Oil and Gas: Interior Has Strengthened Its Oversight of Subsea Well Containment, but Should Improve Its Documentation
Released: 2012-03-30T00:00:00

Letter

Background

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.

Industry Has Improved Its Capabilities for Subsea Well Containment in the Gulf of Mexico

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.

Two Industry Organizations Provide Subsea Well Containment in the Gulf of Mexico

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.

Subsea Well Containment Capabilities Available for the Gulf of Mexico Consist Primarily of Modifications to Established Technologies

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.

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

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.

Interior Issued New Guidance and Is Documenting a Process for Providing Oversight

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.

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

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.

Subsea Well Containment Capabilities Available for the Gulf of Mexico Could Be Used in Other Federal Waters, but Environmental and Logistical Risks Differ

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.

Capabilities Available for the Gulf of Mexico Could Be Used in Other Regions

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.

Industry Is Developing Well Containment Capabilities for the Alaska Outer Continental Shelf

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.

Alaska’s Operating Conditions Pose Risks to Subsea Well Containment

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.

Conclusions

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.

Recommendation for Executive Action

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.

Agency Comments and Our Evaluation

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.

Appendix I: Supplemental Information on Typical Components of Well Containment Plans

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.

Capping Stacks

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.

Hydraulic Control System

A hydraulic control system is used to operate subsurface equipment, such as to close rams on a capping stack.

Subsea Debris Removal Equipment

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.

Subsea Utility Equipment

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.

Well Containment Riser Systems

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.

Support Vessels

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.

Well Kill and Abandonment Procedures

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.

Appendix II: Comments from the Department of the Interior

Appendix III: GAO Contacts and Staff Acknowledgments

GAO Contacts

Staff Acknowledgments

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.