ARCHIVED – NEB Safety Forum 2013 - Emerging Issues in Oil and Gas Industry Safety Management

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NEB Safety Forum 2013 - Emerging Issues in Oil and Gas Industry Safety Management [PDF 50 KB]

The Board released a discussion paper titled, “Emerging Issues in Oil and Gas Safety Management”, that provided context for the discussions at the forum.

Introduction

The National Energy Board (NEB) puts safety and environmental protection at the forefront of its responsibilities in protecting Canadians. This is the expectation of Canadians, and continual improvement in this area must be a priority of industry.

The operating environment of the North American oil and gas industry experienced a monumental shift on 20 April 2010 with the loss of control of the BP Macondo Well in the Gulf of Mexico. The blowout killed eleven workers and created the largest oil pollution disaster in US history. That event was followed by several notable pipeline incidents including the Enbridge Line 6B leak in Michigan, the Pacific Gas and Electric rupture in San Bruno, California, which took eight lives and the Plains Midstream Rainbow Line spill in Alberta. These events and others demonstrate the need for the energy sector to put renewed focus on safety and environmental protection.

In response to the disaster in the Gulf of Mexico, the NEB initiated a review of the safety and environmental requirements for offshore drilling in Canada's unique Arctic environment. Through the Arctic Offfshore Drilling Review (the Arctic Review), the NEB examined the best information available on the hazards, risks and safety measures associated with offshore drilling in the Canadian Arctic. The results of the Arctic Review supported the direction the NEB has been moving since the release of the Canada Oil and Gas Drilling and Production Regulations in 2009 and the Proposed Regulatory Change 2011-01. Safety culture is the key driver of safety and management systems are the tool in which safety and environmental protection can be achieved.

The NEB has prepared this paper to identify three emerging issues where all regulated companies must invest effort and resources to demonstrate continual improvement of safety and environmental protection outcomes. In addition, the NEB will host a safety forum on June 5th and 6th, 2013 to provide an opportunity for discussion, information sharing and to identify opportunities that both industry and regulators can take to improve.

Learning from the Past

As part of the Arctic Review, the NEB commissioned a comparative study of several major industrial accidents.[1] The study focused on the role that management systems play when organizations have major accidents. The objective of this study was to determine if there were any related patterns, trends or relevant lessons for incident prevention in the oil and gas industry.

[1] Det Norske Veritas, Major Hazard Incidents, Arctic Offshore Drilling Review (2011) [Filing A30021]

The assessment indicated that while most organizations involved in the accidents had management systems or programs developed, they were not effectively implemented or reviewed on a regular basis to ensure adequacy and effectiveness. Also, for most of the incidents studied, adequate hazard identification and risk assessment processes were not followed.

The authors of the study reported several overarching lessons based on their findings, including:

  • accident prevention requires active leadership by management on safety issues
  • there must be effective implementation of the right controls to manage, mitigate or eliminate hazards and risk
  • accurate hazard assessment and risk management are critical to executing a plan that protects people and the environment
  • management systems and attitudes towards safety go hand-in-hand in creating robust defenses

Further work has been done to assess the importance of the role of corporate leadership in an organization’s actions to prevent major accidents. The Organization for Economic Cooperation and Development’s (OECD) assessment of similar studies of major industrial accidents reveals that “inadequate leadership and poor organisational [safety] culture have been recurrent features, with:

  • a failure to recognize things were out of control (or potentially out of control), often due to lack of competence at different levels of the organization
  • an absence of, or inadequate information on which to base strategic decisions - including the monitoring of safety performance indicators at a Board [or Directors] level
  • a failure to understand the full consequences of changes, including organizational ones
  • a failure to manage process safety[2] effectively and take the necessary actions”[3]

[2] Process Safety is a blend of engineering and management skills focused on preventing catastrophic accidents, particularly explosions, fires, and toxic releases, associated with the use of chemicals and petroleum products. (American Institute for Chemical Engineers, 2010)

[3] Corporate Governance for Process Safety: Guidance for Senior Leaders in High Hazard Industries [PDF]”, June 2012, OECD. Studies referenced include the Baker Report on BP Texas City, the Major Accident Investigation Board’s Buncefield Report as well as the UK Heath and Safety Executive’s report, “The Causes of Major Hazard Incidents and How to Improve Risk Control and Health and Safety Management: A Review of the Existing Literature”.

Based on the OECD study of underlying causes of incidents and the work that the NEB has done previously in the Arctic Review, the following three key issues have been identified:

  1. corporate leadership accountability for growing and maintaining a healthy safety culture
  2. requirements of effective management systems
  3. measuring the right things to
    1. confirm that effective hazard identification and risk mitigation is in place
    2. provide an early indication that safety controls are degrading and require improvement

All companies have a vital interest in raising performance and championing similar attention in other organizations: societal expectations of industry and its leaders have evolved; high hazard industries are subject to intense scrutiny by affected communities, non-governmental organizations and the general public. A company’s reputation could be significantly impacted by the aggregate reputation of the industry as a whole.

Oil and Gas Safety management Issues

1. Corporate Leadership and Safety Culture

Senior corporate leadership can have a profound influence on the establishment and maintenance of a healthy safety culture. Attitudes of senior leaders and their day to day actions and decisions guide the overall corporate culture and performance. Leaders who take an active role in overseeing the safety of the company’s operations set the stage for a culture of safety throughout the organization.

One clear theme in studies of the causes of major accidents is the failure of senior corporate leadership to take an active role in the management of safety in their company’s operations. This prompts the question: why were corporate energy industry leaders not more actively engaged in safety management?

The OECD has developed guidance on corporate governance for safety in high hazard industries. These guidelines recommend that senior corporate leadership play an active role in how the organization manages safety risks: 

“Leaders need to understand the risks posed by their organization’s activities, and balance major accidents alongside the other business threats. Even though major accidents occur infrequently, the potential consequences are so high that leaders need to recognize:

  • major accidents as credible business risks
  • the integrated nature of many major hazard businesses - including the potential for supply chain disruption
  • management of process safety risks should have equal focus with other business processes inclurisksding financial governance, markets, and investment decision, etc”

The OECD guidelines go further in stating:

“CEOs and leaders assure their organization’s competence to manage the hazards of its operations,” and “they are capable of openly communicating critical aspects of process safety with all internal and external audiences.”

The NEB is in the process of amending the Onshore Pipeline Regulations, 1999 to include a requirement that regulated companies designate an accountable officer who must ensure that the company’s management system and programs comply with the regulations. Regulated companies may want to consider using the OECD guidelines in meeting the new requirements.

Senior Leader Considerations:

The following questions are provided to stimulate discussion within your company and at the safety forum:

  • As a senior leader, how do you manage the business risk of a major accident?
  • How does safety and environmental management factor into your internal corporate scorecard? What percentage of your compensation is directly impacted by these targets?
  • What barriers exist to corporate leaders actively managing safety and environmental protection? How can barriers be removed?
  • How can industry move forward as a whole on corporate governance for safety?
  • How can regulators improve requirements that will stimulate the development and maintenance of safety cultures?

2. Effectiveness of Management Systems

As evidenced in the studies of major accidents, many companies find it difficult to effectively implement management systems. Effective management systems are:

Consistently applied

The system elements are applied consistently across operational programs (worker safety, asset integrity, damage prevention, environmental protection, and emergency management), facilities and geographic regions.

Highly integrated

There are multiple interdependencies between management system elements and so the management system is designed to share information and intelligence to promote better decisions.

  • Input is sought from all programs and functions (i.e., human resources and finance) in planning processes such as hazard identification and risk assessment.
  • The organization collects, tests, and verifies information from across the organization to confirm compliance with organizational policies and standards as well as regulatory requirements.

Assign accountability

All officers and employees have a role to play in meeting the safety, security and environmental protection goals of the organization. These responsibilities must be clearly assigned and communicated. Performance must be measured and improvement required.

The NEB is currently amending the Onshore Pipeline Regulations, 1999, to explicitly require the integration of programs and functions in management system design and implementation. Integration is essential to the proper functioning of a management system.

Senior Leader Considerations:

The following questions are provided to stimulate discussion within your company and at the safety forum:

  • How does your current organizational structure enhance or detract from an integrated and comprehensive approach to safety management?
  • How could your company management system be better integrated with your operational programs and other business functions to enhance safety outcomes (HR, Finance, etc)?
  • How can consistency of management system implementation across regions, activities, facilities and programs be facilitated?
  • Are there opportunities to enhance risk management within your operation as a result of improved communication and coordination across business units or defined areas of expertise?  How can these opportunities be leveraged to advance overall safety?
  • How could regulations and guidance be improved to obtain more effective implementation of management systems?

3. Performance Measurement and Its Role in Hazard Identification and Risk Mitigation

Many high hazard industries define and measure the safety of their operations as occupational health and safety of individual workers. This approach to safety performance measurement has principally two short-comings:

  • it places an inordinate amount of attention on “slip, trip, and fall” hazards, which may limit awareness of other hazards and risks that need to be managed in order to protect the public and the environment
  • it is one-dimensional and provides an incomplete and inaccurate account of the overall level of safety of an activity, a facility or organization

Focusing on personal injury data while limiting or excluding information related to process safety and corporate culture can have catastrophic effects as several high profile incident investigations have demonstrated. For example, the final report for the BP Texas City refinery explosion and fire noted “reliance on low personal injury rates at Texas City as a safety indicator failed to provide a true picture of process safety performance and the health of the safety culture”.[4] This issue was also cited in the Chemical Safety Board’s investigation of the BP Macondo Well blowout.

[4] U.S. Chemical Safety and Hazard Investigation Board (2005)

Management of safety is comprised of programs and systems that are designed to achieve a reduction of risk to the public, workers, the environment, assets and production to a level acceptable to society. Therefore in order to get a more complete picture of safety performance, regulators and companies must look beyond lagging indicators such as Lost Time Injury (LTI) rates to identify performance measures that promote more effective and comprehensive hazard identification and risk assessment. This more comprehensive approach would consider indicators relating to both high frequency, low consequence events (typical worker injuries) and low frequency, high consequence incidents (blowouts, fatalities, etc). Such an approach would ensure that active and latent threats to process safety, such as asset integrity, human factors, organizational deficiencies, and safety culture, were effectively identified and managed by companies in order to maintain the greatest margin of safety. We expect senior corporate leaders to set performance measures that provide a complete view of their organization’s current state of safety in order to identify areas of weakness and to proactively manage safety in advance of an incident.

Senior Leader Considerations:

The following questions are provided to stimulate discussion within your company and at the safety forum:

  • How does your organization (CEO, executive team, frontline staff) measure the safety of its operations?  What is included?  What is excluded? 
  • What leading and lagging indicators would provide the greatest visibility of overall safety?
  • What does your choice of safety performance indicators communicate to frontline staff? Are there possible cultural implications to your use of certain measures?
  • How can your company better detect latent threats to safety such as those posed by organizational factors?  Can your organizational structure be modified to improve safety outcomes?
  • How could the performance indicators currently used by your regulator be improved to reflect appropriate safety performance measurement?

We are interested in your feedback. Comments on and responses to the paper can be sent to Dana Cornea at dana.cornea@neb-one.gc.ca any time leading up to the forum. By phone: 1-800-899-1265.

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