natural gas. As the ice retreats, oil and gas developers are moving in to exploit previously hard-to-access resources. Melting has also enabled increased shipping activity through the region, further elevating concerns over emissions in the region.

The Arctic is particularly vulnerable to climate change impacts, where, according to the Intergovernmental Panel on Global Climate Change (IPCC), Arctic temperatures have increased at about twice the global average rate over the past 100 years. September 2011 represented the largest retreat of Arctic sea ice on record, opening wider the fabled Northwest Passage to ship traffic.

Methane is an extremely potent climate pollutant, packing 25 times the punch of carbon dioxide when compared over a 100-year lifetime and 72 times its potency over a 20-year lifetime. Natural gas and oil production is one of the largest human-caused sources of methane, representing 20% of global anthropogenic methane emissions. Black carbon too, punches above its weight as a climate pollutant, but its major impact in the Arctic is hastening melting by depositing heat-absorbing black soot on white ice surfaces. Emissions from gas flaring, diesel engines, and shipping associated with gas and oil operations also represent potentially large in-region sources of black carbon. If oil and gas production is to occur in the Arctic, we must ensure that emissions of CO2, methane and black carbon are held to a bare minimum.

While oil production is the primary focus of current exploration and production activities due to high oil prices, natural gas is almost always produced along with oil, posing the problem of what to do with it. Crude oil usually contains some amount of “associated” natural gas that is dissolved in the oil or exists as a cap of free gas above the oil in the geological formation. In some cases, this represents a large volume of gas. For example, nearly 3 trillion cubic feet (Tcf) per year of gas is produced in association with oil in Alaska. The largest potential source (but by no means the only) of either methane or black carbon from oil production is the disposition of this “associated” natural gas.

When pipelines are available, the natural gas can be delivered to industrial, commercial and residential consumers. If there is no pipeline to bring the gas to market and no local use for the gas, then the “stranded” gas has little economic value and is often flared. While flaring the associated gas destroys most of the methane, it also creates a large source of CO2 and can create black carbon. Estimates of the volume of associated gas flared are substantial, with estimates showing as much as 5.3 trillion cubic feet of gas being flared each year. That’s about 25 percent of the US’s annual natural gas consumption. This leads to the release of approximately 400 million tons of CO2 per year, the equivalent to the emissions from over 70 million cars.

Fortunately, technologies and best practices exist to reduce the impact of oil and gas production. If we are going to extract the oil from the Arctic, we must do it in a way that does not exacerbate the very real problem that climate change is already posing there. In order to do so, the US should take the lead in ensuring that only the best practices are acceptable when it comes to Arctic exploration and drilling. The technologies and practices below can dramatically reduce the emissions associated with oil and natural gas, in some cases by 100%.

First, we need better characterization of emissions in the region, and better monitoring and reporting information. Methane and black carbon emissions from oil and natural gas production, especially in the Arctic, are not well characterized. Establishing standardized monitoring and reporting protocols, backed by legislation, is essential to quantifying these emissions and then adopting the best mitigation techniques.

Second, we must deal with the methane and black carbon from associated gas and well completions.

This means capturing all associated and completion gas (i.e., no venting). Where feasible, all gas should be sent to consumers through pipelines or LNG or beneficially consumed on-site or locally (for power generation or thermal or feedstock uses). Or, where geologically feasible, we should require reinjection of the gas into underground reservoirs. When there is no reasonable alternative to flaring, we should require the use of efficient flares.

Next, we need to deal with vented and fugitive methane emissions. Here we need vapor recovery units on storage, process tanks and floating production, storage and offloading units. Operators should use compressed air or electric control systems rather than pneumatic controllers, mitigation of methane emissions from all dehydrators should be required, and the use of wet seal compressors without gas capture systems should be prohibited. To detect leaks and equipment failures, we should require inspection and maintenance programs for all facilities operating in the Arctic.

Finally, for the mitigation of black carbon emissions, we should require ultra low sulfur diesel (ULSD) and Diesel Particulate Filters (DPF) for all stationary engines and small ships – either new or retrofit. And we should push to establish International Maritime Organization requirements for BC emission reductions for international shipping affecting the Arctic.

The opening of the Arctic to increased oil and gas development is a cause for concern. The Arctic is already being hammered by climate change and other environmental impacts. If we are on the verge of an Arctic oil and gas rush, this will only add to the issues facing this fragile environment. If we implement the above policies domestically, and pressure our other Arctic neighbors to do the same, we will greatly reduce, but certainly not eliminate, the air and climate impacts of oil and gas development in the Arctic.

It is said that a problem poorly defined is poorly solved. A corollary may be that a question poorly asked risks being poorly answered. The form of this week’s question and its implications are potentially misleading.

Safe does not mean risk free. How safe is safe enough is a tough question that is influenced by cost, technology, the implications of alternatives and society’s values and objectives. Driving is safe but risky. We accept those risks because they are a cost of mobility and prosperity. So it is with offshore drilling. It is safe but not risk free.

Oil contributes to our economic wellbeing and our goal should be to achieve the greatest practical benefits from its development at the lowest practical cost (ie. risk). Risk reduction is not free. And the smaller the risk the higher the incremental cost to make further reductions.

The facts are that offshore drilling is currently safe and was so before the Deep Horizon accident. That is demonstrated by the fact that from 1969 until the accident there had been no offshore production accidents. Over those 41 years, 14,000 offshore wells had been drilled, including hundreds of deep water ones. That record demonstrates an industry commitment to safety and to improving technology and a regulatory regime to achieve it.

BP performed poorly and did not have a good safety record before the accident. The fact that three companies exercised control responsibilities, reminiscent of Abbot and Costello’s who’s on first routine, only made the accident worse. There were signs of a problem before the blow out but those signs of problems were mishandled. That was a human failing that in retrospect was avoidable.

To say that “that tools for responding to a major oil spill had advanced little in the 20 years since the Exxon Valdez disaster” is misleading. After the Valdez accident, the industry created the Marine Spill Response Corporation to deal with major spills. Drilling technology and standards continued to improve. It was only after the fact that it was clear that the risk of a subsea accident was larger than had been thought and that further improvements in blow out preventer were needed. Risk assessment is not a precise field of analysis. The absence of other accidents before and after indicate that risks were not being ignored. After the fact hindsight is wonderful but in the world we live in, we simply don’t know what we don’t know before the fact.

Shortly after the accident, the industry announced a new rapid response oil containment system that initially represents a $1 billion commitment that will provide containment technology and equipment that can be deployed within 24 hours of a spill in the Gulf. That is an important action and no doubt other actions will be taken to improve performance and response.

Accidents, unfortunate as they are, are learning experiences. If the right lessons are learned from the Deep Horizon accident, a low risk will be made smaller. If the wrong lessons are learned, resources will be wasted on the wrong technologies, standards, and practices, leading to perhaps a false sense of security.

Industry and government should cooperate on achieving continuous improvements in operating practices and equipment standards. The expertise is with the industry and the government should identify what it can contribute without being heavy handed. Inspections should be more effective than they were and that is fully within the government’s control.

Companies that operate safely and employ state of the art technology should be rewarded with lower compliance requirements and greater operating flexibility. Those that have poor records and citations for non- or poor compliance should face higher costs and more rigorous inspection and reporting requirements. If the incentives are structured properly and good performance rewarded, risks will be reduced and overall performance improved.

Unfortunately, it is a fact of life that an industry’s reputation is only as good as its worst performer. That isn’t fair but it is reality. BP’s negligence tainted the reputation of all the other companies operating in the Gulf. So the industry has to find ways to bring all companies to a higher level of performance and compliance. Some companies regularly report their environmental and safety performance along with information on their operating management systems. Perhaps a standard reporting system should be used by all companies with public recognition rewards for the best performers.