Offshore Oil and Gas Oversight: Actions Needed to Address Leadership Commitment Deficiencies at Interior
Published: 2017-03-21T00:00:00

Fast Facts:
Effective oversight of offshore oil and gas development is critical to preventing another Deepwater Horizon-type disaster.
However, the Department of the Interior's Bureau of Safety and Environmental Enforcement has struggled to successfully implement key initiatives to improve offshore oversight. For example, a risk-based facility inspection initiative was halted due to concerns about its usefulness and unclear protocols.
This and other difficulties are largely due to insufficient coordination and leadership commitment. In turn, we recommended that Interior take steps to improve the bureau's coordination and leadership commitment.
In an earlier version, the capping stack was incorrectly referred to as a blowout preventer. A capping stack caps a well after a blowout to stop the uncontrolled flow of oil.

Highlights:
section_title: Why GAO Did This Study
paragraphs: This testimony summarizes the information contained in GAO's March 2017 report, entitled Oil and Gas Management: Stronger Leadership Commitment Needed at Interior to Improve Offshore Oversight and Internal Management ( GAO-17-293 ).
section_title: What GAO Found
paragraphs: The Department of the Interior's (Interior) Bureau of Safety and Environmental Enforcement (BSEE) leadership has started several key strategic initiatives to improve its offshore safety and environmental oversight, but its limited efforts to obtain and incorporate input from within the bureau have hindered its progress. For example, to supplement its mandatory annual regulatory compliance inspections, in 2012, BSEE leadership began developing a risk-based inspection initiative to identify high-risk production facilities and assess their safety systems and management controls. During pilot testing in 2016, several deficiencies--including the usefulness of its facility risk-assessment model and unclear inspection protocols--caused BSEE to halt the pilot. According to bureau officials, during the development of the initiative, BSEE headquarters did not effectively obtain and incorporate input from regional personnel with long-standing experience in previous risk-based inspection efforts, who could have identified deficiencies earlier in the process. GAO previously found that when implementing large-scale management initiatives a key practice is involving employees to obtain their ideas by incorporating their feedback into new policies and procedures. Instead, BSEE leadership appears to have excluded the input of regional personnel by, for example, not incorporating input beyond the risk-assessment tool when selecting the first pilot facility, even though it was prescribed to do so in the bureau's inspection planning methodology. This undercut the pilot effort, raising questions about whether the bureau's leadership has the commitment necessary to successfully implement its risk-based program. Without higher level leadership within Interior establishing a mechanism for BSEE to obtain and incorporate input from personnel within the bureau, BSEE's risk-based inspection initiative could face continued delays.
Similarly, since 2013, BSEE leadership has started several key strategic initiatives to improve its internal management, but none have been successfully implemented, in part, because of limited leadership commitment. For example, BSEE's leadership identified the importance of developing performance measures in its 2012-2015 strategic plan. BSEE began one of three attempts to develop performance measures in July 2014 by hiring a contractor to develop measures, but the bureau terminated this contract in January 2015 after determining a need to complete its internal reorganization before developing such measures. A second effort to develop performance measures started in December 2015, using the same consultant, and yielded 12 performance measures in March 2016, but BSEE did not implement them, in part, because data did not exist to use the measures. By the time BSEE received this consultant's report, it had already begun a third effort to internally develop performance measures; as of November 2016 had identified 17 draft performance measures, but BSEE leadership missed repeated deadlines to review them. BSEE officials told GAO that after leadership approval, the bureau plans to pilot these measures and develop others. BSEE leadership has not demonstrated continuing oversight and accountability for implementing internal management initiatives, as evidenced by its limited progress implementing key strategic initiatives. Without higher-level oversight within Interior addressing leadership commitment deficiencies within BSEE, the bureau is unlikely to succeed in implementing internal management initiatives.

section_title: Letter
paragraphs: I am pleased to be here today to discuss our report being issued today on  offshore oil and gas oversight. As you know, the 2010 Deepwater  Horizon incident—which resulted in 11 deaths, serious injuries, and the  largest marine oil spill in the history of the United States—raised  questions about the Department of the Interior’s (Interior) oversight of  offshore oil and gas activities in the Gulf of Mexico. In turn, on May 19,  2010, Interior reorganized the Minerals Management Service (MMS)—the  agency responsible for managing oil and gas activities in federal waters— to improve the management, oversight, and accountability of activities on  the Outer Continental Shelf. As an interim step, Interior renamed MMS  the Bureau of Ocean Energy, Management, Regulation and Enforcement  (BOEMRE) and separated major functions of offshore oil and gas  management by making BOEMRE responsible for offshore oil and gas  management and the Office of Natural Resources Revenue responsible  for revenue collections. On October 1, 2011, Interior completed the  reorganization of MMS by splitting BOEMRE into the Bureau of Ocean  Energy Management, which is responsible for leasing and resource  management, and the Bureau of Safety and Environmental Enforcement  (BSEE), which is responsible for reviewing drilling permits, inspecting  offshore drilling rigs and production platforms, and developing regulations  and standards for offshore drilling. BSEE’s mission is to promote safety,  protect the environment, and conserve resources offshore through  vigorous regulatory oversight and enforcement.
Since its inception in 2011, BSEE has undertaken several efforts to  reform its oversight capabilities. In February 2016, we reported that  BSEE’s ongoing organizational restructuring—which it initiated in October  2013 to develop national programs—had not addressed long-standing  deficiencies to its investigative, environmental compliance, and  enforcement capabilities. Among other things, we found that:
Regarding investigations, BSEE continued to rely on pre-Deepwater  Horizon incident policies and guidance for managing its investigative  capabilities and did not have the capability for analyzing data on  incidents that occur on the Outer Continental Shelf.
Regarding environmental compliance, BSEE reversed actions taken  to address post-Deepwater Horizon incident concerns, weakening its  oversight of operator compliance with environmental standards.  Moreover, the bureau had made limited progress developing and  updating guidance, which were among the goals of the restructuring.  Additionally, BSEE’s restructuring has not addressed staffing  shortfalls that are preventing it from meeting its environmental  oversight targets.
Regarding enforcement, BSEE made limited progress addressing  long-standing deficiencies in its effectiveness. Specifically, BSEE has  not completed policies or developed procedures—including defined  criteria for the use of its existing enforcement tools—to guide its  enforcement actions.
To enhance BSEE’s ability to effectively oversee offshore oil and gas  development, we recommended in our February 2016 report that the  Secretary of the Interior direct the Director of BSEE to take nine actions,  including that BSEE complete policies outlining the responsibilities of its  investigative, environmental compliance, and enforcement programs and  update and develop procedures to guide them. Interior neither agreed nor  disagreed with our recommendations. The findings of our February 2016  report served as the basis for the inclusion of the restructuring of offshore  oil and gas oversight in our February 2017 expansion of our High-Risk  List. Simultaneous to our assessment of BSEE’s organizational  restructuring, bureau leadership was developing its Fiscal Year 2016- 2019 Strategic Plan, which identifies key initiatives to improve BSEE’s  safety and environmental oversight as well as its internal management.
In this context, my testimony today discusses the findings from our report  being issued today on BSEE’s leadership efforts in implementing key  strategic initiatives to improve its (1) safety and environmental oversight  and (2) internal management.
To conduct our work, we reviewed BSEE strategic planning and budget  justification documentation as well as interviewed BSEE leadership to  identify key bureau strategic initiatives. For each initiative, we collected  and analyzed BSEE documentation of its purpose and history—including  budget justifications, project plans, and contracts, among others—to  determine its objectives, time frames, and status. We also interviewed  BSEE officials at headquarters responsible for bureau and program  leadership as well as officials in the regional and district offices  responsible for implementing BSEE oversight activities. The report  includes a detailed explanation of the scope and methodology we used to  conduct our work.
We conducted the work on which this testimony is based in accordance  with generally accepted government auditing standards. Those standards  require that we plan and perform the audit to obtain sufficient, appropriate  evidence to provide a reasonable basis for our findings and conclusions  based on our audit objectives. We believe that the evidence obtained  provides a reasonable basis for our findings and conclusions based on  our audit objectives.
subsections: section_title: BSEE Leadership Has Started Several Initiatives to Improve the Bureau’s Safety and Environmental Oversight Capabilities, but Its Actions Have Hindered Progress
paragraphs: We found that BSEE leadership has started several initiatives to improve  its safety and environmental oversight capabilities, but its limited efforts to  obtain and incorporate input from within the bureau have hindered its  progress. Since 2012, BSEE has sought to augment its annual inspection  program with a risk-based inspection program, but limited efforts to obtain  and incorporate input from experienced regional personnel have hindered  BSEE’s ability to develop and implement the risk-based program. In 2012,  BSEE began an initiative to develop an approach for conducting  inspections of offshore facilities based on the level of risks they posed.  However, to date, BSEE has not successfully implemented this  supplemental risk-based inspection capability.
BSEE leadership led the development of the risk-based program;  however, according to officials, leadership developed the program with  little input from regional personnel. Officials in the Gulf of Mexico region  with knowledge and experience conducting previous risk-based  inspection efforts told us that they were not apprised of key program  products (e.g., a risk model developed by Argonne National Laboratory)  until the products were well under development and that they were given  little opportunity to provide comment on them.
As a result, BSEE first identified deficiencies with its risk-based program  during pilot testing in 2015, rather than working closely with experienced  regional personnel earlier in the process to obtain their input to identify  potential deficiencies and remediate them during program development.  In turn, BSEE leadership’s limited efforts to obtain and incorporate input  from regional staff and management during development of the program  led to poor pilot results. In response, BSEE has changed the focus of the  program and reduced expectations for its initial approach to risk-based  inspections.
In 2016, BSEE conducted an environmental stewardship initiative  comprised of two simultaneous environmental risk reduction efforts, but  we found that these efforts were overlapping, fragmented, and  uncoordinated, which reduced the effectiveness of the initiative and  hindered the implementation of identified improvements. These efforts  were led and coordinated by BSEE leadership in the Environmental  Compliance Division at headquarters, which BSEE created in 2015 to  establish national strategic goals and procedures for the bureau’s  environmental compliance activities. However, the efforts were  overlapping because BSEE leadership tasked both with the same five  objectives. The two efforts were also fragmented because BSEE  leadership did not effectively coordinate their execution, which hindered  information sharing between them that could have enhanced their value.  Moreover, because the efforts were uncoordinated, they resulted in the  inefficient use of resources.
In our report being released today, we recommended that the Secretary  of the Interior direct the Assistant Secretary for Land and Minerals  Management, who oversees BSEE, to establish a mechanism for BSEE  management to obtain and incorporate input from bureau personnel and  any external parties, such as Argonne National Laboratory, that can affect  the bureau’s ability to achieve its objectives. In its written response to our  report, Interior neither agreed nor disagreed with our recommendation.  Interior stated that the recommendation reflects an ongoing BSEE  commitment and that BSEE and Interior agree with the concept laid out  therein. However, Interior’s comments do not discuss any specific actions  taken or under way to do so. Without higher-level oversight within Interior  establishing a mechanism for BSEE management to obtain and  incorporate input from personnel within the bureau and any external  parties that can affect the bureau’s ability to achieve its objectives,  BSEE’s risk-based inspection program and Environmental Stewardship  efforts are likely to experience continued implementation and efficacy  problems.
section_title: BSEE Leadership Has Made Limited Progress in Implementing Strategic Initiatives to Improve Its Internal Management
paragraphs: We found that since 2013, BSEE has begun four strategic initiatives to  improve its internal management—two to improve its decision-making  capabilities and two to enhance communication and transparency—but  their successful implementation has been hindered by limited leadership  commitment and not addressing factors contributing to trust concerns.
subsections: section_title: BSEE Leadership Did Not Fully Implement Initiatives to Improve Decision- Making Capabilities
paragraphs: In 2013, BSEE began an initiative to develop an Enterprise Risk  Management (ERM) framework but has not fully implemented it as a  management tool. BSEE has made some progress over the past 3 years  in implementing an ERM framework but has not completed the actions  necessary to fully implement it. In conjunction with a contracted ERM  support consultant, BSEE developed an iterative ERM cycle that includes  six steps. In 2014, BSEE identified and prioritized 12 strategic risks that cover the lifecycle of BSEE operations. BSEE planned to verify the  prioritization of its top several strategic risk treatments by July 2016 but  did not do so. BSEE officials told us that the bureau halted ERM  implementation while it acquired automated ERM software. The officials  said BSEE planned to finalize a plan for its prioritized risk treatments by  August 2016 but did not do so because of the temporary halt to ERM  implementation. Likewise, they said BSEE intended to promulgate a  monitoring plan by October 2016 but did not do so because of the  aforementioned temporary halt to ERM implementation. However, in  November 2016, BSEE determined that it would reinitiate ERM  implementation simultaneous to the implementation of software.
In 2014, BSEE began an initiative to develop performance measures for  its programs but has not implemented any measures. BSEE’s October  2012 Strategic Plan-Fiscal Years 2012-2015 stated that the bureau must  develop performance measures to assess the results of its programmatic  efforts as well as its ability to reduce the risks of environmental damage  and accidents. BSEE’s initiative to develop performance measures has  been comprised of three sequential efforts, in 2014, 2015, and 2016. For  the first two efforts, the bureau contracted with a consultant. BSEE  terminated the first effort, and although the consultant delivered a report  identifying 12 performance measures during the second effort, BSEE  officials said they were not implementing them due to a variety of factors,  including data availability limitations. For its third effort to develop  performance measures in 2016, BSEE headquarters officials told us that  this initiative, which is being conducted internally by BSEE personnel,  represents the beginning of a multi-year effort to implement a  performance management system. BSEE initially planned to finalize its  internally developed list of performance measures in February 2016 but  did not meet this deadline. In December 2016, BSEE completed a report  that discusses 17 performance measures and the bureau’s plans for  future iterations of their development.
We have previously reported on BSEE’s struggles to effectively  implement internal management initiatives. Specifically, in February 2016,  we found that since its inception in 2011, BSEE had made limited  progress in enhancing the bureau’s investigative, environmental  compliance, and enforcement capabilities. Likewise, with regard to its  ongoing strategic initiatives to improve its decision-making capabilities,  more than 3 years have passed since BSEE initiated the development of  its ERM framework, more than 2 years have passed since the bureau  prioritized the strategic risks it faces, and more than 4 years have passed  since it identified the development and implementation of performance  measures as an organizational need. In that time, BSEE initiated several  efforts to develop and implement such measures, and although BSEE  has developed measures, it has yet to fully implement any.
One of our five criteria for assessing whether an area can be removed  from our high-risk list is leadership commitment—that is, demonstrated  strong commitment and top leadership support. An example of  leadership commitment is continuing oversight and accountability, which  BSEE leadership has not demonstrated for implementing internal  management initiatives, as evidenced by its limited progress in  implementing key strategic initiatives as well as its inability to address  long-standing oversight deficiencies.
In our report being released today, we recommended that the Secretary  of the Interior direct the Assistant Secretary for Land and Minerals  Management, who oversees BSEE, to address leadership commitment  deficiencies within BSEE, including by implementing internal  management initiatives and ongoing strategic initiatives (e.g., ERM and  performance measure initiatives) in a timely manner. Interior neither  agreed nor disagreed with our recommendation. Interior stated that the  recommendation reflects an ongoing BSEE commitment and that BSEE  and Interior agree with the concept laid out therein. However, Interior’s  comments did not discuss specific actions taken or planned to meet the  intent of our recommendation. Without higher-level oversight within  Interior addressing BSEE’s leadership commitment deficiencies— including by implementing internal management initiatives and ongoing  strategic initiatives—in a timely manner, the bureau is unlikely to succeed  in implementing such initiatives.
section_title: Initiatives to Enhance Communication and Transparency Have Not Addressed Factors Contributing to Long- Standing Trust Concerns between Headquarters and the Regions
paragraphs: In February 2016, BSEE announced an initiative to assess internal  communications and develop an employee engagement strategy. BSEE  employee engagement initiative documentation identifies the need to  enhance communication vertically and horizontally across the bureau.  BSEE leadership’s safety and environmental stewardship initiatives have  had limited success, largely due to poor communication and coordination  between headquarters and the regions. BSEE officials from across the  bureau told us that the poor communication between headquarters and  the regions led to a deficit of trust vertically throughout the bureau. They  also told us that because BSEE headquarters was newly established as  part of the reorganization of MMS in 2010 following the Deepwater  Horizon incident, not many existing relationships between headquarters  and regional personnel existed.
The data collection plan for this employee engagement initiative focused  on conducting outreach across the bureau to identify the means by which  BSEE personnel prefer to receive information—for example, town hall  meetings, BSEE’s website, or e-mail. BSEE conducted this outreach but  as of November 2016 had not developed an employee engagement  strategy—although its original target completion date was April 2016— and it is unclear when it will do so. In September 2016, BSEE decided to  conduct a second round of outreach across the organization by spring  2017 to review feedback from the initial outreach, discuss next steps, and  provide guidance on existing communications resources.
To address trust concerns that exist between headquarters and the field,  we recommended in our report being released today that the Secretary of  the Interior direct the BSEE Director to expand the scope of its employee  engagement strategy to incorporate the need to communicate quality  information throughout the bureau consistent with federal standards for  internal control. Interior neither agreed nor disagreed with our  recommendation. Interior asserted that, since receiving our draft report for  review, BSEE has completed the assessment and analysis of employee  feedback and developed an engagement plan, but Interior did not provide  documentary evidence of this plan or what it entails. Without providing  evidence of BSEE’s activities, we could not confirm that any action had  been taken and continue to believe that BSEE should expand the scope  of its employee engagement strategy.
In addition, the bureau’s Integrity and Professional Responsibility Advisor  (IPRA) is responsible for promptly and credibly responding to allegations  or evidence of misconduct and unethical behavior by BSEE employees  and coordinating its activities with other entities, such as Interior’s Office  of Inspector General (OIG). Senior BSEE officials from across the  bureau stated that the IPRA function is critical to bolstering trust within the  bureau because personnel need to have a functioning mechanism to  which they can report potential misconduct by other employees. To  increase transparency and consistency in how IPRA cases are handled  following the completion of an investigation report, BSEE conducted a  pilot initiative in 2016 to assess the types of allegations of misconduct  being reported to the IPRA as well as the frequency with which the IPRA  referred such allegations to other entities. In August 2016, BSEE  determined that the majority of incoming allegations were being directed  to the appropriate office for action.
However, BSEE’s pilot initiative did not address unclear and conflicting  guidance that could undermine organizational trust in how the IPRA  addresses allegations of misconduct. Specifically, we found that the  Interior Department Manual and IPRA guidance do not specify criteria for  the severity thresholds for allegations that are to be referred to the OIG.  As a result, the boundaries of IPRA responsibility are unclear.  Additionally, BSEE’s pilot initiative did not address IPRA guidance that  conflicts with the reporting chain established by the Interior Department  Manual and BSEE’s organization chart.
Some BSEE regional officials told us that the uncertainty about how the  IPRA reports allegations to the OIG as well as its reporting structure led  them to question the independence of IPRA activities, and they  expressed concern that the IPRA could be used to retaliate against  employees, which has undermined organizational trust in its activities.  Under the federal standards of internal control, management should  design control activities to achieve objectives and respond to risks, such  as by clearly documenting internal controls. While BSEE has  documented its policies, they are not clear.
In our report being released today, we recommended that the Secretary  of the Interior direct the BSEE Director to assess and amend IPRA  guidance to clarify (1) severity threshold criteria for referring allegations of  misconduct to the OIG and (2) its reporting chain. Interior neither agreed  nor disagreed with our recommendation but stated that contrary to our  draft report, the Interior Department Manual includes severity threshold  criteria for referring allegations of misconduct to the OIG. We believe that  the language in the Interior Department Manual does not provide the  specificity needed to adequately define the boundaries of IPRA  responsibility.
Additionally, Interior stated that the IPRA reports to the BSEE Director,  consistent with the reporting chain established in the bureau’s  organizational chart and the Interior Department Manual. However, the  BSEE Director told us that, in practice, the IPRA often reports to the  BSEE Deputy Director rather than the Director. Moreover, our work found  that the decision-making process of the IPRA Board—whereby the Board  determines how to respond to an investigation without consulting the  Director—does not align with the IPRA’s prescribed reporting chain.  Without assessing and amending its IPRA guidance to clarify (1) the  severity threshold criteria for referring allegations and (2) the IPRA  reporting chain, BSEE risks further eroding organizational trust in the  IPRA to carry out its mission to promptly and credibly respond to  allegations or evidence of misconduct by BSEE employees.
Chairman Farenthold, Ranking Member Plaskett, and Members of the  Subcommittee, this completes my prepared statement. I would be  pleased to respond to any questions that you may have at this time.
section_title: GAO Contact
paragraphs: If you or your staff have any questions about this testimony, please  contact Frank Rusco, Director, Natural Resources and Environment, at  (202) 512-3841 or ruscof@gao.gov. Contact points for our Offices of  Congressional Relations and Public Affairs may be found on the last page  of this statement.
section_title: Staff Acknowledgments
paragraphs: GAO staff who made key contributions to this testimony are Richard  Burkard, Cindy Gilbert, Matthew D. Tabbert, Kiki Theodoropoulos, and  Daniel R. Will.
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