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S. HRG. 112–826 

REPORT TO THE PRESIDENT FROM THE NATIONAL COMMISSION ON THE BP DEEPWATER 

HORIZON OIL SPILL AND OFFSHORE DRILLING 

HEARING 

BEFORE THE

COMMITTEE ON 

ENVIRONMENT AND PUBLIC WORKS 

UNITED STATES SENATE 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

MARCH 16, 2011 

Printed for the use of the Committee on Environment and Public Works 

( 

Available via the World Wide Web: http://www.fdsys.gpo.gov 
(II) 

COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

BARBARA BOXER, California, Chairman 

MAX BAUCUS, Montana 

THOMAS R. CARPER, Delaware 

FRANK R. LAUTENBERG, New Jersey 

BENJAMIN L. CARDIN, Maryland 

BERNARD SANDERS, Vermont 

SHELDON WHITEHOUSE, Rhode Island 

TOM UDALL, New Mexico 

JEFF MERKLEY, Oregon 

KIRSTEN GILLIBRAND, New York 

JAMES M. INHOFE, Oklahoma 

DAVID VITTER, Louisiana 

JOHN BARRASSO, Wyoming 

JEFF SESSIONS, Alabama 

MIKE CRAPO, Idaho 

LAMAR ALEXANDER, Tennessee 

MIKE JOHANNS, Nebraska 

JOHN BOOZMAN, Arkansas 

BETTINA POIRIER, Majority Staff Director and Chief Counsel 

RUTH VAN MARK, Minority Staff Director 
(III) 

C O N T E N T S 

Page 

MARCH 16, 2011 

OPENING STATEMENTS 

Boxer, Hon. Barbara, U.S. Senator from the State of California ....................... 1 

Inhofe, Hon. James M., U.S. Senator from the State of Oklahoma ................... 2 

Lautenberg, Hon. Frank R., U.S. Senator from the State of New Jersey ......... 4 

Alexander, Hon. Lamar, U.S. Senator from the State of Tennessee ................. 40 

Cardin, Hon. Benjamin L., U.S. Senator from the State of Maryland .............. 40 

Vitter, Hon. David, U.S. Senator from the State of Louisiana ............................ 42 

WITNESSES 

Graham, Hon. Bob, U.S. Senator (Retired), Co-chair of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling ................ 43 

Prepared statement ................................................................................................. 48 

Responses to additional questions from: 

Senator Boxer ............................................................................................ 60 

Senator Carper .......................................................................................... 61 

Senator Lautenberg ................................................................................... 62 

Senator Inhofe ........................................................................................... 62 

Reilly, William, Co-chair of the National Commission on the BP Deepwater 

Horizon Oil Spill and Offshore Drilling ............................................................. 46 

Prepared statement ................................................................................................. 48 

Responses to additional questions from: 

Senator Boxer ............................................................................................ 60 

Senator Carper .......................................................................................... 61 

Senator Inhofe ........................................................................................... 62 

ADDITIONAL MATERIAL 

Report, U.S. Environmental Protection Agency, Office of Air and Radiation, 

March 2011, The Benefits and Costs of the Clean Air Act from 1990 

to 2020 ..................................................................................................................... 5–39 

(1) 

REPORT TO THE PRESIDENT FROM THE NATIONAL COMMISSION ON THE BP DEEPWATER HORIZON OIL SPILL AND OFFSHORE 

DRILLING 

WEDNESDAY, MARCH 16, 2011 

U.S. SENATE, COMMITTEE ON ENVIRONMENT AND PUBLIC WORKS, Washington, DC. 

The committee met, pursuant to notice, at 10:05 a.m. in room 

406, Dirksen Senate Office Building, Hon. Barbara Boxer (chairman of the committee) presiding. 

Present: Senators Boxer, Inhofe, Carper, Lautenberg, Cardin, 

Whitehouse, Vitter, Sessions and Alexander. 

STATEMENT OF HON. BARBARA BOXER, U.S. SENATOR FROM 

THE STATE OF CALIFORNIA 

Senator BOXER. I would prefer to just chat, but we have to get 

busy. So, we are going to get busy. We are going to start. 

I am going to waive my opening statement and simply say that 

we are so pleased that both of you are here because I have read 

a lot of your recommendations and they make a lot of sense. 

As we look at what is happening right now in Japan, those feelings of being out of control come back when we think about the BP 

spill. Nobody felt it more than the two Senators from Louisiana. 

So, I am glad that Senator Vitter is on this committee as we look 

at ways to make sure that something like this does not happen 

again and if it does happen again, we have the systems in place 

to keep people whole without having to scramble like we did before. 

So, I want to thank both of you. I will ask unanimous consent 

to put my statement in the record. Hearing no objection, I will do 

so. 

I will ask everyone to keep their opening statement, if they make 

it, to 3 minutes. 

Senator Inhofe. 

[The prepared statement of Senator Boxer follows:] 

STATEMENT OF HON. BARBARA BOXER, U.S. SENATOR FROM THE

STATE OF CALIFORNIA

Today, we will hear from the distinguished co-chairs of the Commission on the 

BP Deepwater Horizon Oil Spill and offshore drilling about their report to the President on the Deepwater Horizon disaster. 

This committee has previously heard testimony about the heartbreaking economic 

and resource damages caused by this oil spill and the need to ensure that the people 

whose jobs and livelihoods are impacted are made whole again. 
2 

The Commission’s report and its recommendations underscore the work that remains to be done to minimize the chance of another disaster like the one we witnessed last year. The report highlights the safety and environmental risks associated with offshore drilling and spotlights the systemic lapses that led to the tragic 

Deepwater Horizon spill. 

The report lays out a comprehensive set of recommendations to improve the safety 

of offshore drilling, to hold oil companies accountable when things go wrong, and 

to protect jobs, coastal communities and the environment. 

The Commissioners recommend that Congress take steps to restore the Gulf 

Coast, including dedicating a significant portion of Clean Water Act penalties to the 

restoration of the Gulf’s damaged ecosystems. I support efforts to restore the Gulf 

Coast and look forward to working with colleagues on a proposal that promotes the 

restoration of economically and environmentally important ecosystems in the Gulf 

of Mexico. 

The Commission’s report also urges Congress to act to increase the outdated limits on liability in the Oil Pollution Act. Under current law, an oil company’s liability 

for economic and natural resources damages from an oil spill disaster is only $75 

million. This is astounding when total damages for the BP Deepwater Horizon spill 

could total in the tens of billions of dollars. 

According to the Commission’s report, current liability limits distort safety incentives for companies drilling offshore and fail to provide assurances to those impacted 

by a spill that all damages will be compensated. 

Legislation introduced by Sen. Menendez, the Big Oil Bailout Prevention Unlimited Liability Act of 2011 (S. 214), has been referred to the EPW Committee for consideration. The bill would remove the current limits on liability to ensure taxpayers 

are not left on the hook for damages from oil spills. 

The committee reported this legislation in the last Congress, and it is important 

that we once again take action to ensure those impacted by a spill due to no fault 

of their own are made whole. 

Working collaboratively, I believe we can find ways to address oil company liability in a way that ensures businesses, particularly small and independent operators, 

are able to maintain their economic competitiveness. 

For example, the Commission’s report recommends the establishment of a mutual 

insurance pool that allows offshore operators to pool risk and share the liability for 

any damages associated with an oil spill. 

Senators Landrieu and Begich have already begun developing such a proposal. I 

plan to continue working with them and other colleagues as we seek to address this 

issue. 

The Commission report also includes important recommendations on improving oil 

spill research, reforming environmental review of offshore drilling, updating Federal 

oil spill response efforts, and better evaluating the use of dispersants. 

Many of the Commission’s recommendations were addressed in legislation reported by this committee in the last Congress. I am committed to working with my 

colleagues in the Senate to again move forward on legislation that holds oil companies accountable while protecting jobs, coastal communities and the environment. 

I look forward to hearing from our witnesses today about the Commission’s recommendations. 

STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM 

THE STATE OF OKLAHOMA 

Senator INHOFE. All right, I will do the same thing. I do have a 

good statement though. 

I just want to make this comment. Every time something happens, I remember in Prince William Sound, way up there after the 

accident 20 years ago, and a lot of people up there celebrating, we 

are going to parlay this into stopping drilling on ANWR and all 

that type of thing. I said, wait a minute. This is a transportation 

accident. If you stop our developing our own resources we are going 

to have to transport more of them and the incidence of that happening would be greater. But that did not make any difference. 

The same thing, I thought, happened when we had this spill 

down here. There were a lot of people who were wanting to stop, 

and they did successfully do it, and the moratorium came off and 
3 

we still have not, we have only issued, I think, two deep water permits since then. 

But I do want to take my remaining 2 minutes to, when I get 

the attention of my colleagues here, I have a bill I am going to be 

introducing today having to do with all the cumulative effects of all 

of these regulations. Now, we are talking about regulations like the 

EPA’s Greenhouse Gas Rules, we know that would be between 

$300 and $400 billion annually, Boiler MACT, around 798,000 jobs, 

Utility MACT, $100 billion by 2015, the NAAQS, $90 billion. 

So, what we have tried to do with the Environmental Protection 

Agency is to get the cumulative effect in terms of dollars and jobs 

of all these regulations, not just the ones I mentioned, but there 

are a total of three more, I believe, and so I am introducing that 

bill today that will set up a committee comprised of the Secretaries 

of Energy, Agriculture, Commerce, Defense, Labor, Small Business 

and others to perform this comprehensive assessment of the effects 

of the EPA rules on America. 

So, what I am going to want to do is encourage as many of the 

members of the committee to get on as co-sponsors of this and I 

will be introducing it today. 

I will yield back the remainder of my time. 

[The prepared statement of Senator Inhofe follows:] 

STATEMENT OF HON. JAMES M. INHOFE, U.S. SENATOR FROM THE

STATE OF OKLAHOMA

Thank you, Madam Chair, for scheduling today’s hearing to discuss the findings 

and recommendations of the President’s National Commission on the BP Deepwater 

Horizon Oil Spill. 

I also want to welcome Chairman Reilly, and welcome Senator Graham back to 

the Senate; I appreciate their work on this important report. I think we all can 

agree that the commission did a terrific job arranging a massive volume of complex 

information, releasing it in readable form, and doing it under budget. 

I support some of the commission’s conclusions and recommendations, while I 

have problems with others. There are specific issues raised by the commission that 

fall under the jurisdiction of this committee, including reforms to the National Environmental Policy Act (NEPA) and to the Oil Pollution Act. I look forward to hearing 

from the co-chairs on these important issues. 

The commission calls for greater, more effective safety regulations. I don’t think 

we need more regulations, but they can certainly be more effective. And to be effective, regulations must not be an obstacle to increasing our domestic production. As 

Chairman Reilly himself recently put it, ‘‘We vitally need the resources of offshore 

oil and gas, that’s where the future lies. This industry is a major contributor to our 

supplies and will become a significantly more important contributor in the future.’’ 

And what of our domestic supplies? According to the Congressional Research 

Service, America’s combined recoverable natural gas, oil, and coal endowment is the 

largest on Earth. In fact, America’s recoverable resources are far larger than those 

of Saudi Arabia, China, and Canada combined. 

Despite this, the Obama administration has made a conscious policy choice to 

block domestic production. Consider the proposed rule by the new regulatory body 

in the Department of Interior overseeing offshore production. Here’s what it said 

about the regulations it proposed late last year: 

‘‘The impact on domestic deepwater hydrocarbon production as a result of these 

regulations is expected to be negative. . .Currently there is sufficient spare capacity 

in OPEC to offset a decrease in GOM deepwater production that could occur as a 

result of this rule.’’ [Emphasis added] 

In other words, the Obama administration is admitting what is simply a matter 

of common sense: if we decrease production, we will increase our dependence on foreign oil. 

This is the inevitable result of the Obama administration’s cap-and-trade agenda. 

EPA is moving forward with regulations that will restrict, impede, and stop domestic energy production. Energy prices therefore will go up; as President Obama put 

it, ‘‘electricity prices will necessarily skyrocket.’’ 
4 

This is the wrong approach. I agree with the commission that we should protect 

the workers who supply the energy we take for granted every day and protect the 

environment. But I also agree with the commission that we should produce our own 

resources, which are the largest in the world. In fact, we should increase that production. I hope that the Obama administration will agree, too. 

Senator BOXER. Thank you. 

Is Senator Cardin here? Senator Lautenberg? 

Senator Lautenberg, hi. You are just in time for your, we only 

have 3-minute opening statements. We waived our statements because we have a pending vote at 10:30 a.m. 

Senator LAUTENBERG. I get the hint, Madam Chairman. 

Senator BOXER. But you have 3 minutes. 

STATEMENT OF HON. FRANK R. LAUTENBERG, U.S. SENATOR 

FROM THE STATE OF NEW JERSEY 

Senator LAUTENBERG. Just very briefly. First, to old friends, a 

long time, I am sorry, we do not use the word old. Friends, I am 

happy to see you and thank you for the work that you have done 

with this Commission. I will be brief with my statement. 

Just to say that today I would like to see us raise the question 

about the cost-benefit analysis for drilling off our coasts and whether or not, with our ravishing use of oil and our limited supply, 

whether that is a good course for the long term. 

We know one thing. If oil is drilled, oil will be spilled. We saw 

it in the worst of terms in the Gulf of Mexico. We do not need to 

repeat that experience, in my view. 

So, I once again thank you. Senator Graham, we still miss you, 

I can tell you that. Bill Reilly, we were together in Brazil some 

time ago and I enjoyed working with you as well. 

Madam Chairman, thank you for holding this hearing and I ask 

unanimous consent that my full statement be on the record. 

Senator BOXER. Without question. 

I ask unanimous consent that I may place in the record a document called The Benefits and Costs of The Clean Air Act from 1990 

to 2020. I think it is a good balance to my dear friend, his comments on the cost of regulation. This shows how many lives were 

saved in 2010, 160,000 infants saved, chronic bronchitis, et cetera. 

So, we are going to put that in the record and we will continue that 

debate at another time. 

[The referenced document follows:] 
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Senator INHOFE. I would agree that I support this. 

Senator BOXER. Good. 

Senator INHOFE. I have always been a supporter of the Clean Air 

Act. I see it has done wonderful things. 

Senator BOXER. Good. Thank you very much. 

Senator, I believe it is Vitter at this time. Alexander? Sorry. 

Senator Alexander. 

STATEMENT OF HON. LAMAR ALEXANDER, U.S. SENATOR 

FROM THE STATE OF TENNESSEE 

Senator ALEXANDER. Thank you, Madam Chairman. 

I want to welcome Bob Graham and Bill Reilly. I started with 

Bob as Governor. He was really one of the most effective and innovative Governors in our country when he served. Bill Reilly I 

served with in the Bush administration, and a great leader on environmental matters. 

Last week, and I will keep my remarks brief, last week I bought 

a Nissan Leaf, so I am driving an all electric car back and forth 

to the office. But I figured out that even if we electrify half our cars 

and trucks, which I would like for us to do in this country, which 

is a very audacious and ambitious goal, we would still need about 

10 or 11 million barrels of oil, of crude oil, a day. And 31 percent 

of our domestic oil comes from the Gulf. 

We are all watching what is happening in Japan with nuclear 

power even though we have never had a death in connection with 

a commercial nuclear plant in the United States. We have not had 

one on any of our navy reactors, no one was hurt at Three Mile 

Island. We worry about nuclear power but it provides 70 percent 

of our clean electricity, no sulfur, nitrogen, mercury or carbon. 

Coal, we have had many discussions about the use of coal, but 

that is 50 percent of our electricity. Natural gas, we are relieved 

that we have a new supply of natural gas which has less pollutants. But all of a sudden we are reminded that 25 percent of our 

domestically produced natural gas comes from off shore. 

So in a country that uses about 25 percent of all the energy in 

the world, all of the energy sources we have have some cost to 

them. I look forward, greatly, to your recommendations about how 

we can continue to explore for oil and gas, because we are going 

to need it, and we are going to need to look off shore and in Federal 

lands in Alaska, in my opinion, but to do so in a safe way as we 

move toward using less oil and gas and natural gas in our country. 

Thank you very much for your service and your work on this. 

Senator BOXER. Thank you, Senator Alexander. 

Senator Cardin. 

STATEMENT OF HON. BENJAMIN L. CARDIN, U.S. SENATOR 

FROM THE STATE OF MARYLAND 

Senator CARDIN. Thank you, Madam Chair. 

I really want to thank our two Co-Chairs, very much, for your 

leadership on this. Senator Graham, it is nice to see you again and 

thank you for your leadership. Mr. Reilly, it is nice to have you before the committee and we thank you very much for your service. 

Your report I found to be excellent. I think it really will be used 
41 

as a judge for congressional action, both legislative and oversight. 

So we thank you. 

I do want to acknowledge that we are proud that Dr. Don Boesch 

was part of your group from Maryland. He is one of our experts on 

the environment and he helps us a great deal on the Chesapeake 

Bay. 

This is the largest environmental disaster in our Nation’s history 

and there are a lot of things we need to take a look at as a result 

of this disaster. We have to take a look at the liability laws to 

make sure they are adequate. We certainly need to take a look at 

a regulatory system that failed. 

But I want to concentrate on one issue and that is focus on the 

environmental damage and the ongoing assessment efforts and 

your recommendations related to independent scientific assessment 

of those damages. 

The role of science in the aftermath of the Deepwater Horizon 

disaster is something which I think all of us need to be concerned. 

I say that because there was a troubling reliance on the responsible 

party for funding. Now, BP put major funding efforts into the 

cleanup, and that is certainly understandable, but they also were 

involved in the assessment of damage and there, of course, they 

have a self interest. So, I think it behooves all of us to make sure 

that we get objective review of the material and assessment so that 

we can take the appropriate action. 

I do not know how that can be done unless we have some form 

of an independent source of funding to allow independent scientists 

to make those judgments to assist the Government in holding a responsible party for the damage that has been done. We need some 

type of a dedicated source of funding so that independent science 

work can be deployed without hesitation. 

I hope that we will find ways in which we can address those 

issues. I think your recommendations really help us in that regard. 

The natural resource damage assessment provisions of the Oil Pollution Control Act require that the public be compensated for the 

injuries and the loss of public resources. We have a responsibility 

to make sure that, in fact, is done. 

I think you have given us the foundation so that we can take the 

appropriate action here in Congress and I thank you very much for 

your public service. 

[The prepared statement of Senator Cardin follows:] 

STATEMENT OF HON. BENJAMIN L. CARDIN, U.S. SENATOR FROM THE

STATE OF MARYLAND

Madame Chairman, let me begin by thanking our witnesses. Both Senator 

Graham and Administrator Reilly have already had distinguished careers. The fact 

that they responded to this call to duty is an example of selfless public service that 

deserves the nation’s thanks. We are indebted to you both. 

I also want to note the contribution of one of the other Commission members. Dr. 

Don Boesch is the President of the University of Maryland Center for Environmental Sciences and an eminent scientist in his own right. He has extraordinary 

experience as a scientist who has studied the Louisiana wetlands complex for decades. We are especially proud of the work that he does today as the Chesapeake 

Bay’s preeminent scientist. I know that his contribution to the Commission was invaluable, and I want the record to note my personal thanks for the work of Dr. 

Boesch. 

The Commission’s report is thorough-going. It contains key findings about this extraordinary event that cost 11 people their lives and immediately disrupted the lives 
42 

of countless Americans. As you note, it was the largest environmental disaster in 

the Nation’s history. 

Your recommendations are thoughtful and I intend to pursue legislation that will 

implement many of them. 

We have much to discuss, ranging from liability limits that are too low, a regulatory regime that failed to protect human lives as well as our public resources. You 

have detailed recommendations that include technology, research, management, 

oversight, emergency response and more. All of these are the proper purview of this 

hearing, but I want to focus my comments and questions on the environmental damages, the on-going assessment effort, and your recommendations related to independent, scientific assessments of those damages. 

In short, I want to focus my remarks and later my questions on the role of science 

in the aftermath of the Deepwater Horizon disaster. 

As the witnesses said in their Recommendations report, we need to deploy the full 

range of the nation’s scientific capacity when disaster strikes. That means government scientists and engineers from multiple agencies and departments, academics, 

and both private sector and independent public scientists being fully engaged day 

one. 

Getting this phalanx of expertise into the field quickly and in a well-coordinated 

fashion is essential. As you note in your report, the full range of that expertise was 

not fully engaged. Unnecessary restrictions were placed on scientists, who found 

many areas with restricted access. Oil spill rates were grossly underreported until 

reasonable access to the site was afforded to independent government and academic 

engineers. 

Further, there was an inability to put sufficient financial resources into the recovery effort quickly enough. There was a troubling reliance on the responsible party 

for funding. BP put major funding into the effort. But cleanup and restoration activities are in the company’s self interest. An independent analysis of the scope of 

damages is not, and yet the company exerted strong hold on those purse-strings. 

In a hearing I held last year, the water and wildlife subcommittee heard compelling testimony from a number of scientists who were engaged in the Natural Resources Damage Assessment. The Federal Government had insufficient financial resources to put full teams into the field to gather both baseline and impact data. 

We need a dedicated source of funding so that independent science work can be 

deployed without hesitation. One of the lessons of Exxon Valdez disaster, several 

witnesses said, was the need to collect better data in the immediate aftermath of 

such a catastrophic event and to keep such expertise in the field long enough to get 

a complete picture of the damages to our natural resources. 

We also heard about the need to have independent scientists conduct these surveys. We were warned repeatedly that data gathered, analyzed and published by the 

responsible party would never be viewed as unbiased. 

Your recommendations make this same point. There is a compelling need for fair 

and transparent analysis of the impacts on our natural resources. The Natural Resource Damage Assessment provisions of the Oil Pollution Control Act require that 

the public be compensated for injury to and lost use of public resources. These include essential habitats such as wetlands. They also include the loss of fish, turtles, 

and uncounted shorebirds such as the brown pelican. Plant life and the microorganisms that make up the basis of the food chain for all species also must be assessed. 

You have done a remarkably thorough job of sorting through the chaos of the Nation’s largest environmental disaster. Your independent, non-partisan analysis, impartial judgment and thoughtful recommendations are remarkable. We are grateful 

for your service, and I look forward to exploring some of these issues in greater detail during our question period. 

Senator BOXER. Senator Vitter. 

STATEMENT OF HON. DAVID VITTER, U.S. SENATOR FROM THE 

STATE OF LOUISIANA 

Senator VITTER. Thank you, Madam Chair, and thanks to both 

of the Chairmen for their work. I would just like to briefly focus 

on two things. 

First of all, to me, moving forward in Louisiana and on the Gulf, 

I think the single most important recommendation of your report 

is that we, in Congress, with the President, dedicate a significant 

portion of the fines related to this incident under the Clean Water 
43 

Act to restoration in the Gulf. I thank you for making that crystal 

clear recommendation. 

The Administration supports that approach. But, of course, the 

devil is in the details in terms of what we dedicate those resources 

to and how it is spread geographically and among jurisdictions. The 

quicker and the fairer we can resolve that, the better. I would really encourage all of us to come together to move forward with dedicating a significant majority of the fines under the Clean Water Act 

to Gulf restoration. 

Second, I would just like to point out that this incident in the 

Gulf is a continuing tragedy and a continuing crisis. Most of the 

continuation of it right now is on the economic side due, in my and 

many people’s opinions, to an unwarranted continuing shutdown of 

the Gulf. I think it is unwarranted. 

None of us argue with the need to learn from this disaster and 

adapt and change. We are doing that in major ways. Maybe the 

most obvious are the two major containment systems that have 

been developed to be on call to respond to any future incident, 

which hopefully we will not have. But we need to move on and restart the Gulf and put people back to work. That is the continuing 

crisis that we are facing, the economic devastation. 

Finally, let me say with regard to both of those points, my colleague, Mary Landrieu, agrees wholeheartedly. She is a Democrat, 

I am a Republican, but we certainly agree on both of those points 

about Clean Water Act fines and about putting people back to work 

in a much more aggressive way immediately in the Gulf to help 

meet our Nation’s immediate energy needs. 

Thank you, Madam Chair. 

Senator BOXER. Senator, I am looking forward to some legislation 

that would carry out what you are talking about because we do 

need that legislation. I just would ask you if you are working on 

such legislation with Senator Landrieu at this time. 

Senator VITTER. Yes. 

Senator BOXER. Good. So, as soon as that is ready, I think we 

ought to bring it here and I think we ought to get it done because 

I fully agree with that. 

We welcome you again and we will have time before the vote 

starts to hear your full statements. So, Senator Graham, do you 

want to proceed? Or, whichever one of you. 

STATEMENT OF HON. BOB GRAHAM, U.S. SENATOR (RETIRED), 

CO-CHAIR OF THE NATIONAL COMMISSION ON THE BP 

DEEPWATER HORIZON OIL SPILL AND OFFSHORE DRILLING 

Senator GRAHAM. Thank you very much, Madam Chair. 

I am very appreciative to join my long-time friend and colleague, 

Bill Reilly, in discussing some of the recommendations of our Commission on Offshore Oil. We believe very strongly that this goal 

should be, as Senator Alexander has said in other areas, to assure 

the American people that the way in which we are conducting this 

enterprise has the highest standards of safety of any place in the 

world. I am afraid that we cannot say that today. 

With that, there may be the confidence of the American people 

that will allow this industry, which is a critical part of our oil and 

gas production, to proceed forward and continue to serve America. 
44 

The President created our Commission and asked it to determine 

the causes of the Deepwater Horizon disaster, evaluate the response, and advise the Nation about how future energy exploration 

could take place in a responsible manner. We spent the better part 

of 8 months organizing ourselves and then conducting a series of 

hearings, interviews, and expert review of the documents and literature in order to reach our conclusions. We made recommendations for the industry, for the executive branch, and for the Congress. 

I am very gratified by the progress that has been made by the 

industry. As Senator Vitter commented, the industry is developing 

impressive new well containment technologies and there are new 

standards being established within the industry itself. The Interior 

Department is moving forward with internal reorganization that 

will allow it to have a higher level of oversight of the industry and 

greater public confidence in the manner in which the Governmentindustry relationship is being managed. 

I would like to focus my remarks, Madam Chairman, on the 

issues that are within the jurisdiction of this committee and I will 

discuss three of those and Bill Reilly others. 

The first is the Oil Pollution Act of 1990. This was legislation enacted after Exxon Valdez and it included the recommendation that 

there be a cap on liability of $75 million. We think this cap is a, 

obviously 20 years out of date. Just inflation itself would demand 

that it be reopened and examined. 

We also think an even more important thing that has happened 

is that about the time that this law was passed, the industry 

moved from being a shallow water industry, that is drilling at 

1,000 feet or less, to increasingly a deep water industry. In the 

next 20 years, almost all of the new offshore oil activities will be 

at depths of greater than 1,000 feet. That is not just a difference 

measured in feet or yards or meters. It is a significant difference 

in the risk and the potential adverse consequence of an untoward 

event. 

So, we recommend that there be a reexamination of what would 

be the appropriate level of, the appropriateness of having any cap, 

and if there is to be a cap, what should be the considerations. 

We think the basic policy considerations are, on the one hand, 

you do not want to create a situation where only the megafirms are 

in a financial position that they can be part of the exploration activity. For a variety of reasons, it is important to maintain a 

strong, independent sector within the oil and gas industry. 

But, on the other hand, if the liability cap is too low and is not 

reflective of the real economic consequences, then the cost is not 

going to go away, but it is either going to be born by the innocent 

victim, that small fisherman in Louisiana who has lost the ability 

to provide his income, or other interests that will be adversely effected, or, as we have seen in other industries, it becomes the Federal Government’s responsibility and, therefore, the taxpayers are 

picking up the costs. 

We think the challenge to this committee is to strike that appropriate balance and we have made a number of recommendations as 

to how to do that. 
45 

The second issue is oil spill response. One of the best things that 

happened in this disaster was that it was a BP well. If this had 

occurred to a company that was less financially capable than BP, 

the disaster would have been multiple times more difficult and of 

greater pain to the American people. 

We believe there are some important steps that can be taken 

that would increase the industry-wide ability to respond to an incident. First, that the Department of the Interior do as it has been 

doing, which is develop a more rigorous set of standards and requirements for industry response plans before a well is permitted, 

that is, before we proceed forward, we need to know that we have 

the capability to respond to an adverse event. 

Second, that the EPA and the Coast Guard should more fully involve State and local governments as significant players in spill response planning. This is a familiar concept to this committee because it would adopt some of the principles of the Stafford Act, 

which relates to earthquakes, hurricanes and other natural disasters, to oil spills. 

Third, that the Congress should provide an adequate and sustained funding for oil spill research as Senator Cardin has suggested. One of the shocking discoveries was that there was virtually no improvement in our ability to respond to an oil spill between Exxon Valdez in 1989 and this incident in 2010. In large 

part, that was a function of the fact that nobody had been investing 

in that research that would have improved our level of response, 

particularly for a deep water event. 

Finally, the issue that Senator Vitter raised. We believe it is very 

important to see this as an opportunity to do something that has 

been long needed but has faltered largely on the lack of an adequate source to make it happen, and that is a major effort to restore one of America’s treasures, which is the Gulf of Mexico. It has 

been a battered area, and that is particularly true in the Mississippi Delta area. 

A combination of actions that had an economic purpose combined 

with nature has caused a serious deterioration of, and the basic 

quantity of the marshlands of, the Mississippi Delta. We believe 

that this is an opportunity by committing 80 percent of any civil 

fines or penalties that are collected under the Clean Water Act to 

this purpose to make a major step forward in the protection of our 

Gulf. 

Madam Chairperson, I have exceeded my time already. I will 

thank you and call upon my colleague. 

Senator BOXER. I would not have called on you to end except we 

do have a vote pending and what I want to do is get both of your 

testimony finished. So, we do have time. If the bell rings, keep on 

going. We certainly can stay for the full 5, 7 or 8 minutes of your 

statement. 

Hon. Bill Reilly, we are very honored to have you here as well, 

along with Senator Graham. 
46 

STATEMENT OF WILLIAM REILLY, CO-CHAIR OF THE NATIONAL COMMISSION ON THE BP DEEPWATER HORIZON OIL 

SPILL AND OFFSHORE DRILLING 

Mr. REILLY [Speaking off microphone]. Thank you, Chairman 

Boxer, Senator Inhofe—— 

Senator BOXER. Make sure you turn on your mic. There you go. 

Mr. REILLY. Thank you. Chairman Boxer, Senator Inhofe, members of the committee, I ask that my testimony, our testimony, be 

included in the record—— 

Senator BOXER. Without objection. 

Mr. REILLY. It will be fairly brief. Senator Graham, with whom 

I have had the great pleasure to serve on this Commission, a 

statesman and a terrific collaborator, very important in the whole 

presentation, organization and approach of the Commission, I 

would just simply point that I believe this may be the first Commission in history, I think Congressman Waxman observed that it 

probably was and he considered it bad precedent that we came in 

well under budget, I think about two-thirds, I think, of the money 

allocated to us we spent, we also finished in about the shortest 

time ever allowed a Commission and that was 6 months. 

I want to comment on a couple of things that are relevant to the 

committee, I think, and some that may go somewhat beyond your 

jurisdiction. Senator Graham has covered some of the key, the really salient points that are within this committee’s jurisdiction. 

I want to say, first of all, that as someone, the only member of 

our Commission who had significant industry experience, a longtime member of the Board of ConocoPhillips, I want to say that 

this is a very vital industry and an extremely important enterprise. 

We do, as Senator Alexander said, get about 30 percent of our 

oil, domestic oil, from the Gulf. We are getting it increasingly from 

deep water. We will get even more of it from deep water going forward for the simple reason that that is where it is. That is where 

the serious reserves of hydrocarbons now lie in the United States 

waters with the single exception of those that are offshore in Alaska. 

The first point I would like to make is that the report is a hopeful report. It is essentially an optimistic report. We believe that 

this enterprise poses significant risks and the deeper you go the 

higher the risk. But it is a manageable enterprise. 

There are many high risk industries that have learned to manage their risks, the chemical industry after Bo Pahl with responsible care, the nuclear industry in the United States, as Senator Alexander mentioned, after Three Mile Island, and this industry has 

had its wake-up call. It is a sophisticated industry and largely a 

responsible industry. We believe that it will learn from this experience and the indications that they are going to establish an institute modeled on some of those that have characterized other high 

risk industries is very encouraging in that respect. 

The experience of the Exxon Valdez, over which I had significant 

responsibilities, led me to believe that the things that we provided 

for in the Oil Pollution Act would have provided a substantially improved response capability, technology, the skimmers, the booms, 

the dispersants, and the rest. The truth is that we did not see any 

improvement significantly in the Gulf. That can be addressed. It 
47 

should be addressed with concentrated research that is fostered. 

There was research provided for, research funds, in the early years 

after 1989. But that money diminished over time as memories 

faded. We strongly encourage attention to response capability and 

technology going forward. 

Second, the interagency coordination process really needs to be 

fixed. The Interior Department has been in the habit of accepting 

comments, advice to its proposals from whomever. If the Coast 

Guard or NOAA should make comments, those are treated along 

with any ordinary citizen’s or inexpert observer. That needs to be 

changed. 

The Commission makes a number of recommendations about the 

improvement in the way in which the National Environmental Policy Act works to engage other agencies and particularly expert 

agencies. We recommend that the role particularly of NOAA and 

the Coast Guard, who really, oddly, have not been heavily involved 

or consulted in deliberations respecting leasing decisions, be substantially upgraded. 

I think going forward one of the major questions that will preoccupy us in this field is what to do about the offshore Arctic. The 

Arctic poses a different set of risks. It is shallow water, largely, but 

has its own threats of terrible fog, very severe hurricane-type 

forces, darkness over much of the year, ice and ice scouring that 

goes all the way down to the 140 foot depth that wells are likely 

to be drilled in the Chukchi Sea. Those are all going to need special 

attention, along with the very important species in the Arctic, some 

of which are endangered, many of which are priceless and highly 

important. 

As we go forward, our Commission, which dealt with this issue, 

it was probably the most divisive or difficult issue that we confronted, we do recommend that there be no moratorium on offshore 

drilling in the Arctic. We recommend also that baseline science be 

developed with respect to those species and other impacts that are 

likely to be encountered. We recommend that much greater attention be given to the prevention capabilities of those who are allowed to drill exploratory wells, and to containment should there 

be a disaster. 

Finally, we recommend that the issue of dispersants, which have 

not previously been tested seriously in the Arctic, that be given a 

high priority by the Environmental Protection Agency. As a former 

EPA Administrator, I fully understand why there has been significant reluctance to deposit oil into waters, particularly, perhaps, 

fragile ones. But that needs to be done so that we can have the conversation about dispersants and determine their appropriateness 

and effectiveness before an event requires their use, which was not 

true in the Gulf. 

Finally, let me just say that this is a global industry and these 

are global problems. We know that Mexico intends to drill within 

the next 2 years in deep water in the Gulf in their sovereign jurisdiction. We know also that Cuba is planning, possibly as soon as 

next year, to begin 16 wells, some of them 50 miles off the coast 

of Key West. In the Arctic, also, we will have to have some kind 

of understanding with the other Arctic powers, Russia, Canada, 

Denmark and the like, with respect to how they proceed. 
48 

There is every reason to give a high priority to getting the best 

practices accepted in regulations and recognized by the international oil and gas developing community of nations. 

Thank you, Madam Chairman. 

[The prepared statement of Senator Graham and Mr. Reilly follows:] 

STATEMENT OF HON. BOB GRAHAM, U.S. SENATOR (RETIRED) AND HON. WILLIAM

REILLY, NATIONAL COMMISSION ON THE BP ‘‘DEEPWATER HORIZON’’ OIL SPILL AND

OFFSHORE DRILLING

I. INTRODUCTION

Chairman Boxer, Ranking Member Inhofe, and members of the committee, thank 

you for the opportunity to testify today on behalf of the National Commission on 

the BP Deepwater Horizon Oil Spill and Offshore Drilling. 

The explosion that tore through the Deepwater Horizon drilling rig last April 20, 

as the rig’s crew completed drilling the exploratory Macondo well deep under the 

waters of the Gulf of Mexico, began a human, economic, and environmental disaster. 

Eleven crew members died, and others were seriously injured, as fire engulfed 

and ultimately destroyed the rig. And, although the Nation would not know the full 

scope of the disaster for weeks, the first of more than four million barrels of oil 

began gushing uncontrolled into the Gulf—threatening livelihoods, the health of 

Gulf coast residents and of those responding to the spill, precious habitats, and even 

a unique way of life. A treasured American landscape, already battered and degraded from years of mismanagement, faced yet another blow as the oil spread and 

washed ashore. Five years after Hurricane Katrina, the Nation was again transfixed, seemingly helpless, as this new tragedy unfolded in the Gulf. The costs from 

this one industrial accident are not yet fully counted, but it is already clear that 

the impacts on the region’s natural systems and people were enormous, and that 

economic losses total tens of billions of dollars. 

On May 22, 2010, President Barack Obama announced the creation of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling (the 

‘‘Commission’’): an independent, nonpartisan entity, directed to provide thorough 

analysis and impartial judgment. The President charged the Commission to determine the causes of the disaster, and to improve the country’s ability to respond to 

spills, and to recommend reforms to make offshore energy production safer. And the 

President said we were to follow the facts wherever they led. 

This Commission report (the ‘‘Report’’), which we ask be made part of the hearing 

record in its entirety, is the result of an intense 6-month effort to fulfill the President’s charge. As a result of our investigation, we conclude: 

• The explosive loss of the Macondo well could have been prevented. 

• The immediate causes of the Macondo well blowout can be traced to a series 

of identifiable mistakes made by BP, Halliburton, and Transocean that reveal such 

systematic failures in risk management that they place in doubt the safety culture 

of the entire industry. 

• Deepwater energy exploration and production, particularly at the frontiers of 

experience, involve risks for which neither industry nor government has been adequately prepared, but for which they can and must be prepared in the future. 

• To assure human safety and environmental protection, regulatory oversight of 

leasing, energy exploration, and production require reforms even beyond those significant reforms already initiated since the Deepwater Horizon disaster. Fundamental reform will be needed in both the structure of those in charge of regulatory 

oversight and their internal decisionmaking process to ensure their political autonomy, technical expertise, and their full consideration of environmental protection 

concerns. 

• Because regulatory oversight alone will not be sufficient to ensure adequate 

safety, the oil and gas industry will need to take its own, unilateral steps to increase dramatically safety throughout the industry, including self-policing mechanisms that supplement governmental enforcement. 

• The technology, laws and regulations, and practices for containing, responding 

to, and cleaning up spills lag behind the real risks associated with deepwater drilling into large, high-pressure reservoirs of oil and gas located far offshore and thousands of feet below the ocean’s surface. Government must close the existing gap and 

industry must support rather than resist that effort. 

• Scientific understanding of environmental conditions in sensitive environments 

in deep Gulf waters, along the region’s coastal habitats, and in areas proposed for 
49 

more drilling, such as the Arctic, is inadequate. The same is true of the human and 

natural impacts of oil spills. 

We reach these conclusions, and make necessary recommendations, in a constructive spirit: we aim to promote changes that will make American offshore energy exploration and production far safer, today and in the future. 

II. THE ROOT CAUSES OF THE EXPLOSION

The Commission examined in great detail what went wrong on the rig itself. Our 

investigative staff uncovered a wealth of specific information that greatly enhances 

our understanding of the factors that led to the explosion. There are recurring 

themes of missed warning signals, failure to share information, and a general lack 

of appreciation for the risks involved. In the view of the Commission, these findings 

highlight the importance of organizational culture and a consistent commitment to 

safety by industry, from the highest management levels on down. 

To summarize, the Macondo blowout happened because a number of separate risk 

factors, oversights, and outright mistakes combined to overwhelm the safeguards— 

promised by both government and by private industry—to prevent just such an 

event from happening. But most of the mistakes and oversights at Macondo can be 

traced back to a single overarching failure—a failure of management by BP, Halliburton and Transocean. Set out below are what Commission investigative staff determined were ‘‘key facts.’’ 

Key Facts: The investigation team identified several key human errors, engineering mistakes and management failures including: • A flawed design for the cement slurry used to seal the bottom of the well, which 

was developed without adequate engineering review or operator supervision; • A ‘‘negative pressure test,’’ conducted to evaluate the cement seal at the bottom 

of the well, identified a cementing failure but was incorrectly judged a success because of insufficiently rigorous test procedures and inadequate training of key personnel; • Flawed procedures for securing the well that called for unnecessarily removing 

drilling mud from the wellbore. If left in place, that drilling mud would have helped 

prevent hydrocarbons from entering the well and causing the blowout; • Apparent inattention to key initial signals of the impending blowout; and • An ineffective response to the blowout once it began, including but not limited 

to a failure of the rig’s blowout preventer to close off the well. 

Key Findings: The ‘‘key facts’’ led investigators to make the following ‘‘key findings’’: • Errors and misjudgments by at least three companies—BP, Halliburton and 

Transocean—contributed to the disaster. • Management failures included: 

• Inadequate training of key personnel. • Inadequate management of numerous late-stage well design decisions. 

• Poor communication within and between the companies involved. 

• Inadequate risk evaluation and risk mitigation measures. 

• The disaster could have been prevented. Notably, workers on the rig incorrectly 

interpreted clear warning signs of a hydrocarbon influx during the negative pressure test. If recognized, those warning signs would have allowed them to shut in 

the well before the blowout began. 

• Government regulations did not address several key causes of the blowout, and 

regulators lacked the resources or technical expertise to address others. 

• Whether purposeful or not, many of the risk-enhancing decisions that BP, Halliburton, and Transocean made saved those companies significant time (and 

money). 

The Commission’s investigation concludes that these failures were preventable. 

Errors and misjudgments by at least three companies—BP, Halliburton and 

Transocean—contributed to the disaster, and Federal regulations did not address 

many of the key issues. 

III. REGULATORY OVERSIGHT AND THE NEED FOR REFORM

Regulatory Oversight 

While our testimony will primarily focus on those areas that fall within the committee’s jurisdiction, it is important to briefly discuss the lapses in regulatory oversight that contributed to this disaster, and the Commission’s recommendations in 

this area. 

The responsibilities assigned to the Minerals Management Services (MMS) in an 

effort to regulate the offshore oil and gas industry have created conflicts of interest 

and have been subject to pressure from political and industry interests. MMS was 
50 

not only responsible for offshore leasing and resource management; it also collected 

and disbursed revenues from offshore leasing, conducted environmental reviews, reviewed plans and issued permits, conducted audits and inspections, and enforced 

safety and environmental regulations. 

Over the course of many years, political pressure generated by a demand for lease 

revenues and industry pressure to expand access and expedite permit approvals and 

other regulatory processes often combined to push MMS to elevate revenue and permitting goals over safety and environmental goals. These problems were compounded by an outdated organizational structure, a chronic shortage of resources, 

a lack of sufficient technological expertise, and the inherent difficulty of coordinating effectively with all of the other government agencies that have had statutory 

responsibility for some aspect of offshore oil and gas activities. 

To remedy this conflict of interest, the Commission recommends that the roles 

and responsibilities of the former MMS should be separated into three entities with 

clearly defined statutory authorities. One entity would be responsible for offshore 

safety and environmental enforcement; another would perform functions related to 

leasing and environmental science; and the third would manage natural resource 

revenues. The safety and environment enforcement authority or entity, in particular, should have primary statutory responsibility for overseeing the structural 

and operational integrity of all offshore energy-related facilities and activities, including both oil and gas offshore drilling and renewable energy facilities. 

Since the Commission issued its final report on January 11th, Secretary of the 

Interior Ken Salazar has already announced changes in the organization within Interior that reflect many of the Commission’s recommendations. 

Regulation to Better Manage Risk 

The Commission also recommends a more comprehensive overhaul of both the 

leasing program and the regulatory policies and institutions used to oversee the 

safety and environmental protection of offshore activities. The goals must be to reduce and manage risk more effectively, using strategies that can keep pace with a 

technologically complex and rapidly evolving industry, particularly in high-risk and 

frontier areas, and to secure the resources needed to execute the leasing function 

and provide adequate regulatory oversight. 

BOEMRE currently relies heavily on prescriptive regulations incorporating a 

number of industry technical standards. Prescriptive regulations must be the basis 

of an effective regulatory system, but given the many variables in deepwater drilling, prescriptive rules can never cover all cases. The Federal agency responsible for 

offshore activity must have a regulatory approach that integrates more sophisticated 

risk assessment and risk management practices into its oversight of energy developers operating offshore. The focus should shift from prescriptive regulations covering only the operator to a foundation of augmented prescriptive regulations, including those relating to well design and integrity, supplemented by a proactive, 

risk-based performance approach that is specific to individual facilities (production 

platforms and drilling rigs), operations, and environments. Both the operator and 

the drilling rig owners would have a legal duty to assess and manage the risks of 

a specific activity by engaging all contractors and subcontractors in a coordinated 

safety management system. 

IV. ENVIRONMENTAL REVIEW

As part of its inquiry into the existing regulatory structure for offshore drilling, 

the Commission reviewed existing mechanisms for protecting the environment. In 

its work on this question, the Commission focused on two issues: (1) the application 

of National Environmental Policy Act (NEPA) requirements to the offshore leasing 

process and (2) the need for better science and greater interagency consultation to 

improve decisionmaking related to management of offshore resources. 

NEPA 

Based on the Commission’s review of leasing and permitting processes in the Gulf 

of Mexico before the Deepwater Horizon incident, the Commission concluded that 

the breakdown of the environmental review process for OCS activities was systemic 

and that Interior’s historical approach to the application of NEPA requirements for 

offshore oil and gas activities needs significant revision. In particular, the application of tiering, use of categorical exclusions, the practice of area-wide leasing, and 

failure to develop formal NEPA guidance all contributed to this breakdown. The 

Commission recommends that the Council on Environmental Quality and the Department of the Interior revise and strengthen the NEPA policies, practices, and 

procedures to improve the level of environmental analysis, transparency, and con-
51 

sistency at all stages of the OCS planning, leasing, exploration, and development 

process. 

Improved Interagency Consultation and Environmental Science 

Under OCSLA, it is up to the Secretary of the Interior to choose the proper balance between environmental protection and resource development. In making leasing decisions, the Secretary is required to solicit and consider suggestions from any 

interested agency, but he or she is not required to respond to the comments or accord them any particular weight. Similar issues arise at the individual lease sale 

stage and at the development and production plan stage. As a result, NOAA—the 

nation’s ocean agency with the most expertise in marine science and the management of living marine resources—effectively has the same limited role as the general public in the decisions on selecting where and when to lease portions of the 

OCS. The Commission recommends a more robust and formal interagency consultation process in which NOAA, in particular, is provided a heightened role, but ultimate decisionmaking authority is retained at DOI. The Commission further recommends the creation of an Office of Environmental Science, led by a Chief Environmental Scientist, with specified responsibilities in conducting all NEPA reviews, 

coordinating other environmental reviews, and whose expert judgment on environmental protection concerns would be accorded significant weight in leasing decisionmaking. 

V. REFORMING INDUSTRY SAFETY PRACTICES

Changing Business As Usual 

Without effective government oversight, the offshore oil and gas industry will not 

adequately reduce the risk of accidents, nor prepare effectively to respond in emergencies. However, government oversight alone cannot reduce those risks to the fullest extent possible. Government oversight must be accompanied by the oil and gas 

industry’s internal reinvention: sweeping reforms that accomplish no less than a 

fundamental transformation of its safety culture. 

Just as the nuclear power industry created the Institute of Nuclear Power Operations (INPO), the nation’s oil and gas industry needs now to embrace the potential 

for an industry safety institute to supplement government oversight of industry operations. To be credible, any industry-created safety institute would need to have 

complete command of technical expertise available through industry sources. To be 

successful, an oil and gas industry safety institute would require in the first instance strong board-level support from CEOs and boards of directors of companies 

for a rigorous inspection and auditing function. Such audits would need to be aimed 

at assessing companies’ safety cultures and encouraging learning about implementation of enhanced practices. The inspection and auditing function would need to be 

conducted by safety institute staff, complemented by experts seconded from industry 

companies. There would also need to be a commitment to share findings about safety records and best practices within the industry, aggregate data, and analyze performance trends, shortcomings, and needs for further research and development. Accountability could be enhanced by a requirement that companies report their audit 

scores to their boards of directors and insurance companies. 

VI. FINANCIAL RESPONSIBILITY AND LIABILITY

Oil spills cause a range of harms, including personal, economic and environmental 

injuries, to individuals and ecosystems. The Oil Pollution Act makes the party responsible for a spill liable for compensating those who suffered as a result of the 

spill—through human health and property damage, lost profits, and other personal 

and economic injuries—and for restoring injured natural resources. The Act also 

provides an opportunity to make claims for compensation from a dedicated Oil Spill 

Liability Trust Fund. The Oil Pollution Act, however, imposes limits on both the 

amount for which the responsible party is liable, and the amount of compensation 

available through the trust fund. In the case of the Deepwater Horizon spill, BP (a 

responsible party) has placed $20 billion in escrow to compensate private individuals and businesses through the independent Gulf Coast Claims Facility. But if a 

less well capitalized company had caused the spill, neither a multi-billion dollar 

compensation fund nor the funds necessary to restore injured resources, would likely 

have been available. 

Liability for damages from spills from offshore facilities is capped under the Oil 

Pollution Act at $75 million, unless it can be shown that the responsible party was 

guilty of gross negligence or willful misconduct, violated a Federal safety regulation, 

or failed to report the incident or cooperate with removal activities, in which case 

there is no limit on damages. Claims up to $1 billion for certain damages can be 
52 

made to, and paid out of, the Oil Spill Liability Trust Fund, which is currently supported by an 8-cent per-barrel tax on domestic and imported oil. 

The Oil Pollution Act also requires responsible parties to ‘‘establish and maintain 

evidence of financial responsibility,’’ generally based on a ‘‘worst-case discharge’’ estimate. In the case of offshore facilities, necessary financial responsibility ranges 

from $35 million to $150 million. 

Inadequacy of Current System 

There are two main problems with the current liability cap and financial responsibility dollar amounts. First, the relatively modest liability cap and financial responsibility requirements provide little incentive for oil companies to improve safety 

practices. Second, as noted, if an oil company with more limited financial means 

than BP had caused the Deepwater Horizon spill, that company might well have declared bankruptcy long before paying fully for all damages. In the case of a large 

spill, the Oil Spill Liability Trust Fund would likely not provide sufficient backup. 

Thus, a significant portion of the injuries caused to individuals and natural resources, as well as government response costs, could go uncompensated. 

Any discussion of increasing liability caps and financial responsibility requirements must balance two competing public policy concerns: first, the goal of ensuring 

that the risk of major spills is minimized, and in the event of a spill, victims are 

fully compensated; and second, that increased caps and financial responsibility requirements do not drive competent independent oil companies out of the market. A 

realistic policy solution also requires an understanding of the host of complex economic impacts that could result from increases to liability caps and financial responsibility requirements. 

Options for Reform 

As this committee and others in Congress consider options for addressing these 

problems, the Commission recommends that first, Congress significantly increase 

the liability cap and financial responsibility requirements for offshore facilities. To 

address both the incentive and compensation concerns noted above, Congress should 

significantly raise the liability cap. Financial responsibility limits should also be increased, because if an oil company does not have adequate resources to pay for a 

spill, the application of increased liability has little effect. Should a company go 

bankrupt before fully compensating for a spill, its liability is effectively capped. If, 

however, the level of liability imposed and the level of financial responsibility required are set to levels that bear some relationship to potential damages, firms will 

have greater incentives to maximize prevention and minimize potential risk of oil 

spills and also have the financial means to ensure that victims of spills do not go 

uncompensated. 

Second, the Commission recommends that Congress increase the limit on per-incident payouts from the Oil Spill Liability Trust Fund. If liability and financial responsibility limits are not set at a level that will ensure payment of all damages 

for spills, then another source of funding will be required to ensure full compensation. The Federal Government could cover additional compensation costs, but this 

approach requires the taxpayer to foot the bill. Therefore, Congress should raise the 

Oil Spill Liability Trust Fund per-incident limit. Raising the Oil Spill Liability Trust 

Fund’s per-incident limit will require the Fund to grow through an increase of the 

per-barrel tax on domestic and imported oil production. An alternative would be to 

increase the Trust Fund through a surcharge by mandatory provisions in drilling 

leases triggered in the event that there are inadequate sums available in the Fund. 

Third, the Commission recommends that the Department of the Interior enhance 

auditing and evaluation of the risk of offshore drilling activities by individual participants (operator, driller, other service companies). The Department of the Interior, insurance underwriters, or other independent entities should evaluate and 

monitor the risk of offshore drilling activities to promote enhanced risk management 

in offshore operations and to discourage unqualified companies from remaining in 

the market. 

The Interior Department currently determines financial responsibility levels 

based on potential worst-case discharges, as required by the Oil Pollution Act. Although the agency’s analysis to some degree accounts for the risk associated with 

individual drilling activities, it does not fully account for the range of factors that 

could affect the cost of a spill, and thus the level of financial responsibility that 

should be required. Interior should analyze a host of specific, risk-related criteria 

when determining financial responsibility limits applicable to a particular company, 

including, but not limited to: geological and environmental considerations, the applicant’s experience and expertise, and applicable risk management plans. This in-
53 

creased scrutiny would provide an additional guard against unqualified companies 

entering the offshore drilling market. 

VII. RESPONSE AND CONTAINMENT

As part of its charge from President Obama, the Commission looked at the effectiveness of the response to the spill. There were remarkable instances of dedication 

and heroism by individuals involved in the rescue and cleanup. Much was done 

well—and thanks to a combination of good luck and hard work, the worst-case scenarios did not all come to pass. But it is impossible to argue that the industry or 

the government was prepared for a disaster of the magnitude of the Deepwater Horizon oil spill. Twenty years after the Exxon Valdez spill in Alaska, the same blunt 

response technologies—booms, dispersants, and skimmers—were used, to limited effect. On-the-ground shortcomings in the joint public-private response to an overwhelming spill like that resulting from the blowout of the Macondo well are now 

evident, and demand public and private investment. So do the weaknesses in local, 

state, and Federal coordination revealed by the emergency. 

Neither BP nor the Federal Government was prepared to conduct an effective response to a spill of the magnitude and complexity of the Deepwater Horizon disaster. 

Three critical issues or gaps existed in the government’s response capacity: (1) the 

failure to plan effectively for a large-scale, difficult-to-contain spill in the deepwater 

environment; (2) the difficulty of coordinating with State and local government officials to deliver an effective response; and (3) a lack of information and understanding concerning the efficacy of specific response measures, such as dispersants 

or berms. Moreover, the technology available for cleaning up oil spills had improved 

only incrementally since 1990. The technologies and methods available to cap or 

control a failed well in the extreme conditions thousands of feet below the sea were 

also inadequate. Although BP was able to develop new source-control technologies 

in a compressed timeframe, and the government was able to develop an effective 

oversight structure, the containment effort would have benefited from prior preparation and contingency planning. 

Improved Oil Spill Response Planning 

The Department of the Interior should create a rigorous, transparent, and meaningful oil spill risk analysis and planning process for the development and implementation of better oil spill response. Several steps are needed for implementation: 

• Interior should review and revise its regulations and guidance for industry oil 

spill response plans. The revised process should ensure that all critical information and spill scenarios are addressed in the plans. 

• In addition to Interior, other agencies with relevant scientific and operational 

expertise should play a role in evaluating spill response plans to verify that operators can conduct the operations detailed in their plans. Specifically, oil spill 

response plans, including source-control measures, should be subject to interagency review and approval by the Coast Guard, EPA, and NOAA. Other parts 

of the Federal Government, such as Department of Energy national laboratories 

that possess relevant scientific expertise, could be consulted. Plans should also 

be made available for a public comment period prior to final approval and response plans should be made available to the public following their approval. 

• Interior should incorporate the ‘‘worst-case scenario’’ calculations from industry 

oil spill response plans into NEPA documents and other environmental analyses 

or reviews. 

Spills of National Significance 

The Gulf oil spill presented an unprecedented challenge to the response capability 

of both government and industry. Though the National Contingency Plan permitted 

the government to designate the spill as one of ‘‘national significance,’’ this designation did not trigger any procedures other than allowing the government to name a 

National Incident Commander. 

EPA and the Coast Guard should establish distinct plans and procedures for responding to a ‘‘Spill of National Significance.’’ Specifically, EPA should amend or 

issue new guidance on the National Contingency Plan to: 

• Increase government oversight of the responsible party, based on the National 

Contingency Plan’s requirement that the government ‘‘direct’’ the response 

where a spill poses a substantial threat to public health or welfare. 

• Augment the National Response Team and Regional Response Team structures 

to establish additional frameworks for providing interagency scientific and policymaking expertise during a spill. Further, EPA, NOAA, and the Coast Guard 

should develop procedures to facilitate review and input from the scientific com-
54 

munity—for example, by encouraging disclosure of underlying methodologies 

and data. • Create a communications protocol that accounts for participation by high-level 

officials who may be less familiar with the National Contingency Plan structure 

and create a communications center within the National Incident Command— 

separate from the joint information center established in partnership with the 

responsible party—to help transmit consistent and complete information to the 

public. 

STRENGTHENING STATE AND LOCAL INVOLVEMENT

The response to the Deepwater Horizon disaster showed that State and local elected officials had not been adequately involved in oil spill contingency planning, 

though career responders in State government had participated extensively. Unfamiliarity with, and lack of trust in, the Federal response manifested itself in competing State structures and attempts to control response operations that undercut 

the efficiency of the response overall. 

EPA and the Coast Guard should bolster State and local involvement in oil spill 

contingency planning and training and create a mechanism for local involvement in 

spill planning and response similar to the Regional Citizens’ Advisory Councils mandated by the Oil Pollution Act of 1990. 

In addition, a mechanism should be created for ongoing local involvement in spill 

planning and response in the Gulf. In the Oil Pollution Act of 1990, Congress mandated citizens’ councils for Prince William Sound and Cook Inlet. In the Gulf, such 

a council should broadly represent the citizens’ interests in the area, such as fishing 

and tourism, and possibly include representation from oil and gas workers as exofficio, non-voting members. 

Research and Development for Improved Response 

The technology available for cleaning up oil spills has improved only incrementally since 1990. Federal research and development programs in this area are underfunded: In fact, Congress has never appropriated even half the full amount authorized by the Oil Pollution Act of 1990 for oil spill research and development. 

Specifically, Congress should provide mandatory funding (i.e. funding not subject 

to the annual appropriations process) at a level equal to or greater than the amount 

authorized by the Oil Pollution Act of 1990 to increase Federal funding for oil spill 

response research by agencies such as Interior, the Coast Guard, EPA, and NOAA. 

In addition, Congress and the Administration should encourage private investment 

in response technology more broadly, including through public-private partnerships 

and a tax credit for research and development in this area. 

Dispersants 

Prior to the blowout, the Federal Government had not adequately planned for the 

use of dispersants to address such a large and sustained oil spill, and did not have 

sufficient research on the long-term effects of dispersants and dispersed oil to guide 

its decisionmaking. 

EPA should update and periodically review its dispersant testing protocols for 

product listing or pre-approval, and modify the pre-approval process to include temporal duration, spatial reach, and volume of the spill. EPA should update its dispersant testing protocols and require more comprehensive testing prior to listing or 

pre-approving dispersant products. The Coast Guard and EPA should modify preapprovals of dispersant use under the National Contingency Plan to establish procedures for further consultation based on the temporal duration, spatial reach, or volume of the spill and volume of dispersants that responders are seeking to apply. 

EPA and NOAA should conduct and encourage further research on dispersants. 

Containment 

The most obvious, immediately consequential, and plainly frustrating shortcoming 

of the oil spill response set in motion by the events of April 20, 2010 was the simple 

inability—of BP, of the Federal Government, or of any other potential intervener— 

to contain the flow of oil from the damaged Macondo well. 

At the time of the blowout on April 20, the U.S. Government was unprepared to 

oversee a deepwater source-control effort. Once the Secretary of Energy’s science 

team, the U.S. Geological Survey, the national laboratories, and other sources of scientific expertise became involved, the government was able to substantively supervise BP’s decisionmaking, forcing the company to fully consider contingencies and 

justify its chosen path. 

The National Response Team should develop and maintain expertise within the 

Federal Government to oversee source-control efforts. The National Response Team 
55 

should create an interagency group—including representation from the Department 

of the Interior, Coast Guard, and the Department of Energy and its national laboratories—to develop and maintain expertise in source control, potentially through public-private partnerships. 

Industry’s Spill Preparedness 

Beyond attempting to close the blowout preventer stack, no proven options for 

rapid source control in deepwater existed when the blowout occurred. The Department of the Interior should require offshore operators to provide detailed plans for 

source control as part of their oil spill response plans and applications for permits 

to drill. 

These plans should demonstrate that an operator’s containment technology is immediately deployable and effective. In applications for permits to drill, the Interior 

should require operators to provide a specific source-control analysis for each well. 

As with oil spill response plans, source-control plans should be reviewed and approved by agencies with relevant expertise, including the Interior and the Coast 

Guard. 

Improved Capability for Accurate Flow Rate Estimates 

Early flow rate estimates were highly variable and difficult to determine accurately. However, the understated estimates of the amount of oil spilling appear to 

have impeded planning for and analysis of source-control efforts like the cofferdam 

and especially the top kill. 

The National Response Team should develop and maintain expertise within the 

Federal Government to obtain accurate estimates of flow rate or spill volume early 

in a source-control effort. The National Response Team should create an interagency 

group—including representation from Interior, the Coast Guard, the national laboratories, and NOAA—to develop and maintain expertise in estimating flow rates 

and spill volumes. In addition, EPA should amend the National Contingency Plan 

to create a protocol for the government to obtain accurate estimates of flow rate or 

spill volume from the outset of a spill. This protocol should require the responsible 

party to provide all data necessary to estimate flow rate or spill volume. 

More Robust Well Design and Approval Process 

Among the problems that complicated the Macondo well-containment effort was 

a lack of reliable diagnostic tools and concerns about the well’s integrity. The Department of the Interior should require offshore operators seeking its approval of 

proposed well design to demonstrate that: • Well components, including blowout preventer stacks, are equipped with sensors or other tools to obtain accurate diagnostic information—for example, regarding pressures and the position of blowout preventer rams. • Wells are designed to mitigate risks to well integrity during post-blowout containment efforts. 

Industry Responsibilities for Containment and Response 

Industry’s responsibilities extend to efforts to contain any big spills as quickly as 

possible and to mitigate the harm caused by spills through effective response efforts. 

Both government, which must be capable of taking charge of those efforts, and industry were woefully unprepared to contain or respond to a deepwater well blowout 

like that at Macondo. All parties lacked adequate contingency planning, and neither 

had invested sufficiently in research, development, and demonstration to improve 

containment or response technology. 

From now on, the oil and gas industry needs to combine its commitment to transform its safety culture with adequate resources for containment and response. 

Large-scale rescue, response, and containment capabilities need to be developed and 

demonstrated—including equipment, procedures, and logistics—and enabled by extensive training, including full-scale field exercises and international cooperation. 

To that end, at least two industry spill containment initiatives have emerged that 

build on ideas and equipment that were deployed in response to the Macondo blowout and spill. The nonprofit Marine Well Containment Company was created in July 

2010 by four of the major, integrated oil and gas companies. The second spill containment initiative is being coordinated by Helix Energy Solutions Group, which 

played a role in the Macondo well containment efforts. 

Yet neither the Marine Well Containment Company’s planned capabilities nor 

Helix’s go past 10,000 feet despite the fact that current drilling technology extends 

beyond this depth. Also it seems that neither is structured to ensure the long-term 

ability to innovate and adapt over time to the next frontiers and technologies. What 

resources, if any, either initiative will dedicate to research and development going 

forward is unclear. 
56 

The primary long-term goal of a spill containment company or consortia should 

be to ensure that an appropriate containment system is readily available to contain 

quickly spills in the Gulf of Mexico with the best available technology. Any spill containment company or consortia should ensure that it remains focused on this goal, 

even when doing so potentially conflicts with the short-term interests of its founding 

companies, in the case of MWCC, or the parent company, in the case of Helix. An 

independent advisory board, with representatives from industry, the Federal Government, State and local governments, and environmental groups could help keep 

any spill containment initiative focused on innovative, adaptive, effective spill response over the long term. 

VIII. SPILL IMPACTS AND GULF RESTORATION

Even before the highly visible damages caused by the spill became clear, many 

crucial Gulf economic and ecological resources—fisheries, transportation, tourism— 

faced long-term threats. First, more than 2,300 square miles of coastal wetlands— 

an area larger than the State of Delaware—have been lost to the Gulf since the 

United States raised the massive levees along the lower Mississippi River after the 

devastating Great Flood of 1927. Exceptionally powerful hurricanes, always a threat 

to the region, struck the coast in 2005 (Katrina and Rita) and 2008 (Gustav and 

Ike), causing even more wetland loss. Second, low-oxygen bottom waters were in the 

process of forming a massive ‘‘dead zone’’ extending up to 7,700 square miles during 

the summer of 2010. Referred to as hypoxia, this phenomenon has intensified and 

expanded since the early 1970’s as a result of nutrient pollution, mainly from Midwestern agriculture. And finally, the Deepwater Horizon disaster made matters 

worse: 11 rig workers killed in the explosion and 17 injured; many thousands of people exposed to contaminated waters, coasts, beaches, and seafood; thousands out of 

work; birds and sea animals killed and significant habitats damaged or destroyed. 

The Commission’s investigation made plain that existing authorities are not adequate to redress these significant harms and ensure restoration of the Gulf. 

Human Health Impacts 

The National Contingency Plan overlooks the need to respond to widespread concerns about human health impacts. For smaller oil spills, the response effort is generally carried out by trained oil spill response technicians, but given the scale of the 

response to the Deepwater Horizon spill and the need to enlist thousands of previously untrained individuals to clean the waters and coastline, many response 

workers were not screened for pre-existing conditions. This lack of basic medical information, which could have been collected if a short medical questionnaire had 

been distributed, limits the ability to draw accurate conclusions regarding long-term 

physical health impacts. EPA should amend the National Contingency Plan to add 

distinct procedures to address human health impacts during a Spill of National Significance. Spills of this magnitude necessarily require a significant clean-up effort, 

potentially exposing workers to toxic compounds in oil and dispersants. 

Consumer Confidence 

Images of spewing oil and oiled beaches in newspapers and on television set the 

stage for public concern regarding the safety of Gulf seafood. Additional factors contributed to the lingering impression that the public could not trust government assurances that the seafood was safe: the unprecedented volumes of dispersants used, 

confusion over the flow rate and fate of the oil, frustration about the government’s 

relationship with BP in spill cleanup, and lawsuits filed by fishermen contesting the 

government’s assurance of seafood safety. The economic blow to the Gulf region associated with this loss of consumer confidence is sizable. BP gave Louisiana and 

Florida $68 million for seafood testing and marketing, as well as money to assess 

impacts on tourism and fund promotional activities. As of early December 2010, BP 

was considering a similar request from Alabama. 

In future spills, however, there is no guarantee that a responsible party will have 

the means or the inclination to compensate such losses. Such indirect financial 

harms are currently not compensable under the Oil Pollution Act. Nevertheless, 

losses in consumer confidence are real and Congress, Federal agencies, and responsible parties should consider ways to restore consumer confidence in the aftermath 

of a Spill of National Significance. 

The Commission recommends that Congress, Federal agencies, and responsible 

parties take steps to restore consumer confidence in the aftermath of a Spill of National Significance. 
57 

Lack of Sustained Funding for Gulf Restoration 

A lack of sustained and predictable funding, together with failed project coordination and long-term planning, has resulted in incomplete and often ineffective efforts 

to restore the Gulf’s natural environment. No funding source currently exists to support regional restoration efforts. While cost estimates of Gulf restoration vary widely, according to testimony before the Commission, fully restoring the Gulf will require $15 billion-$20 billion, or a minimum of $500 million per year, over 30 years. 

A number of different sources currently provide funding to individual states for restoration, however none of these sources provides funds for Gulf-wide coastal and 

marine restoration, and none is sufficient to support the sustained effort required. 

Most policymakers agree that without a reliable source of long-term funding, it will 

be impossible to achieve restoration in the Gulf. 

Several Gulf States and the Federal Government have filed or are expected to file 

suit against BP and other companies involved in the spill, which will likely create 

opportunities to direct new restoration funds to the region. In some cases, congressional action will be required to ensure that funds are directed to this purpose. The 

Commission recommends that 80 percent of any Clean Water Act penalties and 

fines be directed to Gulf restoration. Should such penalties and fines not be directed 

to the Gulf, Congress should consider other mechanisms for a dedicated funding 

stream not subject to annual appropriations. Although such mechanisms face hurdles, the fact remains that resources are needed if progress on coastal restoration 

is to continue. Inaction is a prescription for further degradation. Should CWA penalties not be redirected to Gulf restoration, Congress should consider other mechanisms for a dedicated funding stream not subject to annual appropriations. 

Decisionmaking Body for Expediting Work 

In order for funding to be most efficiently directed at long-term restoration, a decisionmaking body is needed that has authority to set binding priorities and criteria 

for project funding. The Gulf Coast Ecosystem Restoration Task Force is now in 

place, as recommended by the September 2010 report on restoration from Secretary 

of the Navy Ray Mabus to the President, and subsequently established by Presidential Executive Order. According to the Executive Order, the job of the Task Force 

is to begin coordinating the different restoration projects being undertaken by various jurisdictions in the Gulf, coordinating related science activities and engaging 

stakeholders. However, as many in Congress and the Administration have suggested, the Task Force lacks some features necessary to effectively direct long-term 

restoration efforts in the Gulf—most importantly the ability to set binding goals and 

priorities. 

The Commission recommends that Congress establish a joint state-Federal Gulf 

Coast Ecosystem Restoration Council. The Council should implement a restoration 

strategy for the region that is compatible with existing State restoration goals. Experience in major restoration endeavors, including those in the Gulf, has shown 

that, absent binding goals to drive the process, restoration projects are insufficiently 

funded, focused, or coordinated. Therefore, the restoration strategy should set shortand long-term goals with binding criteria for selecting projects for funding. Key criteria should include national significance; contribution to achieving ecosystem resilience; and the extent to which national policies—such as those related to flood control, oil and gas development, agriculture, and navigation—directly contributed to 

the environmental problem. Congress should also ensure that the priorities and decisions of the Council are informed by input from a Citizens Advisory Council that 

represents diverse stakeholders. 

Restoration Rooted in Science 

Finally, but essentially, restoration decisions must be rooted in science. An approach that draws heavily on information and advice from scientists will result in 

project selection and funding allocations that are more likely to lead to an effective 

region-wide restoration strategy. Such an approach will also advance transparency 

in decisionmaking and enhance credibility with the public. 

The Commission accordingly recommends the establishment of a Gulf Coast Ecosystem Restoration Science and Technology Program that would address these 

issues in three ways: (1) by creating a scientific research and analysis program, supported by the restoration fund, that is designed to support the design of scientifically sound restoration projects; (2) by creating a science panel to evaluate individual projects for technical effectiveness and consistency with the comprehensive 

strategy; and (3) by supporting adaptive management plans based on monitoring of 

outcomes scaled both to the strategy itself and to the individual projects or categories of projects included in it. 
58 

Managing Ocean Resources 

The Commission recommends that as a part of management and restoration efforts in the marine environment, greater attention should be given to new tools for 

managing ocean resources, including monitoring systems and spatial planning. Marine scientists have emerged from the Deepwater Horizon incident with more precise 

questions to investigate, as well as a better sense of monitoring needs in the Gulf 

of Mexico, which because of its multiple uses and economic value should be a national priority. To that end, the National Ocean Council, which the President initiated in July 2010, should work with the responsible Federal agencies, industry and 

the scientific community to expand the Gulf of Mexico Integrated Ocean Observing 

System, including the installation and maintenance of an in situ network of instruments deployed on selected production platforms. Participation in this system by industry should be regarded as a reasonable part of doing business in nation’s waters. 

Coastal and marine spatial planning has the potential to improve overall efficiency and reduce conflicts among ocean users. Congress should fund grants for the 

development of regional planning bodies at the amount requested by the President 

in the fiscal year 2011 budget submitted to Congress. Ocean management should 

also include more strategically sited Marine Protected Areas, including but not limited to National Marine Sanctuaries, which can be used as ‘‘mitigation banks’’ to 

help offset harm to the marine environment. Given the economic and cultural importance of fishing in the Gulf region—and the importance of Gulf seafood to the 

rest of the country—scientifically valid measures, such as catch share programs, 

should be adopted to prevent overfishing and ensure the continuity of robust fisheries. 

IX. THE FUTURE OF OFFSHORE DRILLING

The central lesson to be drawn from the catastrophe is that no less than an overhauling of both current industry practices and government oversight is now required. The changes necessary will be transformative in their depth and breadth, 

requiring an unbending commitment to safety by government and industry to displace a culture of complacency. Drilling in deepwater, however, does not have to be 

abandoned. It can be done safely. That is one of the central messages of the Commission’s final report. The Commission’s recommendations are intended to do for the 

offshore oil and gas industry what new policies and practices have done for other 

high risk industries after their disasters. The Commission believes that the potential for such a transformation to ensure productive, safe, and responsible offshore 

drilling is significant, and provides reason for optimism even in the wake of a disaster. 

The significance of the Deepwater Horizon disaster, however, is broader than just 

its relevance to the future of offshore drilling. The disaster signals the need to consider the broader context of the nation’s patterns of energy production and use, now 

and in the future—the elements of America’s energy policy. The explosion at the 

Macondo well and the ensuing enormous spill—particularly jarring events because 

of the belief they could never happen—force a reexamination of many widely held 

assumptions about how to reconcile the risks and benefits of offshore drilling, and 

a candid reassessment of the nation’s policies for the development of a valuable resource. They also support a broader reexamination of the nation’s overall energy policy. 

Important decisions about whether, when, where, and how to engage in offshore 

drilling should be made in the context of a national energy policy that is shaped 

by economic, security, pace of technology, safety, and environmental concerns. Offshore drilling will certainly be an important part of any such policy, but its relative 

importance today will not, and should not, be the same a half-century from now. 

The nation must begin a transition to a cleaner, more energy-efficient future. Otherwise, its security and well-being will be increasingly dependent on diminishing supplies of nonrenewable resources and on supplies from foreign sources. 

Drilling for oil in the Gulf of Mexico, however, is not solely a matter for U.S. consideration. Both Mexico and Cuba have expressed interest in deepwater drilling in 

the Gulf in the near future. Potential sites are close enough to the United States— 

Cuba’s mainland lies only 90 miles from Florida’s coast and the contemplated wells 

only 50 miles—that if an accident like the Deepwater Horizon spill occurs, fisheries, 

coastal tourism, and other valuable U.S. natural resources could be put at great 

risk. It is in our country’s national interest to negotiate now with these neighbors 

to agree on a common, rigorous set of standards, a system for regulatory oversight, 

and operator adherence to an effective safety culture, along with protocols to cooperate on containment and response strategies in case of a spill. 
59 

Frontier Areas 

Our Commission also examined prospects in so called ‘‘frontier areas.’’ On December 1, in the wake of the Deepwater Horizon experience, Interior Secretary Ken 

Salazar announced that the Administration would not proceed with drilling in areas 

where there are ‘‘no active leases’’ during the next 5-year leasing plan. As a result, 

exploration and production in certain frontier areas—the eastern Gulf and off of the 

Atlantic and Pacific coasts—are deferred. The Secretary also indicated that plans 

for 2011 drilling in Alaska’s Beaufort Sea would be subjected to additional environmental assessments. 

The major interest in offshore Alaska reflects the likelihood of finding significant 

new sources of oil there. The Chukchi and Beaufort Sea off Alaska’s north coast 

rank behind only the Gulf of Mexico in estimated domestic resources. But finding 

and producing those potentially important supplies of oil offshore Arctic Alaska requires the utmost care, given the special challenges for oil spill response and containment, and heightened risks associated with this frontier, especially its extreme 

cold, extended seasons of darkness, hurricane-strength storms, and pervasive fog— 

all affecting access and working conditions—and the extraordinary richness of its 

ecosystems and the subsistence native communities dependent upon their protection. To deal with these serious concerns about Arctic oil spill response, containment 

and the heightened environmental stakes the Commission recommends three approaches before the Department of the Interior makes a determination that drilling 

in a particular area is appropriate. First, the Department should ensure that the 

containment and response plans proposed by industry are adequate for each stage 

of development and that the underlying financial and technical capabilities have 

been satisfactorily demonstrated in the Arctic. Second, the Coast Guard and the oil 

companies operating in the Arctic should carefully delineate their respective responsibilities in the event of an accident—including search and rescue—and then must 

build and deploy the necessary capabilities. Third, Congress should provide the resources to establish Coast Guard capabilities in the Arctic, based on the Guard’s review of gaps in its capacity. 

The Arctic is shared by multiple countries, many of which are considering or conducting oil and gas exploration and development. The extreme weather conditions 

and infrastructure difficulties are not unique to the U.S. Arctic. Damages caused by 

an oil spill in one part of the Arctic may not be limited to the waters of the country 

where it occurred. As a result, the Commission recommends that strong international standards related to Arctic oil and gas activities be established among all 

the countries of the Arctic. Such standards would require cooperation and coordination of policies and resources. 

Bringing the potentially large oil resources of the Arctic outer continental shelf 

into production safely will require an especially delicate balancing of economic, 

human, environmental, and technological factors. Both industry and government 

will have to demonstrate standards and a level of performance higher than they 

have ever achieved before. 

Creating and implementing a national energy policy will require enormous political effort and leadership—but it would do much to direct the Nation toward a 

sounder economy and a safer and more sustainable environment in the decades to 

come. Given Americans’ consumption of oil, finding and producing additional domestic supplies will be required in coming years, no matter what sensible and effective 

efforts are made to reduce demand—in response to economic, trade, and security 

considerations, and the rising challenge of climate change. 

The extent to which offshore drilling contributes to augmenting that domestic supply depends on rebuilding public faith in existing offshore energy exploration and 

production. We have proposed a series of recommendations that will enable the 

country and the oil and gas industry to move forward on this one critical element 

of U.S. energy policy: continuing, safe, responsible offshore oil drilling to meet our 

nation’s energy demands over the next decade and beyond. Our message is clear: 

both government and industry must make dramatic changes to establish the high 

level of safety in drilling operations on the outer continental shelf that the American 

public has the right to expect and to demand. It is now incumbent upon the Congress, the executive branch, and the oil and gas industry to take the necessary 

steps. 
60 

RESPONSES BY SENATOR GRAHAM AND MR. REILLY TO ADDITIONAL QUESTIONS FROM

SENATOR BOXER

1. Question 1. Your Commission’s report highlighted the inadequacy of the current liability system in the Oil Pollution Act, which sets limits on liability at $75 million 

per offshore incident. 

Under our current system, would local fisherman, tourism businesses and coastal 

communities be guaranteed compensation if a future, large-scale spill were caused 

by a company with more limited financial resources than BP? How do limits on liability affect incentives for safety in offshore drilling? 

Response. The Oil Pollution Act currently limits liability and compensation for 

damages caused by a spill from an offshore facility in three ways. First, it caps liability for damages from a spill from an offshore facility at $75 million per incident. 

Second, under the Oil Pollution Act, the highest level of financial responsibility a 

covered facility must demonstrate is $150 million. Thus, even though an offshore facility is potentially liable for damages that exceed $75 million, it is not required to 

demonstrate actual capacity to pay damages beyond $150 million. Third, if the responsible party is not able to compensate all of the damages caused by the spill, 

the Trust Fund is available to cover certain damages. However, the amount authorized per incident is limited to $1 billion. 

Thus, in the case of a very large spill, there is no certainty under current law 

that a company would have the financial means to fully compensate fisherman, 

tourism businesses, and coastal communities that were victims of the spill. Moreover, the Trust Fund would likely not provide sufficient backup, and a significant 

portion of the injuries caused to individuals and natural resources as well as government response costs could go uncompensated. 

To the extent that a liability scheme provides incentives to internalize costs, the 

comparatively low $75 million cap distorts companies’ incentives to engage in practices that prevent spills. This point has been made by numerous economists who 

have reviewed the Oil Pollution Act liability cap. Under basic economic theory, companies that have the potential to cause significant harm should pay for the costs 

they inflict. However, the incentive argument is somewhat diminished by the fact 

that there are significant limitations on the scope of the liability cap’s applicability: 

Caps do not apply to removal costs, damage claims under State law, and penalty 

actions, and they do not apply where there has been gross negligence, willful misconduct, or violation of applicable Federal safety, construction, or operation regulation. 

Question 2. In addition to highlighting the problems with existing liability limits, 

your report suggested options for increasing liability while protecting small, independent operators. 

One recommendation was the establishment of a shared insurance pool that 

would allow offshore drilling operators to share risk. 

Can you discuss how such a proposal could ensure that victims of an oil spill are 

fully compensated for damages while providing a way for drilling operators, particularly small and independent operators, to remain economically competitive? 

Response. Substantial increases in financial responsibility requirements and liability caps would make it difficult for many smaller, independent operators—who 

are generally not in a position to self-insure—to purchase insurance to cover damages from a spill. With a mutual insurance pool, however, companies engaged in offshore drilling would pay premiums into a pool, which would pay out damages in the 

event of an oil spill. Premiums could be tied to the level of risk posed by an individual company’s activities, so that smaller firms operating in shallow, less risky environments would not be required to pay excessively high premiums. This option 

would allow companies to demonstrate financial responsibility for the cost of spills. 

Question 3. The ecosystems of the Gulf Coast are both environmentally and economically important. A large portion of the nation’s seafood comes from the Gulf 

Coast. In addition, Gulf of Mexico fisheries support billions of dollars in annual 

sales and hundreds of thousands of jobs. The Commission’s report called on Congress to dedicate 80 percent of Clean Water Act penalties to the long-term restoration of the Gulf’s ecosystems. 

Can you explain why this proposal is important for the long-term recovery of the 

Gulf Coast? Why is it important to establish a science-based decisionmaking body 

to guide restoration efforts? 

Response. The Gulf suffers from continual degradation due to years of pipelines 

and canals built by industry, channeling of the Mississippi River Delta for shipping, 

building of levees for flood prevention, and nutrients flowing down the Mississippi 

River. Numerous ecosystem challenges faced the Gulf before the oil spill, and even 
61 

more so now: Barrier islands and shorelines are eroding, and essential habitats in 

coastal bays and estuaries have been lost or degraded due to pollution, changes in 

freshwater inflows, or overfishing. The result is a rapidly disappearing Gulf landscape, with wetlands vanishing at the rate of a football field about every 38 minutes 

and a massive ‘‘dead zone.’’ 

To truly address this continual degradation, Congress must dedicate a sustained 

stream of funding to restoration. Lack of sustained funding has hampered and undermined restoration efforts to date. Estimates are that Gulf Coast restoration will 

cost $15–$20 billion over 30 years. The Clean Water Act litigation presents an important opportunity to direct funding, at the scale needed, to the critical need for 

restoration in the Gulf. 

Restoration decisions that are rooted in good science will result in project selection 

and funding allocations that are more likely to lead to an effective, region-wide restoration strategy. It will also advance transparency in decisionmaking and enhance 

credibility with the public. 

Question 4. The Commission’s report notes that the technology available for cleaning up oil spills has improved only incrementally since 1990 when Congress passed 

the Oil Pollution Act in response to the Exxon Valdez disaster. 

What can be done to improve oil spill research by both the Federal Government 

and the private sector so that technologies for cleaning up oil spills and minimizing 

damages continue to improve? 

Response. Mandatory funding for oil spill research and development should be a 

top priority. Government and industry were caught completely unprepared. The 

technology used to fight the Deepwater Horizon spill was largely the same as the 

technology used to fight the Exxon Valdez spill, and the response suffered as a result. Under the Oil Pollution Act, Congress authorized up to $28 million for oil spill 

research, but not even half of this amount has ever been appropriated. Since the 

Exxon Valdez spill, funding has averaged only roughly $10 million per year. By removing oil spill research and development funding from the ordinary appropriations 

process, Congress can avoid the experience that followed Exxon Valdez, when support for response research and development quickly decreased as memory of the 

spill faded. 

With agencies, industry, and entrepreneurs intent on developing response technologies for the first time in 20 years, promising technologies were developed during 

the Deepwater Horizon spill response period. We believe it is crucial to capitalize 

on this recent activity and interest. As such, the Commission also recommended establishing an advisory board, made up of experts from relevant Federal agencies as 

well as from professional societies, academia, industry, and non-governmental organizations, to develop a research agenda and roadmap. 

RESPONSE BY SENATOR GRAHAM AND MR. REILLY TO AN ADDITIONAL QUESTION FROM

SENATOR CARPER

Question. In the Commission’s report and in your testimony today, you cite the 

need to increase the limit on per-incident payouts from the Oil Spill Liability Trust 

Fund. As you know, under current law the per-incident payout limit is $1 billion. 

On Friday, the Obama administration submitted the tenth bill to BP and the other 

Responsible Parties for response and recovery operations related to the BP/Deepwater Horizon Oil Spill. The first nine bills have been quickly paid by BP. These 

ten bills total about $694 million that has been paid out by the Oil Spill Liability 

Trust Fund. Given that figure, we are quickly approaching that $1 billion limit. 

What concerns do you have about reaching that $1 billion threshold and who would 

foot the bill if we did indeed reach it? Second, while the report suggests that Congress should increase the payout limit, a specific policy or dollar figure isn’t offered. 

Do you have any thoughts or suggestions as to what specific action you believe Congress should take? 

Response. Our hope is that Congress would take the steps necessary to continue 

funding any remaining clean-up activities and ensure that victims are compensated 

even if the payout limit is reached, especially in light of the fact that BP has reimbursed the trust fund for its expenditures. 

The fact that we are approaching this limit underscores the need for Congress to 

act on this issue. Because of the complexity of this issue and its linkage to liability 

caps for individual companies, however, the Commission did not recommend a particular amount. 
62 

RESPONSE BY SENATOR GRAHAM TO AN ADDITIONAL QUESTION FROM

SENATOR LAUTENBERG

Question. In your written testimony, you call on industry to update its voluntary 

standards. 

The Chemical Safety Board has a long history of conducting independent and 

technically sophisticated investigations into industrial accidents—and then making 

recommendations to improve standards. However, the Commission has refused to 

turn over documents critical to the CSB’s investigation of the oil spill. 

Will you work with the Chemical Safety Board to provide better access to evidence 

in your possession? 

Response. Throughout most of the Commission’s tenure, the Commission and its 

staff enjoyed a constructive relationship with the Chemical Safety Board—one 

marked by mutual cooperation. However, on February 25, 2011, the Chemical Safety 

Board submitted a subpoena to the Commission that was of such an extraordinary 

scope—covering millions of pages of documents and hundreds of thousands of 

emails—that compliance would have taken at least many weeks if not months. 

The Commission was required by Executive Order to terminate within 60 days 

of the release of its report. The Commission received the subpoena just 2 weeks before our scheduled closing. Any effort at compliance would have wholly disrupted 

the remaining Commission staffs essential obligation to close the Commission down 

completely by March 11, 2011, including compliance with government recordkeeping 

requirements, as required by the President’s Executive Order establishing the Commission. It is not clear to us why the Chemical Safety Board, without any advance 

notice, chose just days before the Commission ceased to operate to submit a subpoena, let alone a subpoena of such an extraordinary scope and wholly inconsistent 

with the temporal bounds of the Commission’s existence. 

Even more important, however, is the fact that the subpoena raised many important legal issues that needed to be resolved prior to compliance but that could not 

be resolved in the little time then remaining. Several of these legal issues had implications far beyond the scope and expertise of this Commission and needed to be resolved in the first instance by other parts of the Executive Branch, particularly the 

Department of Justice. For instance, the Chemical Safety Board’s subpoena raised 

the legal issue whether one executive branch agency (the Chemical Safety Board) 

could compel the production of documents from another executive branch agency 

through the use of a subpoena. This issue involved internal executive branch legal 

policy that did not relate to the Commission’s charter or expertise. 

In addition, the subpoena further raised the issue whether compliance with the 

subpoena would violate the Executive Order establishing the Commission. That 

Order states that ‘‘The Commission shall ensure that it does not interfere with or 

disrupt any ongoing or anticipated civil or criminal investigation or law enforcement 

activities or any effort to recover response costs or damages arising out of the Deepwater Horizon explosion, fire, and oil spill.’’ Executive Order No. 13543, Section 4(d). 

The Chemical Safety Board’s subpoena demanded documents that were potentially 

relevant to the kind of ‘‘civil or criminal investigation or law enforcement activities’’ 

referred to by the Executive Order. The Commission could not fairly determine in 

the exceedingly short time existing between the time the subpoena was submitted 

and the Commission’s closing date of March 11th whether release of all these documents would in any way ‘‘interfere with or disrupt’’ those activities. Indeed, the Executive Order expressly required the Commission to ‘‘consult with the Department 

of Justice concerning the Commission’s activities to avoid any risk of such interference or disruption.’’ For that reason, as required by its Charter the Commission 

provided all of its documents to the Department of Energy upon closing on March 

11th and notified the Department of Justice of the receipt of the subpoena and the 

legal issues that it raised. 

The Commission ceased all operations on March 11, 2011. At that time, all Commission documents were turned over to the custody of the Department of Energy. 

There is, accordingly, no Commission or Commission staff that can work with the 

Chemical Safety Board on these issues. The Chemical Safety Board needs therefore 

to contact the Department of Energy and the Department of Justice. 

RESPONSES BY SENATOR GRAHAM AND MR. REILLY TO ADDITIONAL QUESTIONS FROM

SENATOR INHOFE

Question 1. One of the overarching purposes of the National Environmental Policy 

Act (NEPA) is to, quote, ‘‘create and maintain conditions under which man and nature can exist in productive harmony, and fulfill the social, economic, and other requirements of present and future generations of Americans.’’ 
63 

Certainly, one component of that is ensuring that our activities take into account 

environmental impacts—and that we minimize those impacts to the extent practicable. Implied in that, though, is that we can actually move forward with planned 

activities, such as, in this case, offshore energy production. In other words, there 

isn’t a conflict between environmental protection and offshore energy production. • Yet certain environmental are manufacturing that conflict and using NEPA as 

a legal tool to stop offshore production—indeed, all energy production they don’t 

like. How can we make NEPA work more efficiently, so that we can fully account for the environmental impacts, but do so in a way that doesn’t unnecessarily delay projects, especially offshore projects? 

Response. The Commission has stated that it does not believe offshore drilling 

should be abandoned. It can proceed safely and in a way that protects our environment. The Commission’s recommendations are aimed at improving safety and environmental protection so that drilling can proceed. And in fact, the Commission recommended several steps the Department of Interior could take to improve its NEPA 

review process and provide greater efficiency, transparency, and consistency. 

First, the Commission recommended that Interior develop and make public a formal NEPA handbook that provides consistent guidelines for applying NEPA in an 

appropriate manner. A Government Accountability Office report released just prior 

to the Deepwater Horizon spill noted that the lack of formal guidance leaves the 

process for meeting NEPA requirements ill-defined. Such guidance and clarity will 

allow Interior staff to more quickly and efficiently move through the NEPA process. 

The Commission also recommended reforms to the practices of ‘‘area-wide leasing’’ 

and the use of ‘‘tiering.’’ In particular, in less well-explored areas, Interior should 

reduce the size of the lease sales so that more meaningful environmental reviews 

can be undertaken. It is especially important this be done before substantial private-sector commitments are made to purchase leases. Better environmental reviews 

conducted on a finer geographic scale are less likely to face challenges later in the 

permitting process. 

Question 2. Evidence used by the Commission to demonstrate an industry-wide 

‘‘systemic’’ problem was the ‘‘loss of well control’’ statistic showing 79 such 

incidences since 1996. How minor can an event be to qualify as a ‘‘loss of well control’’? How many of these ‘‘loss of well control’’ situations resulted in major spills? 

Even if all 79 events, considering 14,000 deepwater wells have been drilled, does 

that demonstrate a systemic problem? 

Response. We do not claim that any of the other loss of well control incidents resulted in a major oil spill. At least three, however, resulted in fatalities, which is 

clearly serious. The significance of the many other ‘‘loss of well control’’ incidents, 

moreover, is that they confirm the riskiness of drilling. 

A loss of well control does not, by itself, indicate that an operator was engaging 

in unsafe drilling practices. Some risk is inevitable in offshore drilling, especially 

in deep water. The purpose of the chart in the report describing the 79 incidents 

of loss of well control is not to suggest that each of those incidents demonstrates 

unsafe drilling practices. It is instead simply to document the inherent risks of offshore drilling, and to underscore the need to ensure that government and industry 

have the best possible safeguards in place so that incidents do not result in the kind 

of major disaster that occurred with the Macondo well blowout. 

Question 3. Senator Graham, with 14,000 deepwater wells drilled previously without a major incident before Macondo, wouldn’t it be fair to say that the industrywide capacity to prevent this type of incident was systemic? 

Response (Senator Graham). Of course, the industry has drilled many thousands 

of wells safely, and we commend them for this overall record. Nonetheless, offshore 

oil exploration and production has, over the past two decades, consistently moved 

into deeper waters, thereby increasing the risks of drilling. And in coming years, 

the industry expects to move into ‘‘ultra-deepwater,’’ which will require even more 

diligence to avoid a Macondo-type blowout. Our recommendations are aimed at ensuring regulatory practices and standards reflect the risk associated with these 

types of environments. 

The Commission’s final report makes clear that many companies have exemplary 

safety records. The basis for the Commission’s conclusion that the offshore drilling 

industry suffered from a ‘‘systemic’’ problem was based on the nature of the mistakes that the Commission found were the cause of the Macondo well blowout and 

rig explosion, as well as the identity of those making the mistakes. The Commission 

did not discover one or two isolated mistakes, but a pattern of repeated mistakes 

in well-drilling operations that revealed a fundamental failure of risk management 

and safe drilling practices by three of the companies working on the Deepwater Horizon. They included the largest operator of deepwater drills in the Gulf (BP); the 
64 

largest supplier of cement for all deepwater wells, not just to BP but to all operations in the Gulf (Halliburton); and the largest operator of deepwater drilling rigs 

in the Gulf that services not just BP but all major operators (Transocean). 

Question 4. Does the Commission feel that the industry, through its own affirmative actions, has addressed many of the issues related to proper spill response 

through its creation of a deepwater spill containment system? 

Response. We applaud the industry for the many steps they have taken in response to the spill, including the creation of the Marine Well Containment Corporation and the Helix spill containment system, as well as the establishment of a new 

industry-sponsored safety organization under the auspices of the American Petroleum Institute. 

However, we note that after the Exxon Valdez spill, the industry created the Marine Spill Response Corporation—an industry nonprofit initiative dedicated to maintaining response capabilities and responding to spills. Over time, industry funding 

for the Marine Spill Response Corporation declined, and there was a clear failure 

by the industry to innovate and find new methods to clean up oil. Industry must 

implement specific policies and procedures to monitor these new institutions and 

guarantee their long-term readiness as well as funding and investment levels. 

Question 5. What would the potential pitfalls be to allowing liability to extend beyond the lease holders who are typically the operators? 

Response. The Commission did not examine in detail the question of whether liability should extend beyond operators. However, a research paper prepared for the 

Commission by Professor Thomas Merrill of Colombia Law School notes the following: 

[The Comprehensive Environmental Response Compensation and Liability Act 

(CERCLA or Superfund)] has been plagued, especially in its early years, by squabbling among potentially responsible parties over who would assume the burden of 

cleaning up waste sites. The emphasis in the Oil Pollution Act on identifying one 

responsible party for each incident was likely driven by a desire to avoid these sorts 

of problems. In particular, Congress appears to have concluded that the process of 

filing claims and obtaining damages for spills would be greatly expedited by having 

one responsible party for each incident. Singling out one responsible party also 

greatly simplifies the administrative process of certifying that producers have complied with the requirement of demonstrating financial responsibility. Not surprisingly, therefore, Department of the Interior regulations provide that each covered 

offshore facility ‘‘must have a single designated applicant.’’ 

While we do not have a particular position on this issue, the Commission’s research suggests that any effort to extend liability requirements beyond the operator 

should be undertaken only after Congress has carefully weighed both the potential 

advantages and disadvantages of such changes. 

Question 6. Mr. Reilly, I have heard you talk about how impressed you have been 

with the Shell proposal to drill in Alaska. Can you please elaborate on what aspects 

of it impress you the most? 

Response (Mr. Reilly). Speaking for myself and not the Commission, I found several impressive aspects. First, it should be noted that Shell has experience drilling 

in the Arctic. They drilled several exploration wells in the Beaufort and Chukchi 

Sea in the late 1980’s, and they have worked with Russia over the past 15 years 

on sub-arctic offshore oil development. It should also be noted that Beaufort and 

Chukchi are shallow water plays, with relatively well understood formations and 

pressure conditions—these are not considered ‘‘risky’’ wells. 

In addition, Shell has assembled a state-of-the-art system of response and containment equipment that can deploy within an hour. These include helicopters, 

barges, boats, boom, skimmers, and other needed equipment, and they have sponsored a substantial amount of scientific research in the region. While I certainly believe that additional scientific assessment on the environment is needed as we move 

forward with drilling in the Arctic, as well as additional R&D on responding to 

spills in those conditions, in my view Shell is committed to ensuring they can effectively deal with a spill in this region. 

Finally, it is clear that other countries, including Russia, intend to move forward 

with drilling in the Arctic. The United States must take the lead in this area, and 

develop the gold standard for safe, environmentally responsible energy exploration 

and production in the Arctic. 

Question 7. The administration is continuing with the moratorium to this day, 

only having permitted a handful of deepwater wells which were not new permits, 

but were both being drilled at the time of the BP spill. Given two of you opposed 

the moratorium, and that industry has affirmatively taken significant steps to im-
65 

prove containment capabilities in the case a spill should ever happen again, isn’t 

it about time to start issuing new permits in the Gulf and producing our own resources? 

Response. It is true that both of us opposed the moratorium for various reasons. 

However, we do not believe that Administration wants to permanently shut down 

offshore drilling in the Gulf. The President has made clear in his public remarks, 

and his remarks to us privately, that he supports offshore drilling. And the President once again stated the importance of offshore drilling to America’s energy security in his speech at Georgetown on March 30th. Interior has issued several deepwater drilling permits since the companies finalized and submitted their containment plans in mid-February. And nearly 50 new permits for shallow water wells 

have been issue over the past several months. Again, while we disagreed with the 

moratorium, the pace of permitting appears to be picking up in our view. 

We also call on Congress to ensure that the Bureau of Ocean Energy Management, Regulation, and Enforcement is adequately funded, so that they have the staff 

and resources needed to efficiently process new permits and provide the best possible oversight of the industry. The Commission recommended creating a mechanism for offshore oil and gas operators to provide ongoing and regular funding of 

the agencies regulating offshore drilling through industry fees, similar to the way 

other regulatory agencies are funded (for example, the Federal Communications 

Commission). Given our current budget woes, and substantial oil industry profits, 

this is simply a common-sense way to address this pressing need. 

Senator BOXER. Thank you so much. I am glad you raised 

dispersants because I was going to ask a question but you really 

kind of answered it. 

What I am going to do, because the vote has started, is just ask, 

anyone who wants to stay, just ask one question. So, let me start 

it and we will get through as many as we can. 

The one thing that will stick with me forever is BP’s permit application. When they were asked to describe the likelihood of a spill 

and the likelihood that it would cause damage, it was shocking. It 

just said, absolutely impossible. Basically, that is what they said. 

Now, I read it here, I had it blown up. 

So, it worries me that we have these forms people fill out and 

they do not really take it seriously. Did the Commission talk about 

the response plans? Do you find them just universally lacking 

credibility or do some do better than others? I would ask each of 

you and that is my question. 

Senator GRAHAM. We use the term in our report that many of 

these failures were systemic, that is they were not peculiar to BP, 

they were reflective of an industry culture. Certainly there is no 

area in which that is more true than the response plans. Few, if 

any, of the response plans, particularly for deep water drilling, 

were effective in addressing the issues that would be faced or were 

credible in the statement of the resources available to carry out effective containment and response. 

So, one of our major recommendations, which is primarily in the 

hands of the Department of the Interior under its responsibility to 

condition to permits to drill in the first instance, is that there be 

much greater attention to oil spill response to the specific area in 

which that response will be called upon, because it is a lot different 

responding at 500 feet than at 15,000 feet, and that there are credible technologies ready to be deployed to limit the discharge to the 

extent possible. 

Senator BOXER. So, so if I could just cut through this because of 

time problems, basically you have a situation where a company, in 

this case, said something that was not true, and the Interior Department under both Administrations, I think, just rubber stamped 
66 

it. So, you are saying that it is up to the Interior Department to 

be more rigorous in examining these permit applications. Is that 

right? 

Senator GRAHAM. Yes. Senator Vitter made some comments 

which Mr. Reilly and I have considerable sympathy for about the 

moratorium and the delays in getting new excavation underway. 

From what I gather, the principle reason for that delay has been 

exactly this one, that the Department was not satisfied with the response plans and would not issue permits until it became satisfied—— 

Senator BOXER. Well, good for them. Why on earth would they 

not, if they are responsible for the next spill? So, good for them and 

good for you. 

Senator GRAHAM. It has now issued two permits—— 

Senator BOXER. Yes, they have begun—— 

Senator INHOFE. We are going to have to kind of move on to a 

question each—— 

Senator BOXER. Yes, Senator, go ahead. 

Senator INHOFE. Let me first of all say it is very unusual that 

I have two good friends as witnesses. That does not happen very 

often. So, I am glad you are here. 

Let me just quote from the Commission’s Chief Counsel’s report, 

just one or two sentences here. What the investigation makes clear 

above all else is that management failures, not mechanical failures, 

were the ultimate source of the disaster. In clear, precise and unflinching detail the report lays out the confusion, lack of communication, disorganization and inattention to crucial safety issues 

and test results that led to deaths of 11 men and the largest offshore spill of our Nation’s history. It goes on and we have other 

statements that were made. Mr. Reilly, you had said that a good 

operator is in charge of everything that happens and is extremely 

rigorous with respect to policing contractors. 

My question would simply be this. I think you made it very clear, 

Senator, that if we demonstrate the capability to respond to a spill, 

would both of you agree that we should start issuing permits, deep 

water drilling permits, in the Gulf, those conditions being met? I 

think, Mr. Reilly, you had made the statement that you think the 

moratorium should be lifted up in Alaska. Should it be lifted there, 

too? 

Mr. REILLY. We have, I think both of us made clear, personally, 

that we thought the moratorium, insofar as it penalized companies 

that were not in any way implicated in the spill, responsible companies that had good environmental and safety records, went on 

too long. That was very difficult to understand and so, in that 

sense, I would agree with that. 

Senator INHOFE. Alright. Thank you, sir. 

Senator GRAHAM. Let me just supplement what Bill said. 

Senator BOXER. Senator, do it quickly if you can, because the 

vote awaits us. Remember those days, Bob? 

Senator GRAHAM. Absolutely. Oil spill response plans are a critical part of the decision as to whether to permit or not. But they 

are not the only factor that needs to be taken into consideration. 

Senator BOXER. Senator Cardin. 
67 

Senator CARDIN. I am just going to put on the record this question and I really would like your help. 

I conducted a hearing as the Subcommittee Chairman of the 

Water and Wildlife Subcommittee dealing with the damage assessment issue, trying to get an understanding as to what we are looking at. The difficulty is that a lot of the damage may be hidden for 

decades to come. As we saw in the Exxon Valdez, the lingering impacts can be great. 

We are using technologies to do water column sampling that I 

am not sure is necessarily the best techniques and I welcome your 

thoughts on it. There has been some work done by the National 

Aquarium in Baltimore along with Mote Marine in Florida to look 

at more sophisticated sampling techniques so that we can get a 

more accurate assessment of the damages that have been done. 

My major concern is whether we have the best scientific information available to assess the long-term needs for remedial work so 

we get it done accurately. Because once we sign off on this, we are 

not going to be able to have the resources necessary if in the future 

we find out that there is more damage than we anticipated with 

our early surveys. 

So, any help you could be in directing us to make sure that we 

have the process in place to get the best science information and 

sort of think out of the box on this a little bit because sometimes 

the current relationships do not lead to the best protection to the 

public. 

Mr. REILLY. Senator, I would respond to that by saying two 

things. First of all, the Commission gives a very high priority to 

science and to the need for continuing scientific examination of the 

impacts on the Gulf. We recognize that it is going to take time to 

be definitive about those. 

But that leads me to my second point. The settlement moneys 

that were agreed after the Exxon Valdez provided a very significant 

amount of money for 10 years of ongoing scientific research monitoring. The only reason we know about so many of the impacts that 

this spill had and the fact that there is still is substrate of oil crude 

on many of the beaches is because of that scientific research and 

the funding that was included in the settlement to provide for it. 

I would strongly—— 

Senator CARDIN. My last point is that there is conflicting information now about the quality of the sea bottom and I just would 

urge us to make sure that we are as comprehensive as possible in 

the way we—— 

Senator BOXER. I am sorry to interrupt. We have like 3 minutes 

remaining to vote. Thank you very much. 

When we come back, Senator Lautenberg has some very interesting show and tell with his something over there. I do not even 

know where he has gotten that from. But I will let him take over. 

We will be back. We thank you for your contribution to this great 

Nation and to one of the greatest challenges we face. We just, to 

become energy independent, to do this in a way that is safe as, 

again, as we see what is happening over in Japan, our heart goes 

out and that feeling of just not being able to control things. 

Americans, we are people who like to be able to control things. 

When every day we watched BP explode there in the ocean, we had 
68 

no sense that we could do anything about it. So, we really need to 

follow your advice. Speaking for myself as Chairman of this committee, which Senator Graham was a very proud member of, remember those days, Bob, I am going to follow your lead and follow 

your advice. 

So, stand by. We will take a break. There are two votes and we 

will be back. 

[Recess.] 

Senator LAUTENBERG [Presiding]. The committee is restarting 

and I think we have already done the nice things, so you will forgive me if I do not repeat them. Is that all right, Bob? 

Senator GRAHAM. That is fine. 

Senator LAUTENBERG. Anyway, thanks very much for hanging in. 

Each of you knows the routine here and what we have to go 

through to keep on top of everything. 

Mr. Reilly brought up the subject of dispersants and I want to 

continue there. But since the Chairman let the cat out of the bag, 

this is what I brought with me. It was a gift. I do not think it was 

from a friendly person, but it is water from the Gulf. As ugly as 

it is, that is not the key issue. 

The key issue is the long-term effect of something that is as 

threatening as this appears to be. We certainly would not want it 

on our beaches or anywhere in our, in the things that our children 

had contact with. But that is the truth. The ugliness simply emphasizes the high risk of having these spills in front of us on a regular basis. 

Today, I am introducing my Safe Dispersants Act which would 

require advanced testing of dispersants and disclosure of the ingredients in those products. Now, EPA Administrator Jackson testified 

last year that such a change in the law is essential. I would ask 

each of you for your thought on whether or not better testing of 

chemical dispersants can be of value and what should we do about 

them? 

Mr. REILLY. Well, this is a subject I have been long interested 

in, Senator. The issue of dispersants was a major concern of mine 

in Alaska in Prince William Sound and it was very, as it always 

is, strongly favored by the responsible party there and also supported by the Coast Guard at the time. 

I did not permit dispersants to be used in the sensitive areas of 

Prince William Sound essentially on the advice that I was given 

that to use a dispersant, essentially, is to distribute materials into 

the water column and make it unavoidable to fish that happen to 

be swimming through there. We had salmon fry that were expected 

to be released from four hatcheries and they would have encountered the oil and the dispersants, the combination in the water column, had we used it in those areas where they intended to migrate 

down to the ocean. 

We later sampled the fish and discovered that they had swum 

right under the oil and there was no indication of any contact or 

any fish tissue that they had encountered. So, that proved to be a 

good decision. 

So, I came into this experience with a strong prejudice against 

the use of dispersants. I had tended to see them as a cosmetic de-
69 

vice, keeps it out of sight but concentrates it in a place where it 

may do more damage. 

We looked at that issue very carefully and concluded that there 

was a responsible decision made by the EPA Administrator to permit the dispersants to be used, and she obviously anguished over 

that decision, given the sensitivity of the marshes, to make the call 

that she would favor or that we would favor as a matter of policy 

the protection of the marshes which the dispersants did effect over 

the possible impact, long term, probably, on fish and fish larva. 

I have not seen anything that would dispute that. However, I 

would strongly support your initiative to determine in advance of 

the use of dispersants what we know about them, how effective 

they are, corrects it, it had, I think, according to one table I looked 

at, a 55 effectiveness number, and I wondered whether that was 

the best that one could get under the circumstances. It happened 

to be available in sufficient supplies, I know, and it had been preapproved, pre-authorized, by EPA though the volume in which it 

was used was never contemplated before. 

So, all of these questions, I think, need to be addressed and particularly the issue of dispersants used in the icy waters of the Arctic where they are likely to respond very differently, have very different effects, and perhaps be less effective or maybe even more so, 

but if they are persistent, possibly even do more damage. 

Senator LAUTENBERG. So, examining what the results are using 

dispersants, that it is essential, critical if I might emphasize, that 

we find out more about what is really in there and what the longterm damage might be. 

Mr. REILLY. I agree. 

Senator LAUTENBERG. I thank you very much and I will move 

along. What is the order, Senator Cardin, Senator Alexander is 

next in line here. So, Senator Alexander. 

Senator GRAHAM. Senator Lautenberg, could I just add one more 

point to what Bill has said? It is also critical that we test these 

dispersants not just for surface distribution, which has been their 

traditional use, but also for deep water purposes. They were used 

for that in the Gulf and that may have been one of the most anguishing decisions because nobody had done any research as to 

what were the consequences of releasing dispersants at 5,000 feet. 

So, there are a broad range of issues to which the research that 

you have referred need to be applied. 

Senator LAUTENBERG. Thank you very much. 

Senator Alexander. 

Senator ALEXANDER. Thanks, Mr. Chairman. 

Thank you, again, for your hard work and for your long service 

to our country. 

Did you consider whether it would be a good idea for the oil industry to self-insure in the way the nuclear industry does? As we 

look at what is happening in Japan, which, and we are grateful for 

the fact that in our country, as I mentioned earlier, we have 104 

nuclear reactors, we have not had a death, nobody was hurt at 

Three Mile Island. Our nuclear navy has traveled to Mars and 

back a couple of times without a death in connection with a reactor. 
70 

But as we look for, and maybe one reason for that is the PriceAnderson Act which requires all of the nuclear operators to have, 

I think it is about $110 million of, be responsible for $110 million 

of damage if there is an accident at any reactor. In addition to the 

private insurance they have, I suppose if you are going to be responsible as a nuclear operator for an accident at any reactor you 

would keep a fairly close watch on what your competitors are doing 

so you would not be out that money. 

Would it help if in the oil industry that everybody who drilled 

in the Gulf would be responsible for any accident? Would that help 

change the culture within the industry that you write about in 

your report? 

Senator GRAHAM. Senator, speaking personally, I do not know 

the answer to that question. We touched on the issue of liability 

and it was obvious to us that the 1990 standard was no longer adequate, just on the most basic inflation factors. We then recommended a number of alternatives that might be considered, one 

of which was close to what you have just outlined, the nuclear industry. 

I might say that throughout our discussions, we were very impressed with INPO, which is the organization that has been established by the commercial nuclear power industry of the United 

States as a means of improving the level of safety throughout the 

104 plants in the United States and that the offshore oil industry 

should take cognizance of some of the steps that the nuclear industry has taken. The one that you have suggested may be another 

area in which that should occur. 

Mr. REILLY. Senator, you might wish to look at the British system, which has a system like that where the industry is required 

to make contributions to an organization which then has, I think, 

$250 million available to it in the event of a spill that can cover 

what a particular responsible party may not be able to cover. 

I was impressed in our conversations about liability how one has 

to be careful to not create a system in which a company might decide well, if they are insured, maybe they are a little less rigorous 

or anxious about safety than they might otherwise be. That is 

something that was raised by the insurance industry with us. That 

there are, possibly, inadvertent consequences to setting premiums 

at certain levels. 

I had the sense that the majors basically do consider that they 

self-insure, that is the companies on the size scale of BP—— 

Senator ALEXANDER. But the point is that they would be responsible for their competitor’s oil spill. 

Mr. REILLY. I understand. There probably would be some resistance to that on the part of some of the majors, but the direction—— 

Senator ALEXANDER. It might make them more interested in, I 

mean, what I am getting at, and I think I have just less than a 

minute, you are right about the practices that you found placed the 

culture of the entire industry in doubt. Well, was BP an outlier? 

Were they playing fast and loose? Were other offshore drillers more 

conservative and, if that were the case, if the other offshore drillers 

were responsible, were actually liable for a spill by any competitor 
71 

that was playing faster and looser with its practices, would that 

tend to help create safer practices? 

Mr. REILLY. Well, what they now know, Senator, is that they 

were liable because they all got shut down. One hopes that is a sufficient wake up call to cause them to create the kind of institution 

that we talked about, which is modeled on INPO, as Senator 

Graham said, that causes everybody to be able to police and hold 

accountable all of the players. 

It is certainly true that there was a sense in the industry that 

BP was a problem company, that it was challenged from the point 

of view of safety, and I know of two CEOs who actually went to 

the CEO of BP and tried to get some changes made, without success. They had no means to do that in any formal sense, in any rigorous sense that would force compliance. With the right kind of institute, an insurance could play a part in it and certainly third 

party auditing with policing you could possibly protect everybody 

against an outlier who is capable of implementing them all. 

Senator ALEXANDER. Thank you, Mr. Chairman. I think that is 

a very important statement. 

Senator LAUTENBERG. Thank you. Senator Whitehouse, you are 

next. 

Senator WHITEHOUSE. Thank you, Chairman. Thank you, gentlemen, for your hard work in this cause. I appreciate it very much. 

I am interested in the phenomenon of regulatory capture, or 

agency capture. It has been written about for near on 100 years 

now, very distinguished folks, the leaders of administrative law, 

Nobel Prize winning economists, Presidents of the United States, 

leaders of significant educational institutions and foundations have 

over and over again described it. When I was in law school, it was 

taught both in my administrative law class and in my law and economics class. 

It seems that we have had very telling examples of agency capture in our recent history, whether it is the Mine Safety and 

Health Administration or the SEC authorizing 30 times leverage at 

the request of its regulated industry, which I think had a lot to do 

with economic meltdown or, and I think perhaps most trenchantly 

for our purposes here in this hearing, MMS. 

One of the things that concerns me is that, although the doctrine 

of regulatory capture is accepted in the discipline of economics and 

the discipline of administrative law, and has been for decades now, 

it is basically part of the sort of background understanding of those 

disciplines, we, in Congress, have never undertaken any kind of a 

substantive effort to address it. We wait until there is a disaster, 

a catastrophe, and then we raise hell with the agency that was responsible and then, as if it was a one-time thing that just happened to strike us like lightning, we go on to the next one. 

But now we have seen probably the worst environmental incident, certainly the worst oil spill in our history as a country. We 

have seen one of the worst economic and financial collapses. Do you 

think that it is time that we started to consider the problem of 

agency capture, or regulatory capture, more systemically, so that 

we can get ahead of the next disaster? Who knows where the next 

disaster is? 
72 

There are all sorts of corners of the Federal Government that get 

very little public attention but are immensely important to the industries that they regulate and who knows what is going on in 

those dark corners? What, a, do you think that there is an agency 

capture issue at the heart of what went wrong in the Gulf and b, 

do you think it is a recurring enough problem, or a significant 

enough problem, that we should start looking forward and not just 

backward at trying to prevent agency capture in the future? 

Senator GRAHAM. Senator, the answer is yes and yes. If you did 

a case study of agency capture, I believe that the MMS would be 

a good place to start. There is a well documented history of the coziness of price chipping, including some really despicable personal 

behavior. I agree that this is not peculiar to the offshore oil industry. This is a recurring phenomenon. 

We made some specific recommendations as to how to try to mitigate that as it relates to this industry. One of those was that the 

entity within the Department of the Interior which has the responsibility for safety should be independent. We defined independent 

as having a director who served a term of years rather than at the 

pleasure of either the Secretary of the Department or the President 

so that that person would feel that their job was not at risk if they 

did not lower the standard of safety. 

That will require congressional action. The Department of the Interior has already taken administrative action to separate the function of collecting royalties from the function of safety, which is a 

good step but we think insufficient in terms of its long-term viability. 

Senator WHITEHOUSE. But how do you get the next one? I actually agree with what you have recommended with respect to MMS 

itself, but what if it is Bureau of Land Management someplace? 

What if it is forestry? What if it is contracting in the Defense Department? I mean, we do not seem to have a systemic way for having somebody scout around the executive branch of Government 

and say, whoops, there are some real red flags in this agency, we 

ought to take a look there. 

Mr. REILLY. Could I add to what Senator Graham said? I think 

that the place I would begin, before the hearings, is looking at the 

statutes themselves. In the case of MMS, the statute was conflicted. It gave them a conflicted mandate. It said you are supposed 

to increase offshore oil and gas development and leasing revenues, 

and you are supposed to attend to safety and environment. 

When the moneys got to as high as $18 billion a year, in 2008, 

and they are typically anywhere from 6 to 12 or so, needless to say, 

money wagged that dog. It turned out to be, as three MMS Directors said to us, the controlling concern that they had. In personnel 

decisions, all sort of things were made that had the implication 

that revenue is really what your job is about. 

So, the statute would have invited trouble in our view. That, I 

do not know if that is as true for BLM statutes. There is no organic 

act, as you know, for MMS. I would begin by looking to see whether 

the incentives that have been created in the statute are clear and 

protect against that kind of capture. 

Senator WHITEHOUSE. Thank you. 
73 

Senator LAUTENBERG. Thank you very much. What I am going to 

do, time has flown, I will call on Senator Vitter next, but I want 

to restrict this to 3 minutes each. We have been joined by Senator 

Sessions. We will keep the record open for written questions. So, 

with that, Senator Vitter. 

Senator VITTER. Thank you, Mr. Chair. 

Thank you again for your specific recommendation about Clean 

Water Act fines related to the event. I just want to underscore, particularly for my colleagues, you all specifically recommended that 

we legislate and dedicate 80 percent of the Clean Water Act fines 

related to this event to Gulf restoration. Is that correct? 

Senator GRAHAM. Yes, Senator, and it is our understanding that 

if the Congress does not do so, then these funds would go into the 

Oil Spill Liability Fund. 

Senator VITTER. Right. It is also correct that the Administration, 

although I do not think they have used a specific 80 percent figure, 

supports the same notion. Is that correct? 

Senator GRAHAM. That is correct. 

Senator VITTER. OK. Now, the Clean Water Act, as I understand 

it, is about environmental impact. So, is it fair that we would use 

that money and designate that money in terms of dealing with the 

environmental impact of the event? 

Senator GRAHAM. We certainly felt that not only was it fair but 

that it was urgent that the deterioration of the Gulf is at such a 

pace that if we wait another 20 or 30 years, it may be irredeemable. This is a rare opportunity to do something that will have very 

positive long-term impacts on an extremely important part of the 

United States of America. 

Senator VITTER. Right. 

Mr. REILLY. I would just add that we set out a number of criteria 

for making that judgment, among which is whether national policy 

and national interests were involved. Well, the national policy, particularly agriculture policy, has contributed greatly to the degradation of the Gulf and to the hypoxia. Dredging policies and activities 

of the Corps of Engineers have had substantial impacts on the 

marshes and the ecology as well. 

The oil and gas industry, which is very much a consequence of 

our energy policy and our approvals of activities there, are also responsible for a number of dredging activities and canals that have 

not been necessary to service the industry. 

All of those make very clear that the country itself, the Nation, 

is implicated in this and it has a national interest in correcting it. 

Senator VITTER. Right. Beyond the 80 percent dedication, when 

it gets to implementing that and using that money, how would you 

all suggest we structure that in a way, I would hope it is in a way 

that uses objective criteria, objective factors, about the environmental impacts of the event? 

Senator GRAHAM. We certainly agree with that objective. We feel 

that there is a model that has a lot of history and value in terms 

of answering the question of how to organize and that is the model 

that was used in Alaska. Now, Alaska is a somewhat easier situation because you only had one State whereas you have five States 

in the Gulf of Mexico. 
74 

But we think that some of the principles that came out of that, 

one was that there should be a balance of Federal and State interest, two, that the group should have the obligation of developing a 

comprehensive plan first and then allocation of resources should be 

to execute on that plan, three, that it should be a long-term commitment as Bill said earlier, in Alaska it has lasted now for more 

than 20 years because many of the impacts of this event are not 

going to be known even in the next decade. 

So, those are some principles that have proven effective and just, 

I might add one more, in Alaska they made extensive use of local 

citizens groups to assess specific regional impacts or impacts to a 

particular part of the environment or economy of Alaska. I think 

that is another important principle. 

Senator VITTER. Thank you. 

Senator LAUTENBERG. Thanks very much. Senator Sessions, we 

welcome you to the committee and invite you to give your questions. I would ask unanimous consent than at no longer than 4 

minutes after you start that the committee be adjourned and that 

you close the committee down. 

Senator SESSIONS. Mr. Chairman, reserving the right to object, 

I would say Senator Alexander, I do not know if he has permanently left or not, but if he arrived, would it be OK—— 

Senator LAUTENBERG. Well, he has already had a round before. 

Senator SESSIONS [presiding]. OK. I see. Thank you then, that 

will be fine. 

Senator Graham and Mr. Reilly, thank you very much for your 

service in working on this report. I believe this accident should not 

have happened. I do not think it is the kind of thing that is part 

of some risk that is certain to have happened. I believe there was 

a series of errors and that they should not have happened. 

I also believe that we should have had a better response capability, that things that had to be constructed, it seems to me they 

should have been constructed in advance because this was, some 

saw there was always some possibility that an event like this could 

occur. This frustrated us about that. 

BP is, I am not here to criticize them, they are a secular institution, they are out to make money and they do not make money if 

they make these kinds of mistakes. I know they did not want to 

make this kind of mistake but I do believe they have responsibility 

under law and under legal precedent to pay. 

They made an indication that they would do so but we are having, Senator Graham, a good bit of frustration in my people along 

our coast and I think the Northwest Florida Coast, that particularly small businesses who can show clearly how their businesses 

were damaged as a result of this spill, that Mr. Feinberg and his 

team are slow in processing those claims and some of them are on 

the verge of losing their business, actually some have closed. 

Have you had an opportunity to examine that and hear any of 

those complaints? 

Senator GRAHAM. Well, we have certainly heard the complaints. 

One of the first things that our Commission did was visit the five 

affected States and then have our first meeting in New Orleans, 

which was essentially a listening meeting. We said little but heard 

a lot from dozens a people who were effected by this and the issue 
75 

of the promptness with which particularly what I would describe 

as emergency claims were being processed was a point of criticism. 

I know in Florida there has been a gubernatorially-appointed group 

that has been monitoring that and they have reported to me regularly on the progress. 

I would suggest this would be a topic that would be appropriate 

for this or some other Senatorial Committee to review. Our Commission went out of business on March 11th so we are sort of over 

the hill at this stage. 

Senator SESSIONS. Well, only as a man of the committee. Mr. 

Reilly, do you want to comment on that, if you did? 

Mr. REILLY. No, I think that, we did not really try to second 

guess Feinberg, Senator. We had enough on our plate in the 6- 

months that we had and it was still early days to make any definitive judgments. 

I experienced, with you, particularly was struck by the poignancy 

of the Vietnamese fishermen who had no livelihood, did not have 

the language, and simply we were standing in line at 4 o’clock in 

the morning before Catholic Charities to get $100 food baskets. 

Those are very tragic stories. 

There was even some question about whether they went out to 

records for previous years’ fish take, a lot of them, subsistence people, some of them, would be able to present compelling evidence of 

their entitlement. We heard a lot of sad stories. 

I know I have experienced in the north an unwillingness to serve 

seafood. When I asked were the oysters in New York from the Gulf, 

I was proudly assured by the waitress that no, they would not 

serve seafood from the Gulf. This was as late as late October. So, 

I understand very much those concerns and I think Mr. Feinberg 

does, too. I think he has a tough job. 

Senator SESSIONS. Well, he does have a tough job. He is a capable person and he has responded to some of our concerns and has 

changed policies on it. But I just would say that we have a large 

backlog, I think, of some deserving, particularly smaller businesses, 

that do deserve prompt response. He will be well compensated for 

his work and he is, in essence, hired by BP, so it is not as if he 

is from the Government and there to help us. I mean, he has a responsibility to try to serve his masters. I just would say that that 

is a concern and would share it with you. 

We have had a good record of production safety in the Gulf. 

There have been 42,000 wells, over 2,500 deep wells, and more 

than 14,000 deepwater wells worldwide. So, I do not think there is 

a record that demonstrates incapability of producing oil and gas 

safely. 

One of the things I noticed, and we have all sort of jumped on 

the bandwagon to be critical, but we do not want to misrepresent 

the dangers and the circumstances. I was a little uneasy about 

your report that noted that there is a fatality rate of four to one 

between the loss of lives in our Gulf and worldwide production. But 

I noticed that if you took out two aviation accidents, it would be 

1.3 to 1, which is higher than the world average but not a lot higher than the world average, not of four to one. Do you think it is 

fair to consider the aviation accidents? Because your report would 
76 

suggest that is the result of some sort of oil explosion or event of 

some kind. 

Mr. REILLY. Senator, on those numbers, we had strong anecdotal 

evidence that the accident rate, the incident rate, is much higher 

in the Gulf in addition to the fatality rate. The reality is that the 

Interior Department has not been enforcing the rule that these incidents be reported. I do not think it has collected those numbers 

since 2006. So, there is a lack of reliable information on lost work 

days, total recordables, and the usual metrics for all of that in the 

Gulf. 

I would just say, though, we have been criticized for some of the 

determination that this was a systemic accident, a systemic problem, or that this is an aura of complacency affecting the industry. 

I would turn those numbers a little bit around and say yes, we 

have had 2,500 deepwater wells, which makes it even more hard 

to understand how the Chairman of BP could have told me the first 

week of my appointment that we have no effective sub-sea containment capability. I was startled by that at the time. 

Senator SESSIONS. I was, too. That, to me, was one of the more 

startling events in this whole process because a good sub-sea response capability could perhaps have been successful in very short 

order. Is that right? 

Mr. REILLY. Yes, it could, and we are assured now that they do 

have this capability—— 

Senator SESSIONS. Let us talk about that. That is so important 

and I am not, I am glad to hear you authoritatively address it because I have not gotten myself the authoritative answer that I 

would like to have. You believe that the containment capability 

that is present now, it if had been deployed in a matter of days or 

weeks, could have capped that well? 

Mr. REILLY. Yes. There are two parts to it. The first is an effective determination of the flow rate because the failure to get the 

flow rate right is the reason that they tried a lot of things that did 

not work. They had no idea that they were dealing with the force 

that they were confronting. But Marcia McNutt, the head of the 

U.S. Geological Survey, has assured that we now have the capability to assess and determine the flow rate relatively promptly. 

We also have containment capability that should be prepared, 

ready, basically it is the containment capability that finally was 

successful, the top hat containment capability, and that that would 

be deployed in a matter of days and possibly 2 weeks to staunch 

any serious spill that we encounter. 

Senator SESSIONS. I believe that is reassuring to those of us who 

believe, as a matter of national interest, we should produce oil and 

gas from the Gulf. I just believe it is a matter of national interest 

when you see the, well, that we export to buy oil from abroad creating from this industry 1,000 jobs in Alabama, 200,000 along the 

Gulf Coast. These are high paying jobs and they are producing 

wealth for the State and the Federal Government in terms of the 

royalties that are paid. 

So, I guess I am troubled that we are moving slowly on our permitting new production. I do believe the United States is in an economic period of challenge and productivity is important. Energy 
77 

costs as low as possible are important and much domestic energy 

is important. 

I think your report is so valuable. I know you took it seriously. 

I thank both of you for it. Florida, I think, and Alabama particularly have such a tourist industry. It is not, there were economic 

losses that are absolutely indisputable along that coast and one of 

the things we are concerned about is getting proper compensation. 

I guess my time is up and I would glad to hear any final words 

the two of you have. 

Senator GRAHAM. Well, I would just say, I could not agree more 

with your comments, Senator, that this is a very important industry for America. One-third of our oil and gas is coming out of the 

Gulf of Mexico. The consequences of a shutdown of this would be 

indescribable. 

For this industry, however, to continue to have the public support, we need to achieve and be the standard of the world in safety. 

We are not there yet. We can be there. The statistic that you cited 

was not a worldwide statistic but a North Sea statistic, the comparison. The reason that we used that is that we are dealing with 

two very sophisticated countries, the U.K. and Norway in the 

North Sea. Many of the companies that are in the Gulf are also in 

the North Sea. The North Sea, if anything, is a more formidable 

environment than the Gulf of Mexico. 

So, our concern was that there was such a gap between those two 

areas in terms of their safety record and some of the standards 

that have been applied in the past which we think can be easily 

and without great cost or disruption applied in the Gulf of Mexico. 

So, we think the long-term well-being of this industry is very much 

tied to its commitment to being the safest application of offshore 

oil activities in the world an attainable goal. 

Senator SESSIONS. Well said. 

Mr. REILLY. I would just add, Senator, that the most important 

recommendation that the commission made directly to industry 

was the establishment of a safety organization modeled on those of 

the chemical industry and the nuclear power industry after their 

catastrophes. 

I understand that a decision will be made and reported later this 

week on whether they intend to go forward with such an enterprise. I think if they do they will show that they really have understood the magnitude of this challenge and will have a system in 

place to correct a number or the problems that we identified, including that fatality history and that accident history. They will be 

able to police one another to identify and agree upon best practices 

to carry out third-party audits and have a means of influencing 

companies that may be specially challenged from the point of view 

of safety as BP clearly was before this event. 

So, I think that could be one of the most promising things that 

comes out of all of this. It is a salient recommendation of our Commission, and the prospects, I think, are reasonably good that it will 

happen. 

Senator SESSIONS. Well, thank you very much and I really do appreciate your evaluation because I know it is independent and honest that we now have a capability that we did not have to respond 
78 

to a blowout like this in an effective way. There are always dangers 

out there but it gives us more confidence. 

In addition to that, the series of events that led up to this explosion, surely the policies that you have recommended and that are 

already being undertaken, frankly, would eliminate the likelihood 

of an event ever occurring to begin with, which is the best way to 

proceed. 

So, I do think we are moving along better and I hope that we 

can gain the confidence, the industry can gain the confidence of the 

American people because this is a valuable resource that the Nation needs at this point in time. 

Now, we have a new Chairman. Under the UC we have, we are 

supposed to, I would propound that the previous UC be vitiated 

and would be allowed to proceed. 

Senator CARPER. Reserving the right to object—— 

[Laughter.] 

Senator CARPER. I just want to be able to ask some questions. 

Senator SESSIONS. Well, I will allow you to do so. Senator Lautenberg had proposed that after my UC, that after I completed, the 

committee would adjourn. 

Senator CARPER. I do not object. 

Senator SESSIONS. Very good. 

Senator CARPER [presiding]. That would be great. I would ask 

unanimous consent that I be allowed to ask a question or two of 

our colleagues. Thank you for your courtesy. 

It is very nice to see you. I just want to start off by saying thank 

you for all the good that you continue to do with your lives. It is 

nice to know that there is a life, a productive life and a full life, 

after politics. I am grateful to both of you for your continued service to our country. 

I am not sure which of you did this but one of you, I believe, in 

your testimony, actually mentioned that I think the Commission 

recommends that the Council of Environmental Quality and the 

Department of Interior revise and strengthen NEPA policies. I 

think I just wanted to know what specific actions do you believe 

are needed to strengthen NEPA such that the environmental impacts of offshore oil, offshore gas projects, are better assessed and 

what can we do here in the legislative branch to make sure that 

NEPA is adequately improved? 

Mr. REILLY. Senator, some years ago at the beginning of the implementation of the National Environmental Policy Act, I wrote the 

guidelines with Tim Atkinson, our General Counsel of the Council 

for Environmental Quality, for the implementation of Section 

1022(c), the Environmental Impact Statement part of it. We were 

first of all distressed to see that the approaches taken by the Interior Department in leasing, area wide leasing, tiering and categorical exclusions, did not, in our view, provide an adequate opportunity for specific assessment of environmental consequences that 

might ensue from decisions. 

I think that the implications of that are that the area wide leasing has typically comprehended too large an area, that there has 

been a sense that once written, an impact statement has been done 

and therefore nothing further, or at least nothing of the elaborateness of a real impact statement be necessary, even though there is 
79 

a much more specific understanding of what will happen, what the 

impact will be, what the potential consequences may be, maybe a 

species, different species, or different ecologically that will be affected. 

Categorical exclusions, in our view, were over utilized, and some 

of these problems are being addressed, both by the Council on Environmental Quality and by the Interior Department. It remains to 

be seen how that new process works. 

But I was just disappointed, as a student of NEPA, to see that 

it seemed to have played a much lesser role than it should have. 

I will go further and say, in the testimony of the Chairman of the 

Council of Environmental Quality, we heard that she did not consider that there was a role for the Council with respect to the decision to broaden the coastal area that was open to leasing because 

there was no specific Federal action. It was when specific leases 

were granted that NEPA would kick in. 

My reaction to that was that, first of all, I would have expected 

under the statute that the principle advisor on the environment in 

the Executive Branch, who is the Chairman of the Council, would 

have been consulted on that decision. She made clear that she had 

not been. 

There is another section of NEPA, 101, that establishes national 

policy of the United States to give a high priority to protection of 

the environment and the resources and so forth that seems to me 

not to have the attention and understanding and support that it 

should have. I would single it out and I would also, and I know in 

my time on the Council of Environmental Quality, Russell Train, 

who was my boss, would have been consulted on such a decision 

and would have thought it appropriate and even necessary that he 

be consulted on it. 

So, there is an understanding of NEPA, I think, that can be improved and processes in the regulations that can be strengthened. 

Senator CARPER. Great. Thank you. Senator Graham, I have one 

more question. Thank you for that response very much. One more 

question and then we are going to let you guys escape and go back 

and get on with your lives. 

Our country, I am told, accounts for more than 20 percent of 

global oil consumption. I do not know if that is going up or down 

or if it is a stable number, but it is a lot. That is some 19 million 

barrels per day, I understand, that is consumed right here in our 

country. 

However, about 70 percent of the oil that we consume in the U.S. 

comes from other countries, some of which are undemocratic, unstable. We see that play out every day in Libya, although the 

amount that we receive from them is small. It is all fungible in the 

end. 

The BP oil spill is evidence of the environmental and the economic consequence, an impact of our oil dependence. I say to a lot 

of people, every 5 years we get a wake-up call, we get a message, 

we ignore it, and how often do we have to be reminded that we 

need to develop our energy independence and do it in a way that 

creates jobs, economic opportunity and actually cleans up our environment? How foolish can we be here? We have been warned or 
80 

given that message one more time. I hope this time we actually do 

something with it. 

Do you believe that it is in our Nation’s best interests to reduce 

our consumption of oil? I think I might know what you might say, 

but from both domestic and foreign sources, and if so, give us a 

couple of quick examples of how you think what we are doing actually makes sense and some more things that we ought to do. 

Senator GRAHAM. Well, the answer is yes. Let me just give you 

some further statistics. The United States is using about 22 percent of all the petroleum lifted around the world. As you say, it is 

approximately 19 million barrels a day. We sit on top of about 1.5 

percent of the proven reserves in the world. Those are 

unsustainable statistics. 

Now, people will argue that the proven reserves is a soft number. 

It may well be, but it is the only number that we have and if we 

are going to try to make intelligent policy decisions, I think it is 

important. 

I calculated that at the current rate of our consumption, if we 

were to go totally independent, that is, rely on our remaining proven reserves to meet our needs, we would lift the last drop of oil in 

the United States in approximately the year 2031. If we were to 

maintain our current allocation, which is actually 48 percent domestic, 52 percent foreign, we would reach that same last drop in 

about the year 2064. So, we can see the end of the horizon. 

There are some events that are in the news today which I think 

indicate just one of the consequences of that. Bahrain has become 

the last, most recent country to have reached that zero amount of 

petroleum. I think that fact, and the fact that the people understand what the economic consequences of that shift in Bahrain’s 

economic future, have been contributing causes to the unrest that 

is going on there today. 

I believe that we should be wise enough to manage what we have 

left in a manner that will stretch those dates that I gave as long 

as possible, at least as long as it is going to take us to make the 

transition from a heavily fossil fuel dependent America to a significantly less fossil fuel using America. 

You asked for some specific things. I would say probably the single most important thing that we could do to reduce our dependence on oil, because today 70 percent of those 19 million barrels are 

being used for it, is our vehicles. If we could get a significant percentage of our vehicles off petroleum and onto electricity or other 

alternatives, that would have a dramatic impact on our oil consumption, as well as our environment by reducing the emission of 

chemicals that contribute to global warming. So, that is where I 

would put my emphasis. 

Senator CARPER. Thank you. As you know, we passed, I believe 

you may have still been serving in December, we passed the first 

update that we have had in CAFE in so many years, a couple of 

years ago, 35, 36 mile fleet average per gallon, and I think our target date was 2020. The President has updated that and moved it 

ahead by 4 years. 

It is interesting to see the auto companies, I was at the Detroit 

Auto Show back in January, comparing the kinds of cars, trucks, 

and vans that I saw and the power trains and so forth, consider 
81 

what I saw now to 5 years ago, night and day, just night and day 

in terms of what we were thinking about doing, like, 5 years ago 

and what it is today. It is very, very encouraging. 

Our GM plant in Delaware closed about a year, a year and a half 

ago, sadly. We were the last State on the East Coast to have any 

auto assembly operation from Maine to Florida. We lost our Chrysler plant and our GM plant within, like, months of each other. The 

GM plant is going to be reopened next year. They will be building 

a new vehicle, a couple of vehicles built by Fisker, a new startup, 

and Henry Fisker is a great auto designer, some of the most beautiful cars I have ever seen, and they will get about 80 miles per 

gallon. 

Our friends at GM are building the Volt. They initially are going 

to do 10,000 this year, they are going to do 50,000 this year, they 

are going to do 200,000 next year. So, we are heading in the right 

direction. Our tax policy, as you know, is to try to incentivize people to do that. One thing that they are considering doing at GM, 

they are interested in natural gas. They are interested in being 

able to convert especially heavier equipment from diesel to natural 

gas. 

I would like to ask for maybe a 1-minute comment, if you would, 

Mr. Reilly. The use of natural gas, there is a lingering concern a 

number of people have about the fracking and what that, the potential stress to the environment that could pose. Could you just 

give us 60 seconds on that issue, please? 

Mr. REILLY. I am not an expert on fracking, Senator, but my impression is that it can be done safely and securely and is by a number of operators. The number of incidents that have been noted 

where it has gotten into the groundwater, which it should not do, 

are limited to a relatively small number of operators and my sense 

is that this is an industry that would do very well to figure out how 

to police those operators lest it get them all in trouble and find that 

they have been discredited and then are subject to onerous constraints. It might even be necessary to regulate this on a more uniform basis to make sure that the casings, the designs, a lot of the 

kinds of things that exist in the oil and gas industry are tended 

to much more professionally. 

The surface water impacts are a second set of concerns and I was 

surprised to read the recent stories in the New York Times about 

radioactive water and things of that sort. I just do not know how 

serious those are and have in mind to talk to people at EPA about 

what they really think about it. But I know the EPA Administrator 

has indicated that they will take a very close look at this and begin 

to consider responses to it. I think that based upon what we know, 

that is a good idea. 

Natural gas is, I would think, an ideal intermediate field of 

choice for the United States. It is much less in carbon emissions 

than coal, it can support power, our powerplants, mine cycle of natural gas would be an improvement over coal plants that are shutting down, some of the oldest ones, as a consequence of EPA regulations, and I think that is very much in the national interest. So, 

this is something I hope we can be more careful about. 
82 

Senator CARPER. Our thanks to both of you. Thanks so much for 

your time and for your testimony and your responses to our questions. Again, thanks for your continued service to our country. 

With that, not hearing any objection, this hearing is adjourned. 

[Whereupon, at 12 p.m., the committee was adjourned.] 

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