The report to US President Barack Obama, “Deep water, the Gulf oil disaster and future of offshore drilling”, says that both regulation and a safety culture need to be strengthened and supplemented by a peer-led safety organisation for the oil and gas industry. Exxon and Shell are two oil companies who have transformed their own safety standards, but the entire oil industry in America lags behind international safety standards and has not properly managed risk or been prepared for containment and response.
The report lists several potentially dangerous industries that have transformed safety levels through peer organisations – amongst these is the potentially catastrophic nuclear industry. “Public and government acceptance based on a strong safety record is an essential component of the business model of each,” reads the report.
“Even inherently risky businesses can be made much safer, given the right motivations and systems-safety management practices. Civil aviation and nuclear-fuelled electric power are two good examples of industries that have had to manage the risk of catastrophic failures and losses,” reads the report.
On 22 May 2010, President Barack Obama announced the creation of the National Commission on the BP Deepwater Horizon oil spill and offshore drilling – an independent, nonpartisan entity, directed to provide a thorough analysis and impartial judgement to determine the causes of the disaster and recommend reforms to make this form of energy production safer.
“It is the nuclear power example that is expanded at length as a lesson for oil,” says World-nuclear-news.org. Central to this is the Institute of Nuclear Power Operations (INPO), a not-for-profit organisation that was established by the nuclear power industry in December 1979. The Kemeny Commission – set up by President Jimmy Carter to investigate the Three Mile Island nuclear power plant – had recommended that:
• The (nuclear power) industry should establish a programme that specifies appropriate safety standards, including these for management, quality assurance, and operating procedures and practices, and that conducts independent evaluations.
• There must be a systematic gathering, review and analysis of operating experience at all nuclear power plants coupled with an industry-wide international communications network to facilitate the speedy flow of this information to affected parties.
After the 1986 Chernobyl accident, the INPO was supplemented by an international version – the World Association of Nuclear Operators (WANO), and together with the sister organisations have played a major part in today’s safe use of nuclear energy.
“The primary motivation for improving safety in each instance is that neither the public (as consumers and as voters) nor the government would allow such enterprises to operate if they suffered many accidents. People would not board planes if an unacceptable number crashed. The reaction to the contained partial core meltdown at the Three Mile Island power plant in 1979 has kept the industry from expanding in the United States for more than three decades. And, nuclear submarines carry highly skilled crews and are enormously expensive to build (not to mention carrying a fuel source that would pose wide dangers in case of a leak) – all factors that compel the navy to put a premium on safe practices,” continues the report.
The logic of self-policing
Industry standard-setting and self-policing organisations are widespread in the most industrialised nations – typically for operations marked by technical complexity, such as the chemical, nuclear power, civil aviation and oil and gas industries, where government oversight is also present. These processes coexist where there are, as a practical matter, relatively limited numbers of people with the requisite expertise and experience, making it hard for government to be able to rely solely on its own personnel (especially when government cannot compete with private sector salaries for those experts).
Support for standard-setting and self-policing also arises in industries whose reputations depend on the performance of each company, and where significant revenues are at stake.
The limits of unregulated self-policing
Industry self-policing is not a substitute for government, but it serves as an important supplement to government oversight. And the cost of forgetting that essential premise can be calamitous. In the financial sector, for example, the Securities and Exchange Commission’s Consolidated Supervised Entities Programme had in 2004 delegated regulatory risk assessment of global investment bank conglomerates to the banks themselves. The programme was designed to cover a regulatory gap left by Congress amid changes in global finance, but it was entirely voluntary. Four years later, Securities and Exchange Commission Chairman Christopher Cox ended the programme, declaring it a failure – indeed “fundamentally flawed” – after companies like Bear Sterns failed to adequately assess the risk of a sharp downturn in housing prices on their large, leveraged investments in mortgage-backed securities.
Presidential report – Deep water, the Gulf oil disaster and future of offshore drilling
The nuclear model
According to the report, the risk-management challenges presented by nuclear power are in some respects analogous to these presented by deepwater drilling: the dependence on highly sophisticated and complex technologies, the low probability/catastrophic consequences nature of the risks generated, and the related tendency for a culture of complacency to develop over time in the absence of major accidents.
“For the nuclear power industry, it took a crisis – the partial meltdown in 1979 of the radioactive core in Unit Two at the Three Mile Island nuclear generating station in 1979 – to prompt a transformation of its safety culture. But that is what industry accomplished and reportedly with significant, positive results. For that reason, the nuclear power industry’s method of transforming business-as-usual practices offers a useful analogue as the oil and gas industry now seeks to do the same more than 30 years later,” says the report.
For more information, read the full report at https://s3.amazonaws.com/pdf_final/DEEPWATER_ReporttothePresident_FINAL.pdf.