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Erik Milito's testimony before the Senate Committee on Energy and Natural Resources regarding Well Control Rule and other offshore oil and gas production regulations

As prepared for delivery

Senate Energy and Natural Resources Committee 
Hearing to receive testimony on the Well Control Rule and other regulations related to offshore oil and gas production.
Erik Milito
Group Director, Upstream and Industry Operations, API
December 1, 2015

Good morning Chairman Murkowski, Senator Cantwell and members of the committee. My name is Erik Milito and I am Director of Upstream and Industry Operations for the American Petroleum Institute. My responsibilities include advocating for the advancement of safety in offshore operations.

Safe, responsible energy development in the Gulf of Mexico and beyond is vital to the U.S. economy and job growth, and to U.S. energy and national security. The U.S. Energy Information Administration projects that our economy will rely upon oil and natural gas for more than half of our energy needs for decades to come, and the U.S. offshore will continue to play a key role in supplying those resources. Today the offshore accounts for about 1.4 million barrels of oil per day, and makes up about 16 percent of our nation’s total oil production. As we move forward, we must work to ensure that we have a regulatory system in place for the U.S. offshore -- including offshore Alaska -- that promotes the safe development of our energy resources.

Fortunately, today we have a strong system in place to safely develop those resources. Over the past half decade, joint efforts from our industry and the federal government have resulted in significant enhancements in the safety of offshore operations.

A comprehensive review after the 2010 spill has led to improved spill prevention, subsea containment and response capabilities. More than 100 exploration and production industry standards were strengthened or enhanced, including standards for safety and environmental management, well design, blowout prevention and spill response. And today, our industry can rapidly deploy the most advanced subsea well containment technology available.

We have also created the Center for Offshore Safety to advance our industry’s safety improvement goals. The Center for Offshore Safety builds on our industry’s strong safety culture, through the completion of safety system audits and by sharing best practices for safe and responsible energy production, some of which have already been incorporated into federal regulations.

Likewise, the government has stepped up to the plate by drafting various new regulations, including new rules related to safety and environmental management systems, well integrity, and blowout prevention. The Interim Final Drilling Safety rule was published in October 2010 and revised in 2012. The government also has new requirements in place for the demonstration of adequate spill response capability and well containment resources. Congress has taken positive steps as well by dedicating funding for offshore enforcement activities.

However, we remain concerned about various regulatory activities related to offshore energy development -- specifically proposed rules for well control and Arctic operations. In both cases, certain proposed requirements may not appreciably improve safety in offshore operations. In fact, various provisions of the proposed well control rule could actually serve to increase risk and reduce safety. Our goal is to constantly improve operations integrity and decrease risk, but many of the requirements proposed in this rule could create unintended consequences that would shift risk rather than decrease it.

As it relates to the Arctic, it is clear that we have time to make sure that any regulations that are published achieve the objectives of promoting energy development and protecting our workers and the environment. The National Petroleum Council, at the request of the Secretary of Energy, released a report earlier this year that concluded:

“Oil and gas exploration and development in the Arctic is extensively regulated. … Progressing offshore development in the Arctic would require around 60 permit types through 10 federal agencies. Regulations should be adaptive to reflect advances in technology and ecological research, and achieve an acceptable balance considering safety, environmental stewardship, economic viability, energy security, and compatibility with the interests of local communities. Prescriptive regulation may inhibit the development of new, improved technologies by suppressing the potential opportunity that drives advancement.”

As the government finalizes any of its pending regulations, it should ensure that it is not implementing prescriptive requirements that will serve to inhibit innovation and technology advancement.

Our industry has a proven track record of working with the federal government to improve offshore safety. We remain optimistic that dialogue between government and industry experts will continue and the final Well Control Rule will rely on the best technical knowledge to achieve the mutually desired safety objective. With the proposed Arctic rule, the government has denied our request for continued engagement and dialogue, but we are hopeful they will reconsider.

Thank you for your time and I look forward to any questions.