By LESLIE EATON, STEPHEN POWER And RUSSELL GOLD
NEW ORLEANS—Seven months after the Deepwater Horizon exploded in the Gulf of Mexico, the troubled federal agency that oversees offshore drilling has been revamped, renamed and given a new leader with a mandate to turn what critics called an industry lapdog into an effective watchdog.
But there's at least one big change the agency hasn't made: fixing its deeply flawed inspection program. As it has for four decades, that program sends inspectors armed with little more than checklists and pencils into the Gulf to ensure the safety of more than 3,500 oil platforms and drilling rigs.
A Wall Street Journal examination finds that these inspectors have been overruled by industry, undermined by their own managers and outmatched by the sheer number of offshore installations they oversee. Inspectors come into the job with little or no hands-on experience in deep-water drilling, learning as they go.
The small cadre of 55 or so inspectors, who are largely checking hardware, get good marks for reducing workplace injuries on rigs and platforms. But safety experts say the main causes of major accidents are almost always human error, not the mechanical failures that inspectors focus on. Inspectors aren't looking for signs of systemic safety problems—poor decisions, cutting corners, muddled responsibilities—that investigators are linking to the Deepwater Horizon explosion.
The agency "thought all we needed to do was to go through the motions," says Perry Jennings, a former inspector who is now president of the New Orleans chapter of the American Federation of Government Employees, which represents rig inspectors. "And, guess what? It's come back to bite them."
On Thursday, the staff of the presidential commission looking into Deepwater Horizon issued a scathing critique of how the U.S. oversees offshore drilling. It faulted the government for skimping on money for the agency, called inspector training "inadequate and unacceptable" and recommended a wholesale change in the way the agency approaches safety regulations.
Michael Bromwich, the one-time federal prosecutor recruited by the Obama Administration to revamp the Minerals Management Service, says that most inspectors were diligently doing their jobs.
But, he acknowledges, the effort was inadequate: "As operations offshore became more sophisticated, our inspection regime did not keep pace."
Federal inspectors ?nd thousands of minor and serious violations on drilling rigs and oil platforms every year, but only a tiny fraction of those result in civil penalties.
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How to improve the agency is a matter of dispute. Republican lawmakers caution that throwing more money into the agency wouldn't be a silver bullet and are likely to resist a major funding bump. Mr. Bromwich says the agency, now called the Bureau of Ocean Energy Management, Regulation and Enforcement, has teams of employees and consultants working to redesign the inspection program, and hopes to have a plan by early next year.
While the causes of the Deepwater Horizon disaster remain in question, investigators are pointing to a complex series of human errors, including the design of the well and the failure to recognize problems with cement that was supposed to keep natural gas from flowing into the well. Crucial safety barriers, such as a final cement plug, were not installed or were removed; workers aboard the rig misinterpreted key tests and failed to notice warning signs.
No one knows if a more robust and sophisticated inspection program could have detected these problems or prevented the explosion. But there is broad agreement among safety experts that a massive overhaul is needed to create the kind of inspection program that can help avoid such disasters in the future.
"They need to concentrate more on safety management systems and safety culture as opposed to just on equipment," says Ken Arnold, an engineer who served on an advisory panel that recommended changes to the inspection program back in 1990. "That is a very hard thing to do."
Offshore drilling has changed substantially since the government inspection program was created following a spill off the coast of California in 1969. Oil company engineers onshore can monitor what happens on the rigs and platforms, minute by minute. High-tech equipment and subsea robots allow rigs to float above a well a mile or more under the surface and to drill in freezing temperatures and high pressure into once-unreachable rock formations.
Inspecting, however, has stayed much the same.
Inspectors are mostly former oilfield workers without college degrees, have little formal training and aren't required to pass any certification tests; they are expected to learn their craft by shadowing more experienced peers. They have almost no direct experience in the specialized field of deep-water drilling, and, during offshore inspections, have no access to technology more advanced than a pocket calculator.
Failed inspections seldom result in fines, which tend to be low to begin with. Last year, inspectors wrote up 2,298 violations offshore, but only 87 were referred on for possible fines, according to an Interior Department report. The agency levied civil penalties in 20 cases last year, totaling $919,000—less than the cost of one day's drilling aboard the Deepwater Horizon.
Inspectors can shut down operations for safety reasons, which can cost energy companies far more than the fines. But to do so, inspectors need permission from their managers—and some former inspectors complain about having been overruled.
The agency's inspection manpower for the Gulf of Mexico is concentrated in five district offices stretching 400 miles along the coast from New Orleans to Lake Jackson, Texas, south of Houston.
Much of inspectors' time offshore is spent reviewing paperwork and copying data—such as how much oil is being pumped or dates on which equipment was tested—by hand from printouts and logs. They make sure first-aid kits are on board, and that any open holes in the deck have railings to prevent falls.
They are also supposed to check safety equipment such as gas alarms and watch them being tested by rig workers "as conditions and time permit." Many inspectors use a laminated check-list of potential violations to look out for—the one for drilling includes almost 150 items.
Many inspections are relatively brief. The last inspector to visit the Deepwater Horizon, Eric Neal, spent just two hours on April 1 aboard the high-tech 32,600-ton, multi-level installation. That was about the same amount of time a visiting group of executives would take to tour the rig on April 20, the day of the disaster.
The 33-year-old Mr. Neal had visited the rig only once before, with his father, who was training him and is also an inspector. He told federal investigators that he felt more qualified to inspect the installations that produce oil and gas than he did drilling rigs, which in the last decade have become increasingly high-tech and complex as they have moved into deeper water.
As part of cost-cutting measures in the 1990s, the agency started requiring inspectors to be generalists, rather than specializing in specific types of installations like they used to.
Mr. Neal declined to comment, and the agency would not make him or other inspectors available for interviews.
"In the beginning the job was to make sure people were performing in safe conditions," says Cynthia Thompson, who started out as a technician at the agency in New Orleans more than 25 years ago and says she became its first female inspector in 1997. "I didn't go out to be quick, I'd go out to be thorough."
Offshore workers sometimes resisted her efforts, she says; many energy companies give out bonuses to their workers when inspectors don't write up any violations.
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"I'd tell them, 'I don't live here, you do,'" says Ms. Thompson, who retired at the end of 2004 after being injured in a helicopter accident.
Inspectors and their managers have a long history of being courted—and pressured—by industry executives and low-level rig workers, many of whom went to the same high schools, attend the same churches and cheer for the same little-league teams as the inspectors, former inspectors have said. The coziness also has been noted in reports by the Interior Department's inspector general.
When Mr. Bromwich arrived at the revamped agency in June, he vowed to tackle "the reality and appearance of" conflicts of interest at the agency. He set up an internal investigations unit to root out misconduct, and began requiring inspectors to disqualify themselves when they have personal or family ties to a company. Inspectors on day trips offshore now have to bring their own lunches, and are no longer allowed to accept free food aboard rigs.
The agency is also developing a system to track violations and ensure they're corrected, and has asked Congress to increase civil penalties. Next year, offshore operators will be required to have detailed safety plans that the agency can review and enforce. The agency recommended this policy almost two decades ago but never implemented it.
A new training program is being designed for inspectors, whose number has risen to 58, with seven new hires pending. The plan is to add a total of 30. Mr. Bromwich has gone on trips to five colleges along the Gulf Coast to try to recruit engineering students.
One obstacle: The agency is restricted by federal salary guidelines, and so can't offer competitive pay to attract highly educated inspectors. Salaries for most inspectors start at $47,448. Engineering-school graduates command far more when they go to work for the energy industry. This year's graduates of Louisiana State University's petroleum engineering school, for example, were offered an average of $94,000 for industry jobs.
Some safety experts, including members of the presidential panel investigating the oil spill, have suggested that the agency borrow an approach adopted by the United Kingdom after a 1988 platform explosion killed 167 people.
The approach, known as "safety case," puts the burden on companies to prove to regulators that they have identified risks and developed procedures to cope with them—before the companies can receive permission to drill. Inspectors and auditors are supposed to keep an eye on whether the company is doing a good job policing itself, and whether any deficiencies are being communicated to senior executives.
Mr. Bromwich has said that adopting this approach wholesale would be disruptive for years.
Either way, paying for any changes is likely to be a problem. Congress has given the agency $365 million for the current fiscal year, about $23 million more than last year's budget, but well short of the $100 million boost that the Obama administration had sought.
The administration has proposed finding more money by upping the fees that companies pay to fund inspections—an idea that has drawn the industry's opposition.
Some industry leaders, including Rex Tillerson, the chief executive of Exxon Mobil Corp., say they want competent regulators. The industry's powerful lobbying group, the American Petroleum Institute, says it supports giving the agency more money, but that the funding should come out of the billions of dollars the industry already pays in taxes and royalties.
Key congressional Republicans are skeptical about increasing the agency's budget at a time of cost cutting. "The question I have is, what specifically are these inspectors going to do and how it will ensure we have production?" says Rep. Doc Hastings, a Washington Republican who is likely to become chairman of the House Natural Resources Committee. "What I've seen so far doesn't clarify that at all."
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