News

In its new rules for oil and gas drilling in the Arctic, the US has taken the biggest step yet toward a performance-based system that sets clear standards, but allows industry flexibility in how to meet them.

That’s a big difference from most US offshore regulation, which is prescriptive in nature, specifying in almost minute detail how operators must comply and leaving little room for deviation.

It’s an important development, both in the evolution of offshore safety since the devastating 2010 Deepwater Horizon disaster, and in how regulators approach an industry that is using more complex technology to tackle increasingly dangerous frontier environments.

While there are many reasons why operators might return to US Arctic waters, the shift to performance-based standards could help.

Prescriptive rules are sometimes derisively referred to as “checklist” regulation, reflecting their reactive nature that relies on inspectors checking the boxes during inspections.

Performance-based rules, sometimes called a “safety case” approach, by contrast, are proactive, requiring operators to identify upfront the specific risks associated with each new well and then propose how to mitigate those risks.

Last year, the National Petroleum Council, in a study on Arctic potential chaired by ExxonMobil CEO Rex Tillerson, strongly advised adopting a more flexible approach to regulation.

It said that prescriptive rules “can act as a serious barrier” to innovation. And it concluded that a more performance-based system “puts the burden on operators to demonstrate that the technologies and operating  practices…achieve or surpass the specified regulatory objective.”

A similar conclusion was reached by the National Commission on the BP Deepwater Horizon Oil Spill, which reviewed performance, or “risk-based” models in the United Kingdom and Norway.

“The commission saw and was attracted to and impressed by how the performance-based approach requires industry to think more creatively and allows industry to be more innovative,” Commission member Fran Ulmer said in an interview. “Undoubtedly, the Interior Department got educated by the Deepwater Horizon spill.”

The Interior Department’s Bureau of Safety and Environmental Enforcement (BSEE) has been embracing a hybrid approach, adopting a more performance-based approach where appropriate.

But what works so well in Norway and other places may not always...