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65–490PDF 2011

OFFSHORE DRILLING SAFETY AND 

RESPONSE TECHNOLOGIES 

HEARING 

BEFORE THE

SUBCOMMITTEE ON ENERGY AND 

ENVIRONMENT 

COMMITTEE ON SCIENCE, SPACE, AND 

TECHNOLOGY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED TWELFTH CONGRESS 

FIRST SESSION 

WEDNESDAY, APRIL 6, 2011 

Serial No. 112–12 

Printed for the use of the Committee on Science, Space, and Technology 

( 

Available via the World Wide Web: http://science.house.gov 
(II) 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY 

HON. RALPH M. HALL, Texas, Chair 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

MICHAEL T. MCCAUL, Texas 

PAUL C. BROUN, Georgia 

SANDY ADAMS, Florida 

BENJAMIN QUAYLE, Arizona 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

E. SCOTT RIGELL, Virginia 

STEVEN M. PALAZZO, Mississippi 

MO BROOKS, Alabama 

ANDY HARRIS, Maryland 

RANDY HULTGREN, Illinois 

CHIP CRAVAACK, Minnesota 

LARRY BUCSHON, Indiana 

DAN BENISHEK, Michigan 

VACANCY 

EDDIE BERNICE JOHNSON, Texas 

JERRY F. COSTELLO, Illinois 

LYNN C. WOOLSEY, California 

ZOE LOFGREN, California 

DAVID WU, Oregon 

BRAD MILLER, North Carolina 

DANIEL LIPINSKI, Illinois 

GABRIELLE GIFFORDS, Arizona 

DONNA F. EDWARDS, Maryland 

MARCIA L. FUDGE, Ohio 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

JERRY MCNERNEY, California 

JOHN P. SARBANES, Maryland 

TERRI A. SEWELL, Alabama 

FREDERICA S. WILSON, Florida 

HANSEN CLARKE, Michigan 

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT

HON. ANDY HARRIS, Maryland, Chair 

DANA ROHRABACHER, California 

ROSCOE G. BARTLETT, Maryland 

FRANK D. LUCAS, Oklahoma 

JUDY BIGGERT, Illinois 

W. TODD AKIN, Missouri 

RANDY NEUGEBAUER, Texas 

PAUL C. BROUN, Georgia 

CHARLES J. ‘‘CHUCK’’ FLEISCHMANN, 

Tennessee 

RALPH M. HALL, Texas 

BRAD MILLER, North Carolina 

LYNN C. WOOLSEY, California 

BEN R. LUJA ́ N, New Mexico 

PAUL D. TONKO, New York 

ZOE LOFGREN, California 

JERRY MCNERNEY, California 

EDDIE BERNICE JOHNSON, Texas 
(III) 

C O N T E N T S 

Wednesday, April 6, 2011 

Page 

Witness List ............................................................................................................. 2 

Hearing Charter ...................................................................................................... 3 

Opening Statements 

Statement by Representative Andy Harris, Chairman, Subcommittee on Energy and Environment, Committee on Science, Space, and Technology, U.S. 

House of Representatives .................................................................................... 10 

Written Statement ............................................................................................ 11 

Statement by Representative Brad Miller, Ranking Minority Member, Subcommittee on Energy and Environment, Committee on Science, Space, and 

Technology, U.S. House of Representatives ....................................................... 11 

Written Statement ............................................................................................ 13 

Witnesses: 

Dr. Victor Der, Acting Assistant Secretary for Fossil Energy, Department 

of Energy 

Oral Statement ................................................................................................. 15 

Written Statement ............................................................................................ 17 

Mr. David Miller, Director, Standards, American Petroleum Institute 

Oral Statement ................................................................................................. 19 

Written Statement ............................................................................................ 21 

Mr. Owen Kratz, President and CEO, Helix Energy Solutions Group 

Oral Statement ................................................................................................. 23 

Written Statement ............................................................................................ 25 

Dr. Molly Macauley, Research Director and Senior Fellow, Resources for 

the Future 

Oral Statement ................................................................................................. 27 

Written Statement ............................................................................................ 29 

Discussion ................................................................................................................. 35 

Appendix I: Additional Material for the Record 

Prepared Statement by Representative Eddie Bernice Johnson, Ranking Minority Member, Committee on Science, Space, and Technology, U.S. House 

of Representatives ................................................................................................ 100 

(1) 

OFFSHORE DRILLING SAFETY AND RESPONSE 

TECHNIQUES 

WEDNESDAY, APRIL 6, 2011 

HOUSE OF REPRESENTATIVES, 

SUBCOMMITTEE ON ENERGY AND ENVIRONMENT, 

COMMITTEE ON SCIENCE, SPACE, AND TECHNOLOGY, 

Washington, DC. 

The Subcommittee met, pursuant to call, at 2:47 p.m., in Room 

2318 of the Rayburn House Office Building, Hon. Andy Harris 

[Chairman of the Subcommittee] presiding. 
2 
3 

HEARING CHARTER
4 
5 
6 
7 
8 
9 
10 

Chairman HARRIS. The Subcommittee on Energy and Environment will come to order. Good afternoon. Welcome to today’s hearing entitled, ‘‘Offshore Drilling Safety and Response Technologies.’’ 

In front of you are packets containing the written testimony, biographies, and truth in testimony disclosures for today’s witness 

panel. 

Before we get started, though, this being the first meeting of the 

Energy and Environment Subcommittee for the 112th Congress, I 

would like to ask the Subcommittee’s indulgence to introduce myself, welcome back returning Members, and introduce any new 

Members on our side of the dais. Afterwards I will recognize Mr. 

Miller to do the same. 

It is an honor and pleasure for me to Chair the Energy and Environment Subcommittee for this Congress, and it is a position I 

don’t take lightly. I want all Members of the Subcommittee to know 

that I will endeavor to serve all the Members fairly and impartially, and that I will work to serve the best interests of Congress 

and all Americans to ensure that the agencies and programs under 

our jurisdiction are worthy of the public support. 

Although they are not here now, I would like to formally welcome 

back our returning Members Rohrabacher, Bartlett, Lucas, Biggert, 

Akin, Neugebauer, and Broun, and I would also like to welcome, 

when he arrives, our newest member, Chuck Fleischmann of Tennessee. 

At this point I will recognize Mr. Miller for any—if you want to 

introduce or just mention your Members. 

Mr. MILLER OF NORTH CAROLINA. I can do it in my opening statement. 

Chairman HARRIS. Okay. Thank you. I will recognize myself for 

five minutes for an opening statement. 

The title of today’s hearing is, ‘‘Offshore Drilling Safety and Response Technologies.’’ The context under which we review the issue 

is framed by complex and interrelated environmental, economic, 

and even geopolitical policy concerns. Looming large, of course, is 

the Deep Water Horizon oil spill of which we are still assessing its 

root causes and environmental impacts even as we approach the 

one-year anniversary of the disaster. 

Meanwhile, American families are being hit hard at the gas 

pump due to multiple market factors; headlined, though, by tight 

supplies, rising global demand for oil, growing political instability 

in North Africa and the Middle East, and decreasing American production. The current national average price for a gallon of gas is 

over $3.60, the highest ever for this time of the year. This, of 

course, effectively amounts to a tax increase on our consumers and 

families and a drag on our economic recovery. 

Accordingly, I believe we must attack the energy problem from 

every angle we can and expanding domestic oil and natural gas 

supply and production absolutely must be part of this equation. 

Offshore drilling holds incredible promise to help deliver on this 

goal. The Federal Government currently estimates the U.S. Outer 

Continental Shelf holds 85 billion barrels of technically-recoverable 

oil at this point, over half of which is in the Gulf of Mexico and 

400 trillion cubic feet of natural gas. 
11 

We must pursue exploration and production of these valuable resources, but we all realize on both sides of the aisle that we must 

do it safely and be prepared with effective well containment and response if and when an accident should occur. 

To this end, through this hearing we aim to examine the status 

of safety-related drilling and response technologies and standards 

with an emphasis on progress made since last year’s accident. We 

also want to hear how best we should structure and prioritize federal programs in these areas, particularly those of the Department 

of Energy but also interagency response efforts authorized by the 

Oil Pollution Act of 1990. 

Look. We all know it is impossible to completely and positively 

eliminate risks associated with complex endeavors such as deep 

water drilling, but we must continuously work to reduce risks and 

to manage them in a way that allows our economy and American 

consumers to benefit from our vast supply of domestic offshore oil 

and gas resources. 

I yield back the balance of my time and now recognize Ranking 

Member Miller for his opening statement. 

[The prepared statement of Mr. Harris follows:] 

PREPARED STATEMENT OF CHAIRMAN ANDY HARRIS

The title of today’s hearing is Offshore Drilling Safety and Response Technologies. 

The context under which we review this issue is framed by complex and interrelated 

environmental, economic, and even geopolitical policy concerns. Looming large of 

course is the Deepwater Horizon oil spill, of which we are still assessing its root 

causes and environmental impacts as we approach the one year anniversary of the 

disaster. Meanwhile, American families are being hit hard at the gas pump due to 

multiple market factors headlined by tight supplies, rising global demand for oil, 

growing political instability in North Africa and the Middle East, and decreasing 

American production. The current national average price for a gallon of gas is $3.60-the highest ever 

for this time of the year. This of course effectively amounts to a tax increase on consumers and a drag on our economic recovery. Accordingly, I believe we must attack 

the energy problem from every angle we can, and expanding domestic oil and natural gas supply and production absolutely must be part of this equation. 

Offshore drilling holds incredible promise to help deliver on this goal. The Federal 

government currently estimates the U.S. Outer Continental Shelf holds 85 billion 

barrels of technically recoverable oil (over half of which is in the Gulf of Mexico) 

and 420 trillion cubic feet of natural gas. 

We must pursue exploration and production of these valuable resources. But we 

all realize we must do it safely and be prepared with effective well containment and 

response if an accident does occur. To this end, through this hearing we aim to examine the status of safety-related drilling and response technologies and standards, 

with an emphasis on progress made since last year’s accident. We also want to hear 

how best to structure and prioritize Federal programs in these areas, particularly 

those at the Department of Energy but also interagency response efforts authorized 

by the Oil Pollution Act of 1990. 

We all know it is impossible to completely eliminate risks associated with complex 

endeavors such as deepwater drilling, but we must continually work to reduce risks 

and to manage them in a way that allows our economy and American consumers 

to benefit from our vast supply of domestic offshore oil and gas resources. 

Mr. MILLER OF NORTH CAROLINA. Thank you, Chairman Harris, 

and on this side we also have very conscientious Members, none of 

whom are here. We have seasoned Members as well as Members 

with expertise in the subject matter of the Subcommittee. In addition to me, Eddie Bernice Johnson, the Full Committee Ranking 

Member, we have Ms. Woolsey, Ms. Lofgren, and Mr. McNerney, 

all Californians with—and well-known champions of– a clean energy future. Mr. Lujan represents Los Alamos National Lab, and 
12 

brings his expertise on federal research and technology development to this Subcommittee, and Mr. Tonko draws upon his experience as the CEO of the New York State Energy Research and Development Authority. 

Like you, Mr. Harris, we will take the jurisdiction of this Committee very seriously and will always look for ways to push our federal research agencies to be much more effective and efficient drivers of innovation and economic growth. Our job is to know the 

agency’s capability, know what the public needs, and create a credible and strong record on government performance in meeting those 

needs. Where the agencies succeed, we will support them, and 

where they fall short, we will take corrective measures and ultimately we may support redirecting resources. 

Today, however, we are here to discuss the progress that industry has made in meeting the public’s needs for safety and responsible oil and gas drilling. Just as we hold our agencies accountable, 

we must also hold industries accountable and expect them to acknowledge the tremendous risks, the tremendous danger inherent 

in the services they provide, and the work they do. 

Before the explosion that killed 11 men, sank the Deep Water 

Horizon drilling rig, and generated the ensuing oil spill that lasted 

for nearly three months, offshore drilling was not at the center of 

public attention. As is often the case with energy matters outside 

of the public policy world, the availability of oil was largely taken 

for granted, and the environmental risks were not widely known to 

the general public. 

All that changed on April 20 when we got a violent and lasting 

reminder of how dangerous our need for oil has become. As the 

world’s largest oil consumer but with less than eight percent of 

technically recoverable global resources and far less than that of 

economically-recoverable global reserves, our reliance on oil has 

driven domestic production to ever-deeper waters in search of more 

productive fields. 

Chairman Hall has taught us over the years both as a Republican and as a Democrat that this is no small feat of engineering. 

Those companies have pushed the boundaries of technological innovation in finding and extracting oil under nearly impossible conditions. 

But by almost all accounts in the race to deeper waters, the industry’s investment in advancing environmental safety has not 

kept up with those increasingly dangerous conditions. To anyone 

that disputes that I ask you to tell me how an explosion killed 11 

men and sank one of the most technologically-advanced drilling 

rigs in the world. Why did it take three months of failed attempts 

by a NASA team of government and industry experts to stop the 

oil gushing from the disabled blowout preventer thousands of feet 

beneath the surface, creating one of the largest and most expensive 

environmental disasters in U.S. history? It was because nobody 

was prepared. 

President Obama has acknowledged that. He suspended new 

deep water drilling permits in the Gulf until new safety measures 

could be drawn up, and industry could give some assurance that 

they would be prepared if that should happen again. It would have 

been reckless not to do so. 
13 

I imagine that we will hear today a good deal of misplaced 

blame. We will hear from some Members, perhaps from a Member, 

that the President is to blame for not being more diligent in overseeing the industry’s drilling practices, that the President did not 

do enough to help the oil industry and gas industry develop new 

technologies, that the President was not quick enough or prepared 

enough to respond to the unthinkable disaster unfolding, and that 

the President’s timeout on the deep water drilling has been a catastrophe for the industry. 

But from those Members we perhaps will not hear as much about 

the industry’s culpability. We won’t hear how the owner of Deepwater Horizon, Transocean, gave executive bonuses last year for 

their exemplary safety record. We won’t hear how the most profitable industry in the history of the world did not see fit to invest 

resources in assuring that disasters like the Deepwater Horizon do 

not happen or that it could be cleaned up if it did. Most important, 

we won’t hear today the truth about oil and gas production under 

President Obama. 

We won’t hear that production actually continued in the Gulf 

during the temporary drilling suspension, that 39 shallow water 

permits were granted since October, that eight new deep water permits have been granted in just the last month and a half. We won’t 

hear that in 2010, outer continental shelf oil production increased 

by 30 percent, that domestic oil production is at its highest level 

in ten years and natural gas is at its highest ever. 

I do look forward to the witnesses’ testimony today. I acknowledge that the industry has made advances in safety in the last 

year, but it is not enough. We owe it to the public to hold this industry’s feet to the fire and assure that there is relentless innovation in worker safety and environmental protection in the oil and 

gas industry. 

Thank you, Chairman Harris. 

[The prepared statement of Mr. Miller of North Carolina follows:] 

PREPARED STATEMENT OF RANKING MEMBER BRAD MILLER

Thank you, Chairman Harris. 

On this side of the aisle the Energy & Environment Subcommittee is also stocked 

with seasoned professionals. In addition to me and the full Committee Ranking 

Member, Eddie Bernice Johnson, we have Ms. Woolsey, Ms. Lofgren and Mr. 

McNerney, all Californians and well-known champions of a clean energy future. Mr. 

Lujan, representing Los Alamos National Lab, brings his expertise on federal research and technology development to the Subcommittee. Finally, Mr. Tonko draws 

upon his experience as the CEO of the New York State Energy Research and Development Authority. 

Like you, Mr. Harris, I can assure the public that we take the jurisdiction of this 

Committee very seriously, and will always look for ways to push our federal research agencies to be more effective and efficient drivers of innovation and economic 

growth. Our job is to know the agencies’ capabilities, know what the public needs, 

and build a credible and strong record on government’s performance in meeting 

those needs. Where the agencies succeed, we will support them. Where they fall 

short, we will take corrective measures and ultimately may decide to redirect resources. 

However, today we are here to discuss the progress that industry has made in 

meeting the public’s needs for safe and responsible oil and gas drilling. Just as we 

hold our agencies accountable, we also hold these industries accountable and expect 

them to acknowledge the tremendous risk inherent in the services they provide. 

Before the explosion that killed eleven men, sank the Deepwater Horizon drilling 

rig, and generated the ensuing oil spill that lasted for nearly three months, offshore 

drilling was not at the center of public attention. As is often the case with energy 
14 

matters, outside of the policy world, the availability of oil was largely taken for 

granted and the environmental risks were not widely known by the general public. 

That all changed on April 20th when we got a violent and lasting reminder of how 

dangerous our need for oil has become. 

As the world’s largest oil consumer, but with less than 8% of technically- recoverable global reserves, our reliance on oil has driven domestic production to ever deeper waters in search of more productive fields. As Chairman Hall has taught us over 

the years, this is no small feat of engineering. These companies have pushed the 

boundaries of technological innovation in finding and extracting oil under nearly impossible conditions. 

By almost all accounts, in the race to deeper waters the industry’s investment in 

advancing worker and environmental safety has not kept up with these increasingly 

dangerous conditions. 

To anyone that disputes that, I ask you to tell me how an explosion killed eleven 

men and sank one of the most technologically advanced drilling rigs in the world? 

Why did it take three months of failed attempts by a massive team of government 

and industry experts to stop the oil gushing from the disabled blowout preventer 

thousands of feet below the surface, creating one of the largest and most expensive 

environmental disasters in U.S. history? It is because nobody was prepared. 

Acknowledging this, President Obama suspended new deepwater drilling permits 

in the Gulf until new safety measures could be drawn up and industry could give 

some assurance that they would be prepared when this happens again. It would 

have been reckless not to do so. 

I imagine that what we will hear today is misplaced blame. We may hear from 

some Members that the President is to blame for not being more diligent in overseeing the industry’s drilling safety practices; that the President did not do enough 

to help the oil and gas industry develop new technologies; that the President was 

not quick or prepared enough to respond to the unthinkable disaster unfolding at 

the Macondo well; and that the President’s time-out on deepwater drilling in the 

Gulf has been a catastrophe for the industry. 

We won’t hear much from these Members about industry culpability. We won’t 

hear how the owner of the Deepwater Horizon, Transocean, gave executives bonuses 

for their ‘‘exemplary’’ safety record last year. We won’t hear how the most profitable 

industry in the history of the world did not see fit to invest resources in assuring 

that disasters like the Deepwater Horizon do not happen, or that it could be cleaned 

up if it did. 

Most important, in this hearing we won’t hear the truth about oil and gas production under President Obama. We won’t hear that production actually continued in 

the Gulf during the temporary drilling suspension, that 39 shallow water permits 

were granted since October, or that eight new deepwater permits have been granted 

in the last month and a half. We won’t hear that in 2010, Outer Continental Shelf 

oil production increased by 30%, that domestic oil production is at its highest levels 

in ten years, and natural gas is at its highest ever. 

I look forward to the witness’ testimony today. I acknowledge the industry’s advances in safety in the last year. But it is not enough. We owe it to the public to 

hold this industry’s feet to the fire, and ensure that there is relentless innovation 

in worker safety and environmental protection in the oil and gas industry. 

Thank you, Chairman Harris. 

Chairman HARRIS. Thank you very much, Mr. Miller. I know we 

are joined by the gentlelady from California, and if you would like 

to submit additional opening statements, your statement would be 

added to the record at this point, and if other Members arrive, I 

will make the same offer. 

Ms. WOOLSEY. That is fine, Mr. Chairman. 

Chairman HARRIS. Thank you. At this time I would like to introduce our witness panel. Dr. Victor Der is Acting Assistant Secretary for Fossil Energy. Dr. Der also serves as Principal Deputy 

Assistant Secretary for Fossil Energy where he provides strategic 

direction and guidance for the program’s daily activities as well as 

its long-term goals and objectives. Prior to that position he was 

Deputy Assistant Secretary for Clean Coal. He holds a Ph.D. in mechanical engineering and has worked at DOE for 37 years. 
15 

Mr. David Miller is the Director of the Standards Program for 

American Petroleum Institute. He is also Chairman of the American National Standards Institute International Policy Committee, 

and a member of the Offshore Technology Conference Board of Directors. He was elected a fellow of the American Society of Civil 

Engineers in 2006. 

Mr. Owen Kratz is President and Chief Executive Officer of Helix 

Energy Solutions Group, Incorporated. He joined Cal Dive International, now known as Helix, in 1984, and held various offshore 

positions before serving in a number of management positions before becoming CEO in April of 1997. 

And last, Dr. Molly Macauley is Research Director and Senior 

Fellow at Resources for the Future. Dr. Macauley’s research emphasizes new technology and its application to natural and environmental resources. She serves on several national-level committees 

and panels, including the National Research Council’s Space Studies Board, the NASA Earth Science Applications Advisory Committee, and NOAA’s Climate Working Group. She has a Ph.D. in 

economics from Johns Hopkins University. I know that place. And 

also served there as an adjunct professor of economics. 

Now as our witnesses should know, spoken testimony is limited 

to five minutes each, after which the Members of the Committee 

will have five minutes each to ask questions. Right up front I 

apologize that we are starting late. You know, we held a series of 

votes. I am going to apologize to you because your time is valuable. 

Now I would like to recognize our first witness, Dr. Victor Der, 

the Acting Assistant Secretary for Fossil Energy at the Department 

of Energy. Doctor. 

STATEMENTS OF DR. VICTOR DER, ACTING ASSISTANT 

SECRETARY FOR FOSSIL ENERGY, DEPARTMENT OF ENERGY 

Dr. DER. Good afternoon, Chairman Harris, Ranking Member 

Miller, and Members of the Committee. As Acting Assistant Secretary for Fossil Energy I appreciate the opportunity to present the 

Department of Energy’s perspective on improving offshore drilling 

safety and response technologies. Before I delve into my statement 

I want to take a moment to recognize and remember the 11 men 

that died almost a year ago while working on the Deep Water Horizon. As we approach the one-year anniversary of that tragedy in 

the Gulf, we know that there are important challenges we must 

meet in order to ensure that we never again see such a calamity 

on the human, ecological, and economic scales. 

Turning back to my statement, natural gas and crude oil provide 

more than 60 percent of our Nation’s primary energy needs. Last 

week the President outlined a blueprint for a clean energy future, 

and to reduce our dependency on oil we must develop and deploy 

new options like advanced biofuels, vehicle electrification, and improve vehicle efficiency. 

In the meantime, petroleum and natural gas will continue to 

play an important role in our economy for at least the next several 

decades. As both the Chairman and the President have said, we 

have domestic oil and gas resources here that we can use, and we 

will. In fact, last year American oil production reached its highest 

level since 2003. 
16 

But in the wake of last year’s spill the President has made it 

clear that we must tap into these resources safely and responsibly. 

As this Committee knows, the Department of the Interior is the 

agency with the regulatory authority over the oil and gas industries’ offshore drilling activities. The Department of Energy can 

work with other federal agencies and industry partners to ensure 

that new technologies improve the ability to drill in ever-deeper 

waters with greater margins of safety, reduce the risk of spills, and 

provide improved mitigation should a spill occur. 

To help meet rising demand, producers are looking to identify 

and tap new oil and natural gas sources, including many in areas 

that are increasingly difficult to locate and produce such as deepwater locations. Offshore oil now accounts for about one third of 

our domestic fuel production, and 80 percent of this production 

comes from the Gulf of Mexico deepwater sites. Deepwater’s contribution to domestic oil and natural gas supplies is expected to increase in the years ahead. That contribution must be accompanied 

by ongoing technology solutions to production safety and environmental challenges which will need to be developed and deployed. 

As the Nation’s largest funder of R&D in the physical sciences, 

DOE has long had a role in oil and gas technology development. 

Again, as I noted above, DOE has no regulatory role over the oil 

and gas industry, which is primarily the purview of the Bureau of 

Ocean Energy Management, Regulation, and Enforcement at the 

Department of the Interior, as well as the National Oceanic Atmospheric Administration and the Coast Guard. 

The DOE’s responsibilities regarding deepwater research are outlined in Section 999 of the Energy Policy Act of 2005, which established the Ultra Deepwater and Unconventional Natural Gas and 

Other Petroleum Research Program. Until last year, DOE’s activities under the deepwater portion of Section 999 were focused primarily on exploration and production-related technologies, which 

we believe is more appropriately funded by industry. DOE has 

since refocused the work under Section 999 on safety and environmental protection associated with production. 

Consistent with budget requests since fiscal year 2007, the President’s fiscal year 2012 budget proposes repeal of the Ultra Deepwater and Natural Gas and Other Petroleum Research Fund established as part of the Section 999A program. In the absence of this 

program, this important work can be carried out through investments from the private sector in coordination with the Ocean Energy Safety Advisory Committee. 

In the wake of the Deepwater Horizon accident, industry developed new technologies to contain underwater blowouts. However, 

additional work remains to ensure that deepwater resource development is safe and environmentally sound. The Administration believes that it is appropriate for industry to assume the funding of 

these activities, and DOE stands ready to provide technical expertise and assistance through both the Office of Fossil Energy and 

our participation on the Advisory Committee in order to integrate 

enhanced safety and environmental capabilities into deep water 

production technologies. 

In conclusion, Mr. Chairman, deepwater oil and gas will be crucial to meeting the demand as we continue to transition to a more 
17 

sustainable energy feature. At the same time, last year’s tragic oil 

spill serves as a stark reminder of the risks associated with deepwater drilling. As improved extraction technologies are developed 

and implemented, so, too must be approaches for addressing potential risks, safety issues, and environmental impacts. 

With that, Mr. Chairman, I respectfully request that my written 

statement be included in the official record of these proceedings, 

and I will be happy to answer any questions that you and the other 

Members of the Committee may have. Thank you. 

[The prepared statement of Dr. Der follows:] 

PREPARED STATEMENT BY DR. VICTOR K. DER, ACTING ASSISTANT SECRETARY FOR

FOSSIL ENERGY, U.S. DEPARTMENT OF ENERGY

Chairman Harris, Ranking Member Miller, and Members of the Subcommittee, 

thank you for the opportunity to appear before you today to discuss the Department 

of Energy’s (DOE) perspective on research and development (R&D) to improve oil 

and gas drilling in ever-deeper waters with greater margins of safety, reduced risk 

of spills, and better mitigation approaches should there be a spill. 

As you know, the Office of Fossil Energy (FE) leads DOE’s efforts to ensure that 

we use our hydrocarbon resources—coal, oil, and natural gas—for clean, affordable, 

and reliable energy. A key part of fulfilling this mission is a commitment to cuttingedge R&D across fossil energy technologies. In discharging this responsibility, we 

have conducted significant R&D over the years to advance technology development 

related to oil and natural gas supply and production, unconventional fossil energy, 

and deepwater resources. 

In terms of going forward in the deepwater area, we must do everything possible 

to ensure that we never again face an environmental disaster of the magnitude as 

last year’s Gulf of Mexico oil well spill, which not only tragically claimed 11 lives, 

but also caused extensive economic and ecological damage. 

We at the Department of Energy (DOE) recognize that improving deepwater oil 

and gas technology is a challenge; but one that also provides a major opportunity. 

The Federal Government’s responsibility is to rigorously regulate the oil and gas industry’s deepwater activities, appropriately quantify risks in offshore development, 

and maximize the capability and resources to prevent and mitigate damages of future offshore events should they occur. As this Committee knows, the Department 

of the Interior is the agency with regulatory authority over the oil and gas industry’s offshore drilling activities. 

Today, I will offer some DOE perspectives on the continuing importance of deepwater resources, the challenges that lie ahead, the role of DOE and our Federal and 

industry partners in moving forward, and current R&D activities. 

Moving Toward a Sustainable Future 

The Obama Administration has made a strong commitment to move our Nation 

toward a clean energy future, which includes reducing reliance on oil and other fossil fuels, while developing new sources and technologies related to renewable energy. As we make this transition, however, oil and natural gas will continue to play 

a key role in our economy for many years, particularly in the transportation sector. 

Currently, oil and natural gas provide more than 60 percent of our Nation’s energy 

needs, and over 95 percent of the fuel that Americans use for transportation. 

According to the U.S. Energy Information Administration (EIA), the United States 

uses slightly more than 19 million barrels of liquid fuels every day, about 22 percent 

of the world’s total; this total is projected to increase to nearly 22 million barrels 

by 2035 ( Annual Energy Outlook 2011 Early Release). In 2010, U.S. domestic crude 

production rose by 150,000 barrels per day to 5.51 million barrels per day (MB/D) 

(STEO, March 8, 2011), the highest level since 2003. Looking longer range, EIA 

projects that U.S. domestic crude oil production will continue to increase to 5.7 million barrels by 2035. Production increases are anticipated to come from onshore enhanced oil recovery projects, shale oil plays, and deepwater drilling in the Gulf of 

Mexico. They also project that U.S. dependence on imported liquid fuels to continue 

declining over the projection period. This trend is in keeping with President 

Obama’s comments at a March 11, 2011, news conference that, ‘‘First, we need to 

continue to boost domestic production of oil and gas.’’ However, as the President has 

said, we cannot drill our way out of this problem, which is why the Administration 

has outlined a blueprint that includes measures to reduce our consumption. 
18 

1 Source: Energy Information Administration:http://www.eia.doe.gov/oil—gas/natural—gas/ 

data—publications/crude—oil—natural—gas—reserves/cr.html. 2 Source: Chakhmakhchev & Rushworth, IHS, May 2010 

Globally, EIA projects the world’s use of oil and other liquid fuels to grow from 

86.3 million barrels per day in 2007 to 110.8 million barrels per day in 2035. Global 

natural gas consumption is forecasted to increase from 108 trillion cubic feet per 

year to 156 trillion cubic feet per year over the same period. 

In this environment of increasing demand, the world’s producers are continuously 

endeavoring to identify and produce new sources of oil and natural gas to replace 

the volumes which are being consumed by the world’s economies. While significant 

reserves remain, many of these are in geologic formations that are increasingly difficult to locate and produce, including deepwater locations. 

Increasing Role of Deepwater Production 

In recent years, the oil and gas industry has been discovering and producing in 

increasingly deeperwater. In the Gulf of Mexico there have been 13 major discoveries in deepwater areas over the past five years alone. Offshore oil now accounts 

for about one-third of our domestic field production, and some 80 percent of this 

comes from Gulf of Mexico deepwater locations. 1

Internationally, 60 percent of the largest non-U.S. discoveries have been offshore, 

and 73 percent of offshore discoveries have been in deepwater (400 meters or deeper). Since 2007, over 70 percent by3 volume of major discoveries have occurred in 

deepwater, with the outliers being onshore discoveries in Iran and Iraq. 2

The deepwater contribution to domestic oil and natural gas supplies is expected 

to increase in theyears ahead. A key underlying assumption, however, is that ongoing technology solutions to production safety and environmental challenges will be 

developed and deployed. The industry, both domestically and globally, is exploring 

in deeper water, which means we mustrecognize two key points: 

1) We can no longer rely on inexpensive supplies of oil that can be produced from 

shallow waterregions and; 

2) The technology used to extract these deepwater resources must be much safer 

and more reliable than they have been in the past. This is consistent with the Administration’s determination that, prior to drilling activity, deepwater operating 

practices must be consistent with new heightened safety measures, including development of worst case disaster projections and demonstration of capabilities to respond to an oil spill. 

DOE’s Role and Perspective 

The Department of Energy has long had a role in technology development for the 

oil and natural gas sectors. Over decades, the Department has amassed a depth of 

knowledge and expertise in such areas as fluid flow, imaging, fire science, and 

subsea systems. The focus of DOE’s past R&D efforts was on reducing the cost of 

technologies that increase production—an area of research more appropriately funded by industry. However, a smaller portion of DOE’s research addressed improvements to environmental and safety technologies. 

While the Department has historically conducted fundamental and applied research to develop and improve deepwater environmental and safety technologies, it 

has no regulatory role over the industry. With regard to permitting and regulatory 

issues generally, offshore oil and gas drilling is wholly within the purview of the 

Department of the Interior (DOI), although activities conducted on the Outer Continental Shelf also require permits from other agencies, such as the National Oceanic 

and Atmospheric Administration and the Unites States Coast Guard. 

The Administration has taken steps to improve its capabilities to conduct environmental and safety related research to support our regulatory responsibility. Specifically, the DOI led Ocean Energy Safety Advisory Committee (OESAC), which includes representatives from government, industry, and academia, is tasked with 

identifying, prioritizing and recommending research and development projects in the 

areas of drilling and workplace safety, containment, and oil spill response; recommending an allocation of available resources to these projects as appropriate; and 

providing a venue for representatives from industry, government, non-governmental 

organizations, national laboratories, and the academic community to exchange information and ideas, share best practices, and develop cross-organizational expertise. 

The Energy Policy Act of 2005 (EPACT) established a mandatory program, the 

Ultra-Deepwater and Unconventional Natural Gas and Other Petroleum Research 
19 

Program, funded with $50 million each year of diverted Federal oil and gas lease 

revenues that would otherwise be deposited in the Treasury to offset governmentwide expenses. In the past, the Department used the deepwater portion allocated 

under Section 999A of EPACT 2005 for reservoir characterization, drilling and completion, seafloor facilities, and other exploration and production related technologies. 

As has been requested since Fiscal Year (FY) 2007, the President’s FY 2012 Budget proposes repeal of the Ultra-Deepwater and Unconventional Natural Gas and 

Other Petroleum Research Fund which was established as part of the Section 999A 

program. We also are requesting no discretionary funding for R&D to increase hydrocarbon production in the belief that these activities are more appropriately funded by industry. Absent congressional action to repeal this program, DOE is refocusing the work done under Section 999A of EPACT on safety and environmental 

protection with the funding we continue to receive. While the administration does 

not support Section 999A funding, it considers OESAC to be an important mechanism to guide research to improve the safety and environmental responsibility of offshore oil and gas operations. 

Industry has had success in innovating new technologies to find, develop, and 

commercialize oil and gas in deepwater locations. And, in the wake of the Deepwater Horizon accident and ensuing Gulf of Mexico oil spill, industry developed new 

technologies for the containment of underwater blowouts. Additional work remains 

to be done to ensure that this development is conducted with sufficient protections 

for workers and the environment, and to ensure that the communities that rely on 

our ocean resources continue to thrive. The Administration believes that it is appropriate for industry to integrate enhanced safety and environmental capabilities into 

the advances in production technologies for deepwater areas. 

Summary 

The tragic oil spill in the Gulf of Mexico last year is a stark reminder of the risks 

associated with operating in the deepwater. Even as we continue the transition to 

a more sustainable energy future, deepwater oil and natural gas will be used to 

meet a significant portion of our energy needs in the near future. As technologies 

for improving the production and economic aspects of this extraction process are developed, so too must be approaches for identifying, quantifying, and solving potential risks, safety issues, and environmental impacts. 

Mr. Chairman, and Members of the Committee, thank you again for the invitation 

to testify today. I look forward to answering any questions that you may have. 

Chairman HARRIS. Thank you very much, Dr. Der, and now I recognize our second witness, Dr. David Miller, the Director, Standards, at the American Petroleum Institute. 

Mr. Miller. 

STATEMENT OF MR. DAVID MILLER, DIRECTOR, STANDARDS, 

AMERICAN PETROLEUM INSTITUTE 

Mr. MILLER. Good afternoon, Chairman Harris, Ranking Member 

Miller, and Members of the Subcommittee. Thank you for the opportunity to address offshore drilling safety and response technology. My name is David Miller. I am the Standards Director for 

the American Petroleum Institute or API. 

API has more than 470 member companies that represent all 

sectors of America’s oil and natural gas industry. Our industry supports 9.2 million American jobs, including 170,000 in the Gulf of 

Mexico related to the offshore development business and provides 

most of the energy America needs. 

First, even though it has almost been a year since the tragic accident in the Gulf, it is important that we remember the families 

who lost loved ones, the workers who were injured, and all of our 

neighbors in the Gulf who were affected by it. Their losses were 

profound, and they remind us every single day that the work we 

do to improve safety in our operations is extremely important. 
20 

Our industry’s top priority is to provide energy in a safe, technologically-sound, and environmentally-responsible manner. We, 

therefore, take seriously our responsibility to work in cooperation 

with government to develop practices and equipment that improve 

operational and regulatory processes across the board. 

As further proof of our commitment, API has been the leader for 

nearly nine decades in developing voluntary industry standards 

that promote reliability and safety through proven engineering 

practices. API’s standard program is accredited by the American 

National Standards Institute, ANSI, the authority on U.S. standards and the same organization that accredits programs at several 

national laboratories. API standards are developed through a collaborative effort with industry experts, as well as the best and 

brightest technical experts from government, academia, and other 

stakeholders. 

API’s Standards Program undergoes regular third-party program 

audits. API maintains more than 600 standards that cover all aspects of the industry, including 270 focused on exploration and production. The committees that develop and maintain these standards represent API’s largest program with 4,800 volunteers working on 380 committees and task groups. 

API’s standards are frequently referenced in federal regulations 

because they are recognized to be industry best practices. Overall, 

nearly 100 API standards are referenced in more than 270 citations 

by government agencies, including the U.S. EPA, the Department 

of Transportation, OSHA, and in addition 80 standards referenced 

by BOEMRE, and as part of our commitment to program transparency, last year API made the decision to provide all of our safety and incorporated by reference standards available for free online. 

We are using the incident investigation findings to continue to 

improve the technologies and practices to achieve safe and environmentally-sound operations. As part of this process we are working 

to develop new API standards and revisions of existing API standards when necessary to raise the bar of performance to a higher 

level. 

We have already published a new standard on isolating potential 

flow zones during well construction, which has been incorporated 

by BOEMRE into its offshore regulations. We plan to complete 

work later this year on two new API standards; one on deep water 

well design and one on well construction interface. We are working 

also to update the API standards on blowout preventer design, 

manufacture, and operations. 

In addition, API’s Board of Directors just last month approved 

the formation of a Center for Offshore Safety with the mission to 

promote the highest level of safety for offshore operations through 

an effective program that addresses management practices, communication, and teamwork. This program’s foundation will be API’s 

recommended practice on safety and environmental management 

programs, the API standard most recently cited by BOEMRE. 

Regarding permitting delays, the recently-lifted moratorium and 

subsequent safety regulations led to some confusion and concern in 

the industry. For example, the Interim Final Drilling Safety Rule 

published in October of last year contained text that summarily 
21 

changed all 14,000 ‘‘should’’ statements to ‘‘must’’ requirements in 

the 80 referenced API standards. 

And while DOI did provide a clarification, it wasn’t until just last 

week. In the meantime, industry felt it had no choice but to consider how it could possibly be in compliance with the requirements 

that were often contradictory and potentially unsafe. This uncertainty has added unnecessary delay in developing exploration and 

production plans and applications for permits to drill as industry 

was forced to consider the requirement to request up to 14,000 departures simply to be in compliance with the standards that its and 

the government’s technical experts had developed. 

In fact, API provides extensive comments to DOI as part of its 

White House mandated regulatory review. One of my items of significant importance is compliance with the Outer Continental Shelf 

Land’s Act amendments of 1978, in which Congress declared that 

the Outer Continental Shelf is a vital national resource reserve 

held by the Federal Government for the public, which made available for expeditious and orderly development subject to environmental safeguards in a manner which is consistent with the maintenance of competition and other national needs. 

By statute, the leasee is entitled to a timely and fair consideration of submitted plan and permit requests, and exploration plans 

and applications permits for drill must be acted upon within 30 

days of submittal. DOI should work to meet the statutory requirement. 

Permitting delays in the moratorium have already led to the loss 

of 300,000 barrels a day in oil production since May of 2010, according to EIA short-term energy outlook, and the job loss is no 

less disturbing. Dr. Joseph Mason, of Louisiana State University, 

who recently testified before the House Subcommittee on Energy 

and Power, noted in a follow-up interview that, ‘‘We are already, 

however, pushing above the Administration’s estimate of 20,000 

jobs nationally for the deep water de facto and de jure moratoria.’’ 

We look forward to providing constructive input as this Committee, the Congress, and the Administration consider changes to 

existing policy. Industry is ready to work, return to work, Mr. 

Chairman and Ranking Member, and seeks clarity and certainty in 

the permitting process. 

This concludes my statement. I welcome any questions from you 

and your colleagues. Thank you. 

[The prepared statement of Mr. Miller follows:] 

PREPARED STATEMENT OF MR. DAVID MILLER, STANDARDS DIRECTOR, AMERICAN

PETROLEUM INSTITUTE

Good afternoon, Chairman Harris, Ranking Member Miller and Members of the 

Subcommittee. Thank you for the opportunity to address offshore drilling safety and 

response technology. 

My name is David Miller. I am the standards director for the American Petroleum 

Institute. API has more than 470 member companies that represent all sectors of 

America’s oil and natural gas industry. Our industry supports 9.2 million American 

jobs—including 170,000 in the Gulf of Mexico related to the offshore development 

business—and provides most of the energy America needs. 

First, even though it’s been almost a year since the tragic accident in the Gulf, 

it is important that we remember the families who lost loved ones, the workers who 

were injured, and all of our neighbors in the Gulf who were affected by it. Their 

losses were profound and they remind us every single day that the work we do to 

improve safety in our operations is extremely important. 
22 

Our industry’s top priority is to provide energy in a safe, technologically sound 

and environmentally responsible manner. We therefore take seriously our responsibility to work in cooperation with government to develop practices and equipment 

that improve the operational and regulatory process across the board. 

As further proof of our commitment, API has been the leader for nearly nine decades in developing voluntary industry standards that promote reliability and safety 

through proven engineering practices. API’s Standards Program is accredited by the 

American National Standards Institute (ANSI), the authority on 

U.S. standards, and the same organization that accredits programs at several national laboratories. API’s standards are developed through a collaborative effort with 

industry experts, as well as the best and brightest technical experts from government, academia and other stakeholders. API undergoes regular third-party program 

audits to ensure compliance with ANSI’s Essential Requirements for standards development. 

API maintains more than 600 standards—recommended practices, specifications, 

codes, technical publications, reports and studies—that cover all aspects of the industry, including 270 focused on exploration and production activities. The standards are normally reviewed every five years to ensure they remain current, but 

some are reviewed more frequently, based on need. The committees that develop 

and maintain these standards represent API’s largest program, with 4,800 volunteers working on 380 committees and task groups. API corporate membership is not 

a requirement to serve API’s technical standards committees. 

API’s standards are frequently referenced in federal regulations because they are 

recognized to be industry best practices. BOEMRE, for example, currently references 

80 API standards in its offshore regulations and has recently proposed an additional 

12 API standards be incorporated into their regulations. Overall, nearly 100 API 

standards are referenced in more than 270 citations by government agencies, including the USEPA, the Department of Transportation and OSHA, in addition to 

BOEMRE. And, as part of our commitment to program transparency, last year API 

made the decision to provide all of our safety and incorporated-by-reference standards available for free on-line. One-hundred sixty API standards are now posted on 

API’s website and have been viewed by close to 5,000 individuals since last fall. 

We are using incident investigation findings to continue to improve the technologies and practices to achieve safe and environmentally sound operations. As 

part of this process, we are working to develop new API standards and revisions 

of existing API standards, where necessary. to raise the bar of performance to a 

higher level. We have already published a new standard on isolating potential flow 

zones during well construction, which has been incorporated by BOEMRE into its 

offshore regulations. We plan to complete work later this year on two new API 

standards—one on deepwater well design and one on well construction interface, 

which will provide a systematic way for the offshore operator and the drilling contractor to ensure that their respective safety programs are fully aligned. We are also 

working to update the API standards on blow-out preventer design, manufacture 

and operations. 

In addition, API’s Board of Directors just last month approved the formation of 

the industry Center for Offshore Safety, with the mission to promote the highest 

level of safety for offshore operations through an effective program that addresses 

management practices, communication, and teamwork. This program’s foundation 

will be API’s recommended practice on safety and environmental management programs, the API standard most recently cited by BOEMRE. 

Regarding permitting delays, the recently lifted moratorium and subsequent safety regulations led to some confusion and concern in the industry. For example, the 

interim final drilling safety rule, published in October of last year, contained text 

that summarily changed all 14,000 ‘‘should’’ statements to ‘‘must’’ requirements in 

the 80 referenced API standards. This action vitiated the standards development 

process by ignoring the recommendations of the some 4,800 technical experts who 

labored over the years to develop performance-based standards that allow for a variety of options to ensure the most appropriate engineering choice is made. And while 

DOI did provide a clarification, it wasn’t until just last week. In the meantime, industry felt it had no choice but to consider how it could possibly be in compliance 

with requirements that were often contradictory and potentially unsafe. This uncertainty has added unnecessary delay in developing exploration plans and application 

for permits to drill as industry was forced to consider the requirement to request 

up to 14,000 departures simply to be in compliance with the standards that its and 

the government technical experts had developed. 

In fact, API provided extensive comments to DOI as part of its White House-mandated regulatory review. One item of significant import is compliance with the 

Outer Continental Shelf Lands Act Amendments of 1978, in which Congress de-
23 

clared that ‘‘the outer Continental Shelf is a vital national resource reserve held by 

the Federal Government for the public, which should be made available for expeditious and orderly development, subject to environmental safeguards, in a manner 

which is consistent with the maintenance of competition and other national needs.’’ 

By statute, the lessee is entitled to timely and fair consideration of submitted plan 

and permit requests, and exploration plans and application for permits to drill must 

be acted upon within 30 calendar days of submittal. DOI should work to meet this 

statuary requirement. 

Permitting delays and the moratorium have already led to a loss of 300,000 barrels a day in oil production since May 2010, according to the EIA’s Short Term Energy Outlook, and the jobs loss is no less disturbing. Dr. Joseph Mason of Louisiana 

State University, who recently testified before the House Subcommittee on Energy 

and Power noted in a follow-up interview that: 

‘‘We are already, however, pushing above the administration’s estimate of 20,000 

jobs nationally for the deepwater de facto and de jure moratoria.’’ 

We look forward to providing constructive input as this Committee, the Congress 

and the administration consider changes to existing policy. The industry is ready 

to return to work, Mr. Chairman and Ranking Member, and seeks clarity and certainty in the permitting process. 

This concludes my statement, Mr. Chairman. I welcome questions from you and 

your colleagues. Thank you. 

Chairman HARRIS. Thank you very much, Mr. Miller. 

I would now like to recognize our next witness, Mr. Owen Kratz, 

the President and CEO of Helix Energy Solutions Group. 

STATEMENT OF MR. OWEN KRATZ, PRESIDENT AND CEO, 

HELIX ENERGY SOLUTIONS GROUP 

Mr. KRATZ. Mr. Chairman, Members of the Subcommittee, thank 

you for the invitation to testify today. As the head of a team called 

upon to respond to the Macondo incident, I believe Helix Energy 

Solutions’ experience can be of assistance to the Subcommittee as 

it evaluates response policy going forward. 

Three Helix vessels, the Q4000, the Express, and the Helix Producer I, were instrumental in successfully bringing the Deep Water 

blowout under control. At the Macondo site Helix staff logged a 

total of 135 days aboard the Q4000 alone. The lessons we learned 

will inform our approach to containment efforts well into the future. 

In December, 2010, Helix brought numerous independent operators together to form the Helix Well Containment Group. Our purpose was to develop a comprehensive, rapid, and effective response 

to a deepwater well control incident in the Gulf of Mexico. Currently, 23 leading energy companies belong to the consortium, 

working in close collaboration with DOE and RE we designed a 

comprehensive, 1,000-page well containment plan that meets the 

agency’s requirements in NTL–10. 

The plan addresses multiple scenarios inclusive of specific well 

information and deployment procedures, many of which were refined during the Macondo response effort. Technical experts and 

critical equipment from each of the 23 member companies will be 

made available to any member during an event, providing a fullycompliant level of capability as required by NTL–10. 

The system is specifically designed for expansion and inclusion of 

developing new technologies. The Helix Fast Response System is 

ready to respond today. In fact, five drilling permits have recently 

been granted based on our containment system. 

What does it mean to be prepared for an endeavor as complex 

and time sensitive as an undersea well control incident? The Helix 
24 

Fast Response System’s Interim Containment System includes a 

10,000 pounds per square inch capping stack, a riser system, the 

Q4000 intervention vessel, and all necessary equipment to complete the intervention system. 

This system is capable of completely capping and closing in a 

well that has the necessary mechanical integrity to do so or allowing flow back and flaring of up to 55,000 barrels of oil a day or 

70,000 barrels of liquids per day and 95 million cubic feet of natural gas per day in water depths up to 6,500 feet. This system as 

described there stands ready today. 

The next stage of readiness, which we refer to as the complete 

containment system, is designed to handle more comprehensive responses by including a 15,000 pound per square inch capping stack 

and a riser system capable of operating in 8,000 feet of water. By 

April 11 our system will be capable of completely capping and closing in a well that has the necessary mechanical integrity to do so 

or allow flow back by a combination of producing and flaring. By 

April 15 the 15,000 pound per square inch capping stack will be 

available. 

Finally, as we look into the future, we are evaluating an even 

further expanded system, having capability to 10,000 feet of water 

that will allow capture and flow back of up to 105,000 barrels of 

oil per day and 300 million cubic feet of natural gas per day. Approval of this expansion will take place only if the members of our 

consortium decide a system with this capacity is necessary. If they 

do this, then the vessel or the system could be ready by 2012. 

One of the most innovative parts of the U.S. energy industry 

comes from a robust and healthy offshore independent oil and gas 

sector. The diversity of upstream players has produced countless 

innovations, and they are not always the largest companies. Yet 

one of the most—one of the major impediments faced in convincing 

the producers to dedicate the means to provide a solution in a more 

timely manner is the uncertainty surrounding the government’s 

policy as to what specifically will be accepted as a sufficient containment solution. 

Helix is grateful to the BOEMRE for the relationship that we 

have developed. Government can greatly aid the process by continuing, if not hastening, to resolve uncertainties inherent in early 

drafting of the regulations and to address concerns of the industry 

as to what may be deemed deficient in the process of drilling that 

may arise in the future such as liability caps, lease expirations, 

and spill response. 

Additionally, the government could play a productive role by assisting and minimizing the cost of capital through reinvigorating 

programs designed to advance maritime industrial development. 

The Loan Guarantee Program administered by MARAD, for example, can help. It has a proven track record. In fact, the Q4000 was 

built in Texas using the MARAD financing. 

Thank you for the opportunity to testify today. The industry has 

always developed innovative technologies and processes, even in 

the fact of the toughest challenges. Now, with the experience of 

Macondo behind us, we have learned how to fashion an even more 

appropriate, effective containment system. Thank you. 

[The prepared statement of Mr. Kratz follows:] 
25 

PREPARED STATEMENT OF MR. OWEN KRATZ, PRESIDENT AND CHIEF EXECUTIVE

OFFICER, HELIX ENERGY SOLUTIONSGROUP, INC. 

Chairman Harris, Ranking Member Miller, and Members of the Subcommittee, 

thank you for the invitation to testify before you today on the topic of Offshore Drilling Safety and Response Technologies. The question of the appropriate technological 

response to what this nation learned at the Macondo site in the Gulf of Mexico is 

central to responsible policy. As the head of a team called upon to lead the response 

to that situation, I believe Helix Energy Solutions’ experience can be of assistance 

to the Subcommittee as it evaluates response policy going forward. 

Helix provides life-of-field services and development solutions to offshore energy 

producers worldwide, and is a leader in the provision of containment solutions for 

undersea well control incidents. Since the events that began unfolding at the 

Macondo well nearly one year ago today, there has been a great deal of interest 

among all Americans—and rightfully so—about how our industry can most effectively prepare itself to respond to an undersea blow-out and oil spill as we go about 

the business of harvesting our nation’s critical offshore natural resources. We are 

pleased to have the opportunity to share our considerable experience on the subject 

at hand today. 

The provision of effective oil well containment capability plays an essential role 

in facilitating responsible energy development in the deep waters of the U.S. Gulf. 

Helix stands ready to assist industry in providing the benefit of its expertise and 

resources immediately. Helix has participated in hundreds of deepwater well intervention efforts around the world for more than 15 years. 

Most relevant to today’s discussion, Helix vessels were enlisted to play a key onsite role in the Macondo Incident Control and Spill Containment effort following the 

April 2010 blowout. Three Helix vessels—the Q4000, the Express and the Helix Producer I—were instrumental in successfully bringing the deepwater blowout under 

control. A forth Helix vessel, the Normand Fortress, also played a vital role in the 

effort. 

At the Macondo response site, Helix staff logged 285,000 man-hours aboard the 

Q4000 alone during the blowout response—a total of 135 days altogether. Helix staff 

provided the conduit for thousands of barrels of fluid during the static kill and cementing operation. Up to 80 barrels of kill fluid were pumped every minute through 

four vessels daisy-chained to the Q4000 during the top kill operation. Helix also provided flowback and burning of up to 10,000 barrels of oil and 15 mmcfd for approximately 30 days as well as deploying the original cofferdam. And it was the Q4000 

that eventually lifted the Deepwater Horizon’s BOP from the seafloor onto its deck— 

a BOP weighing 1 million pounds. The lessons we learned during those intense days 

will inform our approach to containment efforts well into the future. 

Building on our unique undersea containment experience, Helix joined together 

with numerous independent operators in December 2010 to form the Helix Well 

Containment Group, an industry cooperative founded under the umbrella of Clean 

Gulf Associates, a not-for-profit oil spill response organization serving oil and gas 

exploration and production companies in the Gulf of Mexico. Currently, 23 leading 

energy companies have joined the consortium, and over 30 subcontractors have 

signed on to be available to the Helix Well Containment Group to provide the core 

services necessary to fully complement a deepwater response. 

The mission of the Helix Well Containment Group (HWCG) was to develop a comprehensive and rapid deepwater containment response system, with a designated 

purpose to manifest an effective response to a deepwater well control incident in the 

Gulf of Mexico. CGA and HWCG members have contracted with Helix Energy Solutions for vessels, equipment and services necessary to contain a deepwater spill. 

Helix is pleased to be of assistance, and we provide emergency containment services 

to the industry without regard to profit. Our goal as an offshore service company 

that employs more than 1,600 people worldwide is putting the Gulf back to work. 

And when the Gulf goes back to work—realizing the full potential of this incredibly 

productive energy basin—companies engaged in well intervention, drilling, field 

servicing and other related tasks all are gainfully employed to the benefit of the 

economy and energy security. 

Working in close collaboration with the Bureau of Ocean Energy Management, 

Regulation and Enforcement—including in-person meetings with Director Bromwich 

and Secretary of the Interior Salazar—the HWCG technical Committee designed a 

well-containment plan that meets the agency’s requirement in its notice to lessees, 

NTL 2010–N10. We developed decision trees, procedures and schedules, and identified services and equipment necessary for an effective response based upon lessons 

learned from the Macondo incident. Our well containment plan evolved into a com-
26 

prehensive document addressing multiple scenarios inclusive of specific well information and deployment procedures. 

What emerged from this work is a Well Containment Plan that encompasses over 

1100 pages of comprehensive procedures, processes, and technical detail of equipment to be employed during a subsea containment response. Many of these processes and procedures were refined by Helix during the Deepwater Horizon response. 

The Helix Fast Response System, the key component of the HWCG, is ready to 

respond to a subsea deepwater containment incident today, as shown by the four 

drilling permits recently granted based on our containment system. The Fast Response System is underpinned by a Mutual Aid Agreement that outlines how technical experts and critical equipment from each of the 23 member companies will be 

made available to any member during an event—providing a level of capability not 

required by NTL 2010–N10, but which the member companies feel adds an additional layer of capability to protect the safety of our workers, the environment and 

commerce of the Gulf of Mexico, our integrity, and our companies’ investments. The 

system is designed for expansion and inclusion of developing new technologies. 

We are pleased to report to the Committee that the HWCG today stands ready 

to respond to the most complex scenario referenced in the well containment plan— 

including an incident with the complexities of Macondo. The technology deployed in 

this effort is innovative, to be sure, but the real secret is the men and women of 

companies like Helix who are fully trained on how to use equipment in a broad 

range of circumstances and at a moment’s notice. 

What precisely does it mean to be prepared for an endeavor as complex and timesensitive as an undersea well control incident? The Helix Fast Response System’s 

Interim Containment System includes a 10 thousand pounds per square inch (psig) 

capping stack, a riser system capable of operating in 6500 feet of water, the Q4000 

intervention vessel (used during the Deepwater Horizon response) and all necessary 

equipment to complete the intervention system. This system is capable of completely 

capping and closing in a well that has the necessary mechanical integrity to do so, 

or allowing flow back and flaring of up to 55,000 barrels of oil or 70,000 barrels of 

liquids per day and 95 million cubic feet of natural gas per day at water depth up 

to 6500 feet of water. This system stands ready now. 

The next stage of readiness, which we refer to as the Complete Containment System, is designed to handle more comprehensive responses by including a 15 thousand pounds per square inch capping stack and a riser system capable of operating 

in 8000 feet of water. By April the 11th, our system will be capable of completely 

capping and closing in a well that has the necessary mechanical integrity to do so, 

or allowing flow back by a combination of producing and flaring of up to 55,000 barrels of oil per day and 95 million cubic feet of natural gas per day in 8000 feet of 

water. By April 15th, the 15 thousand pounds per square inch capping stack will 

be available. 

For the sake of context, the initial reservoir pressure at the Macondo well face 

at the time of the blowout was 11,850 psig, according to the U.S. Coast Guard. The 

well sat in 4,992 feet of water and, according to final government estimates, may 

have disgorged up to 60,000 barrels of oil per day. It is important to note that a 

discharge rate of 60,000 barrels of oil per day does not equate to the flowback requirements. Flowback capacity required is meaningfully less than the discharge rate 

due to hydrostatic head and flow restrictions through the system. Actual flowback 

capacity requirements must be calculated for each well, but our system would have 

completely contained the Macondo well. 

Finally, as we look into the future, the HWCG is evaluating an even further expanded system having capability to 10,000 feet of water that will allow capture and 

flow back of up to 105,000 barrels of oil per day and 300 million cubic feet of natural 

gas per day. Approval of this expansion will take place only if the Members decide 

a system with this capacity is necessary. If approved by the Members, this expansion could be made available by 2012. 

You have asked for input on what role the Federal Government can play going 

forward to assist with further innovation. Frankly, one of the most innovative parts 

of the energy industry in the United States comes from a robust and healthy offshore independent oil and gas sector. Consistently, a diversity of players in upstream oil and gas have produced innovation after innovation (not always the largest companies), tackling technological challenges safely and effectively. When the 

government fails to respond appropriately to permitting concerns or creates significant doubt which undermines business confidence, it saps potential investment capital necessary to innovate. The smaller companies are more vulnerable to production 

delays and may leave the market. Ironically, if production in the Gulf should fall, 

the government is also denying itself access to revenue, making its own oversight 

job all the more difficult. So the bottom line is that in a world of limited resources, 
27 

one of the most critical things for the government to do is ‘‘to do no harm.’’ And 

that means putting the Gulf back to work as soon as possible. I understand the 

charge of responsibility the government has, but quite frankly, one of the major impediments faced in convincing the producers to dedicate and allocate the means to 

provide a solution in a more timely manner is the uncertainty surrounding the government’s policy as to what specifically will be accepted as a sufficient solution. 

Of course, the federal government has its own research and development resources. In the Macondo situation, the private sector worked hand in glove with the 

talented men and women of the U.S. Coast Guard, including its capable Research 

and Development division. Further, the research centers of the U.S. Navy were 

called upon to assess technology, particularly for surface containment applications. 

NOAA also has tremendous value to bring to bear. We certainly encourage those 

government agencies to work closely with industry organizations like the HWCG 

and the Marine Well Containment Corporation established by some of the major integrated oil corporations. Coordination and sharing ideas is very important to making advances. 

The technology we deploy is robust, but it is not inexpensive. Another policy the 

government can undertake is to assist us in minimizing the cost of capital by reinvigorating programs specifically designed to advance maritime industrial development. One familiar program of this type is the loan guarantee program administered by the U.S. Maritime Administration, or MARAD. MARAD can help responsibly and within fiscal constraints, and has established a proven track record for 

bringing innovative vessel designs to market. As we have seen, the most innovative 

vessel designs will be the most useful going forward. The Q4000, built in Texas with 

MARAD financing, provides an excellent example. As I described earlier in my testimony, the Q4000 was instrumental in bringing the blowout under control—and 

MARAD support helped make the Q4000 possible. 

Mr. Chairman and Members of the Subcommittee, thank you for the opportunity 

to testify. There is no doubt that the unique circumstances faced in the Gulf last 

year were one of the most difficult crises faced by our industry. But the industry 

has always developed innovative technologies and processes even in the face of the 

toughest challenges. Now, with the experience of Macondo behind us, we have 

learned how to fashion an even more appropriate and effective containment system. 

It is time to get back to work. 

Thank you. 

Chairman HARRIS. Thank you, Mr. Kratz. 

I now recognize our final witness, Dr. Molly Macauley, Research 

Director and Senior Fellow, Resources for the Future. Dr. 

Macauley. 

STATEMENT OF DR. MOLLY MACAULEY, RESEARCH DIRECTOR 

AND SENIOR FELLOW, RESOURCES FOR THE FUTURE 

Dr. MACAULEY. Good afternoon, Chairman Harris and Ranking 

Member Miller, Subcommittee Members, and panelists. I am an 

Economist and Research Director at Resources for the Future, 

which is an economics research organization established by the 

President of the United States in 1952, and my comments today 

draw from work that I carried out together with colleagues at Resources for the Future, and we undertook this work for the National Commission on the BP Deep Water Horizon oil spill and offshore drilling. But my comments today are my own. They do not 

represent the views of the Commission nor of Resources for the Future. 

As an economist I know that jobs matter not only in the Gulf but 

to this Nation. I appreciate the role of energy. It is our Nation’s 

lifeblood. I am aware of the concern expressed by businesses of all 

stripes, government and the public, about the need to balance the 

benefits of energy with the risks in producing energy of all types, 

both fossil and renewable. 

The public cares. We mourn when we lose coal miners, oil 

riggers, nuclear plant operators, and when the environment is 
28 

harmed. I think people want government and industry to balance 

that risk, and in fact, the Nation mourned the loss of those on the 

rig. And then in addition perhaps the most disturbing result of the 

Deepwater Horizon spill a year ago was not that the spill could 

happen. Spills, small spills happen all the time, but that the spill 

could not be promptly contained, and containment is precisely what 

I have been asked to speak about today. 

So I will make two points. The first about containment in the 

near term over the next horizon for spills similar to last years 

roughly in about 5,000 or so feet of water, and this speaks to the 

technology that my panel colleague has just described. 

And then the other point I will make is something near and dear 

I think to this Subcommittee’s reason for being, which is research 

and development for containment in the future, and this is particularly in the case of ultra-deep water. You know, these depths are 

greater than 5,000 feet, and it is a very extreme environment in 

which to operate pressure, temperature, geology. It is very similar 

in its extremities to what we do with our Nation’s space program. 

It is an extreme environment. It is very unique in that regard, and 

the genus of industry is that it is drilling there. It is drilling successfully in ultra-deep water, much like we are very successful in 

the extreme environments of space. 

According to the Energy Information Administration production 

in ultra-deep water is really where the action is. Production at 

these depths has risen sharply. In fact, according to the EIA production there has reversed the decline in overall Gulf of Mexico 

production that began in 2003. 

So containment in the near term. As we have heard from Helix, 

industry has stepped up and committed over $1 billion to supply 

containment services for some types of spills in the Gulf of Mexico. 

Helix played a major role in helping to contain the Deep Water 

spill, and the newly formed Marine Well Containment Corporation, 

MWCC, is also part of this industry effort. 

I understand there are some types of spills for which these services are not optimized at the present time, but the adequacy of containment readiness is being jointly determined, not only what industry is willing to supply but what government is demanding. It 

is a joint effort here. 

I think where I lose sleep is on my second point. It is not so 

much containment today because there are very strong incentives 

for government and industry to make sure containment works. 

Imagine the public reaction to another large spill anytime soon. 

But where I lose sleep is about the next battle. Again, these 

ultra-deep water depths exceed those where MWCC and Helix are 

prepared to service at the present time, although as Helix mentioned, if your members agree, you may be prepared to go up to 

10,000 feet, and that is exactly my point. 

In the event of a spill at these deeper depths, will we have to 

innovate on the fly again? What new science and engineering and 

state-of-the-art risk assessment do we need now? Who has this 

game plan? In short, are we innovating such that the capacity to 

contain keeps pace with the capacity to drill in increasingly extreme environments? 
29 

1 National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, Deep 

Water: The Gulf Oil Disaster and the Future of Offshore Drilling: Report to the President (Washington, DC: U.S. Government Printing Office), January 2011. 

Now, the National Commission acknowledged these questions. It 

did not consider them at length, and if unanswered, these questions point to a potentially large gap in our public policy. And there 

is a reason to ask these questions. As a Nation our industry and 

our government tends to under-invest in R&D for a lot of reasons. 

It takes money to do R&D. Sometimes the results aren’t fully appropriable. The reward is shared widely, and it doesn’t return to 

the innovator, and the problem with innovation in containment is 

particularly difficult because government limits liability for a spill, 

and regulation is sometimes not as effective as we would like it to 

be for these blunt incentives to contain and incentives to innovate. 

And if we discover new ways to contain, we want that technology 

widely deployed yet proprietary innovation is not always widely deployed. I note that the commission staff paper points out that a few 

years after the Valdez oil spill efforts to innovate in spill response 

had dwindled to almost nothing. 

So I have three suggestions for what the Committee or other policymakers might do. First, have some discussions, not only with 

Helix but with MWCC and others supplying containment services, 

ask them what their plans are for innovation. 

Second, already a panelist has referenced the new permanent 

federal advisory group on safety containment and response. Federal 

advisory groups can do a good job, but who is going to listen, who 

is going to act upon their suggestions? 

And third, and this is more substantial, disadvantages and advantages worth talking about, but we might consider changing the 

liability regime to risk-based drilling fees much like risk-based insurance premiums, risk-based liability caps for each well, or phasing in requirements for insurance to cover damages to third parties. 

So I think a prudent approach and the best we can do is make 

sure we align incentives to think about the R&D for the next battle. It still may have to occur but at least we will have done the 

in advance, long-lead kinds of research and development that will 

be necessary then. 

Thanks very much for asking me to join the panel today. 

[The prepared statement of Dr. Macauley follows:] 

PREPARED STATEMENT OF DR. MOLLY K. MACAULEY, SENIOR FELLOW AND RESEARCH

DIRECTOR, RESOURCES FOR THE FUTURE, WASHINGTON, DC 

The President’s Oil Spill Commission has identified a series of failures leading to 

last year’s Deepwater Horizon (DH) spill in the Gulf of Mexico. 1 The spill’s damage 

came not just from the blowout and tragic fire, however, but was matched by the 

subsequent inability to contain the spill once it began. These efforts, from junk shots 

to top kills, took nearly three months before finally stopping the flow of oil. 

In my testimony today, I have been asked by the Subcommittee to offer my views 

on the problem of containment, including incentives to advance the state-of-the-art 

in containment to keep pace with advances in deepwater and ultradeepwater drilling. I draw from research carried out with several colleagues and undertaken for 

the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drill-
30 

2 My work is coauthored with several colleagues. See Robert Anderson, Mark A. Cohen, Molly 

K. Macauley, Nathan Richardson, and Adam Stern, ‘‘Organizational Design for Spill Containment in Deepwater Drilling Operations in the Gulf of Mexico,’’ Resources for the Future Discussion Paper DP 10–63, January 2011, at www.rff.org/deepwaterdrilling; and Mark A. Cohen, 

Molly K. Macauley, and Nathan Richardson, ‘‘Containing Future Major Oil Spills,’’ Resources, 

Winter/Spring 2011, No. 177, pgs. 44–47, at http://www.rff.org/Publications/Resources/Pages/TheNext-Battle-Containing-Future-Major-Oil-Spills-177.aspx. 3 National Commission, p. 52. 4 U.S. Department of Interior, Deepwater Gulf of Mexico 2009: Interim Report of 2008 Highlights, OCS Report 2009–016, May 2009. 5See Lucija Muelenbachs, Mark A. Cohen, and Todd Gerarden, ‘‘Preliminary Assessment of 

Offshore Platforms in the Gulf of Mexico,’’ Resources for the Future Discussion Paper 10–66 

(Washington, DC: Resources for the Future), January 2011. We note that company-reported incidents do not necessarily mean the release of hydrocarbons, and in deepwater, where more than 

14,000 wells have been drilled, there had been only minor spills until the DH accident (Anderson and coauthors 2011). 

ing (Oil Spill Commission). 2This research is available at the Commission’s website 

and on the website of my organization, Resources for the Future, at www.rff.org/ 

deepwaterdrilling. 

I offer my views as an economist who has studied the use of new technology for 

environmental management and the economics of technological innovation and the 

environment. I have also had the opportunity to testify before the Committee on 

space technology, for which the problem of innovation and risk are also relevant and 

offer some parallels. I am a senior fellow and research director at Resources for the 

Future (RFF), an organization established at the request of a presidential commission in 1952. RFF is a nonprofit and nonpartisan think tank that conducts independent research, primarily using economics, on environmental, energy, and other 

natural resource issues. The work that my colleagues and I carried out for the Oil 

Spill Commission was conducted independently of the Commission to inform its deliberations. I emphasize that the views I present today are mine alone. Neither the 

work from which I draw nor my comments today represent the views of the Commission or RFF. RFF takes no institutional position on legislative, regulatory, judicial, or other public policy matters. 

I summarize my main points as follows: 

• Adequate investment in containment R&D is essential for limiting damages 

from future offshore accidents like the Deepwater Horizon spill. 

• Industry and government both recognize this need and are taking commendable 

steps to address it. 

• Over the long term, however, there is reason to be concerned that existing incentives faced by industry are inadequate to ensure a robust and sustained investment in containment R&D. 

• There is a strong argument for a government role in supporting containment 

R&D, much like the role that government has had in supporting R&D in other 

industries. This need not be a financial drain on an already fiscally stressed 

government or an onerous burden on industry. 

The Challenge of Drilling and Containment in Deepwater 

The DH spill occurred at an underwater depth of about 5000 feet-a depth at the 

breakpoint between ‘‘deep’’ and ‘‘ultradeep’’ water. The spill revealed the complexities of drilling in deepwater and at the large depths of the well itself to reach hydrocarbon reservoirs beneath the ocean floor (the DH was drilling some 13,000 feet 

under the ocean floor). At these depths, particularly in the Gulf of Mexico, pressure 

is high, temperatures are extreme, and the geology is complex. Although industry 

has been drilling in deepwater for some 25 years, each well is said to have its own 

‘‘personality’’ reflecting a complicated mix of unique conditions. 3 Prior to the accident, the Minerals Management Service of the Department of Interior had tracked 

the industry’s efforts to develop exploration and drilling operations in the Department’s periodic reports on deepwater operations in the Gulf of Mexico.4 An independent analysis carried out by my colleagues since the spill has found a statistical 

relationship between deepwater drilling depth and the probability of company-reported incidents, suggesting that drilling at increased depths seems to result in 

greater technical challenges and therefore, may require novel approaches to industry operation and government regulation. 5

The spill further revealed the challenge of containment. Containment is defined 

to include the deployment of technology, people, and other resources to stop addi-
31 

6See http://www.doi.gov/news/pressreleases/Salazar-Proposes-Ocean-Energy-Safety-Institute.cfm (accessed April 1 2011) and http://www.doi.gov/news/pressreleases/Salazar-Names-Members-of-Ocean-Energy-Safety-Advisory-Committee-to-Guide-Oil-and-Gas-Regulatory-Program-Reform.cfm# (accessed April 1 2011). 7 Mark A. Cohen, Madeline Gottlieb, Josh Linn, and Nathan Richardson, ‘‘Deepwater Drilling: 

Law, Policy, and Economics of Firm Organization and Safety,’’ Resources for the Future Discussion Paper 10–65, January 2011. 

tional hydrocarbon release and get a well back under control when a release occurs. 

(Containment differs from prevention and response; preventive actions-such as a 

well-functioning blowout preventer-keep releases from occurring at all, and response 

actions deal with hydrocarbons that have escaped containment, such as use of 

booms, burning, skimming, and dispersants.) The series of failures before the well 

was finally capped and the spill contained revealed an inability to deal effectively 

with containment of a well in deepwater. Adequate containment capability had not 

appeared to keep pace with the impressive technological accomplishments that have 

enabled drilling in ever-deeper water. 

For many, the most disturbing result was not that a spill could happen, but that 

it could not be promptly contained. While the spill-with the benefit of hindsight-has 

many lessons, one of the sharpest is the need for improvement in ability to contain 

spills that may occur in increasingly deepwater drilling operations. It is worth considering for a moment the losses to people that would have been avoided if effective 

containment technology had been in place prior to the spill. 

Recognition of this need has led to quick reactions. A few months after the spill 

was capped, a group of major drilling firms announced plans to invest an initial $1 

billion in creating the Marine Well Containment Company (MWCC), a consortium 

to design, build, and operate a system capable of containing future deepwater spills 

in the Gulf of Mexico. Another company, Helix Energy Solutions, played a major 

role in the DH containment efforts and is now providing new deepwater containment services for some kinds of spills. 

Regulators took notice as well, updating permit requirements to include demonstration of ability to contain spills. Companies that have been issued permits 

since the spill have met the new requirements by incorporating the new containment services of Helix or MWCC. The Secretary of Interior has proposed a new public-private safety institute. The Secretary and the Director of the Bureau of Ocean 

Energy Management, Regulation and Enforcement (BOEMRE) have established the 

Ocean Energy Safety Advisory Committee, a permanent advisory group of leading 

scientific, engineering, and technical experts on offshore drilling safety, well containment, and spill response. 6

Are these steps likely to be enough to ensure future readiness and effectiveness 

in containing the next deepwater spill? Research undertaken with my colleagues indicates that while developments so far are positive, much more needs to be done, 

both in terms of government policy and industry commitments. 

Incentives to Invest in Containment and in Containment Research and Development 

It is well recognized that limited liability and sometimes-ineffective regulatory 

oversight can lead people naturally to underinvest in safety, environmental protection, and other activities that protect parties other than themselves. To be sure, no 

one wants to hurt companies, shareholders, and customers by causing harm to 

workers, incurring business disruption, losing expensive equipment, or losing revenue. The question here, and for government, is something more: whether firms 

have adequate incentives to minimize additional harm to third parties (people, other 

businesses, ecosystems, public health). Liability caps and ineffective regulatory oversight limit incentives to protect these third parties. Striking the right balance in 

public policy to protect third parties is essential but not easy. 

Government intervention such as this results in a situation where government coproduces risk together with industry. In other words, by limiting liability, government (and taxpayers) assume part of the financial risk not covered by the firm and 

its shareholders. Similarly, by regulating safety and other operating conditions, government assigns some risk to workers and other parties, and some to industry. 

Measures to enhance incentives, such as raising or eliminating liability caps, will 

push firms to make greater containment investments and reduce the burden borne 

by taxpayers. My colleagues and others have suggested alternatives to eliminating 

the liability caps altogether, recognizing the disproportionate burden this could impose on smaller firms and a possible chilling effect on insurers. 7 For example, alternatives include a separate, risk-based liability cap for each well determined by the 
32 

8 Much like the accident of the space shuttle Columbia, occurring 21 years after the first 

operational shuttle flight, or the failure of the long-operating nuclear power plant in Japan, the 

DH spill shows the consequences of a sequence of individual failures in large-scale technology 

systems even when none of the individual failures alone is by itself catastrophic.Cooke and coauthors recommend use of an approach, known as accident sequence precursor analysis, for assessing risks in deepwater drilling; this approach models situations when failure can happen 

as a result of a sequence of individual failures see Roger Cooke, Heather Ross, and Adam Stern, 

‘‘Precursor Analysis for Offshore Oil and Gas Drilling,’’ Resources for the Future Discussion 

Paper 10–61, January 2011, at htpp://www.rff.org). 

estimated worst-case discharge for each well; requiring firms to demonstrate financial responsibility up to the level of the cap; phasing in requirements for third-party 

insurance to fully cover financial responsibility; and introducing risk-based drilling 

fees (much like risk-based insurance premiums). 

To be sure, part of the reason for past underpreparedness to contain large spills 

like the Deepwater Horizon was a widespread belief that such spills were either extremely unlikely or impossible. Yet that belief failed to take into account that deepwater drilling is more complex and riskier, and that risk assessments did not adequately account for these complications. 8 Policy changes to take account of these 

complexities and to increase financial liability will strengthen incentives to invest 

in containment. 

Incentives for research and development in containment are another concern, one 

that is separate but related to the problem of incentives to invest in containment 

alone. Even if changes in liability led firms to perfectly internalize damages in the 

event of a spill, industry may underinvest in containment R&D. Yet innovation in 

containment is necessary to keep up with innovation in deepwater and 

ultradeepwater drilling. 

Underinvestment in R&D is one of the most-studied but, as yet, incompletely answered questions in technology policy. Incentives to innovate depend on several conditions being met: obviously, first the ability of firms to fund R&D, then the ability 

to appropriate the returns to invention, and at the same time, protect intellectual 

property embodied in the invention. These conditions can sometimes be hard to 

meet, hence the tendency of firms to underinvest in R&D. Moreover, another problem arises in the special case of innovation that, if widely deployed, would serve the 

public, not just the individual firm carrying out the innovation. Containment to protect third parties has this potential problem. Incentives are weakened when damages to third parties are not fully borne by the firms (circumstances related to the 

liability and regulatory problem discussed above). The proprietary nature of innovation, the need to deploy it widely to serve broader public interests, and the limits 

on damages internalized by firms all tend to reduce incentives to invest in containment R&D. This result calls into question whether we will be able in the future, 

without making the up-front investment in R&D now, to deploy state-of-the-art containment technology in increasingly deeper water in the coming years. 

On this point, the extent of innovation likely to be taken by industry as a whole, 

or by MWCC and Helix, is not clear. The services offered by MWCC and Helix are 

impressive. They appear to focus, however, on preparing for a repeat of the Deepwater Horizon spill. MWCC’s proposed system would not, for example, be able to 

contain a spill like the 1979 Ixtoc I event, in which the sinking rig came to rest on 

the wellhead. It also does not appear to address un- or underappreciated failure scenarios such as multiple simultaneous blowouts at different wells or a leaking well 

casing. It is also unclear the extent to which MWCC, Helix, or other containment 

suppliers will undertake R&D today, in order to provide containment tomorrow at 

future, deeper water depths. 

Based on the experience that BP has documented for responding to the DH spill, 

it is worth noting that, going forward, innovation in containment requires not only 

innovation in engineering and new hardware. Innovation in all of the processes, logistics, and people that serve to deploy the hardware and make decisions in realtime and under the duress of an emergency is also necessary. These systems, processes, procedures, and organization of people who will be called upon to deploy and 

manage containment activities are a necessary part of containment readiness. To illustrate this point, Box 1 shows the wide range of innovations, in addition to equipment, listed by BP as required in responding to the DH spill. 
33 
34 

9SeeResponse/Clean-Up Technology Research & Development and the BP Deepwater Horizon 

Oil Spill, Staff Working Paper No. 7, National Commission on the BP Deepwater Horizon Oil 

Spill and Offshore Drilling, 11 January 2011, p. 3, at http://www.oilspillcommission.gov/sites/default/files/documents/Updated%20Response%20RD%20Working%20Pa per.pdf (accessed April 3, 

2011). 10This partnership is the Research Partnership to Secure Energy for America (RPSEA), a consortium of industry and academic experts. At present, the emphasis in RPSEA’s mission statement, its annual draft plan for 2011, and current list of funded activities appears to be on new 

technology and engineering but not containment per se or related organizational and process 

design and risk assessment. Perhaps the mission and activities could be realigned to include 

a focus on containment R&D. 

Because incentives can be weak for investing in R&D to prepare for future containment, it may be that industry containment suppliers, while ready for spills similar to DH, may have less capacity to advance the state-of-the-art in containment to 

keep pace with ongoing innovation in drilling in the extreme operating environment 

of increasingly deep water. It also may be that R&D in containment is not part of 

the mission of these containment suppliers. If this is the case, then ascertaining 

who will be responsible for leading the next generation of containment research, 

prototyping, and testing is a fundamental question with keen policy importance. 

This doesn’t mean that ongoing containment plans and systems won’t have value, 

but it will likely mean that in the event of a new catastrophic spill, these plans will 

have to be adapted and updated on the fly-much as was necessary for the recent 

spill. 

Recommendations 

My colleagues and I suggest moving beyond this rearward focus and devoting resources toward a more comprehensive examination of future scenarios, particularly 

since future drilling efforts are expected to reach ever-increasing water depths. This 

recommendation is wholly aligned with experience in other technologies under this 

Committee’s purview, including space transportation, for instance. Much like the 

post-shuttle accidents, expert analysis and risk assessment, both by industry and 

by third parties, are needed. War gaming to test procedures and failure scenarios 

would inform this analysis and improve preparedness. Creation of a center of excellence specifically to carry out state-of-the-art research in deepwater and 

ultradeepwater containment, again with third-party involvement, would be a welcome development. 

The recent history of spill response (clean-up) technology gives some reason for 

concern that industry efforts to prepare for the next spill may still fall short over 

the longer run. Regulatory requirements and industry resources for response were 

increased following the Exxon Valdez spill in 1989. The Marine Spill Response Corporation (MSRC) was created as an industry collaboration with many similarities 

to MWCC. But the Oil Spill Commission report found that despite claims by industry, the evidence suggests that little investment has gone into response and containment technologies. One of the staff papers published by the Commission finds that 

‘‘despite industry claims that the oil industry committed significant funds to cleanup technology R&D in the years immediately following the Exxon Valdez spill this 

commitment quickly waned. Industry funding for response R&D fell off after the 

mid-1990s. Today, oil companies invest ‘little to no’ money in oil spill response technology.’’ 9 Private companies entered the business, but did not significantly expand 

response capability. The same series of events could occur in containment if the current focus is not translated into an ongoing commitment to innovation. 

Part of this commitment must come from industry. Even if permit requirements 

ensure that the containment plans submitted to regulators are grounded in sound 

technology and practices, and capable of replicating the containment needs displayed during the DH spill, we lack assurance of continued investment in R&D to 

go beyond current capabilities-especially as we continue to drill into deeper waters. 

For example, a governance structure for MWCC that includes either public-interest 

board members or an external third-party expert panel and transparent disclosures 

of expenditures might provide some assurance that R&D is adequately funded and 

containment technology keeps up with the latest drilling depths. Some direct or indirect government oversight and support of containment R&D may be warrantedfor example, to encourage frontier academic research and its application-given the 

difficulty for any individual company to fully appropriate the returns to innovation. 

One route may be to link directly the recommendations of the new safety advisory 

Committee with an existing energy research partnership that was established by 

the Energy Policy Act of 2005. 10
35 

Conclusions 

Deepwater Horizon revealed a failure of spill containment. That failure was partly 

technological, but it was ultimately human. The MWCC, the Helix services, and updated permit requirements show recognition of this and are undoubtedly positive 

steps. But the opportunity created by momentary attention to containment should 

not be lost. Other measures are needed as well, including attention to incentives 

that are blunted by liability limits, consideration of a wide range of failure scenarios, use of third-party review, and commitment to ongoing innovation in spill 

containment to match the pace of innovation in drilling. 

Chairman HARRIS. Thank you very much, Dr. Macauley, and 

thanks to all the panel Members for their testimony. 

Reminding Members of the Committee rules. Limit questioning 

for five minutes, and the Chair at this point will open the round 

of questions, and I will recognize myself for the first five minutes. 

Dr. Der, thank you very, very much for coming and testifying before the Committee. My understanding from your testimony is that 

once again the President’s budget reposes repeal of the ultra-deep 

water and unconventional natural gas and other petroleum research fund, and I have got to ask that given the fact that we are 

recently—it is coming to our attention that our oil reserves, our recoverable reserves both for oil and especially now for natural gas, 

are coming to be realized that we have these reserves, why don’t 

you think there is a role for the government in trying to figure out 

how to get to them safely, not just safety but how to, you know, 

partnering with industry or, in fact, doing some of the research. 

You know, my understanding that, for instance, the research to 

get to our shale natural gas, you know, is one fellow who thought, 

yes, this could be done when everybody else said, no, it couldn’t be 

done, but—it took him years and years to figure it out with apparently little help from the government, even though we sit on these 

resources. 

So, Doctor, why is it not appropriate for the government to actually help as part of this program to do some of that innovative research that could get to more of our oil and natural gas given the 

rising price of energy, the rising cost of gas? 

Dr. DER. Thank you for the question here. I want to let you know 

that this innovative person who developed and commercialized the 

technology for hydrofracking, and horizontal drilling was, in fact, 

a result of the early research that the Department of Energy has 

engaged in. We had spent I think on the order of something like 

$137 million between the 1980s and 1990s to release trillions and 

trillions of potential in terms of natural gas in this country. 

So the role of the government early on is there, but oil and gas 

production is a fairly mature technology, and the industry and the 

Administration’s opinion is that industry is well capable of investing in these types of technologies to unlock and unleash these potential domestic resources that we have in our country. 

Continuing forward I think that we do have a role in helping advise and assist where necessary in terms of safe and responsible 

drilling in areas such as the ultra-deep regime. But, again, the Administration’s position is that the oil companies and gas companies 

and the majors are very well equipped to make these types of investments on their own with the guidance from groups such as this 

advisory Committee I spoke of in my opening statement. 
36 

Chairman HARRIS. Yes. Thank you. I guess the only follow up I would say is if you think that those $137 million which we invested 

in the past had something to do with leading to the development 

of the new technology to unlock some of the natural gas, it almost 

makes an argument for continuing for the government to do things 

like that because that has yielded some result. 

Mr. Miller, let me ask you a question because, you know, it appears that we are going to be buying oil that is found in deep waters off Brazil, that there is a national decision that has been made 

to invest billions of dollars through the Export-Import bank to do 

deep water drilling off Brazil. 

So I have got to ask you, what are the standards that they are 

going to have? I mean, because, you know, the API is developing 

all these standards. First of all, is there an international equivalent of the API? Are they ahead of us or behind us on these standards? I mean, you know, it begs the question how do we make certain that when we are supporting this drilling elsewhere in the 

world, how do we know that it is going to be up to the standards 

that we hope to have here in the United States? 

Mr. MILLER. Thank you for the question. There are really a couple of ways to answer that, Chairman. The first way is that API 

as was mentioned when you gave my bio, is very involved in international standards development, and I am the chairman of the 

ANSI International Policy Committee, and one of the things we 

look at is how industries work with the International Organization 

for Standardization or ISO, which is based in Geneva and develops 

standards that are worldwide recognized. 

And in our support of that particular set of Committees that develop international oil and natural gas standards, approximately 70 

percent of the standards that they have developed under that one 

Committee are base API standards. So number one, we have 

worked with our international counterparts to make sure that 

these best practices are moved around the world and used around 

the world. 

The second point I would make is that in a study that was done 

last year by the UK-based Oil and Gas Producers’ Association, 

looking at 14 different producing regions around the world, they 

found that API standards were the most widely referenced by the 

regulators, with over 225 citations in addition to the citations here 

in the United States. So the regulatory regime is there for both the 

standards to have been transferred and used through the ISO process or the International Organization for Standards Processing in 

addition to the regulators using the API standards for their regulations as well. 

Chairman HARRIS. So in Brazil if they are going to drill using 

those standards, then your feeling would be that since those standards roughly are going to be equivalent to the standards we have 

here, then perhaps we should be doing it here as well. I take it that 

you think they are roughly equivalent. 

Mr. MILLER. Absolutely. I would think that with the strong 

records we have here we should be expanding our drilling operations here in the states. 

Chairman HARRIS. Thank you very much. 

I now recognize Mr. Miller. 
37 

Mr. MILLER OF NORTH CAROLINA. Thank you, Mr. Chairman. 

Just as a layman, when I hear that there is a device called a blowout preventer on a well and the well has a blowout, my conclusion 

is that the blowout preventer probably didn’t work. 

Mr. Miller, is there a flaw in that reasoning? 

Mr. MILLER. To answer your question, I know that there has 

been a study that has just been released that has come out that 

is looking at some of the potential problems that occurred in the 

Deep Water Horizon. We have got a group of technical experts that 

are looking at the standards that cover blowout preventer design 

and operation, and in addition to other items that we were already 

looking at, we are looking at that case where you did have that uncontrolled kick, if you will, that according to the study, and we 

haven’t fully had a chance to digest it yet because it is over 500 

pages, where they theorized that the kick, the uncontrolled release 

pushed the pipe into a place where the sheer rams did not fully 

close. 

So we are looking at those design requirements to make sure 

that as we update the standard we consider those results. 

Mr. MILLER OF NORTH CAROLINA. Well, some scientists or some 

engineers who have looked at this have said that the assumption 

that the pipe would be centered at that depth with those pressures 

from every direction, that those pressures were not unusual. I 

mean, they are usually unusual, and some engineers have said that 

if it was actually centered, it would be just dumb luck. It would be 

like a stopped clock being correct. It does happen twice a day, but 

it is really just dumb luck. 

What are the differences between drilling or the safety considerations, the technological challenges in safety and the environmental protection between shallow water and deep water drilling? 

Mr. MILLER. Well, I am not a drilling expert, but I can talk a little bit about the equipment itself. It is governed by 12 separate 

regulations under BOEMRE. In each one of your BOP’s you are required to have at least one annular ram, which is sort of the rubber donut that sits on top, two pipe rams, which do help you center 

the pipe and also can help you close in a blowout, and then finally 

a blind sheer ram that closes that. 

One of the other things that we are looking at is that we understand, and this was just announced I think earlier in this week, 

that we will be seeing additional proposed regulations from 

BOEMRE. We understand there will be an advanced notice of proposed rulemaking on BOP design and manufacture and operations. 

So we will have a chance to take a look at what they are believing 

we need to be looking at as far as our design requirements, those 

particular pieces of equipment. 

Mr. MILLER OF NORTH CAROLINA. Uh-huh. What role, if any,— 

well, you really are not claiming any expertise in drilling or drilling 

safety? 

Mr. MILLER. No. My expertise is in standards and standards development and the technical standards that support drilling operations and equipment but not as a petroleum engineer, drilling engineer. 

Mr. MILLER OF NORTH CAROLINA. Okay. Well—— 

Mr. KRATZ. Would you mind if I added something to that? 
38 

Mr. MILLER OF NORTH CAROLINA. Yes, sir. 

Mr. KRATZ. I think it is important in any discussion, and I am 

not an expert on BOPs, but any discussion about BOPs I think it 

is important to understand that any technology has operational 

limits, and I am not making a comment on Macondo or not, but the 

BOP is actually the last barrier of defense in a series of barriers 

used to control a drilling operation. 

So when you say the BOP failed, what has to occur for that to 

happen is several other systems have to fail as well, and I think 

what Macondo has taught is that no matter how well the system 

is designed, and I think the government, the BOM has it right on 

this, you can’t rely totally on prevention, and that is where the 

missing link of the next step of containment comes in is for the inevitable. 

Mr. MILLER OF NORTH CAROLINA. Okay. Well, I am in search for 

a witness who seems to have expertise on a topic I want to ask 

about. 

Dr. Macauley, you were an economist, Ph.D., and you mentioned 

liability and liability caps and the affect that had on innovation in 

the safety area. I don’t claim to be an economist, but I have studied 

kind of the economics of liability, the theory behind legal liability 

and that potential liability is kind of the economic incentive to safety practices. 

What is the economic effect of setting a cap, a liability cap on 

safety innovation? 

Dr. MACAULEY. Yeah. It is an excellent question, because it is so 

relevant to what we are discussing. A liability cap, caps-led industry will be liable for and who foots the bill then? The other parties, 

the taxpayers in this case. Liability caps serve important purposes. 

They are often thought to allow small companies to enter in, and 

you don’t have to back the company in order to provide a useful 

public service, in this case, offshore drilling. 

On the other hand, the very fact that you have a cap does say, 

well, who will pay, taxpayers, but we have this tradeoff. We are allowing small companies to participate, provide that competition. So 

setting the liability cap is really important. 

To the extent it can be related to the risk, then you begin to put 

incentives in place to bring about the very prevention containment 

and effective response that we are talking about, though. 

Mr. MILLER OF NORTH CAROLINA. I am sorry. Will the liability— 

will the safety efforts match the potential liability if there is a liability cap? 

Dr. MACAULEY. I think that industry has an incentive to pay attention to the liability cap to protect its shareholders. Industry also 

has a reputation to uphold, though, so it may well be that industry 

acts beyond the cap because reputation really matters, what the 

public thinks is very critically important as we know in the case 

of nuclear power plant safety. 

So the role of the liability cap is a complex one. 

Mr. MILLER OF NORTH CAROLINA. Mr. Chairman, I see my time 

has expired. There are three documents, studies of this disaster 

that I would like to enter into the record. The first is the study— 

and in each case I have excepted out the portions that seem to be 
39 

pertinent. If the Chair wants to add additional chapters, that is 

fine, but these seem to be the ones pertinent. 

The first is a report by the Det Norske Veritas on their forensics 

examination of Deep Water Horizon’s blowout preventer that they 

undertook for the Department of Interior. DNV concluded that the 

buckled drill pipe inside the blowout preventer obstructed the blind 

sheer rams that the witnesses just described in their ability to 

sheer the pipe fully and seal the well. And in addition to the introduction, Chapter 4 would be sufficient to deal with those conclusions. 

And then two other documents from the Department of Interior. 

One is investigation, MMS report 2001–009, and report 2004, page 

21, conclusion six, and page 5. Those appear to indicate that BOP 

failure similar to that depicted in the DNV report had occurred in 

the past decade on two other occasions. 

And Mr. Chairman, I would now move these three documents be 

inserted into the record. 

Chairman HARRIS. I thank you very much. I thank the Ranking 

Member for sharing that with staff and without objection, so ordered. 

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Chairman HARRIS. With respect to the DNV report on the blowout preventer I think it is worth noting for the record there appears to remain a great deal of uncertainty surrounding what actually did happen that day and the conclusions reached in the report 

itself, so to that end I would like to enter into the record an article 

from the New Orleans Times-Picayune that summarizes some of 

the issues in question, in particular the accuracy of DNV’s computer modeling that they use in their report of the blowout preventer. So thank you. 

[The information follows:] 
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92 

Mr. MILLER OF NORTH CAROLINA. Is that the article that really 

talks about the lawyers questioning of the—okay. Well, I certainly 

welcome the Chairman treating lawyers as expert on all topics on 

which they represent a client. 

Chairman HARRIS. That may be unusual for this physician, but 

anyway, Ms. Woolsey, you are recognized. 

Ms. WOOLSEY. Thank you, Mr. Chairman. Mr. Chairman, for as 

complicated as this topic is, I feel like my questions are really 

basic, but I think they are necessary. 

So, Mr. Kratz, when you were talking about Helix’s fast response 

system being ready and up and ready to go now, how long did that 

take to develop, and what if we had had it in place before the 

Deepwater Horizon oil spill? How much difference would there 

have been in the results, and why aren’t we doing this sooner? 

Mr. KRATZ. I think it is important to note that Helix is a wellintervention company, which is different from a well service company like a Schlumberger or Halliburton. They are the ones that 

actually do the work down inside the well. Helix’s expertise is actually getting onto a well and into a well. What we do every day with 

our vessels is intervene into live oil wells—and then allow the service companies to do the work. 

So getting into the well is not new technology. In fact, the capping stack that we have we actually fabricated two years prior to 

Macondo so that the technology is there. We do it every day. It is 

reliable. The issue really is on readiness and preparedness because 

it is a complicated operation, and it takes an awful lot of people 

to be coordinated, and that is where the consortium has spent a lot 

of their time on preparing these procedures, and we have actually 

run two tabletop drills now just to refine it, where you are actually 

simulating a crisis and trying to——— 

Ms. WOOLSEY. Let me just interrupt a minute. 

Mr. KRATZ. Sure. 

Ms. WOOLSEY. That is why we care about this and this testimony 

on this subject today. So why didn’t we have all that tabletop exercise done before this all happened? I mean, were people just taking 

it for granted? 

Mr. KRATZ. That is a good question. I think the industry’s predominant view was on prevention and probably an over-reliance on 

prevention, and I think following the Valdez incident there was a 

lot of focus on spill cleanup. The part that, you know, and there 

was supposed to be a renewal and—but as the industry went deeper, the missing link between the inevitable spill and the cleanup 

was sort of overlooked. And the innovation of our equipment for application onto the blowout actually came from the fact that innovation occurs through the commercial incentive of the well intervention market. It just happens that the same technology is very easily applied to blowout containment. 

Ms. WOOLSEY. Okay, and with the idea that April 11 the new 

system will be up and ready to go feels a little bit like, well, company is coming. I am going to be a witness. I need to—we better 

hustle and get this done, but whatever, whatever the incentive 

was. It is good that you have that new technology developed or system developed. 

Mr. KRATZ. We are actually late. 
93 

Ms. WOOLSEY. Well——— 

Mr. KRATZ. We had promised it over a month ago, so we are behind schedule. 

Ms. WOOLSEY. Okay. Well, get on with it. 

Dr. Der, last year this Committee and the full House passed my 

legislation, the Oil Pollution R&D Program Reauthorization Act, 

which would have doubled the federal investment in oil spill response technologies, and unfortunately, the bill was not taken up 

by the Senate. 

But my question to you is in your opinion would doubling—is it— 

I mean, currently do we have enough federal investment or would 

it have been better to pass this and double the investment in oil 

spill technologies? How much do we need, and who should contribute? 

Dr. DER. Well, as I mentioned before, and I think the Secretary 

of energy has testified that the funding of oil and gas research relating to safety and environmental mitigation should be the responsibility of the industry since they are a very big industry, they can 

afford to do that kind of work. Our role in the Department of Energy would be to help guide some of that activity, but I think in 

the end it should be funded by industry. Our ongoing work in Section 999 has refocused the emphasis on safety and response and 

environmental aspects and sustainability. 

Ms. WOOLSEY. So, your current budget in order to do this oversight that you—encouragement, is it enough, or would you prefer 

that we increase it? 

Dr. DER. Primarily I would have to say that the response to oil 

spills is primarily the responsibility of the U.S. Coast Guard and 

those programs that come under its purview, but the Department 

of Energy does have a lot of technical expertise that could help in 

that regard. 

Ms. WOOLSEY. That is right, and the Department of Energy is 

part of the team of the Coast Guard and NOAA to keep these systems and these programs current. I mean, we were way back in another century virtually when we got—came forward for this deep 

water protection and know how. 

So okay. I just wanted to make sure you knew that we were trying to get you more. 

Dr. DER. Appreciate it. Thank you. 

Chairman HARRIS. Thank you, and I am going to take the opportunity to ask a few more questions and give the opportunity to any 

member here to continue questioning at this point. 

Mr. Kratz, let me ask you a question—to recap part of your testimony, obviously from your testimony had that accident occurred 

after April 15 when this 15,000 pound per square inch cap would 

be available, your opinion would be that could have been contained? 

Mr. KRATZ. Our current depth, the 10,000 pound cap could have 

contained the well. 

Chairman HARRIS. Well, I thought the testimony was that the 

measured pressure was 11,800 or something. It is in your——— 

Mr. KRATZ. Yeah. Shut-in pressure that was within——— 

Chairman HARRIS. Okay. So that could even be done by the system we have now. So let me ask you. Where does that stand, that 
94 

kind of pressure? Where does that stand within the range of what 

is—and I got to ask. Are pressures always measured? Are these estimated pressures? What are they? 

Mr. KRATZ. The shutting pressure? 

Chairman HARRIS. Yes. 

Mr. KRATZ. That would be read off of a gauge. 

Chairman HARRIS. So it is measure—all right. So what is the 

range of measured pressures that you have? As we gauge whether 

or not your systems would be adequate to reasonably, very—prevent the vast, you know, virtually 99.9 percent of these kind of 

problems. What is the range of pressures that are measured? 

Mr. KRATZ. A majority of the systems internationally might comment on it, but are rated at 10,000 PSI. It is only more recently 

that the 15,000 PSI pressures have been encountered, and you are 

seeing a greater and greater proliferation of it, but still, 15,000 PSI 

is relatively rare. 

Chairman HARRIS. That would be rare. And—let me ask you. Do 

you—does your company also do bioremediation, or is that the idea 

of developing something that eventually—if some oil spills, you 

know, some bacteria or some organism actually just consumes it? 

Mr. KRATZ. No. 

Chairman HARRIS. Who does that? 

Mr. KRATZ. I believe that would come more under the purview 

of spill cleanup kind of a company, which we are not involved with. 

Chairman HARRIS. Well, Dr. Der, let me ask you. Has your shop 

done any of this? I mean, that would come right under the purview 

of environmental, you know, environmental protections against 

spills, and you know, that is the kind of biological development 

that may fall in the cracks. I mean, you know, I don’t think the 

NIH is doing it, you know. Mr. Kratz is not going to do it. Who 

would be doing that, and how are we developing those other—those 

alternative, those thinking outside the box techniques? 

Dr. DER. Well, again, the response capability to spill response is 

the U.S. Coast Guard’s, but I think the technologies that we have 

been working on in the laboratories may have some bearing on 

that. Again, our role is to help, assist and to advise through our 

program with the Safety Advisory Committee. 

Chairman HARRIS. But is it funded through this program? Because, I mean, the recommendation was to eliminate this program, 

and my only response is as I think Dr. Macauley mentioned, there 

are some things that probably you might need, you know, government research support in order to develop some things to make 

these types of endeavors, these exploration and production endeavors that are safe. 

Dr. DER. The program that we have currently and under the Section 999 was refocused from the efficiency and economics of production into safety and environmental aspects, and I am not 100 percent clear that we have that funding under Section 999. 

Chairman HARRIS. Well, but why not? I mean—why would you 

want to zero out a program when there are questions that, really 

some basic questions that could be answered that could result in, 

in fact, even say for production and exploration. 

Dr. DER. Well——— 
95 

Chairman HARRIS. I guess I am asking—are we really sure there 

is not a role for some basic research to be done to make these techniques production, exploration safe and environmentally sound? 

Dr. DER. I think there is, but my point is that the funding of 

those types of technologies should come from industry, and they 

can make use of the resources that we at the Department of Energy and our national labs have. 

Chairman HARRIS. So that would be in contra-distinction to, for 

instance, how we handle medical research where you could say, 

look, you know, medical device companies, hospitals, they all make 

a lot of money, but yet—we think there is a role for some basic research in other areas of the government. So you think we should 

just think about this completely differently? 

Mr. DER. I am not familiar with the medical field, sir. 

Chairman HARRIS. Well, we spend tens of billions of dollars on 

research that one could make the argument that some pharmaceutical company should fund, some medical device company 

should fund, so, you know, someone who is going to make money 

on the final product should fund it. 

So I just ask that you consider that it is my opinion that there 

may be areas like that. 

And, Dr. Macauley, I was going to just ask you because you mentioned it and perhaps there may be some errors. I mean, what 

kinds of new science do you think might be under the purview of 

the Federal Government to be involved in? Basic materials? Yeah. 

Bioremediation. What do you think? 

Dr. MACAULEY. Yeah. I think this discussion of what is the basic 

research is an interesting one. My colleagues and I when we were 

working for the—on our research project, we were searching to find 

a discussion of the R&D that would be needed to see how much of 

it is basic, how much of it is development, how much is it ready 

to prototype. This is why I think there is a policy gap at the moment. I am not sure we have a full understand, and if it is really, 

really basic research, it could be exactly what we need for, you 

know, the stem concerns, the science, technology, et cetera. 

So I would love to see that intersection, but we weren’t able to 

find anything, you know. 

Chairman HARRIS. That is being done. Well, thank you very 

much. 

Mr. Miller. 

Mr. MILLER OF NORTH CAROLINA. Thank you, Mr. Chairman. I 

think when the Chairman and I agree we should pause and celebrate that as we did when he earlier agreed to the expertise of lawyers on almost any topic. 

But—and I am very pleased to hear you supporting research, but 

we saw in H.R. 1 dramatic cuts in research funding and even in 

this Committee just a couple, three weeks ago cuts to the FAA’s 

Authorization Bill for research into, flight safety.—Icing, human 

error, cockpit fires, and smoke— and the argument for cutting that 

funding was that that it was applied as opposed to basic research, 

and applied research should be paid for by the industry, not by the 

government. 

It certainly appears that this industry, the oil and gas industry, 

is vastly more profitable than the airline industry, and I know that 
96 

there is not a bell that sounds when basic research crosses over 

into applied research, but is correcting the flaws in a blowout preventer or containment technologies basic or applied research? Anyone? Dr. Macauley? 

And do you agree with that distinction and that we shouldn’t 

fund applied research? 

Ms. MACAULEY. I never argue for government intervention unless 

it seems to really, really be necessary, and I comment that industry 

will do the innovation on its own. Sometimes industry does, something industry doesn’t, and it is identifying is there a market failure in R&D to ensure the health of our offshore deep water drilling 

industry. 

That is a gap in our understanding as policymakers at the moment, and I do hope that we can get a better handle on where 

those gaps are and what is the nature of the R&D, and who is 

doing it. 

Mr. MILLER OF NORTH CAROLINA. Okay. Well, Dr. Macauley, you 

said that there was more than just the economic consideration of 

liability. There is reputation at stake. But I have seen folks who 

have made a whole lot of money doing really disreputable things 

be accepted into polite society, and their acceptance seems to have 

been greased by how much money they had. 

Now, I know that Tony Hayward, it appeared to hurt his feelings 

how much criticism he got. This industry seems to be vastly profitable and not terribly bothered by the bad press that they may have 

gotten. 

Mr. Miller, what percentage of the industry’s profits went into 

safety research and development before this? 

Mr. MILLER. Well, I don’t have that information with me, but I 

know that we have done studies on the basic R&D that the industry does and percentages and to different areas, and I will be 

happy to get that information back to you. I just don’t have it with 

me. 

Mr. MILLER OF NORTH CAROLINA. Okay. Anyone else venture a 

guess on that? 

Okay. Mr. Chairman, I yield back. 

Chairman HARRIS. Thank you very much, and I would like to recognize the Chairman of the Committee, Mr. Hall, for any questions. 

Chairman HALL. Mr. Chairman, since like everybody up and 

down the row here on both sides have other things they have been 

doing all day today and the problems we have, I have been looking 

for a doctor to give me an appointment tomorrow to take my appendix out again where I won’t have to cast those bad votes tomorrow, but I haven’t been able to get that. 

But I won’t take their time because——— 

Chairman HARRIS. I could do the anesthesia. 

Chairman HALL. —I don’t know what has been asked, but if I 

might, I will send some questions in, and I am sure they will answer them if you as them to properly. 

Chairman HARRIS. Thank you very much, Mr. Chairman. 

Chairman HALL. Thank you. 

Chairman HARRIS. I am just going to follow up just one very brief 

question before we close the meeting. 
97 

I guess—along the lines of what I was suggesting was, for instance, I am going to ask Mr. Kratz and maybe Mr. Miller, you 

know, when you design, for instance, you showed us all the materials that you are going to put down under, you know, 10,000 feet 

of water for instance. There has to be some fairly basic research 

into materials that I am sure your company doesn’t do. I mean, 

really basic research on materials that can withstand that pressure. 

So along the lines, and you know, the ranking member brings up 

a good point. I mean, the blowout preventer appears not to have 

worked, but maybe it was a materials issue on what the material 

was, and you know, the Federal Government supports a lot of materials research. 

Does the industry have the ability to do that? And, Mr. Miller, 

maybe you can answer. Is there something within the industry that 

can do that? 

Mr. MILLER. Well, that is a really good question. We have been 

working for a little while now on a new standard on high pressure, 

high temperature equipment. In particular, we are looking at 

equipment that will be rated higher than the 15K, 15,000 that Mr. 

Kratz mentioned. 

And one of the real challenges for us in developing that standard 

is the material section because what we want to develop as many 

of our standards are primarily performance-based standards. So we 

will set the criteria for generally speaking what the performance of 

the material must be but not make it so specific that it excludes 

the innovation and industry. 

And so what we ask the Members of the Committees to do is to 

bring to us their broad outlines so that we can craft a standard 

along those lines to allow that innovation to continue to take place 

as was mentioned earlier. 

But I can provide that information back to you and where we are 

on that standard and when we expect to publish it. 

Chairman HARRIS. Thank you very much. 

Mr. Miller, anything else? 

Mr. MILLER OF NORTH CAROLINA. Well, Mr. Chairman, just because you asked questions I think I should. 

This—well, first of all, it is pretty clear that the blowout preventer didn’t work because there was a blowout that was not prevented. So I think we can say conclusively the blowout preventer 

didn’t work, and we can argue about why, but I don’t think you can 

argue about whether. 

We have been talking about an event at 5,000 feet below—about 

a mile deep—below the surface and how extreme that is, how extreme the pressures are, et cetera, and now we are talking about 

drilling 10,000 feet. 

Is that going to double how extreme, or is it more exponential? 

What are the pressures going to be at 10,000 feet as compared to 

5,000? 

Mr. KRATZ. I will start. I think the industry is, if not prepared, 

has been preparing for quite awhile for 10,000 feet. The Q4000, for 

instance, there was a lot of R&D help from tax credits on that vessel. It was the first vessel specifically designed to work in 10,000 

feet of water, funded by MARAD. 
98 

Since then, you know, we are producing out at 9,000 feet, so 

there has been and there continues to be and especially with Brazil 

on the horizon, there is a lot of incentive for the industry to develop 

the capabilities in 10,000 feet of water. Most robotics now are designed for 10,000 feet of water. In fact, 10,000 feet of water is becoming pretty much of a standard basic design parameter for any 

service company or drill or doing work in the deep water. 

Mr. MILLER. And one thing that I could add, Ranking Member 

Miller, is that as we move into some of the ultra-deep water, some 

of the things that we want to look at are the idea of what is known 

as a safety case approach. This is a recommendation that our joint 

industry task force made to the Department of Interior when we 

had those 30 days to respond right after Deep Water Horizon, and 

it was included in the final White House report that they would 

consider a safety case. 

And what that is is a more risk-based approach so that you are 

looking at your actual individual well, and you are combining the 

safety approach from both the driller and the operator to make 

sure that you have considered all these different risks as you described when you move into different environments. 

So that is another area that you could sort of innovate on how 

you approached safe operations and your compliance. 

Mr. MILLER OF NORTH CAROLINA. Mr. Chairman, I don’t have 

anymore questions unless you do. 

Chairman HARRIS. No. Thank you very much. I want to, listen, 

I want to thank the witnesses for your valuable testimony, and the 

Members for questions. 

Again, I want to apologize for us starting late, but I will have 

you out on time because your time is valuable. 

The Members of the Subcommittee, including those who weren’t 

here today, may have additional questions for witnesses and would 

ask for you to respond to those in writing. The record will remain 

open for two weeks for additional comments from Members. 

The witnesses are excused, and this hearing is now adjourned. 

[Whereupon, at 3:59 p.m., the Subcommittee was adjourned.] 
(99) 

Appendix I: 

ADDITIONAL MATERIAL FOR THE RECORD
100 

PREPARED STATEMENT BY REPRESENTATIVE EDDIE BERNICE JOHNSON

Thank you, Chairman Harris 

I appreciate the opportunity to discuss this important topic. 

As a Texan I am very familiar with the oil and gas industry. Oil derricks are as 

much an icon of our state as the cowboy hat and boots. Much of the state’s history 

and economy is built upon the enormous profits of the industry. However, we have 

also seen the downside of booms and busts in oil and gas, and have diversified the 

state’s economy to protect ourselves from fluctuations in the market. 

My constituents also spend a lot of time in their cars, and feel the pains of high 

gas prices. But, contrary to the claims of some, this pain is not caused by President 

Obama’s drilling policies. Instead we should acknowledge that the price of oil is, by 

and large, out of our control. Despite reducing our net oil imports by 10% in the 

last two years, we cannot count on drilling our way to energy independence and low 

gas prices. We simply don’t have the oil. And, even if we did, we would still be vulnerable to price volatility and manipulation in the global marketplace. In the longrun, our only recourse is to wean ourselves off of oil. It is an addiction we cannot 

afford. 

As Texas has done with its economy, the Nation should be protected from the potentially devastating effects of an unpredictable global oil market. We must diversify 

in the fuels we use to power our transportation sector, and we must do so in the 

most environmentally benign way possible. From its earliest days, oil and gas drilling has been tough and dangerous work. It is an impressive testament to human 

ingenuity to move a hydrocarbon molecule from thousands of feet underground to 

your car’s engine, and all for a few dollars per gallon. But it is also dirty work, and 

the Deepwater Horizon disaster highlighted that pushing the technology envelope 

to drill in ever deeper waters also exposes workers, the public, and the environment 

to new risks. 

Regardless of the contribution to our economy, no industry has a right to neglect 

public health and environmental safety. Instead, the oil and gas industry should 

take responsibility and devote some of its intellectual and technological capacity to 

developing safer drilling practices and advancing the technologies to respond to 

spills when they happen. 

Æ