Oil and Gas: Interior Has Strengthened Its Oversight of Subsea Well Containment, but Should Improve Its Documentation
Published: 2012-02-29T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: On April 20, 2010, an explosion and fire on board the Deepwater Horizon, an offshore drilling rig, resulted in 11 deaths and the largest oil spill in U.S. history in the Gulf of Mexico. After this event, the Department of the Interior (Interior), which oversees oil and gas operations in federal waters, suspended certain offshore drilling operations. After developing new guidance, Interior resumed approving drilling operations in the Gulf of Mexico. GAO was asked to examine (1) the industrys improved capabilities for containing subsea wells (those on the ocean floor) in the Gulf of Mexico; (2) Interiors oversight of subsea well containment in the Gulf of Mexico; and (3) the potential to use similar subsea well containment capabilities in other federal waters, such as those along the Alaskan coast.
GAO reviewed laws, regulations, and guidance; documents from oil and gas operators; and Interiors oversight processes. GAO also interviewed agency officials and industry representatives.
section_title: What GAO Found
paragraphs: Since the Deepwater Horizon incident, the oil and gas industry has improved its capabilities to respond to a subsea well blowoutthe uncontrolled release of oil or gas from a well on the ocean floorin the Gulf of Mexico. In particular, operators have formed two new not-for-profit organizations that can quickly make available well containment equipment, services, and expertise. Among the equipment that these organizations can provide are capping stacksdevices used to stop the flow of oil or gas from a well. This improved well containment response equipment consists primarily of existing technologies that have been modified to support well containment, according to industry representatives.
Following the Deepwater Horizon incident, Interior strengthened its review plans and resources to contain a subsea well blowout; however, its internal oversight processes have not yet been fully documented. Interior has issued guidance to operators outlining information that must be provided to Interior to demonstrate that operators can respond to a well blowout. Interior officials said that they expect to have documentation of their process for reviewing this information in place by spring 2012. Also, Interior incorporated tests of an operators well containment response capabilities into two unannounced spill drills, and Interior officials told us they intend to incorporate such tests into future spill drills. However, Interior has not documented a time frame for incorporating these tests, and until it does so there is limited assurance of an operators ability to respond to a subsea well blowout.
Subsea well containment capabilities developed for the Gulf of Mexico could generally be used elsewhere, including Alaskan waters, according to industry representatives and Interior officials. However, because other areas lack the infrastructure and equipment present in the Gulf of Mexico, well blowout response capabilities are more limited. Two operators have submitted plans to Interior to drill in waters north of Alaska as early as the summer of 2012. They are developing, but have not submitted, final well containment plans to Interior, and these plans will need to be approved by Interior before drilling. Oil and gas exploration and production off the coast of Alaska is likely to encounter environmental and logistical risks that differ from those in the Gulf of Mexico because of the regions cold and icy conditionsfactors that would also likely affect the response to a well blowout.
section_title: What GAO Recommends
paragraphs: To help ensure that operators can respond effectively to a subsea well blowout, GAO recommends that Interior document a time frame for incorporating well containment response scenarios into unannounced spill drills. In commenting on a draft of this report, Interior concurred with GAOs recommendation.
or Frank Rusco at (202) 512-3841 or ruscof@gao.gov .

section_title: Letter
paragraphs: On April 20, 2010, the Deepwater Horizon offshore drilling rig exploded  and caught on fire, resulting in 11 deaths, serious injuries, and the largest  marine oil spill in the history of the United States. Located over 40 miles  off the coast of Louisiana and at a depth of nearly 5,000 feet in the Gulf of  Mexico, the subsea well spilled oil for 87 days before responders were  able to cap the well and contain the flow of oil. According to government  estimates, by that time, over 4.9 million barrels of oil had spilled into the  Gulf of Mexico. The spill damaged the environment and adversely  affected oil workers and nearby businesses, with estimated costs to  compensate for these damages totaling in the billions of dollars.
The nation’s economy and security are heavily dependent on oil and  natural gas. The Department of the Interior (Interior) regulates oil and  gas activities in federal waters, including in the Gulf of Mexico. According  to a 2010 Interior study, almost 97 percent of U.S. offshore oil and gas  activity in federal waters occurs there. However, drilling for oil and gas is  an inherently risky undertaking, and although industry has the capability  to respond to subsea blowouts—the uncontrolled release of oil or gas  from a well on the ocean floor— the risk of the loss of control of a subsea  well can never be entirely eliminated. Given this risk––and the severity of  the consequences––it is critical that the operators who lease public lands  and the federal agency that oversees them demonstrate that they are  taking all reasonable steps to mitigate these risks. Following the  Deepwater Horizon incident, for example, Interior suspended certain  offshore drilling operations and developed new regulations and guidance  for oil and gas operators. Interior lifted this moratorium on October 12,  2010, and on February 28, 2011, issued its first permit for offshore drilling  under the new guidance.
In this context, you asked us to examine Interior’s approach to addressing  the risk of subsea well blowouts and oversight of industries’ well  containment capabilities. Our objectives were to examine (1)  improvements to subsea well containment capabilities now available for  use in the Gulf of Mexico; (2) Interior’s oversight of subsea well  containment in the Gulf of Mexico following the Deepwater Horizon  incident; and (3) the potential to use similar subsea well containment  capabilities in other federal waters, such as those off the Alaskan coast.
The Marine Well Containment Company and the Helix Well Containment Group were the  two organizations formed after the Deepwater Horizon incident to offer well containment  services in the Gulf of Mexico. capabilities and plans for capping and containment.officials from Interior and the oil and gas industry to identify the  capabilities that U.S.-based and international organizations use to  address subsea well blowouts. To determine the potential to use subsea  well containment capabilities available for the Gulf of Mexico in other  federal waters, such as those along the Alaskan coast, we reviewed  documents and interviewed officials from Interior responsible for  permitting in Alaskan waters as well as operators and industry groups.
We conducted this performance audit from April 2011 to January 2012, 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: Background
paragraphs: According to a 2010 Interior study, 97 percent of oil and gas production in  federal waters occurs along the U.S. outer continental shelf of the Gulf of  Mexico. The outer continental shelf is the submerged lands outside the  territorial jurisdiction of all 50 states but within U.S. jurisdiction and  control. The outer continental shelf contains an estimated 85 billion  barrels of oil, and over half of this oil is located in the Gulf of Mexico.Significant reserves also exist in the outer continental shelf off Alaska.
Interior is responsible for the oversight of oil and gas activities on the U.S.  outer continental shelf, which includes submerged lands in federal waters  off the coast of Alaska, in the Gulf of Mexico, and off the Atlantic and  Pacific coasts.in the outer continental shelf for mineral development, including oil and  gas exploration and production. The lease holder may operate the well or  may hire other companies to perform drilling operations and other related  services. Operators submit a series of documents to Interior for approval  to drill, including an application for permit to drill and an oil spill response  plan. In October 2010, Interior promulgated certain new requirements for  the application for permit to drill process designed to prevent a blowout  including, among other things, requiring independent third-party  verification that the subsea blowout preventer is compatible with the  specific well location and well design. The oil spill response plan is to  include an operator’s proposed methods for ensuring that oil spill  containment and recovery equipment and response personnel are  mobilized and deployed in the event of a spill. This plan is to be  implemented immediately following a spill. The plan is also to include an  inventory of spill response resources such as materials and supplies,  services, equipment, and response vessels available locally and  regionally, as well as a description of the operator’s procedures for  conducting monthly inspections and necessary maintenance of recovery  equipment. As part of its oversight responsibilities, Interior is required to  conduct scheduled and unscheduled inspections of offshore facilities,  such as drilling rigs and production platforms. Equipment scheduled for  inspections includes equipment designed to prevent or alleviate blowouts,  fires, spillages, or other major accidents.
As part of its responsibilities, Interior leases blocks of land  Also under its oversight responsibilities, Interior issues guidance called a  Notice to Lessees and Operators to clarify, supplement, or provide more  detail about certain requirements, including requirements for applications  for permit to drill. In response to the Deepwater Horizon incident, Interior  issued a number of these notices, which, among other things, notified  operators that Interior would be evaluating whether they had submitted  adequate information about their well containment capabilities with their  oil spill response plans. Specifically, in a November 2010 notice, Interior  informed operators that it would evaluate whether operators could  demonstrate that they had access to and could deploy well containment  resources that would be adequate to promptly respond to a blowout or  other loss of well control. This notice applies only to operators conducting  operations using subsea blowout preventers, which are devices placed on  wells to help maintain control over pressures in the well, or blowout  preventers on floating facilities. Operators provide information on their  well containment capabilities to Interior in a collection of documents that  compose a well containment plan. According to Interior officials, all  approved applications for permit to drill subject to the November 2010  notice have included a well containment plan. For additional information  on the types of information operators provide in their well containment  plans, see appendix I.
There are three phases to produce oil or gas from a subsea well: drilling,  completion, and production. During the drilling phase, operators drill a  hole, called the wellbore, from the seafloor down to the reservoir of oil or  gas. Early in this phase, a blowout preventer is placed on top of the  wellhead, which, in turn, is installed on top of the wellbore to provide an  interface between the wellbore and other equipment. A large-diameter  pipe called the riser connects the drilling rig to the blowout preventer, and  the drill pipe, drill bit, drilling mud, and casing are routed down to the well   Industry officials we spoke with  through the riser and blowout preventer.said that during the drilling phase, operators must constantly balance the  pressure of the drilling mud inside the wellbore with the pressure from the  surrounding formation thousands of feet below the seafloor. Interior  officials explained that during this phase, operators may encounter a  number of unknown well conditions, which if not controlled or corrected  could pose a risk of a blowout. During a blowout, operators close the  valves in the blowout preventer in an attempt to seal the wellbore and  prevent oil and gas from escaping to the surface. Figure 1 illustrates the  drilling phase.
In the second phase, known as completion, the operator opens the  wellbore to allow the flow of oil and gas from the reservoir, and installs  equipment at the top of the wellbore to control and collect the oil and gas.  The third phase is production, the extraction of oil or gas from the well.
The difficulty of the drilling process can vary depending on the depth of  the seafloor as well as the depth of the reservoir. According to a 2010  Interior study, the majority of oil production in the Gulf of Mexico occurs in  deep water, which the study defined as 1,000 feet or more below sea  level. and gas compared with wells in shallower water, in part because high  reservoir pressures contribute to well productivity. These high pressures  also make drilling deepwater wells significantly more dangerous than  drilling shallow wells because, among other things, the increased  pressure can exacerbate the effects of a blowout and make a well  containment response more challenging. In the case of the well that the  Deepwater Horizon was drilling, the seafloor was nearly 5,000 feet below  sea level, and the operator, BP, drilled an additional 13,000 feet below  the seafloor to reach the reservoir.
According to a 2011 report by the National Commission on the BP Deepwater Horizon  Oil Spill and Offshore Drilling, companies and governmental organizations have adopted  definitions for deepwater ranging from 600 to 1,500 feet. that is specifically designed to cap a well after a blowout.blowout preventer is designed to manage drilling operations and prevent  a blowout, a capping stack is designed to be deployed after a subsea  blowout has already occurred. At the time of the Deepwater Horizon  incident, there were few capping stacks in existence, and capabilities to  support subsea well containment were limited.
section_title: Industry Has Improved Its Capabilities for Subsea Well Containment in the Gulf of Mexico
paragraphs: Since the Deepwater Horizon incident, the oil and gas industry has  improved its capabilities to respond to a subsea well blowout in the Gulf  of Mexico. In particular, operators have formed two new organizations  that are expected to offer improved well containment capabilities,  including more effective equipment and services, and expertise to  member operators in the event of a well blowout. The subsea well  containment capabilities available for the Gulf of Mexico consist primarily  of existing technologies that have been modified to support well  containment.
subsections: section_title: Two Industry Organizations Provide Subsea Well Containment in the Gulf of Mexico
paragraphs: Following the Deepwater Horizon incident, two not-for-profit organizations  of oil and gas companies—the Marine Well Containment Company  (MWCC) and the Helix Well Containment Group (HWCG)—formed to  provide subsea well containment capabilities and support to operators in  the Gulf of Mexico that enter into contracts with them. Once under  contract and in the event of a spill, each of these well containment  organizations is to provide certain containment equipment and services— capping stacks, vessels, and other resources necessary to respond to a  subsea blowout—that operators can customize to their well containment  needs. Equipment and services provided by these well containment  organizations were developed in consultation with Interior and have been  a key part of the well containment plans that operators submit to Interior,  according to Interior officials. All of the operators subject to Interior’s  November 2010 notice that have received permission to drill in the Gulf of  Mexico since the moratorium was lifted have contracted with one or both  of these well containment organizations to provide certain well  containment equipment and resources in the event of a subsea blowout,  according to these officials.
In general, MWCC members include some of the largest operators with  oil and gas exploration and production activities in the Gulf of Mexico,  such as ExxonMobil, ConocoPhillips, Chevron, and Shell, and HWCG  members include operators of various sizes. Some operators are  members of both groups. More specifically:
MWCC operates as an independent, stand-alone company where  each of its 10 members has equal ownership and voting rights, and  according to MWCC representatives, its members drilled  approximately 70 percent of deepwater wells drilled in the U.S. Gulf of  Mexico from 2007 through 2009.
HWCG is a consortium of 24 operators, which, according to HWCG  representatives, represent approximately 80 percent of the deepwater  operators in the Gulf of Mexico. HWCG was created around the well  containment capabilities offered by one deepwater services company  whose equipment was used in the response to the Deepwater Horizon  incident.
According to representatives from both well containment organizations,  members also commit to mutual aid agreements in which operators agree  to provide equipment or other support to consortium members that  experience a subsea well blowout. Representatives of the well  containment organizations said that both HWCG and MWCC also offer  services to nonmembers on a fee basis. Furthermore, representatives of  the well containment organizations we spoke with generally agreed that  should another incident like Deepwater Horizon occur, industry would  mobilize to make available all of the equipment and services necessary to  ensure a quick and effective response.
In addition to equipment and services, both MWCC and HWCG provide  overall plans that identify how the equipment and services are to be  deployed and used; a schedule of activities to be followed; various  contingencies for high-risk activities, such as straightening a bent  wellhead that may have been damaged by a blowout; and names and  contact information for technical experts who may be called on as  required. According to Interior officials, operators would need to  customize the well containment organizations’ overall plans to their  specific well design. For example, the well pressure would determine the  specifications of the capping stack, and the depth of the well would  specify which ships have cables long enough to reach it. These  customized plans comprise some of the documents in the well  containment plans that operators submit to Interior. However, operators  may need additional equipment and services that the well containment  organizations do not provide. For example, the well containment  organizations provide capping stacks for well containment, but in some–– if not all––cases the operator must identify a separate service provider to  transport the capping stack to the site and deploy it to the well. In their  well containment plans, operators also identify other needed equipment  and services that may not be provided by the well containment  organization, including debris removal equipment, remotely operated  underwater vehicles, which are controlled from surface vessels and used  to, among other things, clear debris, and apply chemicals called  dispersants that are used to disperse leaked oil.
section_title: Subsea Well Containment Capabilities Available for the Gulf of Mexico Consist Primarily of Modifications to Established Technologies
paragraphs: The subsea well containment capabilities that MWCC and HWCG offer  for the Gulf of Mexico consist primarily of established technologies that  have been modified to support well containment. For example, according  to industry representatives, capping stacks are devices similar to  previously used blowout preventers and contain many of the same  components. According to representatives from the two well containment  organizations, the well containment capabilities (i.e., equipment,  procedures, and processes that MWCC and HWCG would activate in the  event of a subsea blowout in the Gulf of Mexico) incorporate established  technologies commonly used for offshore well drilling. Well containment  capabilities in the Gulf of Mexico include the following:  containment equipment, including capping stacks used to shut in a  well, and containment domes and top hats that are used to collect  escaping oil and gas and flow them to the surface;  subsea support systems, such as riser systems that direct captured oil  and gas to surface vessels in the event that the well cannot be shut in  completely; utility equipment, such as dispersant injection systems,  hydrate inhibitor systems, and hydraulic power systems; manifolds  and connection systems; and remotely operated vehicles; and  surface vessels, such as multipurpose containment response vessels  that can be configured to conduct a variety of drilling or containment  activities, production vessels that can process captured oil, storage  tankers to transport the captured oil, and other support vessels used  to distribute dispersants and control remotely operated underwater  vehicles.
Figure 2 illustrates a subsea well containment response system.
A key component of both MWCC and HWCG’s response capability is a  capping stack. According to industry representatives, capping stacks are  essentially lighter, specialized versions of blowout preventers that use  similar components to stop or control the flow of oil and gas. The capping  stacks built for MWCC and HWCG are designed to withstand the high  pressures experienced in deepwater reservoirs—up to 15,000 pounds per  square inch for the most recent capping stacks. These stacks can be  deployed to 10,000 feet below sea level. Most capping stacks have  multiple outlets that allow oil and gas to be routed to surface vessels and  processed. Capping stacks are usually deployed on top of the blowout  preventer but can also be installed on other points, including the  wellhead. Industry representatives told us that fittings between connection  points are generally standardized but that capping stacks can be modified  with different fittings to allow for proper installation. Once a capping stack  is installed, depending on the scenario, the containment plans typically  call for slowly closing each of the outlets until the well is closed. In some  cases, operators may also be able to deploy dispersants into or around  the capping stack to help break up the oil (see fig. 3).
Capping stacks are a primary component of HWCG and MWCC well  containment capabilities, but Interior officials told us that it does not  require operators to use any particular technology in the Gulf of Mexico.  Instead, Interior expects operators to demonstrate that they have the  capability to control a well with a capping stack or some other functionally  equivalent technology, and according to Interior officials, capping stacks  have demonstrated that capability. Industry representatives told us that  capping stacks are tested periodically and physically located near staging  points around the Gulf of Mexico, where they can be moved offshore  rapidly. When not needed, they are stored onshore and not used for any  other purpose. Representatives from both HWCG and MWCC told us that  both of their organizations have multiple capping stacks ready for  deployment.
In addition to capping stacks, well containment capabilities rely on other  equipment and services to transport the capping stack to the well site,  assist with debris removal, and collect oil and gas from the capping  stack.gas from the capping stack or other collection devices, vessels with lift  and hoist capabilities to position and move the capping stack, control  ships with electronics to monitor the pressures and status of the capping  stack, and remotely operated vehicles that perform a variety of subsea  operations. In their well containment plans, operators provide Interior with  a list of this other equipment as well as how it could be utilized and  positioned at the blowout location.
section_title: Interior Has Issued New Guidance and Is Documenting Many of Its Oversight Processes, but Has Not Documented a Time Frame for Testing Operators’ Responses to a Subsea Blowout
paragraphs: Following the Deepwater Horizon incident, Interior issued new guidance  that identified information operators are to provide to demonstrate well  containment capability, but Interior has not fully documented its internal  process for reviewing this information. Also, the well containment plans  that operators submit to Interior as part of the permitting process identify  equipment, such as a capping stack, that would be needed for well  containment response, but Interior has not yet documented its process for  ensuring that this equipment is regularly inspected and available. Finally,  while Interior has conducted two unannounced spill drills that  incorporated scenarios for well containment, it has not documented a time  frame for incorporating these tests in the future.
subsections: section_title: Interior Issued New Guidance and Is Documenting a Process for Providing Oversight
paragraphs: Interior issued guidance following the Deepwater Horizon incident that  identifies information that operators are to provide to demonstrate they  can respond adequately and promptly to a blowout or other loss of well  control, but the agency has not documented its process for reviewing the  information it receives. A Notice to Lessees and Operators issued on  November 8, 2010, after Deepwater Horizon, identifies specific  information, including types of well containment equipment accessible to  the operator in the event of a spill, that operators are to provide to Interior  to ensure that operators’ spill response plans are adequate. Interior  issued subsequent supplemental guidance on the November 2010 notice  on December 13, 2010, explaining that it would review this information as  part of the application for permit to drill approval process. For example,  operators are to provide information describing their plans to use capping  stacks; containment domes; subsea utility equipment, including hydraulic  power, hydrate control, and dispersant systems; riser systems; remotely  operated underwater vehicles; and oil collection vessels. Operators may  satisfy these new information requirements by submitting a well  containment plan as part of their oil spill response plans.
Interior officials told us that they discuss their expectations for the  contents of these plans with individual operators but noted that the  agency has not finalized documentation of these expectations or  completed the documentation of its internal process for reviewing these  plans. Interior officials who review these plans have developed a one- page checklist outlining the types of information they review, but the  checklist does not provide criteria for assessing the information. For  example, the checklist asks “Does the plan adequately address debris  removal?” but does not provide criteria for determining whether the  information the operator included is adequate. These officials said they  are in the process of documenting their review process and expect to  have the documentation in place by spring 2012.
Under the Standards for Internal Control in the Federal Government,  federal agencies are to employ control activities, such as to clearly  document internal control in management directives, administrative  policies, or operating manuals, and the documentation is to be readily  available for examination. Interior officials told us that the agency plans  to transfer the responsibility for reviewing well containment plans to  another office in 2012, and will document the review process before that  time. In the meantime, Interior officials told us that they rely on the  expertise and judgment of staff to perform these reviews and  communicate their expectations to operators. Until the agency completes  a documented review process, Interior cannot provide reasonable  assurance that well containment plans will be reviewed consistently.
In addition to the new guidance issued since the Deepwater Horizon  incident, as part of Interior’s review of well containment plans, Interior and  operators use a new software tool to analyze a proposed well’s design  and its ability to withstand increased pressures that result when an  uncontrolled well is closed by a capping stack. In certain situations,  capping the well shut could cause portions of the well to burst, potentially  allowing oil and gas to flow up through the seabed and releasing oil and  gas into the sea from outside the wellbore. This new software tool, called  the well containment screening tool, helps Interior and operators evaluate  whether a well could be closed using a capping stack and still maintain  wellbore integrity. The development of this screening tool was initiated by  Interior and completed with input from the oil industry. The screening tool  analyzes potential well integrity and risk based on various factors  including well design, geological characteristics, reservoir pressures, and  wellbore fluid gradients. Interior provides the tool to operators and then  reviews each operator’s analysis of expected wellbore integrity; following  this review, Interior may advise operators to adjust screening tool  parameters when appropriate. According to Interior officials, on at least  12 occasions, an operator strengthened its wellbore design based on the  results of the screening tool. Industry representatives we met with also  said that the screening tool was valuable for helping address the risks  associated with a subsea blowout by requiring operators to document  their well design decisions and have those decisions reviewed by Interior.  According to Interior officials, in some cases, Interior may have access to  a wider set of data on the geological characteristics of the area than the  operator. In these cases, Interior can advise the operator on the need to  modify its well design.
section_title: Interior Is Documenting Its Process to Ensure Equipment Is Inspected and Available, but Has Not Documented a Time Frame for Incorporating Well Containment Scenarios into Unannounced Spill Drills
paragraphs: As previously stated in this report, since the Deepwater Horizon incident,  the well containment plans that operators submit to Interior as part of the  permitting process identify equipment that the operator plans to use to  contain subsea well blowouts. However, Interior does not have a fully  documented process and associated schedule to ensure that the  equipment is regularly inspected and available for deployment. Interior  regulations that have been in place since before the Deepwater Horizon  spill specify that operators are to submit an oil spill response plan that  identifies procedures the operator is to follow in the event of a spill,  including methods to ensure the availability of oil spill response  equipment and an inventory of this equipment and the operator’s  procedures for conducting monthly inspections. Interior is also required to  conduct inspections of offshore facilities and response equipment. Interior  has scheduled inspections of surface response equipment but has not  scheduled regular inspections of well containment equipment. Interior  officials we met with told us that they have observed officials from the well  containment organizations conducting certain tests of all capping stacks  identified in well containment plans approved for the Gulf of Mexico.  These tests include pressure tests to ensure that the capping stack can  withstand well pressures, and functional tests to ensure that components  operate properly. However, Interior officials told us that the agency does  not have a regular schedule for inspecting such equipment and does not  specify what tests should be conducted to ensure that the equipment is in  operational condition. The officials added that by June 2012 Interior plans  to have a process that (1) establishes a schedule for testing equipment  and (2) identifies the tests that will be conducted as part of the agency’s  oversight of operator readiness to respond to a subsea event.
While Interior does not have a documented process for monitoring the  availability of equipment that operators identify in their well containment  plans, this concern is somewhat mitigated by the number of vessels and  capping stacks located in the Gulf of Mexico that could aid a well  containment response in the event that dedicated equipment is  unavailable. Interior officials told us that they expect well containment  plans to list multiple replacement vessels and equipment to demonstrate  this redundancy, and these officials believe this sufficiently mitigates the  possibility that resources could be unavailable in the event of a subsea  blowout. In addition, Interior relies on operators to inform them when well  containment equipment is unavailable, and industry representatives told  us that the two well containment organizations are to inform their  members and Interior when critical equipment is out of service.
In addition, Interior has not determined the extent to which it will conduct  drills to test operators’ abilities to respond to a subsea well blowout.  Interior’s regulations provide for periodic unannounced drills to test the  spill response preparedness of operators, but Interior has not set a time  frame for incorporating well containment scenarios into these exercises  that would test operators’ abilities to implement their well containment  plans. Interior conducts these drills to, among other things, test an  operator’s ability to notify the appropriate entities and personnel in the  event of a spill, including federal regulatory agencies, affected state and  local agencies, internal response coordinators, and response contractors,  and to take appropriate action to implement the operator’s response plan.  If the decisions made during the drill do not align with the approved oil  spill response plan, the drill provides an opportunity to determine what  needs to change in the response process. In September 2011, Interior  conducted its first unannounced spill drill that included a subsea well  containment scenario, and held a second unannounced drill in December  2011. According to Interior officials, the agency plans to incorporate  subsea well containment scenarios in certain future unannounced spill  drills with operators. According to these officials, Interior staff have  observed well containment exercises conducted by the two well  containment organizations in the Gulf of Mexico. However, Interior has  not tested most operators’ ability to respond to a subsea blowout, and has  not established a time frame to incorporate these tests into unannounced  spill drills. Until Interior sets a time frame for incorporating well  containment scenarios into unannounced spill drills, there is limited  assurance that operators are prepared to respond to a subsea blowout.
section_title: Subsea Well Containment Capabilities Available for the Gulf of Mexico Could Be Used in Other Federal Waters, but Environmental and Logistical Risks Differ
paragraphs: Subsea well containment capabilities similar to what industry offers for the  Gulf of Mexico could generally be used in other federal waters, including  the outer continental shelf off Alaska. Industry officials said that they are  developing a well containment response capability for use in this region.  Moreover, operators of subsea wells off the Alaskan coast are likely to  face operating conditions that pose different environmental and logistical  risks than those faced in the Gulf of Mexico and may require modified  blowout response plans.
subsections: section_title: Capabilities Available for the Gulf of Mexico Could Be Used in Other Regions
paragraphs: According to industry representatives and Interior officials we spoke with,  capping stacks and other equipment available to respond to blowouts in  the Gulf of Mexico could be used in other federal waters. For example,  because capping stacks are installed on top of the wellhead or blowout  preventer, they are not affected by the condition of the seafloor, so they  could be used in other regions. Industry representatives explained that  the connection points between subsea devices like wellheads, blowout  preventers, and capping stacks are mostly standardized and that these  connections can be exchanged on a capping stack to ensure a proper  fit.officials and industry representatives told us that capping stacks  developed for use in the Arctic would not need to manage the same  pressures as capping stacks developed for use in the Gulf of Mexico  because reservoir pressures in the Gulf of Mexico are generally much  higher.
section_title: Industry Is Developing Well Containment Capabilities for the Alaska Outer Continental Shelf
paragraphs: For the past two decades, the majority of subsea oil and gas exploration  and production in U.S. waters has occurred in the Gulf of Mexico;  however, in 2010, Shell Oil submitted plans to Interior to drill in the waters  north of Alaska as early as the summer of 2012. In August 2011, Interior  conditionally gave approval to Shell Oil to drill exploratory wells along the  north shore of Alaska in the Beaufort Sea, pending receipt and approval  of Shell’s well containment plans and other requirements. In December  2011, Interior conditionally gave approval to Shell to drill in the Chukchi  Sea, again pending receipt and approval of Shell’s well containment plans   If Shell submits these materials to Interior and  and other requirements.Interior approves them, Shell could begin drilling in these areas early as  the summer of 2012. Figure 4 illustrates the location of the Beaufort and  Chukchi Seas relative to Alaska and the Arctic Circle.
According to Shell representatives, the company is still developing the  capabilities that it will need to support well containment operations in the  Beaufort and Chukchi Seas. These capabilities are to include a capping  stack similar in design and functionality to capping stacks already  inspected and approved for use in the Gulf of Mexico.stack has been specifically designed for use in Arctic waters and,   Shell’s capping  according to Shell representatives, is expected to be completed by April  2012.
According to Shell representatives we spoke with, Shell is to have  dedicated capping and containment capabilities at sea and ready for  deployment. In the event of a subsea well blowout, Shell will deploy a  capping stack as its primary response. The capping stack is to be housed  on an icebreaking vessel supporting drilling operations in the Beaufort  Sea, according to the Shell representatives. The icebreaking vessel is to  have the lifting capability to deploy the stack onto an uncontrolled well.  Shell representatives said that if a blowout occurred on a well in the  Chukchi Sea, operations in the Beaufort Sea would be shut down and the  icebreaking vessel with the capping stack and other supporting vessels  would be deployed from the Beaufort Sea to the Chukchi Sea. Likewise,  in the event of a well blowout in the Beaufort Sea, Shell would cease  operations in the Chukchi Sea and send support vessels to assist  operations in the Beaufort Sea.
section_title: Alaska’s Operating Conditions Pose Risks to Subsea Well Containment
paragraphs: Subsea drilling operations in Alaska will face operating conditions that  greatly differ from those in the Gulf of Mexico and may pose unique risks.  For example, the Beaufort and Chukchi Seas are inside the Arctic Circle,  with cold and icy conditions for much of the year and with few daylight  hours during the winter. Interior and Coast Guard officials said that a well  containment response in Alaskan waters might face certain risks that  could delay or impede a response to a blowout. For example, if a  blowout were to occur at the end of the drilling season in late October,  surface ice and temperatures could pose risks to a well containment  response.
Even with Shell’s plans to have dedicated capping stack and well  containment capabilities in the region to provide rapid response in the  event of a blowout, these dedicated capabilities do not completely  mitigate some of the environmental and logistical risks associated with  the remoteness and environment of the region. Environmental challenges  include the following:
Surface ice. According to Interior officials, Shell proposes to drill from  July 15 through October 31, except for a period in late August to allow  for whale hunting by the indigenous population. A regional drilling  expert told us that if a blowout occurred late in the season, icy  conditions in November and December could make well containment  challenging. Shell plans to maintain an icebreaking vessel at each  drilling site to conduct ice management operations, but these  conditions could still pose a challenge to well containment response.
Ice scouring. In addition to ice that can accumulate on the surface of  the ocean, in shallow waters, floating ice can scrape along the surface  of the seafloor. This has the potential to damage the wellhead and  blowout preventer, as well as other well containment equipment on  the seafloor. Shell representatives told us that Shell will place the  wellhead and blowout preventer in a hole on the seafloor to prevent  damage from ice scouring. However, this does not eliminate the  possibility that the capping stack or other equipment placed on or  above the seafloor, such as dispersant systems or risers, could be  obstructed or damaged by floating ice.
Logistical challenges include the following:
Limited infrastructure. Shell officials told us that they will have self- sufficient, dedicated subsea well containment capabilities situated on  vessels in the Arctic seas during drilling operations. Nonetheless,  these officials told us that additional personnel would be needed to  respond to a subsea well blowout. Moving personnel to the site could  delay a response, since harbors, airstrips, and hotels necessary to  support personnel are limited in number and size along Alaska’s  northern shore. The facilities are also generally much farther from the  drilling sites than they are in the Gulf of Mexico, and harbors and  airstrips have much less capacity to move and support response  personnel.
Lack of redundant vessels and equipment. According to Interior  officials, because of the low rate of offshore production in the outer  continental shelf off Alaska compared with the Gulf of Mexico, there is  not an established industry in Alaska to manage subsea oil production  or respond to a subsea blowout. Therefore, the availability of vessels  and equipment to provide additional support to respond to a subsea  well blowout may be limited. For example, we reported in October  2010 that U.S. Coast Guard infrastructure and assets for Arctic  missions are limited, including by fuel capacity, distance to fuel  sources, and crew rest requirements. Shell representatives told us  that the company plans to have two concurrent drilling operations  capable of providing mutual assistance, but there are few additional  resources available in the region to respond in the event that Shell’s  capabilities are insufficient.
Because Interior has not seen or evaluated Shell’s well containment plans  and other required documents, it is too early for us to evaluate Interior’s  oversight of oil and gas development and well containment capabilities in  Alaskan waters. However, the existence of different types of risk and the  limited response infrastructure pose additional challenges Interior will  have to address to conclude that it is providing sufficient oversight.
section_title: Conclusions
paragraphs: Since the Deepwater Horizon incident, Interior has strengthened its  oversight of the oil and gas industry’s ability to respond to a subsea well  blowout, and industry has responded by improving well containment  capabilities and creating dedicated well containment organizations.  Interior is developing and documenting oversight processes, and in some  cases has established time frames for completion. For example, while  Interior has not fully documented its well containment plan review  process, Interior officials told us that they expect to have documentation  in place by spring 2012. Interior has also not established a regular  inspection process for well containment equipment listed in well  containment plans, but Interior officials told us that they are developing  such a process for this equipment and plan to have it in place by June  2012. Similarly, Interior does not have a documented process for  monitoring the availability of equipment identified in operators’ well  containment plans, but Interior requires operators to list multiple and  redundant vessels and equipment in their well containment plans, and  Interior officials believe this sufficiently mitigates the risk if certain  equipment is unavailable. The availability of redundant vessels and  equipment found in the Gulf of Mexico does not exist in Alaska, however,  and is something that Interior will need to consider as it receives and  evaluates Shell’s plans to drill in waters off Alaska. Finally, Interior has  conducted two unannounced spill drills that have included a subsea well  containment scenario, and Interior officials told us it will incorporate these  scenarios into future spill drills. However, Interior has not established a  time frame for incorporating subsea well containment scenarios into spill  drills and until it does so, there is limited assurance that operators drilling  in the Gulf of Mexico or other areas will be prepared to respond to a  subsea well blowout.
section_title: Recommendation for Executive Action
paragraphs: To help ensure that operators are prepared to respond to a subsea  blowout, we recommend that the Secretary of the Interior document a  time frame for incorporating well containment response scenarios into  unannounced spill drills.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to the Department of the Interior for  review and comment. We received written comments from Interior’s  Acting Assistant Secretary for Land and Minerals Management, which are  reproduced in appendix II. The Acting Assistant Secretary concurred with  our recommendation, stating that Interior agrees that well containment  response scenarios that test operator responses to subsea blowouts  should be a regular element in its annual plan for unannounced spill drills.  The Acting Assistant Secretary also provided technical comments, which  we have incorporated as appropriate.
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If you or your staff have any questions about this report, please contact  Madhav Panwar at (202) 512-6228 or panwarm@gao.gov or Frank Rusco  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 report. GAO staff that made major contributions to this report are  listed in appendix III.
section_title: Appendix I: Supplemental Information on Typical Components of Well Containment Plans
paragraphs: We reviewed seven well containment plans submitted by operators. Four  of the plans relied on Helix Well Containment Group (HWCG) equipment  and three on Marine Well Containment Company (MWCC) equipment.  The equipment listed below comprises some of the key components that  could be used to respond to a well blowout and were included in the well  containment plans that we reviewed.
subsections: section_title: Capping Stacks
paragraphs: A capping stack is a device that helps cap a well—called well shut-in—to  bring a well under control after a blowout. It is designed to sit on top of  other equipment that sits on top of a subsea well, such as the wellhead or  a blowout preventer, and forms a high-pressure seal around the well.  Capping stacks have a combination of gate or ram valves to block fluid  flow. Capping stacks also have side outlet valves that can allow for the  partial flow of oil, reducing the pressure in the wellbore, if needed. For  instance, if the well containment screening tool indicates wellbore integrity  will not allow for a full well shut-in, the side outlet valves will be used to  direct flow to the surface capture vessels as necessary. In this scenario,  a procedure known as “flow and capture” could be used to partially flow  the oil to a surface vessel for processing and transport.
The technical features of all capping stacks designed and developed for  the Gulf of Mexico are similar and made from pre-engineered  components commonly used in the oil industry. Capping stacks typically  feature multiple rams for redundancy. Some stacks are rated for well  pressures up to 15,000 pounds per square inch (psig) and can operate in  water depths of up to 10,000 feet. Capping stacks vary somewhat in  height but are generally about 30 feet tall and weigh approximately 100  tons.
In response to Deepwater Horizon, the global oil industry formed  initiatives and advisory groups to design and develop capping stacks.  Capping stacks that are ready for deployment include the following:  Other containment devices, including top hats, caissons, and cofferdams,  are used to collect or contain the flow of oil from the wellhead when a  capping stack cannot be connected, such as when a secure seal cannot  be achieved. A top hat provides a low-pressure seal and allows for a  limited collection of oil. A top hat is typically a temporary measure used  while the operator is evaluating or preparing alternative options. A  caisson creates a soft seal with the seabed—similar to a top hat––by  covering the damaged blowout preventer. A cofferdam provides no seal  to the seabed or the damaged blowout preventer.
section_title: Hydraulic Control System
paragraphs: A hydraulic control system is used to operate subsurface equipment, such  as to close rams on a capping stack.
section_title: Subsea Debris Removal Equipment
paragraphs: Debris removal equipment, such as shears for cutting pipes and remotely  operated vehicles, is used to remove debris from around a well, such as  pipes that have fallen to the seafloor following a blowout. In the event of a  blowout, debris may need to be removed to access the blowout preventer  and riser system to install the capping stack.
section_title: Subsea Utility Equipment
paragraphs: This equipment consists of a seafloor distribution system for injecting  hydrate inhibitor chemicals and dispersants directly into the flowing oil to  suppress hydrate formation and disperse the oil.needed to transport and deploy these chemicals.
section_title: Well Containment Riser Systems
paragraphs: Risers used for well containment consist of tubing that enables access to  an offshore well for emergency intervention. These riser systems allow  the oil flowing through the side outlet lines of a capping stack to be routed  to the surface for collection and further processing. Risers are used when  operators determine that it is not safe to completely shut in the well  because of the potential to compromise well integrity. In this instance,  risers are attached to a capping stack, after which the well may be killed  from the top––known as a top kill––by funneling mud through the risers  and down into the wellbore.
section_title: Support Vessels
paragraphs: These vessels include oil capture vessels; support vessels, such as those  needed to deploy the capping stack; remotely operated underwater  vehicles; and oil storage facilities. According to MWCC and HWCG,  during a flow and capture procedure, these vessels are capable of  handling up to 60,000 barrels of liquid and up to 120 million standard  cubic feet of gas per day.
section_title: Well Kill and Abandonment Procedures
paragraphs: These procedures seek to successfully kill the well without compromising  the well’s integrity. If the well’s analysis determines that its integrity  would be intact under top kill conditions, then the top kill option is  generally used. However, if the operator determines that a top kill may  cause surface broaching, flow and capture is used while the operator  evaluates options for drilling a relief well to permanently kill the well.well is then plugged with cement and, once the wellbore pressure  indicates that the well has been killed, the capping stack and blowout  preventer are removed to the surface.
section_title: Appendix II: Comments from the Department of the Interior
section_title: Appendix III: GAO Contacts and Staff Acknowledgments
subsections: section_title: GAO Contacts
section_title: Staff Acknowledgments
paragraphs: In addition to the contacts named above, Bill Carrigg, Assistant Director;  Christine Kehr, Assistant Director; David Bennett; Antoinette Capaccio;  Nirmal Chaudhary; David Messman; Alison O’Neill; and Kiki  Theodoropoulos made key contributions to this report.