UK Deepwater Drilling - Implications of the Gulf of Mexico Oil Spill - Energy and Climate Change Contents

Examination of Witnesses (Questions 188-226)

Mr Steve Walker, Mr Philip Naylor, Dr Jonathan Wills and Ms Susie Wilks

Q188 Chair: Good morning and welcome. Thank you for coming to the Committee. We have about an hour to range through a number of issues with you. I appreciate that some of you come from slightly different standpoints on this subject, but don't feel obliged—each of you—to answer every single question, unless you want to say something different from what other people have said. Can I ask you to introduce yourselves? This is the first time we have seen you in this Parliament. So perhaps we could start with you, Mr Walker?

Mr Walker: Yes, I'm Steve Walker. I'm the Head of the Offshore Division of Health and Safety Executive.

Mr Naylor: I am Philip Naylor. I'm the Director of Maritime Services for the Maritime and Coastguard Agency.

Dr Wills: I'm Jonathan Wills. I'm a wildlife tourism operator, a recovering journalist and also a local councillor; although I attend today in a private capacity and not on behalf of my council.

  Chair: Did you say you are "a recovering journalist"?

Dr Wills: I spent 20 years covering the oil industry.

Ms Wilks: I'm Susie Wilks and I'm an environmental lawyer from a non-profit law firm, ClientEarth.

Q189 Chair: Would you like to start, perhaps, by saying how the Health and Safety Executive's responsibility for offshore installations compares to the regime in the United States?

Mr Walker: Yes. It's different and we have additional and different layers of regulation. In the UK we have a safety case regime whereby, before an operator brings a drilling rig into the UK or operates a fixed platform, they have to prepare a safety case for the Health and Safety Executive to approve. I can go into that in more detail if you want me to. The US doesn't have that. In addition, 21 days before you drill a well, you have to send a fair amount of technical detail about how that well is going to be drilled, designed and so on, to the Health and Safety Executive. So that gives us an opportunity to assess that well design, have discussions with the company and take action if we need to. The US doesn't have that. We also have a system of independent verification, which is enshrined in law, both for the well design and also for the safety-critical elements offshore, such as the BOP, and that would involve independent verification by people like Lloyds and DNV. The US doesn't have that.

  We also have, I think, a different way in which the regulator operates. I'd like to think we have a more sophisticated inspection regime because we have a performance-based legislation. Therefore, rather than just a checklist approach of inspection, it is a more sophisticated inspection. And, lastly, in the UK I'd like to think that we have a different safety culture compared to the safety culture that applies in the Gulf of Mexico—a lot more employee involvement and a healthier safety culture. I can expand on that if you want me to.

Q190 Chair: Would the Deepwater Horizon, for example, have been allowed to operate in the UK in deep water, say with a single blind shear ram on the blowout preventer?

Mr Walker: The way in which that would have been done in the UK, we would have seen that particular operation; we would have seen the design, which would have come in 21 days before that well was drilled. After discussions with my technical staff, we would have accepted that BOP because its design was to the relevant standards and we would have asked the well operator exactly, "Right, why have you chosen that design? Why have you chosen, say, only one ram or two rams", etcetera. We would then assess their answers and decide whether we needed to take any action.

Q191 Sir Robert Smith: Two things: earlier you mentioned the different safety culture and that does seem to be, anecdotally, what a lot of people say, as neighbours and friends in the north east of Scotland. But I just wondered how we maintain that safety culture within the North Sea as we fragment the ownership, going from larger companies that can maybe permeate that culture to new entrants. How are the new entrants inducted into the North Sea culture?

Mr Walker: I think that is a challenge, as the industry changes from the major companies to the smaller companies. Within the UK we do have organisations such as Step Change, which is the industry's safety focus, of which all operators who belong to Oil & Gas UK are members—and the trade unions and the regulators. So that provides a very good learning and networking environment and it does drive forward safety on the UKCS. Part of that working is the workforce engagement, workforce involvement work. So that is one way in which new entrants will be inducted into the safety culture.

You also need to remember that, quite often, it's the same people just turning around into different sort of organisations. It's very rare for there to be a completely new company to come into the UKCS. There are also the legislative requirements that we have in the UK. We have legal requirements for there to be safety representatives on every offshore installation, and safety committees. So, whether you are a new entrant or an established company, you still have to have that and my staff go out and make sure that those arrangements are working.

Q192 Chair: Is there a case for HSE to be more prescriptive about what technology is being used?

Mr Walker: There is always this argument about prescription against the performance setting. Our line is very much that we see performance-setting legislation as in fact much more challenging for the industry, much more able to keep up with developments and provide, in the end, a safer environment for those working offshore. I think I'm quite pleased that, in the global discussions, other countries seem to have accepted that the approach that we and the Norwegians take on performance-based legislation has been taken up by people like the Australians, the Canadians, and so on. And that seems to be the approach that the Americans are now taking, post Deepwater Horizon.

  Chair: Phillip?

Q193 Dr Lee: Good morning. A few questions on the spill response. When we had BP here, I asked them about their oil spill response plan for the Macondo well, because I had had access to it. My impression of that document was that it maybe was cut and pasted, and I've since been made aware of plans for ongoing exploration in other parts of the world that have similar schoolboy errors—for example, references to animals that don't exist in the region in which the well is being drilled. It is a broad question: are we happy that the oil spill response plans that have been put in on the UK continental shelf stack up?

Mr Naylor: Yes, good morning. I accept the point that you make in relation to cutting and pasting a plan; certain elements of a plan, it is true, will be applicable for many types of field and for many types of activity. One of the reasons for that is that the underlying principles of dealing with a spill are going to be the same, regardless of where the activity takes place. There will be some differences reflected in the plan that, by and large, go to the heart of the way the plan will model the behaviour of the spill following its occurrence. The reference you make to Antarctic animals or Arctic animals being present in the Caribbean, I think is well known. I'm not sure that goes to the heart of dealing with a spill.

  Dr Lee: I'm not so sure it was well known before I said it.

Mr Naylor: Sorry. Okay. I was aware of it, probably because I am in the business. But, as I say, from the point of view of providing a practical plan to deal with and to respond to a spill, the underlying principles are similar, regardless of where the spill occurs.

Q194 Dr Lee: My concern, though, it gives the impression of a bit of a slap—"Oh the environment thing. We'll deal with it". It didn't give the impression that it was being taken seriously. That is my point.

Mr Naylor: Yes. I wouldn't want to comment on that, other than perhaps to say that another way of looking at that approach might be to say that they're drawing on some tried and tested approaches to dealing with the issue, rather than trying to come at everything from first principles and make more mistakes along the way.

Q195 Dr Lee: Okay. Staying within the realm of the plan, I also asked BP about their use of dispersant at 5,500 metres subsea. Would you say "Yes" if BP asked for that in Shetland?

Mr Naylor: The use of dispersants in the subsea mode is something that emerged from the response to the Macondo spill. I'm not sure that the technology is sufficiently well developed to say that that is a response that could be used at the moment.

Q196 Dr Lee: So tomorrow, if you got the call, would you say "Yes"?

Mr Naylor: I think we would need to have some evidence that it was an efficacious way of dealing with the spill.

Q197 Dr Lee: So you are saying that you would say no; because there isn't any evidence, is there?

Mr Naylor: We haven't seen any evidence, one way or the other. What we have seen coming out of the response to Macondo are some views that say the use of dispersants was developed and it seems to have an effect.

Q198 Dr Lee: Yes, but over what time scale? I mean the whole problem with dispersants is that they disperse oil to various areas of the Gulf. We don't know where. We don't know how it is going to come out in the system. We could be talking decades before we start seeing plankton that are slightly affected, and then if those plankton are consumed by fish and we eat the fish—I mean the potential liability here is great. What I want is a straight answer that you use an evidence base before you say yes to using a technology like that.

Mr Naylor: I can assure you of that.

Q199 Dr Lee: All right. I recently had the pleasure of going to Oslo for a trip and I asked at the Petroleum Ministry about the Norwegian approach to licensing for deep sea drilling. It is not that there is a moratorium in place, but the Minister said, "Before we give any new licensing to deep water we will need more knowledge". What knowledge do you think the Minister was referring to?

Mr Naylor: I'm not sure what knowledge he was referring to.

Dr Lee: Any ideas what he might be referring to, because we haven't suspended anything, have we, and we have not suggested that we're going to suspend anything?

Mr Naylor: As far as I'm aware, we have treated the licensing that is in hand on its merits. We've certainly changed the information that we need to see in the operator's OPEP to respond to some of the experiences that came out of the Gulf of Mexico, particularly in relation to the operator's demonstration of the worst case scenario from their well. I'm not aware of anything that would act as a reason why we would say no.

Q200 Dr Lee: One more question. It has been suggested to me that there may be a managerial problem on wells on a rig, and that everybody on the rig is under contract to the company that is drilling, which creates a culture and an atmosphere whereby, if you're the Emperor's clothes man and you say, "There's a problem here", that could affect your employment in the wider industry. When I suggested that there may be a managerial issue to Dr Hayward there was a pretty negative response. But rumours are flying around that there wasn't anybody on the well in Macondo to make the decision to switch it off. Now, are we happy with the regulation in that area? For instance, I go back to Norway. There is a union member on each rig, and they are not viewed as a whistle-blower. They are viewed as helping if they raise any safety concerns. I'm not suggesting it needs to be a union man, it could be any nominated person, but I am not aware that it is the same on our side. Are you happy about that set-up? Are we happy that there is somebody on each rig who can make that call?

Mr Naylor: Can I answer that question from the point of view of the MCA's interest in oil spill response? I wonder if you might want to direct the question about the underlying safety culture to Mr Walker. The first answer, in relation to the decision-maker on the rig, is that, from the point of view of the MCA and our responsibility for managing the response to pollution, for us it is very clear—and is an aspect that is captured in our national contingency plan—that there is an offshore installation manager on a rig. From our point of view, that individual is the decision-maker. But I wonder if you might like to direct the remainder of the question to Mr Walker?

Dr Lee: Yes.

Mr Walker: When you have a drilling rig, there are usually two main organisations on board: there will be the actual owner of the rig—in the case of Macondo, that was Transocean—and you'll also have the well operator—in the case of Macondo, that was BP. Certainly, in the UK, the owner of the actual rig has the control and the responsibility for the safety of the people on board. So, as Philip said, the OIM—the offshore installations manager—has the final say. There is a need for both parties to co-ordinate their activities because they have different, but separate, responsibilities. The way in which we do that in the UK is that there will be a bridging document between the rig owner's systems and the well operator's systems to make sure that issues such as who has the final say—who can press the BOP buttons, and so on— is well and truly agreed before you start the operation. So you have a very clearly laid down procedure for that.

On top of that—you mentioned the trade unions in Norway—in the UK we have a system of safety representatives on every rig or platform and so on. They don't have to be trade union representatives, as such, but they are representatives and they are voted on by the work force. And that's part of the increased safety culture that we have in the UK, because people like that can act as formal whistle-blowers. They have the strength of the legislation behind them and also are accepted by the oil companies. So there are two areas—the clarity of responsibilities via the bridging document and the empowerment of employees by their safety representatives to take action.

Q201 Chair: Dr Wills, do you have a point on that?

Dr Wills: Thank you, yes. I think if you asked the Offshore Industry Liaison Committee, which is now part of the RMT union, they would give you a rather different answer about safety reps. The split of responsibilities here and in the States was mentioned earlier. After the Cullen Report into Piper Alpha, we hived off health and safety regulation to a separate organisation. In the States, regulation remained in the same organisation—the Minerals Management Service, I believe it's called—as the licensing authority and the organisation responsible for promoting the industry, which is part of what the Department of Energy does, and it has to be done. We still have the promotion of the industry and its licensing in the same Department. I think the Americans are catching up on the way you have to split off health and safety, but we may have some lessons to learn because they now have those three separate boxes.

There is pre-approval, as I understand it, for the use of dispersants on the surface. The evidence I've seen from studying Exxon Valdez, the Braer in Shetland, the Amoco Cadiz and the Erika and various other spills is that the use of dispersants on the surface is largely cosmetic. As Dr Lee said, we don't know yet what the effect is if you use dispersants below the surface. They are likely to spread the oil more widely through the water column. They are likely to be ingested by various plankton and, in some instances, we know the by-products from them ingesting the oil can be more toxic than the oil itself. Basically, nature cleans up and the only question is how long it takes and how bad the effects are. I haven't seen any containment, dispersal or clean-up equipment that works in the open Atlantic. It didn't even in work in flat calm in the Gulf of Mexico. I haven't seen an oil spill where more than 20% is recovered; and, of that 20%, most of it is probably water because you recover an emulsion.

The old statement is that prevention is better than cure. It's a truism, obviously, but there isn't any cure. The only option in town is prevention, which is why what the gentleman on my right is saying is so important. We have to make sure this doesn't happen. I do not have the technical ability to argue with him, but I do know that around the Shetland Islands and west of the Shetland Islands are some of the most fragile and bio-diverse marine ecosystems in the world, some of the most productive marine ecosystems in the world, and we damage them at our peril. The oxygen we're breathing in this air partly comes from the plankton in the ocean.

Q202 Laura Sandys: I was very interested when we had the session with Dr Hayward. He said that BP had decided that there was no risk from deepwater drilling in the Gulf of Mexico, and they would focus on other risks. When you're looking into the future, what risks that you might have put aside are you bringing back to the table? This issue that the industry itself has decided that certain aspects, certain operations, do not come with risk is quite a concern from my perspective. Also, when you talk about prevention rather than cure, we need to pre-empt some of the issues and work collectively with your bodies, but also internationally, to ensure that we are predicting and that we do have actions in place.

Mr Walker: I must admit, that statement from Tony Hayward I don't recognise in the UK because the whole legislation and the whole safety ethos is that companies need to look at the major hazard risks that could occur during a particular operation. And that's the whole range, not cutting anything out. Then they have to convince us, as the regulator, that they have planned and have the facilities and the capability for dealing with those risks. Companies have to do that even before they start their operation and then part of the role of my staff is to go out and make sure that their promised procedures and processes are there and working. So I don't see that we have ignored a particular area in the UK.

Certainly, drilling is a high-hazard operation. You are drilling into a pressurised reservoir and there are precautions that must be taken. As the development matures, as you put your production platform in, as your production platform ages, you have different risks. If you're talking about an old production platform 30 years on, it's not the drilling problem there; it's the ageing, it's the corrosion, it's the obsolescence of the machinery. So from cradle to grave, there are significant risks in the offshore industry that the industry must address. So I don't see that there are bits where they're saying, "Oh, we're not going to bother about that".

Q203 Laura Sandys: It is just that they'd done the risk assessment and decided there was no risk. I also am concerned about what the industry is taking away from this particular disaster, which is that we always plan our risk assessments on the last disaster. There might be other issues that we need to address and I was just interested in how you look at the wide breadth of risk assessments and whether we're not just, in many ways, responding first of all to the Piper Alpha issue, which determined a lot of our regulation. We're now going to look at the Gulf of Mexico. That will determine our responses. Do you think we need a total overhaul that in some ways looks at a wider group of risks?

Mr Walker: I think it's right that we do look at some of the root causations. If we get too tied up with a particular incident, then we'll prevent that incident but there will be other ones.

I think, to give you an example, we did a big programme of work called KP3 between 2004 and 2007 that looked holistically at how the offshore industry was managing its assets—in other words, how it was keeping the oil and the gas in the pipework—and that was a three-year programme, 100 inspections and a report afterwards. It did raise some fundamental issues—general issues about leadership, managing of assets and information. I think it's by tackling those over-arching areas that the industry can improve and we can ensure that the industry improves. It was interesting; we did a follow-up from KP3. We did a review and we did find that, although it's not completely hunky-dory offshore, there had been a significant improvement by the industry. And we're keeping on hammering those same areas of safety leadership, of competence and so on, and the industry have picked that up and made that one of their flagship improvement areas.

Q204 Sir Robert Smith: I had better remind the Committee of my entry in the Register of Members' Interests as a shareholder in Shell. But on KP3, because the industry was looking at driving down the safety statistics, was it not in a sense much easier to look at management, slips, trips and falls and the things that could be measured? Had the industry lost sight at that time—it maybe has that sight back—of the fact that if you don't keep the structural integrity then you could end up with much larger incidents, albeit less frequent?

Mr Walker: Yes, that's correct. It's very easy just to look at the slips, trips and falls and what I call the occupational safety incidents, which happen relatively frequently. To manage a major hazard activity—these major hazards very rarely happen, but when they do happen they have very big consequences—you need to be looking at the underlying precursors and the hints that all may not be quite well. Therefore it does require a different way of managing, a different way of leading and looking at different metrics in order to see, "Are we doing all right? Do we have all our barriers in place?" That was something that came out of KP3. We felt the industry was too focused on occupational safety and it needed to change to look at process safety and the major hazards. When we did the KP3 review, we felt that there had been a significant redirection of the industry, looking at the major hazard potential of the offshore industry.

Q205 Albert Owen: Mr Walker, you said the regulations were different in the UK to the US. Is there anything unique about the operations off the west coast of Shetland? Are there any unique issues there that need addressing?

Mr Walker: From a drilling safety perspective, the geology will change, and it can change very, very quickly. So West of Shetland covers a large area but I don't think there are any particular challenges in West of Shetland deep water that you won't have in deep water in Norway, Brazil or the States. As I say, the geology is slightly different over here than perhaps in the Gulf of Mexico, but the geology can change and you can drill some relatively easy deep-water wells in the West of Shetland and you can have some more challenging wells. But, once again, it depends on where you're drilling. So I don't think there's anything fundamentally different West of Shetland. Deep-water drilling does have its challenges, but there's nothing that brings West of Shetland out as a red-light area.

Q206 Albert Owen: What about the biodiversity that Dr Wills mentioned and the environment?

Mr Walker: That's something for the Department of Energy.

Q207 Albert Owen: I'm not just asking you, I'm asking everybody. Would others like to respond to the question about the uniqueness of West of Shetland?

  Dr Wills: I think it's right that technically, on the drilling side, there probably isn't anything special. Although the wells out there are generally lower pressure and in rather shallower water, they are still a major technical challenge. The overriding problem out there is the weather. It's appalling. Take what Total said in their recent environmental statement. We rely on the oil industry for many of the details we have of the meteorological regime and the biodiversity. The industry has done some great research out there and it's very useful to us. Total said "the area of the Atlantic Ocean to the West of Shetland on the edge of the Continental Shelf is characterised by extreme environmental conditions such as strong winds, huge waves, very low temperatures and significant water depth". That simply means that if something goes wrong, it's going to be more difficult to fix it. It has just become slightly more difficult because the MCA has decided to withdraw the emergency towing vessel, emergency tug, which is designed to cope with drifting tankers. In fact, it's extremely useful out there because it's equipped with spraying equipment and it is also a fire-fighting tug. It has just been withdrawn as an economy measure, which sends—

  Chair: Maybe the Navy will think it's not an economy measure after what happened last week.

Dr Wills: It sends us the wrong message, I'm afraid.

Q208 Albert Owen: But isn't what you're saying there about the weather—the fact that there is terrible weather to deal with, and that they disconnect from the wells—that they are testing their equipment more than they did in the Gulf of Mexico? So isn't there a plus side to that?

Dr Wills: One would hope so. When something does go wrong and it's a north-wester, we have less than two days before the oil is ashore in a pristine kelp forest; which is where the fish breed and live until they're big enough to be caught by the fishing industry.

Q209 Albert Owen: There's a lot of experience in the North Sea. Can we learn a lot from what's happened in the North Sea and how different it is in the West of Shetland? I hear what you say about the depth and the pressure, and that has to be dealt with technically, but my concern is the environmental damage that you talked about, possibly the biodiversity that you talked about. What lessons have been learned from the North Sea that can be learnt in the West of Shetland? I go back to the point about the weather and the need to decouple and to test the equipment more because what I found outrageous in the responses that we had is that nobody had tested batteries, for instance. You know, this is very basic to me; that in a multi-billion pound industry there was no operator looking after the levels of batteries. Are these issues being looked at? There was no preparedness in the Gulf of Mexico. Are we prepared today?

Dr Wills: The battery problem was one of the reasons there was Esso Bernicia spill in 1978—new year 1979.

Q210 Albert Owen: So this is recurring?

Dr Wills: It's an old problem. It's a simple problem. The technical problems that cause disasters tend to be quite simple. As I think Dr Lee said, it's very often a management problem—people are not following their own safety procedures, the whistle-blowers are not able to call a halt to things and the managers are obviously trying to make money for the company. That's what they're there for. They're not there to protect the environment. They're there to make money and good luck to them. It's our job to protect the environment and make sure they do what their own procedures say they should do and what our law says they should do. Because it's not their oil, it's our oil. That's why they have to apply for licences.

Q211 Albert Owen: Mr Naylor or Ms Wilks, would you like to say whether anything is unique about the West of Shetland?

Ms Wilks: From a legal point of view, there's nothing particularly unique about it. That area comes within the same safety case regulatory system as any other area. I think, having listened to what the rest of the panel have said, I understand the benefits of having a goal-setting regulatory regime and I don't think that fundamentally there's any problem with that. But it just is a way of regulating that relies really strongly on having a strong regulator with efficiency and capacity and robustness and proper independence. One of my key concerns about the regulation, even on paper at the moment, is some of the independence requirements. So, for example, in the system of verification of well design by independent and competent persons, the legal requirements for independence are not tough enough. I understand that the system operates as a client relationship essentially between the oil companies and the consultants who carry out these verification systems. I would prefer to see that brought on to a much more independent level and administered independently with an extra level of oversight from an EU independent authority as well.

While the UK may be doing a lot more than other jurisdictions, we need to think of this as a European Union-wide issue and we need to be sharing some of the best practice that we developed after Piper Alpha and so on. They're drilling off the Netherlands and Denmark as well as off the UK Continental Shelf, and this is a trans-boundary issue.

Mr Naylor: In terms of uniqueness, it's true that the weather in that part of the Atlantic can be atrocious but the oil industry is quite well accomplished at exploring for oil in very hostile conditions, whether in the North Sea or other parts of the globe. If, heaven forbid, there was a spill—I sincerely hope there never will be—the weather would act as a force to assist with the breakup and eventual dispersal of the oil. So in some ways the atrocious weather conditions can assist. I think the point about the depth of the well is obviously that, as was shown with Macondo, it takes much longer to resolve the problem if you're in deeper water, purely because of issues of accessibility, distance and so on. But I'm not, by any means, an expert on the oil exploration industry.

  Picking up on the point that Susie mentioned in relation to trans-European co-operation, I think it's worth bearing in mind that that the model of oil spill response that the MCA has developed, as described in our national contingency plan, does have the ability to, and in fact would, involve other member states within Europe under what we call the Bonn agreement. That is an agreement among all European member states that border the North Sea to work together, to lend assistance and to really make best endeavours to assist other European member states when they have a problem. Similarly, in relation to Norway, we have an agreement called the Norbrit Agreement, which in many ways is a mirror of the UK's national contingency plan and establishes a very clear boundary and clear communication and command and control arrangements for a spill in UK waters that might affect Norway or vice versa. So, to that extent I think it's probably fair to say that we've got quite a good model of co-operation within Europe and indeed with Norway.

Q212 Sir Robert Smith: Just on the EU role, there is a lesson from the fishing industry. The model that Mr Naylor outlined is a better model than maybe the EU-wide model because Czechoslovakia, Poland and Austria don't necessarily have much interest in what's happening in the North Sea whereas those countries that live and breathe and work around the North Sea do. So what we're trying to achieve in the fishing industry is regional management again, which may be one we should stick to for this.

Mr Naylor: I suppose I use the term "EU" loosely. More correct would probably be to say those members of the EU with whom we have a common interest within the area where we operate, rather than the EU per se.

Q213 Dr Whitehead: Mr Naylor, you mentioned the possibility, heaven forbid, of a blowout. The Shetland region has not just rougher weather throughout the year but very strong currents—unlike in the Gulf of Mexico. How would those particular circumstances affect oil spill response plans?

Mr Naylor: Well, they go to the very heart of the principles that would underlie a response to an oil spill because the first thing that we would look to do is model the expected dispersion of oil as it came to the surface. That obviously needs to take account of aspects such as wind and weather but also aspects such as drift. That would then be verified in the early stages of responding to the spill by mobilising equipment towards the scene of the problem by surveillance. We have a surveillance aircraft that is on short readiness to fly out. It is fitted with a number of sensors including sea-surface radar which can paint a very clear picture of what's on the surface of the sea, coupled with satellite imagery, particularly the satellite imagery that emerges from what's called the clean sea net. The modelling that we would do, coupled with our observation of what was happening in reality, would then give us a very clear steer about what was happening to this oil as it came to the surface, where it was likely to go and hence what our response strategy needed to be.

Dr Wills: We have much better surveillance capacity than we used to have. We can see where the oil is going. We still can't do anything about it. The coastline of the Shetland Islands, if you go to every bay and around every little island, is 1,600 miles. It varies from salt marsh to some of the highest cliffs in the United Kingdom. Much of it is, to all intents and purposes, inaccessible to spraying equipment. There is no way you could contain or clean up a significant amount of oil and I don't think the Committee should be under any illusion about this. We do have plans, very detailed plans. There are some for inshore and for sheltered harbours like Sullom Voe, which have worked very well. But none of the kit would work in the open Atlantic.

Q214 Dr Whitehead: But in the case of Macondo, the eventual solution took three and a half months and involved a relief well being drilled. Arguably, the effort to clean up the oil prior to drilling the relief well, putting the cement in and capping the well were pretty ineffective, but clearly the relief well was effective. So if a relief well were required to be drilled, are there sufficient rigs in the area and would the same sort of circumstances apply to the drilling of a relief well—which after all I think started only a fortnight after the blowout in the Gulf of Mexico—or would there be particular difficulties with that?

Dr Wills: I imagine there would, as there were in northern Australia in a recent, very well publicised spill, or there would be in a blowout that went on for a long time. We haven't had a prolonged blowout in the North Sea since Ekofisk and that was only seven days until it was stopped.

Q215 Gemma Doyle: Taking the issue of environmental legislation at an EU level, do you think there are problems with the current legislation and, if so, what changes would you like to see?

Ms Wilks: Can I just respond to that and also respond to Robert's point about the dangers of EU intervention? Obviously, we wouldn't want to see something like the disaster of the common fisheries policy coming out of a call for extra EU action. Nobody wants to see the EU coming in with some kind of lowest common denominator or a one-size-fits-all policy. However, there is capacity within DG Energy and DG Environment to assist with a forum for best practice sharing and looking at whether some kind of minimum technical standards or procedural standards are necessary; capacity for assisting with inspections, and capacity for working on research and development outcomes and training of rig personnel or national inspectors. Given the rapidly changing technologies and the new environments that we're going into, and what we were saying before about the need to predict some of the dangers rather than just respond to things that have already happened, we need to use all of that capacity and take advantage of it. We could go in there and share best practice and take what assistance we can because, while our system might be better than many, it's still not perfect and there's still room for improvement.

Your question was about what I would like to see in terms of different legislation or amendments to current legislation. My main concern is with the liability system and the absence of any regulatory framework or any clear, consistent and reliable regulatory framework for determining liability and compensation arrangements in the case of a spill. So we have the European environmental liability directive, but it is likely to be of limited application in the case of a big spill in European waters and, as a matter of UK law, there's nothing to fill that gap. So I'd like to see something done about liability.

Q216 Gemma Doyle: Do the rest of the panel agree with that?

Dr Wills: Yes, I couldn't disagree with that. There is a good precedent. The European Marine Safety Agency now based in Lisbon is trying to do much the same for tanker traffic and for shipping standards in general.

Mr Naylor: I think, from the point of view of the Maritime and Coastguard Agency, I can probably do no more than to remind members of the organisation's mission which simply is, "Safer Lives, Safer Ships and Cleaner Seas". That's why we exist. So we would endorse anything that has the effect of helping to keep the seas cleaner.

Q217 Dan Byles: I'm interested in touching further on the liability regime. One of the things that raised a lot of eyebrows about the Gulf of Mexico spill was the sheer cost involved once an incident has happened. I think it is probably fair to say that a smaller company than BP with less deep pockets would not have been able to cope with that on their own. Do you think that the entire international liability regime, as it is stands, is fit for purpose for this sort of incident?

Ms Wilks: No, is the short answer. No, it's not; it's far from being fit for purpose. While the US has not been so strong on prevention, a lot tougher on liability, which probably comes as no surprise. There's no equivalent to that in the EU or in the UK specifically. There are international conventions dealing with oil pollution liability and compensation for tanker traffic, but no equivalent for offshore installations. The problem with the environmental liability directive, without going into too much detail, is that it only responds to very particular kinds of environmental damage—so the most relevant to this scenario is probably biodiversityspecies and habitats—and it responds only to specifically legally protected habitats and species, and then only if the damage is significant enough, which is quite a high threshold of adversity. So the chances of it providing a complete regime are pretty slim.

There is, of course, the OPOL Voluntary Industry Scheme but the limit of that is $250 million and it's not enough, in my view, given what we now know about how much Macondo has cost. Also it's a voluntary scheme and at the moment all the drillers on the UK Continental Shelf are a member of it, but they don't have to be. Also the fact that it is voluntary means that it has no legal footing. There is no legal control over it. So basically the company that has caused the damage and should be paying the claim is also deciding on the value of the claim and deciding whether the kind of damage that has been caused falls for coverage under the rules of this particular scheme. So the OPOL scheme covers direct pollution damage. There's a whole set of legal principles about what constitutes direct versus indirect damage and it is debatable whether some of the widespread ecological effects that you can see and that Jonathan has talked about would qualify as direct damage according to the oil company that is going to be paying for it. So we need to have that system on a legal footing.

Q218 Dan Byles: For my own information and for the rest of the panel—I genuinely don't know this—the independent competent persons, do they have any liability? If they investigate and sign off a well and there is a subsequent incident, is there any liability that comes back to them?

Ms Wilks: That's an interesting question. I think you would probably have to show some sort of negligence, just as a matter of regular tort law. If they had been negligent and the oil company had relied on what they said and there was, therefore, a loss—

Dan Byles: But there is no direct clear liability link?

Ms Wilks: There is no strict liability mechanism, no.

Dr Wills: On that point, Det Norske Veritas—the Norwegian ship inspection company which also inspects platforms—signed off the motor tanker Braer in January 1993 and said she was okay to go to sea, despite the fact that her main steam pipe had just been repaired without being physically inspected by an inspector. DNV suffered no loss and there was no liability. The government picked up most of the tab.

I'd like to refer to the point raised by Susie and one of the Members just now about the extraordinary costs of oil spills. Shetland Islands Council, which I have the honour to be a member of, operates the Sullom Voe Oil and Gas Terminal[1]. It's the largest export terminal in Europe and our Head of Ports and Harbours just yesterday produced some rather interesting figures in connection with the loss of the emergency towing vessel. This shows that in the Fair Isle Sea area the cost to the UK economy—not to Shetlands economy—per tonne of crude oil spilled is something like £1,600. So you could basically multiply any numbers by 1,600. It is a very interesting paper, far too detailed to go into here. But if you are interested, sir, I could leave it with the Committee Clerk. You might wish to consider it.

Chair: Thank you.

Q219 Laura Sandys: Just picking up from Dan's points and your inputs on this, one of the things that really concerns me is the issue of how we get compensation through the system. If you look at BP's response, in many ways their immediate response was much more to do with their reputation with the US and ensuring that the US Government were looking at them in a little bit more of a benign way than previously. If they hadn't had those interests in the US, the matter would have ended up in court between all the different parties. Now we are getting these very, very large investments, multiple partners, all looking to blame each other through the courts. How can we structure a process where compensation would be not necessarily immediate but speedy; where people would not have to spend five, 10 or 15 years in the courts before, let's say, communities got their compensation? How do we structure something like that to bring security to the communities that might be impacted?

Ms Wilks: The US system has its problems, as I understand. I don't know if you've come across the Environmental Liability Superfund. It is a system of comprehensive and strict liability, by which I mean liability regardless of fault, where you identify any "potentially responsible party"—that is how they phrase it. So the issue of the contractual arrangements between the driller and the rig contractor, for example, is irrelevant to getting the compensation paid to the people who have been damaged. So it is a joint and several system; any potentially responsible party can wind up liable for the entire loss and then it is for the companies to wrangle it out between them. So that is a possibility; that is one example. I would suggest that a liability regime like that would and should have a pretty strong preventive effect as well in terms of risk management.

Q220 Christopher Pincher: On that same point, in the UK, unlike the United States, you cannot claim any money for environmental damage. After the Exxon Valdez, some communities received compensation which they then used, for example, to purchase areas of pristine forest to prevent it being clear-cut and this was seen as an environmental compensation. That isn't possible in this country because you can kill as many gannets as you like; they're not worth anything.

Ms Wilks: Yes, so the environmental liability directive is supposed to provide for remedial measures, not for property damage, but for environmental damage. If you destroy X number of sea birds, you have to provide some kind of ecologically sound compensation for that, not just a monetary payment.

Q221 Christopher Pincher: Thanks, Chair. My question is directed specifically at Dr Wills, as you are on site, as it were. I suppose there is a tension, hopefully a creative one, on Shetland between a hugely enriching business on your doorstep and one that poses very significant environmental risks and you have alluded to some of them very eloquently. I wonder if you can tell us what the perception is of the oil and gas industry among the islanders?

Dr Wills: Well, it got off to a bad start. In 1978 the 12th tanker spilt 1,100 tonnes of fuel oil, which killed more birds than the 85,000 tonnes from the Braer. It was a different kind of oil. Then the industry realised that it had a PR problem and a big one and, in good faith, it came to the council and the MCA and other bodies concerned and said, "How can we improve this?" As a result, we received a tanker traffic control system, which at that time was the best in the world. The entire process is based on stopping things happening—you can clean up in a harbour, but you can't clean up outside a harbour—and we have been very impressed with the industry, and particularly with BP. Companies can do it if they want to and if they have to.

We regard BP on Shetland Islands Council—and I am sure I do here speak for most councillors—as a partner and an honest partner who will do things that we require them to do for the health of the environment. We've seen in Shetland BP—as belatedly in Alaska—has realised that looking after the environment is very good business for them and the public relations costs of spills, in the days of electronic media, are quite catastrophic. They are much more serious than they were in 1978 because not many people heard about our oil spill then. That was in the days when only the industry had fax machines. By 1993, when we had the Braer, everybody had a mobile phone and a few people had email.

But nowadays the damage from that kind of PR disaster goes around the world in seconds and we have found that BP and its partners at the Sullom Voe Oil Terminal are capable and willing to have a successful and clean offshore oil and gas industry. Now, this refers to pipelines and to tankers. We haven't had any pipeline problems and we've had very few tanker problems. The big tanker problem we did have was a tanker that wasn't subject to the rules of our oil terminal. The rules in Sullom Voe are good international standards but they are enforced by clauses in commercial contracts. So when you have a tanker and you go to pick up a cargo of oil at Sullom Voe, you have to agree in writing that you will observe all these extra standards and this is enforced by the industry's own commercial clauses in their own commercial contracts. When you bring the insurance industry into it, of course, that's where you have real clout. The insurance industry could massively increase offshore standards tomorrow.

Q222 Christopher Pincher: Can you quantify the benefits to the Shetland Islands of the industry? How many people are employed, directly or indirectly, by it?

Dr Wills: Jobs and contracts in the terminals are worth £50 million to £60 million a year to a local community of 22,000 people. We have trust funds which have been built up by a very tiny levy on the price of each barrel of oil passing through—a very tiny levy, a fraction of half a per cent.—and I think we have £175 million[2] in a charitable trust that is for the use of inhabitants for charitable purposes. There is also a reserve fund that the council operates from being the port operator. Again, it is a small proportion of the total. I think we have currently £80 million[3] in the reserve fund. These are small sums to the oil industry, but they are big sums to a small community and they have been earned over the past 34 years because the industry recognised very early on that to be a real partner, not just a paper partner, it had to take the concerns of the local fishing industry and the local wildlife tourism industry into account. The one thing you may not know is that oil spills kill a lot of sheep because sheep in coastal areas eat seaweed and if it gets oiled and they eat it you have to destroy them, usually. There are all sorts of things you don't think about when an oil spill happens and I've seen enough of them; so I don't want to see anymore.

Q223 Dr Whitehead: The question I want to ask this morning is a question on the West of Shetland's environment and ecology and also the environment of the islands themselves and this is a particular question, perhaps, to Dr Wills. Do you think overall the knowledge that we have of how the systems, particularly on the West of Shetland seabed, work and the particular nature of the continental shelf marine environment in that part of the world means that we have to do a lot more work on understanding that before one might seriously go into deep sea drilling in the way that has been described?

Dr Wills: We are just starting to find out what is going on down there. It is very new science. When I was born, I will not say when, we didn't know anything. We didn't even know there was a mid-Atlantic ridge. Now we know a lot more about the topography of the seabed; we know a lot more about the ecology. We've discovered there are corals down there—corals that don't need light and don't co-exist with a plant. So there are large deposits of coral down there. We're learning all the time. Thanks to the oil industry's own researches, we've learnt a lot, but you're undoubtedly right that there's a great deal more that we have to learn. As long as the industry operates safely, that ecology will not be damaged. The question is whether the commercial pressures on the people working out there are so great that they won't or can't follow their own procedures? That is my worry.

Q224 Dr Whitehead: Are there, in your view—and indeed in any of the panel's view—particular circumstances of the ecology and the environment West of Shetland that might cause one to say that, over and above what we know about best endeavours in safety procedures, other issues need to be taken into account that are specific to the West of Shetland further precautions need to be thought about?

Dr Wills: Of course. The Precautionary Principle suggests we should "gang warily" as they say in Scotland and the industry themselves have told us, from their scientists' research, that where normally you expect the variety and the numbers of animals to decline as you go into deeper water, West of Shetland they do not. They get richer and we're still exploring that. So I'm not technically competent to say whether there should be a moratorium on deep-sea drilling. You will be, by the time you have heard your evidence, but I would err on the side of caution.

Ms Wilks: Briefly, again on the liability question, I just want to add that, the current liability regime that we have just discussed relies on protected habitats and protected species. Marine areas currently lag way behind terrestrial areas in terms of designation of protected sites and we're discovering new marine species so they can't all be on the protected species list yet. So, the precautionary principle becomes particularly important against that background.

Q225 Sir Robert Smith: Isn't it important to remember, though, that we are not just starting drilling West of Shetland. We have been drilling West of Shetland for some time, and we are producing West of Shetland?

Dr Wills: That's true, but we are only just beginning to understand the ecology of the seabed down there and what goes on underneath the seabed. We have a very limited understanding of what goes on in the plankton and deep water plankton—the zooplankton.

Q226 Chair: Just to conclude; Mr Naylor, is it your view that the oil spill response in the UK is more focused on tanker spills than well blowouts?

Mr Naylor: That is not my view. My view is that the plans we have, which have been developed over so many years now, based on our experience of dealing with spills, originated back, I suppose, in the days of the Torrey Canyon. It is true to say that many of the spills that we have had to deal with have been as a result of transportation-related spills, whether from tankers or of fuel from ships. But, nevertheless, as I mentioned before, the principles of dealing with an oil spill pay little regard to the origin of the oil. The principles of dealing with it are the same and so, to that extent, I would say that the plan is not shipcentric. It is unfortunately the case that we have to deal with many more incidents of oil from ships than we do oil from the offshore industry. The record of the offshore industry, in terms of calling on us to manage any consequences from its activities, is much better.

Dr Wills: That may or may not be true, but how do we know if there has been a spill offshore?

Mr Naylor: It's self-inspection and self-reporting.

Dr Wills: I don't know if there's a spill going on offshore today and I wouldn't know unless the spiller told me.

Chair: Well, it depends how big it is.

Mr Wills: Yes, there are lots of small ones every day; I know that—a few gallons here and there.

Chair: Okay. Well, thank you all very much for coming in.

1   Note from the witness: "The council only runs the port. The terminal is operated by BP on behalf of a consortium of many oil and gas companies." Back

2   Note from witness: "The total was £178 million on 22 October 2010" Back

3  Note from witness: "The total was £90.3 million on 22 October 2010" Back

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