Auditing offshore facilities for safety and environmental management systems

F. RUSS DAVIS, Aon Energy Risk Engineering

Under new US guidelines that went into effect Nov. 15, operators on the outer continental shelf have two years to submit an audit of their ability to manage hazards. 

US Interior Secretary Ken Salazar (third from left) inspects a stabilizer on an offshore rig that was used to drill the relief well to contain the Macondo well blowout. Photo by Tami A. Heilemann, courtesy of the US Department of the Interior.

Earlier this year, the US Interior Department’s Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) issued new requirements for oil and gas companies working on the US outer continental shelf to develop and implement a Safety and Environmental Management Systems (SEMS) program. The new regulation, which became effective Nov. 15, incorporates and makes mandatory the American Petroleum Institute’s Recommended Practice for Development of a Safety and Environmental Management Program for Offshore Operations and Facilities (API RP 75, third edition), which was adopted by API in May 2004 and reaffirmed May 2008.

In September, BOEMRE also issued notice of proposed changes to 30 CFR Part 250, subpart S, the SEMS requirements. In its current form, the SEMS rule allows companies to perform audits internally using designated and qualified personnel, or have them done by an independent third party. The proposed change would make the use of independent third-party auditors mandatory.

The rule defines a compliant SEMS program as one that “identifies, addresses, and manages safety, environmental hazards, and impacts during start-up, operations, inspection and maintenance of all new and existing facilities, including mobile offshore drilling units (MODU) while under BOEMRE jurisdiction and Department of Interior (DOI) regulated pipelines.” BOEMRE has since been split into two independent agencies within the Interior Department—the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE), with the latter being assigned responsibility for enforcing the SEMS requirements.

AUDIT REQUIREMENTS

The audit is the initial step in determining if an operator’s SEMS program is effective. It must be comprehensive and effectively evaluate all 13 elements of the SEMS program. Each of the elements must be effectively addressed in the company SEMS program and there must be auditable evidence of compliance to the company program. The elements of the SEMS requirements are as follows:

General. A company must develop a written program that will define who in management is responsible for the SEMS, define when the SEMS will be reviewed, define responsibility lines, identify communication lines, and outline the elements of the SEMS.

Safety and environmental information. Each company must compile information pertaining to the facility, such as process design, process flow and safe upper and lower operational limits. Design information and basis for design must be compiled or developed and be available for all vessels, piping, emergency relief systems, instrumentation, passive and active fire protection systems, and emergency evacuation equipment and procedures.

Hazard analysis. The company must have a program in place to ensure that hazard analyses are performed for each facility. The hazard analysis must identify the hazards involved in operating the process and evaluate the protective systems in place to protect against an unwanted event. Human factors must be considered in the hazard analysis. A job safety analysis must be developed and implemented for offshore activities identified or discussed in the SEMS program.

Management of change (MOC). The MOC program must include written procedures for managing change. The program must include changes to the equipment, operating procedures, materials, personnel and process conditions. The MOC program must contain review and approval procedures. Affected employees, including contractors, must be trained in the change prior to startup.

Operating procedures. A company must ensure that facilities have operating procedures for normal operations, normal startup, normal shutdown, emergency operations, startup following a normal or emergency shutdown, and bypassing and flagging out-of-service equipment. Safety and environmental consequences of deviating from equipment operating limits must be identified, as well as steps to correct or avoid such deviation. Similarly, operating procedures must take into account the hazards of chemicals used, raw materials controls in place, and possible impacts of the chemicals on the human and marine environment.

Safe work practices. A company must have written safe work practices designed to minimize the risks associated with operation, maintenance and modification activities as well as the handling of materials that could affect safety or the environment. Safe work practices must address contractor selection and management. 

Training. Each company must have a documented training program designed to ensure that all personnel, including contractors, are trained to work safely and are aware of environmental considerations.

Assurance of quality and mechanical integrity of critical equipment. A program must be in place to ensure that equipment is adequately designed, procured, installed and maintained. A company must develop and implement written procedures for inspection, testing and quality assurance of process equipment.

Pre-startup review. Each company must have a written pre-startup review procedure to ensure a facility is safe to start up after a modification, downtime or as part of the commissioning process.

Emergency response and control. All companies must define and document an emergency action plan and designate responsibilities for implementation of the plan. The company must develop written procedures and then conduct periodic drills based on realistic scenarios.

Investigation of incidents. Each company must have a written procedure for the investigation of accidents with serious safety or environmental consequences or those incidents that could have resulted in serious consequences but didn’t (near misses). The incident investigation process must contain a system for distributing the conclusions of the investigation to similar facilities and appropriate personnel within the organization.

Auditing of SEMS elements. The company must develop a SEMS auditing program, which should define who is responsible for conducting the audit. Audits may be conducted by company qualified and designated personnel or an independent qualified third party. As mentioned above, proposed rule changes would require that audits be conducted by independent third-party auditors.

Records and documentation. The company must develop and maintain a program for document control and records retention.
Additional requirements in the proposed revision, which should become part of the effective rule in early 2012, include the following:

A company must have a procedure to authorize any and all employees on the facility to implement a stop-work authority when witnessing activity that is regulated under BOEMRE (now BSEE) jurisdiction if it creates a safety or environmental threat.

• The company must have a plan of action that shows how employees are involved in implementation of the SEMS program.

• The company must clearly define who has the ultimate authority on the facility for operational safety and decisions at all times.

• The company must have guidelines for reporting unsafe work conditions related to the SEMS program. Employees must have the right to report possible safety or environmental violations and to request that the regulatory agency inspect the facility if they believe there is a serious threat of danger to the employees or the environment.

The first SEMS audit must be completed within two years of the initial implementation of the SEMS program. SEMS audits must be performed at least once every three years after the initial audit. Each company must develop a plan for completing a SEMS audit for all of its facilities. The company audit plan must be submitted to the regulatory agency at least 30 days prior to the audit. The agency has reserved the right to modify the list of facilities that a company proposes to audit. It is likely that the agency will review the company submittal of accident and incidents reported each March 31 on Form MMS-131 with the intent to ensure that audits are first conducted on facilities with high accident and incident rates.

SELECTING THE AUDITOR

The agency has identified specific requirements that a company must consider when selecting an auditor. The auditors must have previous education and experience with SEMS, or similar management programs, as well as the technical capabilities to perform the audit and previous experience with BOEMRE regulatory requirement and procedures. In addition, auditors must have previous education and experience sufficient to evaluate how the company’s offshore activities, raw materials, production methods and equipment, products, byproducts and business management systems may impact health and safety performance in the workplace.

The proposed revisions would require that a company submit the name and qualifications of its proposed third-party auditor, as well as a signed statement confirming that the proposed auditor was not implemental in developing the SEMS program and that the auditing company is not in any way owned or controlled by the company being audited. The agency would be able to accept or reject a third-party auditor.

Third-party companies with experience in performing audits of compliance with the US Occupational Safety and Health Administration’s standard 1910.119 (process safety management of highly hazardous chemicals) and in the regulations and recommended practices for the offshore oil and gas industry will be especially qualified to perform SEMS audits. The API recommended practice made mandatory by the SEMS rule has almost the same requirements as those found in OSHA 1910.119, Table 1.

Table 1. Comparison of OSHA 1910.119 and SEMS requirements

PERFORMING THE AUDIT

The audit should begin with a meeting between the audit team and management so that the audit plan can be reviewed and, if necessary, modified to fit available resources. The audit plan should address items such as audit objectives and scope, identification of the audit team, identification of the facilities to be audited, audit procedures, confidentiality requirements, and report contents and format.

The audit scope should include a review of all company procedures addressing the SEMS elements. The audit team should evaluate the procedures to determine if they adequately address all of the elements. The team should then identify areas for potential improvement. Procedure review should be followed by observations of the audit team, which may include review of documentation that verifies compliance to company procedures and programs. The team may review such documents as the hazard analysis report, safety check sheets, operating procedures, emergency and evacuation plans, safe work procedures and permits, equipment inspection and testing reports, quality control reports, and other evidence of compliance to company procedures. The audit team should conduct interviews with company personnel and contract employees to evaluate how well the SEMS program is understood and the level of employee compliance.

The SEMS audit will probably have to be conducted in two separate portions: onshore review of the company SEMS program documents and procedures and offshore observations and interviews for evaluating how well the company SEMS program is implemented. Areas for improvement should be noted and fully documented by the audit team. The team findings should be reviewed with the company’s SEMS-responsible personnel during a closing meeting. This will allow the company to question findings and produce evidence if there is any dispute to the audit team findings.

Within 30 days of the audit, a report must be submitted to the regulatory agency clearly defining which facility was audited and noting all deficiencies found. For any deficiencies, the report must state clearly which element of the SEMS rule is not adequately addressed.

Also within 30 days, the company must submit a plan of action for addressing all deficiencies found by the audit team. The plan must include a schedule for correcting the deficiencies and identify the person responsible for correcting each deficiency. The agency has reserved the right to verify that the corrective actions have been effectively addressed.

WHAT TO DO NOW

OSHA has been conducting a national emphasis study of chemical facilities’ process safety programs since 2009. Since the SEMS regulation has been in effect for a very short time, no analysis can yet be made of SEMS audit findings, but the OSHA findings may provide a useful comparison, Table 2. Many chemical companies have difficulty in fully implementing a quality assurance and mechanical integrity program, as well as in compiling and maintaining process safety information.

Table 2. OSHA 1910.119 compliance findings as of Oct. 31, 2010

Companies have two years to complete their first audit of all facilities. Now is a very good time to begin developing audit plans and selecting a third-party audit company. A gap analysis should also be conducted within the company to determine what must be done to become fully compliant with the SEMS rule. No program will ever be perfect. An audit company will likely find opportunities for improvement in almost any offshore facility, so it is important to plan ahead to effectively address such issues.   .