detonate a-bomb while traveling last summer, the recent terrorist plot that was recovered regarding suspicious packages that originated in yemen, there's no question al qaeda plans to show weaknesses in our air transportation system when it comes to passenger flights in shipments of cargo. so i will just try and keep my remarks brief some of the witnesses respond to a couple of questions. and maybe this was announced, if it has, i apologize.

, operating within in identifying with the measures are and standards we use we hosted a big conference last november, three weeks ago, where we had numerous countries that were represented. we have about 85 people from all over the world who attended in our attempt to ensure the interest of the fully with the benefits are of ait and

eliminate some of the concerns of the drawbacks of ait. >> it's important to know there's a significant difference in the scale, the magnitude of the deployment. as of today i believe tsa has deployed but 300 units in 75 airports. nomination we collected as our audit its our observation even those 13 other countries have either testing or deploying the quantities, the numbers of machines deployed are rather small, and as you probably know, the tsa plans to have 500 deployed at the end of this year, 1,000 the end of next year and 1800 us full deployment so i think that's important to understand the scale of the deployment in our country vastly exceeds what other kern trees -- countries are considering. >> one other thing in terms of what we do is an exceptional way is the privacy protections we put in place to ensure the

privacy of public. there's never procedures in place to begin with. all images are viewed in an area by somebody who's not where the screening is taking place. the officer who is resisting can't view the images. the images cannot be stored, printed or transmitted in fact they are deleted. the officer cannot go to the next image until the image is deleted. they are not allowed to bring cameras or anything in the room. they will be fired if they do so they can to retain those images, and the images are blurred in inappropriate ways of there's a number of privacy protections we put in place to ensure the travelling public understand we take that seriously. >> very quickly from their .. of view, we very much interested in the development of this 80 hour technology. the image comes up that looks like a gumby character if you

remember gumby, and it looks like the false positives and the pat downtime that takes. if we can take that technology over the finish line you don't have to have the person sitting in the room who can't see you are. you can put that person to doing something really important and take them away from looking at that screen if we can get that technology there it is really worth looking at and investing in and pushing and for the meeting that mr. reeder talked about a few weeks ago the included stakeholders as well as the airline and airport community it's important airlines and airports are involved in these solutions. >> when you are saying is that sort of foster with software issue they are not fully developed? >> it is a technology issue, it isn't a cost issue. it will be in addition to the existing hardware, but it's just the technology has not devolved

that far yet. >> semidey explained it to me on the third grade level. they said you want to get the machine at least as good as the human looking at the image. the machine is as good as that, then we want to get beyond that point and for me to understand that really bring home with me. >> i think mr. pistol when he was here indicated the programming and the technology would be usable in the existing frame of the imaging systems they now have, so as a matter of plugging it in asking the question you have to buy all new machines the answer is no. >> on computers, right? a chip or something. >> to get to the goal of having a thousand machines by the end of 2011, and again, i would direct this i guess to either

assistant secretary or ms. reeder. could you give the committee a sense of the percentage of these machines -- the machines would cover verses the walks through magnetometers? >> okay, it's not something that's -- >> i know the answer to that question is my understanding 2300 checkpoints it is still not going to be enough to insure 100% coverage. the tsa strategy is the focus on the use of the machines on the airports. >> and almost half covered. okay. when it comes to separating the machine from the actual tsa screen, can you tell the committee how much training is required when it comes to operating those machines? >> it does require training. the -- each of the officers who

are required to go for mandatory training and updates, and they are also overseen by supervisors who we see the same training and continue to ensure the integrity of the program. >> my time is up. thank you, mr. chairman. >> senator rockefeller. >> you talk about machinery, which dhaka that information and that is about passengers coming and you had i believe in instant where the european parliament rejected the continuation of the past record of he information on passengers. that can be an important as the machinery itself and can reveal things the machinery never

could, such things as intent. and i think machinery is the final passage and ought to be. but the sharing of information about passengers surely has to be extremely controversial. why did they turn it down, the european parliament? and secondly, who sets the standard on information? do we have the best way off -- in the united states of delineating information? i wouldn't think that would be necessarily the case because i think the german -- the germanys and the angolan, amsterdam etc, might feel more threatened because they have a higher at risk so to speak population. but anyway, can you enlighten me on that? >> happy too, senator. the european parliament did not vote down our p.m. argument. we have a bilateral agreement with the united states and the european union for the sharing

of passenger name records, dnr. these are the records travelers provide to their travel agents when they purchase a ticket and they are forwarded a number of discrete fields, names and -- >> so it's not secure? >> the purposes of that information we get that information -- the information is then sent forward 72 hours before the departure of a flight to the united states. having that information 72 hours advance allows us to check against our watch lists and do the kind of screening we need to do to make sure people are not either on the flight who shouldn't be on the flight because they are unknown suspected terrorist or they are in fact we need to take a second look and have to do additional screening. so the record is extremely important and it has helped us on a number of occasions. recent occasions to identify or

through the data pnr provides us to do analysis that allows us to find travelers, for a simple, for me be of concern. we did that in the case of zazi, and to identify individuals may be trying to flee the country is the case was with faizal shahzad. so very valuable tool. the information is critical. parliament has rejected that. they have had questions about the they've won to strengthen the privacy protections and a number of other elements and have consequently said they are going to withhold their voting down until the commission negotiates an agreement with the united states, and so that the commission received today the mandate to negotiate with the united states and the will be forthcoming negotiations starting very soon. >> so what information needs to

be there? >> so you asked about standards. the united states has 19 different types of data that we have required, and that requirement is different from country to country, that is to say other countries who have pnr systems do not have the same standard as the united states. you mentioned germany and the europeans. europeans do not have a pnr system for analysis at this point. a number of countries want to have it. there is no agreement. >> the european -- factor? >> and number of countries are waiting to get that equivalent of a mandate for the commission to have a uniform union pnr system. at this point that does not exist. they do not have that tool. >> i would think the factor, they don't have passports, it would actually be quite a risk when it comes to information for airplane travel and potential

terrorism. >> well, there are, as you know, ongoing threats that have been discussed in the public in europe, having all of the tools that we need to avert those threats is critical. we very much would support a european system -- >> in their system is at the same for all members of the european union, and suddenly, is it i you indicated is not satisfactory or compatible with our own. >> we don't have one at this point so that is to be determined. member states seek to have their own systems and the european commission will seek to have a one for all member states. >> that sounds like two decades worth of work. what is the problem here? >> i will defer those questions.

look, they have their own process by which they go through to develop the tools. i think just this week the counterterrorism coordinator for the european commission stated quite emphatically that more investment needs to go into terrorist, counterterrorism programs in particular transportation security, and that europe needs to come up to speed on that, to include better coordination on understanding the threats, so i think they are having discussions in that and we would encourage -- okay, finally, if they don't come up to the standards if they ever get to have the standards, to agree on everything, surely they should, but europe is europe, what if they don't come to our standards? what do we do? >> we have an agreement with the europeans today. we have in place a highly

effective operational arrangement -- >> that i stipulate, but just as machinery has to in some way be compatible, so this information. >> i would think to satisfy us what the europeans don't have right now is flights flying to europe from outside of europe they do not have the same advanced passenger information which we get in our pnr arrangement, so if this point we would be lacking a tool to do the kind of screening that we do which we find quite useful. >> ok. thank you. we have been joined by senator klobuchar. senator klobuchar? >> thank you very much, mr. chairman, and for holding this hearing on international aviation and screening standards. regrettably recent attempts against the u.s. have once again highlighted both of the risks we face for our aviation system and also dependency on our international partners. we are lucky in this case we

were alerted of these attempts by our allies and this step in the process shows there are some good things happening in terms of the sharing of information that there is clearly more work to be done. i wanted to start with something i know chairman rockefeller discussed, and that was the issue with canada, as a kind of site point. but it is the requirement, i discussed this with secretary napolitano, of the screening for passengers arriving from canada. i don't know if you are aware of this, since the baggage must be transported from the air rifle aircraft to a baggage screening facility in the u.s.. i see that you are nodding your head, this reeder, mr. principato, and it causes a lot of delays on our end for passengers, by the way, who have already flown in from canada over our airways with their screening. could you just discussed if there's any progress on that issue because of the deily that it's causing the u.s..

ms. reeder? >> senator, as i believe we have a uncertain a couple of your letters we to continue to work with the canadians on this topic. as you're aware, the aviation and transportation security act is very specific in what kind of screening has to be done on those checked bags. we encourage the canadians to purchase the same kind of explosive detection systems for screening to check bags that we use and that's in accordance. however given the financial constraints etc. they have not been able to move forward. once they are able to purchase those types of equipment, install them and be believed to begin using them as we do we anticipate we will be able to move forward very quickly and eliminating the need for their prescreening of the bags of on a rifle in the united states. >> mr. principato? >> the minneapolis st. paul

airport in your state, there is no airports in the country with higher cost caused by this particular requirement. denver is rising quickly in chicago and a number of others. example i often use you can fly from montreal, and i apologize for not using any of collis as an example the this is geographically to go from montreal to denver with your bags screen did montr your fine. going over two-thirds of the country than you transfer to the grand junction a couple hundred miles and you have to have your bag screened and it may not make it with you to grand junction, and i understand the requirement that is perhaps just to fox, perhaps number one as we look at maybe hopefully reforming that so we can deal with that provision because it just doesn't make any sense, and never to in the meantime we are looking for when medved is a possibility for an airports in canada we can do may be a pilot. i talked to the airport director of minneapolis about this, and perhaps we can work with tsa and

others to show a pilot how this might work. >> thank you. just on the issue that we have been focused on here is the partnership with the international partners on the cargo screening. can you talk about what is happening with that in terms of the international partners, and i guess specifically if you have worked with private industry on this on the expansion of the systems to strengthen security? >> we have a number of activities under way. one is obviously following the events of over 28 and working with the industry, with the carriers, government, united states postal service, state department, a number of different actors involved in making sure that we have in place a regime of that is both

operationally effective and maintains the security that we need. that will continue to be all over the next weeks to months. in terms of the specific requirement that we have from hundred% screening of air cargo, we have come as you know, succeeded in doing 100% screening within the united states and we are not incrementally moving towards 100% internationally that will be achieved by 2013. we have done that in two ways. one is to increase the requirements through our standards of the security programs and number two is to develop the national cargo security programs that are commensurate with screening programs that we would have. that is to say third parties that can validate and screen the cargo in advance.

there's a bunch of challenges associated with different systems, different laws and regulations throughout the world but we are making steady progress on that. >> and what steps has tsa, ms. reeder, taken to offer guidance to other partner countries particularly high risk nations, and can you talk at all the training efforts that are going on when it is so clear that this is a global issue? >> well, in terms of the cargo outreach, as mr. heyman mentioned, we are working on the national security program reviews. there are a number of countries, in fact the top 20 exporters to the united states, the majority of them have a very robust security programs. we have a security program to which we are going through each of the countries. we are evaluating the programs coming to the countries, looking at the actual process, following a box from the point at which the shipper and sit in to the point it gets on the aircraft to determine whether that is

meeting with our needs are as far as the 100% screening requirement. for training, we have developed a pretty comprehensive cargo training program. we have to act will approaches. one is looking at cargo screen based on the requirements. currently receive requirements focus on implementing security controls. it doesn't dictate that you screamed the cargo. with amendment 12 it opens the door and that is the most recent iteration of international some alleviation organizations amex 17, that opens the door to more stringent activities regarding cargo, but the carvel training has been focusing very much on using actual technology, not just physical screening but the use of x-ray, the use of explicit traced detectors. looking at what we have been doing at specific countries, high-risk countries, we have a team that is departing yen and tomorrow who's been working with them on the use of etd, explicit

trees detectors for cargo, passengers, checked baggage. we also provided to them on a long-term loan of portable etd. the portable speed and ducks stand alone that you would see at a u.s. airports. as we've been identifying those locations where pose the greatest concern to us, going and providing the training and in some cases during the long term loans of the sp -- etd. >> anyone want to add anything to that? okay, just one other thing you could pass on to the secretary -- i know this is in the focus today but i was talking to some of our tsa people when i was coming home from the holidays to come back here and i want to pass on the good work they do. they work through quite a public brouhaha last week. i think there were issues with education on the public to get there were concerns by people who called me. but somehow the should be taken out of the front-line employees or simply doing their job, i

think what they told me, which is good, is the passengers were appreciative of their work. but i think they worked through the wringer and appreciated the support they got from the department. so, i want to just put my appreciation for their work, whatever the policy changes may be. all right? thank you. >> thank you very much. i think that's an important statement to understand. the folks who are at our airports during the day to day screening, they are working under the orders of the process of procedures and supervision. and they by and large do we really outstanding job. i mean, like everyone else, you can find one that is crabby or had a bad day and probably not doing quite as well as you would hope. and by and large, i've worked a lot of it, travel a lot, and i think the in and day out they are doing a good job. and given the patau down issue, given the advanced imaging

issues and though 24/7 news about -- >> and the saturday night live commercial. >> all of that. i think it's been a pretty tough time. and i know mr. pistol wishes, and the department which is perhaps the advanced work to explain to people with your doing. given the choice of getting on an airplane with a large number of passengers who have not been properly screened and who could possibly have an explosive device or getting on an airplane in which passengers have been screened sufficiently so there's no possibility of flying with a bomb i think most passengers would choose the latter by far and that is what we expect and want to read and i want to say the sum total of all that we've been talking about is a around the world to try to keep people and luggage of airplanes and other methods of transportation, but especially airplanes. keith luggage and people of ear plans that would be containing a bomb or a within and it's not

easy to do, especially in as much as recent years what has happened this we now have people that are perfectly willing to kill themselves while they commit an act of terror. but that's a change. we haven't always seen that in our lifetime, and so it seems to me kind of a race between offense and defense. who are the terrorists, how do you identify them, keep them and the things they would want to carry with them onto an airplane. they want to kill people, we want to protect people. it's that simple, and yet it's that complicated as well. and so the purpose of this hearing is to once again, get a status report of where we are, what we are trying to do, and as i said at the outset, not just an airport in fargo or minneapolis or somewhere else in this country, but the network of airports and the network of screening around the world by which someone could enter the

system and mover of the world the process of providing security in those circumstances people and luggage is enormously complicated and that very big undertaking. one thing i don't quite understand for sure is have the good fortunes we have experienced, and that is being able to at least see the prevention of the bombs that we are aware of the didn't detonate and so we haven't seen the other acts, is that good of, or just good fortune? i don't know the answer to that but i know there is a lot of work underway and a lot more is necessary to provide the kind of protection though traveling public demand and deserve so i went to thank all of you for your testimony and being with us and i know that you will be asked again and again to come before this committee and give status reports on the work and you're doing. thank you very much.

this hearing is adjourned.

earlier republican senators mike crapo and tom coburn announced they will vote in favor of the report released wednesday by the national commission on fiscal responsibility and reform. the plan cuts the deficit by almost 4 trillion over the coming decade. 14 of the 18 commission members need to vote in favor of the report for it to be officially endorsed by the group. >> everybody ready? all right. tom and i have put out a statement which i and you all

should have now and we are both going to make brief remarks. the purpose for being here today is announce we are going to support the debt commission's report and encourage its adoption by congress. as we stayed in our announcement, our debt crisis is a threat not just to our way of life but our national survival, and the threat that we face is so real and so close that we do not have time for further grid lock or inaction. it's necessary that we take strong, aggressive action now. in the near future if we take no action, we could see a collapse in the value of the dollar, hyperinflation or other consequences that would force congress and this country to incur consequences and take actions that are far more serious and far more painful than anything in this proposal. as painful as some of the provisions in this proposal are. i want to talk for just a moment about what our current

circumstance is. we agree to the beginning of the deliberations of that commission to use cbo numbers. if you do that, you would know what the debt of our nation has risen from 52% of our gdp, just about eight or nine years ago, to 62% today. and the alarming thing is if we continue on our current policies, that debt will begin to skyrocket. it is projected if we do not change our course to hit approximately 90 per cent in 2020. and go as high as 180% by 2035. it probably will never hit that because if we don't take decisive action, then the economy will come and we will see the kind of forced consequences that will change those dynamics in very, very painful, difficult and damaging ways to every american. the reason that we are supporting this plan is because

although it is not everything we wanted, and although it contains things that frankly are painful to us and our -- rays heartburn, it does take us dramatically down the path and the right direction towards addressing these issues. first and foremost it addresses the spending issue. under the proposal there will be definite heart attacks on spending and put into place and this is quickly summarize it will result in us returning to the 2008 spending levels by 2013 and reaching a balance in our budget by 2035. if you look at those numbers it will stop that skyrocketing debt that i just talked about and actually buy 2035 return down to 41% of gdp. still not adequate or necessary but for different and far better than what we would see if we take no action. i think equally as important, and one of the most beneficial

parts of this plan in my opinion is that it doesn't only focus on the tax policy, but it also focuses on revenue policy. and does so in a way that does not continue our debate in congress and this country whether we should raise tax rates were reduced tax rates but instead engage in tax reform. if we are going to strengthen our nation and preserve the american dream for our people, we need to have a strong if robust economy. yet if you look at our current tax code i'm not sure you could conduct one that is more complex, more unfair, more costly to comply with and frankly, as anti-competitive to our own businesses as our current tax codes and we expect the reforms in this plan which are some of the most dramatic and extensive reforms i seen in my lifetime to changing our tax code will help us move to a more

fair, less complex, less costly and more competitive tax code that will generate a strong per more robust and more dynamic economy and one of the other beneficial parts of this is in using the numbers we have not projected the than an impact of that kind of tax reform on our revenue. in other words there is a dynamic impact and we are was confident there will be that additional revenue as a result of a stronger economy is locked in by this plan to be utilized for either further rate reduction for further debt reduction and is barred from being utilized to justify additional spending release. it's these kind of measures and others that caused me to be ready to support this plan. like i said at the outset there is much in this plan with which i have a problem there is a

necessity that we move forward and this plan will get us on the way. as we bring this plan before congress, i'm sure there will be the need to adjust and to add to it that there are significant things missing from the plan that need to be included. that as we debate about whether to add or adjust to this proposal we must get started. i will end as i started by saying that the time for divisiveness, gridlock and the late has ended. we must take decisive action now. thank you. >> the best quote i have heard so far about this plan is the only thing worse than being for this is against it from cape conrad and i think it is accurate. it says a lot. i am not typically a worrier but i can tell you right now i am

significantly worried about our short-term future, not our long-term future. i think we are in a precarious balance. i think we are in a day of reckoning and it doesn't matter which political party is, or what your philosophical even is, this is a starting point and that is all it is, it is a starting point. more will have to be done. there will not be one american that is not called on to sacrifice if we are to get out of the holes that we are in. the time for action is now, the threat is real, it's urgent. we cannot wait for another election, we cannot wait until we get more of what we want. there is more in this plan that i dislike than i like, but the urgency requires me to put aside anything other than a constitutional obligation to get the federal government range into the realm and size and

intent that it was originated upon. this bill doesn't touch spending year enough. we documented over $350 billion a year and wasteful spending, lucrative spending, fraud. we didn't get there. we got 200 plus billion. we need to get more. the tax rates aren't flat enough. the need to be flat if we really want a robust economy and use both growth and common sense to get her out of the problems we are in. the challenge is a matter of national survival. that does not understate the case. if you look at history, no republic has survived as long as we have. and the of all field for the same reason. they lost control of the fiscal policies long before the offer were conquered.

we see it today and our weakness and our foreign policy on not only our kids and grandkids but of sounds well. the good news is there is not a problem in front of us that we cannot solve. the question is will we take off our particular hats and work in a the best interest of america to cure the real problems that a loss to the will to your questions puna thank you. >> what does it mean to support this if you were also going to be changing voting for more spending cuts less tax cuts in congress? i thought the old idea is it was a package? >> well, you pass this package than you do more this package does not solve our problem only cuts 4 trillion. we need to cut ten. and we need to grow the economy and finding their rates further,

lessening the programs, you know, the real essence in terms of looking at america individual initiative and self-reliance has been replaced in all too many instances by dependency and reliance on government. and the was that self-reliance and individual initiative and individual responsibility and we have to get back to that if we are to succeed. >> let me add to what tom said and make an explanation. thisplan is a package and comes as a package but it is not the end it is the beginning of the significant steps we must take, and i believe every member of the commission recognizes that additional steps will be needed and we are already committed on a number of those the we believe are necessary to continue advocating for them.

>> senator coburn and senator crapo, what do you say to the anti-tax bill that's been reported by to grover norquist has already come off but it predictable statement and seem to be driving a lot of opinion across the way in this building? with using in response to that? >> the first thing i would say is our obligation is to the country as a whole, not any special-interest groups. number two is a golfing we break the pledge at all with this bill at all. it may in a cursory look at the letter that we do but we are at about 92 per cent tax reduction versus tax increase and if you score that dynamically we are going to get more tax reduction then you have tax increase, so i don't believe we are in there and if we, are there, so ways ronald reagan because this tax plan is ronald reagan on

steroids and that is passed in '96. >> too quick addition to that. >> you have to look at what is coming if we do not take action. if we do not take action the tax increases this congress will face and probably have to pass are far greater than any kind of marginal tax increase in this bill. and second, we have put provisions in as i mentioned earlier and if there is a dynamic impact on the economy which we are confident there will be, that the revenue generated from that is to be used for the further rate reduction and further debt reduction which will address those issues and i agree with tom this doesn't crew cut pledge in any way. >> just to make sure everybody understands this is the starting point. if we pass the bill tomorrow what doesn't get us out of the works. everybody needs to understand that it does not get us out of the woods.

there are many more difficult choices this country is going to have to make. we are going to have to do something with medicare. it's impossible. the health care, one of the objections that doesn't address the health care cost and because there's a political reason why it can't because we just had a bill passed that nobody was going to go for on the other side but we are going to have to come back and have something like paul ryan's road that for something else innovative if we are going to achieve stability financially in this country. so this is the beginning. this not the start this is the end. >> if we talk about provisions in the plan that might be most difficult for the members of your party as. >> i probably can't. it's not a day for politics. we don't have that luxury anymore. america needs to understand

there's not a luxury for politics anymore. it's time for us to get our act together. we'll get war on three fronts now. iraq, afghanistan and the financial tsunami that is facing us, and we need to bind together without a half, without a philosophy and see what do we do to fix our country? and i said in my opening statement it's going to come a lot quicker than anybody in this room thinks. all you have to do was watch what's happened in europe and we are not far away to a >> you mentioned for health care specifically for those concerns. any actions? >> he's an independent member of the commission. he gets to vote the way he wants. we have to address that anyway, and i believe this is the first step. i will tell you we have to start somewhere and it can't be all my way.

i would have written a totally different plan. i would have eliminated the income tax completely and we would go to a national sales tax and wouldn't be a medicare tax for social security tax. we wouldn't have done this at all. i can't have my way but our country deserves this to sacrifice like the call we are going to match everybody else to sacrifice to accomplish what we have to accomplish and that is to get out of this whole. >> have you talked to senator mcconnell about this proposal or your other -- what is the prospect? >> i am not good at predicting how things will pass. i'm good at predicting things that don't. [laughter] i would say in response to that we have talked to most of the members of our conference and of the other as well with the democratic conference and i would say that at this point other than the numbers of the commission who are starting to now express their position on

the report, most of the other members of both caucuses are reserving judgment and studying right now, and my initials observations are that just like every other member of the commission they are seen pain and they are seeing a gay and in the proposal. >> let me ask you a question most of you know me. what would cause me to move multiple principal positions over the last six years to accomplish what we need to accomplish? do you think i am fearful of what is getting ready to happen to us? i am scared to death at the potential that could unwind this country far greater than anything we've seen before and sooner than anybody imagines, and we have to send a signal to the international financial community. look at great britain. they came, put an austerity budget. what's happening to the growth? the are starting to do this

already. austerity works, so we are going to drive more austerity. i can promise the next six years i'm going to drive austerity like crazy because our kids and grandkids are worth it. >> can you to look the process when president obama cradle to the commission in february i think a lot of people were surprised at how much bipartisan support. you spend a lot of time working on the details of this. can you tell how this comes out and how you got to this point? >> that we take a stab at first. i was very dubious like many people in the country were, and i have to give credit to the six congressional nominees or members of the commission who came and in a non-partisan way addressed this issues and helped the members of the commission who are from the senate or the house achieve that bipartisan approach. now the members of the commission from the congress were also hopeful and we could you this, but having that sixth

set of members who were not voting members of congress in my opinion actually helped significantly to move us in the direction of discussion that could get us here. one of the early things i think that happened was as you'll recall the outset there was a concern this commission might be a vehicle to create another tax engine on top with the income tax in this country, and one of the early things i think that we would hope to achieve was an understanding that there would not be helpful to solving this problem and that in fact a major reform and overhauled or tax policy could help us become more competitive globally would be the stuff for the commission to take the lead could take and it's those kind of developments in the deliberations are synched think helpless move to this point believe >> i think the commission understands the severity of what we face. and ceiling to recognize that --

if the congress doesn't recognize that in this next year no matter whether it is this plan or some other plan, if we don't act, we have shortened the time line which we would have inadvertently, number one, and the consequences would be grown to believe that we would suffer as americans if we don't act pew >> looking ahead, the white house said yesterday they are looking to evaluate proposals for their budget submission. rye and mengin he saw things in their. what do you see as the core elements are principles that if this plan doesn't get sent to congress this year should be carried over into the framework for next year? >> first of all i'm hopeful we do get to 14 and i don't think it is out of the question yet. if we don't get to 14 nothing

stops us as a country with it be through presidential initiative for congressional initiative from considering all of the provisions of the proposals in this plan or pieces of them and i am actually confident that will happen in one way or another. i am hopeful we can create a very strong dynamic, that as tom says will cause the congress to act, because for the reasons that we have said, i agree. we do not have time to delay. in addition though, i believe that the core elements we must focus on our, as i said at the outset, the spending controls, a strong advocate of caps with very strong enforcement mechanisms, to make sure that congress has put on a path it cannot get off of without extremely strong margins. second, i believe putting that restraint in control, and please

come and putting the enforcement process in place to keep congress on that spending path we also need to address the second element which is to make our tax code more competitive and reform in a way the will give us a much stronger and dynamic opportunity for economic growth. those two pieces i think are the core pieces we have to focus on. >> do you think there is an up or down vote in the senate regardless whether it is the 14? >> [inaudible] >> if it does get 14, is there time to draft the legislation based on these proposals? i mean, could there be even practically speaking a vote [inaudible] >> to have written assurance from leadership in the house and the senate that they will allow the process to move forward in the near future in the congress. >> sometime early next year?

>> can you get insurance from john boehner? >> i don't have any idea whether they did -- >> i'm confident if we have the votes in the congressional leadership on both sides in this congress and the next congress would give us the opportunity. >> you know president obama pretty well can you tell us if you talk about the deficit issue if he is pretty committed to the things? >> i haven't talked to him about five weeks or six weeks, and we've not discussed this, but this is his connection. i voted against this process. i feel we have a commission. but the commission of the congress failed to act as we have seen this week we ought to be acting on that we set it up. it's his commission, it's his report. it's what his commissioners gave and now we are going to be above the majority so i think it sends

a signal its their potato now. how did that in -- >> that's now, but the point is what are the tax cut extensions about? it's about not hurting this fragile recovery coming and by the time -- where we are in this and treated that, i think you would see a more brilliant recovery if we put this reform to the tax rates, especially the corporate tax rates into this in a way of what ultimately build greater revenue for the federal government not to increase tax rates would increase the size of the gdp. >> let me make an observation on that. in number of economists who reported to the commission dreamed of the deliberations told us on of the most important things we could do, one of the biggest impacts we could have on our economic growth in this country would be to adopt a plan

and give the world economy the confidence america is going to reverse and correct its fiscal policy. with the concept in the plan were with regard to the tax questions you asked i believe one of the important elements and one of the three positive elements of this plan is adopted it would move us out of this debate about whether to raise taxes or lower taxes and on which category should they be raised or lowered and would move us into a new dynamic of tax reform and how should our tax code look as we try to create what would be as i said early your more efficient, less complex, less costly to comply and more competitive and in this plan literally changes the dynamic from the entire kind of discussion we're having in congress today over rate levels. thank you.

ayaan education program specialist here the c-span classroom to read each year we conduct a video for her trip

from petition asks students grade six through 12 to speak critically about issues facing the nation. this year's theme is washington, d.c. through my lens. we chose this because we would like you to explain how the federal government has affected an issue or even in your life or community. select a topic that interests you. once you have your topic you can be in your research. the goal was to develop and researcher topic, provide different points of view and include c-span footage of the the the 25 to eight minute documentary. for more information you can visit our web site, studentcam bought or gore e-mail any questions you have at educate@c-span.org. next the bp oil spill and offshore drilling commission continues its investigation of the oil and gas industry. the group is holding its final public session this week before submitting its recommendations to president barack obama in

january. former senator bob gramm and former epa administrator william reilly are the co-chairman. >> thank you and your colleagues for the excellent support you have given to this commission. we are very appreciative of the oil and gas off our shores is an american asset. the american government is not just a regulator of offshore oil, it is also close to word for the american people of this asset. in a real sense, we have a landlord and an obligation to respond with a public trust has been abused. president john adams said facts are a hard thing. there are some facts that i believe we have uncovered. one, our investigation would determine there are fundamental weaknesses in the u.s. government's regulatory approach. most americans would be

surprised and disappointed as i was to learn that america lags behind other countries and how we regulate and overseas oil and gas exploration and production. this points toward the need for alternative strategies, such as a commitment to safety procedures as a condition of drilling on seabeds which belong to the people of america. the wheel and gas industry at large has an obligation to respond. it is not enough in my view to lay the blame solely on the few rogue companies. the companies involved in this disaster are major players in the gulf, and the contractors are used throughout the world. at last months during i was impressed with the shell with their industrywide safety. they must continue strong

advocates for new and more effective industrywide regimes which complement effective federal government regulation and execution of least conditions. number three, america's current energy mom policy is unsustainable. with the awareness and virtually no considered to date, we've positioned ourselves as the usurp of 22% of the world's petroleum while we kunkel only 3% of known reserves under america's land and waters. this commission has an opportunity to speak to this article in balance which threatens our national security. last month, the head of our investigative team, mr. friend bartlett, put it well when he said 100 years from now, we want the world to say they changed the safety regime and offshore

drilling. these are a worthy aspiration with one significant exception. the world should see this in 2011, not in 2010. as a nation, we have the opportunity to exchange, to have a chance to learn the lessons from this disaster in a way that our oil and gas industry is stronger, our work is safer, our environment is healthier and our national security more secure finally, i would like to know why injury impressed with what we have been able to accomplish without subpoena power. i remain mystified as to why a few senators decided to do by this commission this power when subpoena power has been granted as almost an absolute for congressional commissions with chaff analogous responsibilities to hours. when the subpoena power has the lack of subpoena power has made

our commission's work more difficult. our success is a testament both to the determination and skill of our team and the plain fact the problems and deficiencies of the current safety regime are so egregious. over the next two years we will discuss our findings and how we propose to translate them into reforms that are worthy of our great nation. ..

and to the other members of this extraordinary team, that they have displayed the energy, the creativity, resourcefulness and the investigative congeniality, which marks their best work. the fact that we are as prepared as we are after just four or so months of work by the commission is a great tribute to anyone else come into this to distance itself. today will have staff presentations and then deliberate on a safety culture, under unitary environmental review, drilling and they are and not oil spills response. and struck myself by the evolution in my own thinking in

the course of the time that i spent serving on this commission, i came in to have persuaded as i think most people in the oil and gas industry may still be persuaded, that this was a case of a company with at least a five year history of severe safety challenges and misbehavior in that we were dealing with essentially a web company. i think it has been conclusively and indisputably established that we have a bigger problem than the three major companies as senator graham just observed were heavily involved in the decisions that are most questionable, that were made on the macondo rig. and this perception in some quarters of the oil and gas industry that macondo was the consequence of one company's bad decisions simply doesn't stand.

our investigative team concluded the three major companies were fully implicated in the catastrophe and her staff further reported that other companies have no effective containment preparations and laughable response plans that promise to look out for any polar bears or walruses that happen onto the scene. the poor state of containment and response plans and capability in the gulf of mexico is indisputable evidence of a white bit like a serious preparation, of planning, of management. that culture must change. in this change for so many reasons for the good of all of us. it must change under good reasons for the oil and gas industry. reflect for a moment on this. a recent commission paper noted

there was a point in the management of this craziness, when industry experts fear the entire 120 million barrier reservoir might sleep through the ocean floor and weak total have the. i would ask you to take a moment to reflect on this. what would we be talking about today if the well couldn't be kept? it was still pumping 60 billion barrels a day in typical, if the shores of gold results in mississippi, alabama and florida had been smothered with oil? and if the videos were still being shown 24/7 on every cable network and news website around the world? i can assure you we wouldn't be here debating how long it will take to jumpstart the permitting process in the gulf or the arctic. we be having an existential conversation about whether offshore drilling should never be permitted in u.s. coastal

waters again. even the companies would find safety and environmental management systems, and we have heard from them and we have studied and come to admire those systems. these companies that were not implicated in the macondo explosion themselves nevertheless found themselves shut down in the polls because of other companies mismanagement , because of decisions over which they had no control. the failure of three companies on one rig ended up shutting down three. and i was a risk even the best risk management systems did not anticipate and did not control. so let me say this emphatically as i can come in the oil and gas industry needs to embrace a new safety culture. the series of decisions that jim

macondo evidence the failure of management and good management could have avoided the catastrophe. a new safety culture is important. it is not enough. drilling for oil in deep water is risky, but so was flying or operating submarines in nuclear reactors. the systems in the industry safety -- the systems represented in an industry safety institute, particularly of the sort that the nuclear industry has developed, the institute for nuclear power operations, particularly offers useful lessons on how to ensure management that is judged an incentive to implement best practices and call out when it doesn't.

commission staff have identified a whole range of issues to which we must respond. i think that the self-interest of the oil and gas industry that considers it does have superior systems of safety management lies in the reassurance that they could obtain with the safety institute, the reassurance that the lacquer is from accident prone companies can be brought up to a higher standard by their peers. that is the history of other industries, which have confronted serious catastrophes. well, the essential foundation of good risk management is high-quality no-nonsense regulation. staff presentations and staff investigations have made clear,

as have other investigations by federal regulators and inspectors have failed utterly to keep abreast of the profoundly sophisticated technologies involved in deepwater exploration and development. to protect the public interest, the interior department will require more funds, more inspectors, more engineers, more professionals who know the oil and gas industry and equal of of industry personality regularly. it is widely acknowledged that the generation of revenue husker than the old mms and it took them a lot of money, millions annually. the money from oil and gas should be sufficient to finance the agency reformation that is needed. secretary salazar has recognized the need to separate the feed and revenue generation from environmental and safety regulations. we will consider today whether to recommend that he go further

and construct an impenetrable wall with environmental safety regulators from those who option in the use and manage the money, those activities generate. that is what other countries have done. the u.k. and norway most recently after their own desires or is. a word about the proposals we are considering. we made at a time of national preoccupation with reducing federal expenditures. we are sensitive to the realities of the countries fiscal precariousness. neither safety case nor safety institute need until federal appropriations or even congressional action. in the improvements amid terror departments regulatory capability are, we believe, relatively modest and failure to upgrade the quality of federal regulation would be a national

scandal. as both the ceos of exxon mobil and shall have observed, industry requires a competent regulator. i called the industry to support in congress the increase in resources over us so badly needs to become competent. oil is a strategic resource and is important to the security and the economy of the united states. my own experience with the industry leaves no doubt about the industry's technological savvy and its ability to manage risk and to feel the economy. we are not dealing here with the

sick or feeling or unsuccessful industry, but with the complacent one. the industry created marina welcome point is that industry commitment that addresses shortfalls in containment. we need more such initiatives. and so, we will now hear presentations about the shape that some of these initiatives might take on the recommendations that the commission will consider. >> at mornay, cochairs, commissioners and colleagues. over the next two days you will receive many staff recommendations for improvement the government can make in its oversight of safety and environmental protection of the resources affected by oil and gas activities. within the first ballot, we're going to focus on the frontlines, on industry itself. the companies who invest and explore energy resources to meet the demand of american

consumers. these activities take place on public lands and the public waters and frankly as we've been talking about industry needs to do a better job protecting lives and livelihood when they undertake these activities. to look ahead to the end of the session, we're going to look at recommendations that you the commissioners challenge the oil and gas at ministry to up its game, to help each other and hold each other accountable for her accident prevention and preparedness to respond to accidents that do happen. because i was macondo demonstrated and wish on the course of the presentation, it wasn't just macondo. they are not up for the task, they're not prepared for the task and this could happen again if they don't change their culture and change their preparedness for another accident. but before we get to the recommendations, my colleague rich sears will start us off. which is a senior adviser to the commission is going to start and stop with the first part we

recognize that macondo was unavoidable accident. >> thank you, nancy. i want to take us through the first part of this agenda can look specifically at the accident. and in doing that, i'm going to go back to pretty much where we left off in november. and it was with the slide where we summarized that it will be called managerial conclusions, conclusions that come to from the investigation looking at how the work was done at macondo. much of oversight in the november hearing in terms of the act investigation was about the light, what they did what they didn't do, what they couldn't do. and i was very important because it's how these organizations function that macondo, how they carried out their work, how they undertook operations that ultimately mattered. and it's rare when i finish with the short story of kind of getting under the skin of looking at it, developing it, nancy is going to talk about how

the industry might do this differently and might look better in the future. i used in the seven conclusions. were not going to go through them again, but they can be summed up very simply and commissioner riley coming he basically said this in your introduction, that our investigative team found mistakes and oversights led directly to the blowout. and they were the result of management failures by three companies, bp, halliburton and transocean at macondo. it's a very clear statement, very important statement that there is no mincing words about it. we need to examine it more closely to understand what it means to think about how we move forward. and i'll start here. offshore deepwater offshore exploration particularly is a very complex business. that's a very complex business that carries with that risk, inherent risk in operating a deepwater, for a short remote

locations. and these risks have to be managed. they have to be managed very carefully. when you're out on one of these facilities, you really have two things at your disposal to manage these risks. you have the people. the people with their experience, training, knowledge, instincts. in your process. the process is support that allows them to do their job, as function in complex environments and think beyond the task at hand. and it's the people and the processes together to make the system work and make the system work safely. and what we found in terms of the risk awareness and risk management that bp in particular had their management systems that were on display that we looked at the macondo incident, did not ensure that the team was able to identify and properly evaluate the risks that they were even creating with their own decisions. they were not able to look at the risks ballistically and

evaluate them in the context of a complex system. and very specifically, and the result of this, there were a lot of changes made to the well-planned, to the wall program and operations we described in november. changes in the last month of operation blowout. and these changes themselves created risk that were not and could not be adequately addressed by the macondo team. it's a very, very critical conclusion that we came to. even if you have the risks clearly identified, you have to make the decisions about these risks. you have to make them before you in a framework that allows you to consider them properly. as i said earlier, holistically and the context of a complex system. and it appears from our investigation that there were many key decisions made by the

macondo team. when i say the macondo team, and speaking of a very extended team that included people on the rate for many companies, people in offices and at many companies. key decisions were made by the macondo team without formal risk analysis and sometimes without internal expert review. and that macondo, there were several key decisions that in one case or another addressed one risk, try to minimize the risks associated with one aspect of the decision without realizing that in other ways they may have in some cases did increase the overall risk profile the operation they were undertaking. in other cases they failed to take advantage of expertise. there were not necessarily process in place that encourage them to call for help and rely on very experienced people outside of the rush of the business to help them make complex decisions. in many cases, they show an

overreliance on individual preferences and experience that we found in the documentary evidence. comments like well, i've seen this before and to explain a very complex set of data from the negative pressure tests, or if always done it this way, so, to explain how can a complex test is done. and when you fall into that trap, it gets to the last luthier that you really are putting aside the guidance that's available to established best practices. industry best practices, a very large industry with a lot of activities and competent players and even the own company's best practices. bp, halliburton transocean. in some cases we found these best practices, with regard to the test didn't even exist and work well spelled out for the people to act on.

so this lays the foundation of not just for risk awareness of poor decision-making around the data they had. and at the heart of poor decision-making, some communication. and here come the communications really important. i'm going to say in this world deep offshore operation, there's very little that goes on on these platforms, on these rigs that is a spectator sport. this is not about sending e-mails and sitting back and waiting for a response. this is a batting cage sharing, two-way sharing of information. this is for me at least, having been in this industry for several decades one of the troubling things about our conclusions is what we found is there are ways of communicating around the separations between operator and contractor in between contractors themselves, where information is partitioned

and shared selectively. sometimes all for good reason at least thought to be for good reason on the day. it's highly competitive information were not deemed to be necessary or it's not their responsibility to make the decision. when information in this complex environment institutions like that, you run the risk that the people that could be involved, that should be involved, that could add to the deliberation in the decision-making are not involved and the decision-making is consequently not as good as it should be. and what we found indeed, in many cases that bp, transocean, halliburton failed to share information, calling in experts, engaging. and certainly there are many tenses where they did not share information from operator to contractor and certainly between contractors. and as a result, individuals are

making very important decisions about the operations, the safety of what was happening on the rig. they are making these decisions without fully appreciating the context in which they were being made or even the importance of a particular decision. now, i want to quickly go down a level and look at an example and cement is actually good place to look in the business of this deepwater well and particularly cementing the production casing. the reason we've shown the 19th and a member of operation shown over a period of time and affect their operations that involved all of this and many of the companies out on the rig and certainly involved the three players, bp, halliburton transocean. when we look at the cement testing, this was testing of the cement component themselves prior to the cement being pumped into the well.

what we found is that management processes in place that halliburton and bp did not ensure that the cement was adequately tested before pumped into the well. halliburton didn't have the controls in place to initiate testing soon enough and did not have the controls in place to make sure the test results were properly communicated to bp was ultimately responsible for what is happening. in some cases, one case in particular it appeared to us -- appears to us the test was undertaken so late the results were not even available to halliburton prior to punting on the cement. this is important. and it's even more important that bp personnel have been engaged an e-mail dialogue to this about the importance of this that they authorize this without actually knowing whether this test data had been

received, without overdoing it and we could not find any conversation discussion between players about it. and so again, its failures of management, certainly about this particular area. and after the cement was pumped, he continued in really poor communication. bp halliburton employees had many discussions about the complexities of the cement job, the fact it was very low volume and all the things we talked about in november, difficult pressure environment at the bottom of the well. been doing this, they did not necessarily communicate all of these issues with each other. they can selectively shared information and certainly did not sure a lot of this information with the rig crew. the rig crew who had responsibility for monitoring the safety of the soil and being aware of the well didn't even

know some key information about the cement job that was a key component of the states as well. and the welfare leaders and transocean crew didn't consult with good spirit i no evidence they consulted on score about the interpretation of very confusing data from a very complex series of negative pressure tests. and as a result, they were making decisions and again communication, core communication is at the beginning of it. do we do believe that had this been done differently, how the conversation on the rate about our example the negative pressure tests then instead of being well i seen this before and is instead the conversation would've started with well look, we've got high-pressure sure requirements at 18,000 feet, something like 13,000 psi. we have a very difficult for the job we just pumped.

we have lost circulation. we had difficulty converting floats. with a long list of things we discussed in november. have the conversation occurred, we believe that the blowout could've been prevented. a very different kind of conversation on the rig at the time could have prevented this incident. so when you come back to decision-making, the bottom line is you can't leave it to chance. you can't hope that the right conversation happened at the right time, with the right people. you have to process in place that allows people to come together and encourage in fact insist that these people come together to consider the complexity of what they're undertaking. given risks in deepwater drilling companies have to take these processes and policies. this has to be the way the business is done. and if they don't do this, the risk is that the time pressures that are inherent in these big expensive operations are going

to find us in a decision in efficient tea and timely cost savings. this is a very natural outcome of not looking at it clearly and systematically. we found that bp did not have these policy systems in place. or if they did, they weren't applied in the condit case. they were accused, weren't enforced. and there's not evidence across the board that there was good, systematic thinking about what they were doing. now attacked in this context -- we talked about a number of decisions that have been made, which ultimately get results in time savings on the break. and reference was made to a chart that was made very much at the last minute. it was still a work in progress at the time of the november hearing. this is that chart. this is a preliminary version of the chart. were actually working on it to improve it. we found there are errors on it

in the sense that it certainly could be clear and more complete. an updated version of this chart will be available very shortly, which we will share with the commission. when you look at this chart, on the left-hand column on the decision, there are things we talk about in the november hearing about centralizes, cement job, various tests that were done or were not done. many decisions made about these. in particular, decisions that were taken turned out to be riskier than alternative decisions and in most cases, save time during the operation. >> the updated chart does not, i would assume, take away from the conclusions that are drawn in these columns? >> no, no. the updated chart is being looked at for at there are things we think could be worded

better. but the conclusion is the same. many decisions taking on the rig one of the time turned out to read risks to the whole operation, were the result of that decision, there were sometimes they been involved. whether that's a primary driver or not is not the point. but in hand, if you look at the right-hand column, all of these companies were involved, either as primary decision-maker or involved in the decision-making process. so when we sum all of this up, we had -- which frankly for me is a very disturbing conclusion. the better management systems macondo by these three companies, certainly would have prevented this blowout by improving the ability of the people on this break to identify the risks they face, to manage them, communicate them and address them properly.

it's a very difficult thing for me to say frankly. i've worked in this industry for more than three decades. i was one of these managers. to think that these three companies screwed up like this bothers me. but it is the conclusion of our work that we found. and it's from here that i'm going to hand it back to nancy, who's going to talk about what this means in the context of trying to create a proper safety system and try to build an environment where the work can be done better. >> thank you. >> and a very brief questions or comments from which now before we go into the next part? >> rich, in this summary cable chart, the negative pressure test is that specific? >> it's not. and as i said, this is a preliminary chart. that's in the revised version of it out of the negative pressure tests. things were asking about that. because again, it's all complex

because the negative pressure test wasn't necessarily carried out swiftly. it was debated over a six-hour period. but at the end of the day, they chose to move on. and there could've been more debate, extensive debate and thinking about what is exactly happening here. another way is -- maybe this pressure test didn't actually confirm that the cement is good. how could we -- what could we do to further evaluate the cement job? that is a decision that should have been taken and certainly would've at a time to the whole process. it was a decision that was not taken. >> dr. boesch, this is nothing. >> okay, we just talked about what we've got none of our own investigation of what happened at macondo. and at the same time we've been trying to look at the context of that.

what do we know about investigations of previous accidents of investigations or looks at the three companies involved in macondo. and this is a slide that shows bp, which is one of the world's largest integrated oil companies and is the largest company in the gulf of mexico deepwater, it has a history of cost-cutting and resulting problems associated with that, with all business segments over many years. this is the systemic corporate culture issues. going back just at 2000, there were, at the grange refinery complex, there were incidents that i'm going to show you that in a minute, it turned out to be very similar to texas city refinery. in between that they had problems at a production platform in the gulf of mexico. and after texas city refinery, they have problems with their thunder horse platform, which was slated to poor material that was an engineering problem.

and then just after texas city, which is the most famous problem that bp had in the united states, and discovered serious problems of the pipeline up in alaska. we've been talking about the deepwater horizon, which overshadowed the fact that they had chemical leaks exposures come as serious exposures at the fence line. again, this summer and then they -- there's just been reporting from their own self investigation about really serious problems with their pipelines across alaska. so all this adds up to give us the impression that the safety lapse to appear to be chronic with bp and its about system safety engineering and safety culture in the company still needing improvement, even though they're making a lot of effort to improve it in their best and a lot to improve it. just to blow up a couple of these, and these are taken from previous accident investigations like our own. the u.k. hopes and safety

executive look at -- they're a series of three incidents at the grange house complex. it was refinery and chemicals. the stress you want to point out is they thought it was weaknesses and safety management systems that over a period of time contributed that resulted in the failure. that was about one particular event, but they reach virtually the same conclusions about the other two events. and it's all happened over the course of a month. a man, investigating the texas city refinery explosion, the u.s. chemical safety board found that the texas city this strategy was an accident embedded in the refinery's culture. certainly the chemical safety board looked at other technical causes of the accident. i'm pulling out the comments that speak to management culture and organizational causes. and they went out -- went on to find that these organizational causes linked to numerous safety systems failures that extended

beyond the unit that had trouble. i'm imagining you're hearing an echo of a rich just told you of these combinations of problems that link up with them this failure -- as a failure of the safety system. as you all probably recall, bp itself commissioned a panel to look at what went wrong and how they can change after texas city noted similarities between grange mouse, which is in the u.k. and the texas city last, including the lack of management leadership and accountability. and just to highlight, the poor and are standing up and a lack of focus on process safety. and the panel concluded that in its response to grange mouse, bp missed an opportunity to make and sustain companywide changes that would have resulted in safer workplaces. and i want to highlight here that i think of failure,

while -- sorry, i'm ahead of myself. i think is important for us and everyone paying attention to this accident to make sure the lessons of deepwater rison are learned across the whole industry. >> nancy, can i ask a question before we leave bp, you said that you thought that bp had instituted some practices now that would improve the situation. i noticed the last sentence in the baker panel i don't his untimely completion of corrective actions from audits, this impasse instance of investigation. what is our evaluation at least to the conclusion that he has made significant improvements. >> they've sent us a summary of how they're handling safety improvements. we for example after texas city, one of the recommendations as they have an independent

evaluation of their safety management systems. and they did hire this independent -- i think it's called an independent investigator or independent evaluator, who is preparing annual or biannual reports. and in reviewing one of those reports, we found they're making progress in a number of areas and they're not making progress in other areas. i think would be unfair to the company to say they are not paying attention and they're not trying. i also think it's fair to take a look at my macondo and say they haven't gotten there. and completely requirement, but the new safety culture that would've avoided, that they weren't able to avoid deepwater horizon. they have an operation management system, which i think they would like to be like exxon mobil's operation. integrity management system that mr. tiller said told us about at the last hearing. i'm not in a position to say that's good enough for how

comparable it is, but they've invested in a number of efforts in mind of the texas city and the recommendations that came from it. so then, just some things we've learned about halliburton, which is the world's largest cement macondo oilfield cementing business and a significant part of halliburton's total global business. i'm a comment i have here is that for all of this experience, they prepared for meant for bp, which is one of the largest clients, the reputedly field laboratory test. among the halliburton managers onshore at its own teeth and transocean, bp continue with the cement jobs without timely and positive stability results. and it begs the question for me, if you have all this experience and you're in the largest in the field, how does that happen? how do you continue to let something go forward when you're not absolutely sure that you're

providing best? >> there was a large explosion on the rake off the northern coast of australia in august of 2009. and the accident inquiry just officially came out last week. and they confirmed that cementing problems led to the blowout. and the specific problems were different at montera than they were at macondo. but in both cases, management processes by the operator, who took the responsibility and halliburton failed to ensure that the crew achieved a good cementing job. and then we have transocean, which is the world's largest deepwater driller. and they have their own safety culture problems. in february this year, the u.k. health executive accused the companies of short managers of bullying aggression, harassment, humiliation towards their staff. according to one of the industry trade journals that i've seen a copy of the report.

and also in response to a series of serious accidents and near has within the transocean global organization, a company contracted lloyd's register review safety management and its safety culture. another four north american rigs that lloyd visited, the deepwater horizon has the lowest scores. there were really in the middle of a five-point scale,, twos and threes. on the next page is going to show you that the comments that lloyd collected on hazards identification. in other words, on the risks on how the crews managed them look really strikingly similar to what are investigators found at macondo. so these are quotes coming from the register report. they found a fundamental lack of hazard awareness underpinning many of the issues and the north america division. the transocean supervisors and whig leaders themselves believed -- these were quick they found, that the workforce

is not always aware of the hazards they were exposed to, that risk management plan to always identify relevant major hazards related to the task, that rick post identified hazards were not fully, but emergent hazards during tax execution in houses for the change in risk level were not always detected or appreciated in the crews didn't always know what they know now. so the front-line crews seemed to be working with the mindset are potentially working at the mindset they believe they're fully aware of the hazards when it's highly likely they were not. i think that's really eerily similar to what rich was describing going on at macondo. >> nancy, can i ask for these supervisors and whig leaders, mostly unsure? because regulators implies that there were also were on the rate. >> these were all over. i'd have to come back and ask

you. these are on the break and i'm sure. i remember from reading the report that the answers were quite different on the rake versus onshore. and there were a lot -- to be clear, there a lot of positive responses. it wasn't uniformly negative audit. there were a lot of good cohesion, a lot of trust in the managers on the rake. they felt they had a really good safety culture. they felt like the majority of the people working on the rake tell if they have the ability to stop the something was dangerous. but that contrast with these kinds of comments, which is they weren't necessarily sure they would know when something was too hazardous to continue. >> before we go onto the international scene, i wonder on the halliburton issue is, do you know, is very corporate protocol that requires they have satisfactory tests conducted and approved and accepted before

they actually do a job in cement a job and communicate the test to the oil company? >> we've asked halliburton to provide his materials. we don't have them yet. we don't know whether they were there or having them provide. >> we were about to turn to a page that has gulf of mexico accents. how confident are we that indicators of safety are being fully reported, for instance, you raise the question of, is the crew culturally willing to pull the plug on the operation if they see a dangerous situation, do we have data as to how frequently it has occurred on the rigs in the gulf of

mexico? >> i haven't seen any data on that. i think that it would take surveys and there might be surveys done by companies, like the lloyd's register report of the private port produced for one company that's trying to improve -- understand and approve its own safety culture. the reporting is very uneven. it's not done the same across countries, with respect to official reporting by companies to a regulator or a safety authority. so i would say we have very strong confidence that with a comprehensive global understanding of accident, probably better, but near misses i don't think we have a good baseline of that at all. and very apparently, for example, is in the u.s. -- the u.s. doesn't require the reporting of releases of hydrocarbons, which really means gases.

because if they release oil it would be a spill and they'd have to report that. but the release of gases is an indication you've lost control and that should be reported and investigated as a near miss. if for no other reason than it's learning -- not reporting that gets in the way of having learning within the industry. and i think surely might touch on this later on, but that is something that should be changed in the coming months. another regulatory regimes to require that. >> could i go back a moment to the other issue. i would assume there is the relationship between the cost of insurance and the insurers level of confidence in the safety of the operation. is that kind of information maintained in some systematic way? >> well, i want to make one clarifying point. lloyd's register is not lloyd's insurance and they are not the same company. they may be in the same group.

i don't understand that. secondly, what did look into the question as to what the extent the underwriters -- to what extent are they able to discern safe from unsafe behavior? and the answer from the research was that they certainly do try to look at that, but i think that they know that they're going to try harder in the future. they weren't as aware of some of these systems safety risks that they were taking before macondo and montera. there are not -- there is not a well accepted that of what you might call process safety or systems safety leading indicators that everybody would look at an agreed this company is really managing the engineering system risks better than that company. it's very difficult to do today. but understanding from interviews with the industry is that they will be investing more in trying to discern that kind of -- that kind of behavior

moving forward. >> so is what you're saying that as of today, insurance rates are not a particularly reliable indicator of the underlying safety of the operation? >> no, not completely. yeah, not completely. >> are you finished? >> yeah. >> do it at that map in the list of incidents suggest to me two very important needs. one is for standardized reporting throughout the world. it is a global industry after all and there aren't that many players in it. that is one. and i assume could be done by the international regulators meaning together to agree on such standards for reporting. but secondly, it suggests the need for international agreements on safety itself. you look at the very large part of the golf that is not under united states sovereignty. one company is responsible for whatever oil and gas development

occurs in mexican waters. that's pemex. we have the arctic with canada on one side and russia on the other. any one of those three countries in that immediate area could affect significantly the resources of the environment and wildlife and rest of the others. and there's every reason, it seems to me, for an international agreement on safety. has anyone pursued that? is that an issue at the state department? is it something we should recommend? >> i don't know if it's an issue at the state department. i do know that there is a group called the international regulators forum. and i do know is informal might be too strong, but it's the members of that themselves would've gotten together frequently in the past year post macondo and post-montera and they've come up with some consensus recommendation, really quite consistent with what you're suggesting.

i have those listed in just a couple slides from now and will get to them. and i -- i don't know if they're heading towards a treaty. and that is something we can investigate for your formal treaty. there's an awful lot though that even absent a treaty, if those recommendations that companies can do themselves and that national regulators can do themselves, that don't need to wait for a lot of formal negotiations. they've done some of them. they worked through a lot of what they consider to be fast tracked says and how to proceed in order to stay on top of best practices as we move forward. and i just make one more point before we leave that aside, is to say unfortunate list of incidents is sitting over where there will be new deepwater activities off the coast of cuba, only about 50 miles from the florida coast. and of course, you know, the u.s. operators and companies won't be involved in that

directly because of our trade embargo, but that's going to be one of the next sites. >> we understand the gas price is likely to be the company that are further, that would be very useful to have relationship if that was cuba on their international operations. we have a lot riding on it. >> and chinese will be involved i think the spanish will if that's what it looks like. so this is just up here. it's not exhaustive. it just illustrates the vast macondo wasn't the black phone, it wasn't a fluke or does a lot of losses that will control come a lot of blowouts, loss of life and a lot of weirdnesses and it is in a complete list or does a much longer list of incidents out there on the shelf that of the serious enough to trigger a panel investigation. >> can i ask a question of u.n. rich. or looking at the risk of incidents when you look down the

look of names, some of them are the larger companies that were familiar with. there were many other needs that are does -- as well known at least to the general public carrots or does this indicate -- are these independent contractors, smaller companies? i think coming to the issue of the risk profile and whether the companies have the resource is to manage the risk, can you just -- both of you perhaps reflect on what this list indicates that sort of the range of size companies that are participating out there? because i think there is some sense that only the large majors are out there operating in these very high-risk situations. but this indicate that the much broader range of companies. because i'm not familiar with them, if you could elucidate that. >> i will say a few words. it is a very diverse list for sure. there are very large companies on their. bp, for example.

a lot of medium-size fast chevron is a large company. a lot of medium-size companies and anadarko that i would consider in terms of the offshore companies like debian and mariner and apache 2:00 p.m. on -- firmly in that medium-size and there is some others all operators -- independent operators. but not in substantial companies a significant market capitalization. and they're fairly act to reduce a lot of oil and gas. but they are nowhere near the scale. a couple orders of magnitude separate the top of the scale from the bottom if you look at market capital revenues or production. so it is a diverse list. at one of the things about this list as i was working on it and taking very many of those companies that don't exist anymore because they've been absorbed by others, even on that list. and that -- that's another aspect of this business.

and it's a very sort of vibrant ecosystem of companies and asset out there. and that's part of what makes the complex. >> i was going to ask, how many of those that you know are self-insured? >> on that list, i don't know. but i would guess that to at least. bp and chevron, the big ones for sure. the others, you know, i don't know what self-insured means in this context. i don't know that you can actually go out to buy tens of billions of dollars worth of insurance. i don't think you can. >> did anyone walk away from the way both of these companies? >> i don't know. i can't say. i think i can say that the ones on that list that don't exist -- i don't think it's because of these incidents. it's because they were absorbed by something else. a lot of think that is an issue. but on the with the insurance

standing is that most of the companies on the list to be honest. >> nancy, can i ask another question about this list? i noticed that from the first, which was in 1979, 21999, there were a total of 12 incidents reported, beginning in 2000 there've been 21. now is that a function of the data set, or has there in fact been that degree of acceleration of acts? >> i can't answer for certain, but when we put this together and when this was given to me, i was told that this is not exhaustive. and i think to stop putting these together a train to only put names on the list that they understand enough about to put on the list. so i wouldn't draw a conclusion about acceleration of accidents from the pattern here. and we can do more research on this, but this wasn't a primary

point of our investigation. brother just to show -- it wasn't like we been in the gulf of mexico for 30 years and nothing has happened until macondo. i do want to make one point about the range of companies, independents versus majors and super majors out there. which i'm a little bit of work. and i don't think there's any reason to think that the independents are riskier operators than super majors. they are smaller, but everybody is smaller than a super major oil company. some of them are really big companies. and some of them are quite small. i don't think we have any research that says they are riskier. i don't have the capitalization. and so this is a big part of the discussion that has to further happen about how to make sure it is a robust -- if were going to have industry in the gulf, there's a robust ecosystem of

economic actors out there, because they do i'll serve important purposes in the economy of the exploration -- exploitation of the resources out there. and size doesn't correlate with risk as far as we can tell. >> cat, i'd say that all of these companies operate with very similar skill sets. many of the very small companies are in fact start at people that have left the large companies then gone out on their own, thinking this would be an interesting business to run. and though, the operate with very similar skill sets and even experience. significantly, they all use the same group of contracting companies. and this is where the relationships between operator and contractor become important. and because they all -- i suspect a very different relationship somehow they rely on the expertise of the contractors. and in our conversations with contractors, some of the contractors so much so that

appeared well, we know who were talking to. if it's a large company with the defense and a lot of experience in this environment, we recognize that versus when we're talking to a small independent that might meet more of our expertise. how that plays out exactly in terms of sharing is not clear. but certainly the same group of contract or czar involved. >> bridge or an aunt e., do we know how many of the smaller medium-size companies aren't ultradeep water? is there any evidence? >> of the ones that exist still on this list, several. yes, several. >> they were in the independents operate in deepwater have been in to talk with us, but we didn't do a head count on them. there's more than one with pink from whale talk about the

majors. >> that's obviously important when we get to financial responsibility. >> we are now going to shift gears a little bit and talk about solutions, how to transform ideas and the safety culture and make sure that they are prepared in a very practical way to practice rescue, response and containment. we serve the slide quoting i think of as the dean of regulators, the directorate general norway's petroleum safety. and he put it but it's a risky business, no question about it. we talk a lot about the risk. but the presence of risk does that mean accidents have to happen. at that, but rockefeller said that her previous hearings that if we don't let us about her previous disaster and the next question is how we put those two words together? i mentioned earlier in response to those questioned, there is

international regulators for them and they have very recently come up with consensus findings and recommendations because this is the session on industry and i'm going to focus just on the things that industry can do. industry really needs to take the lead on the third point, on continuous improvement. and they need to take lead on communications and learning although there is a government role there for government regulators themselves and also for helping. industry needs to take the lead on that. industries of april and international standards and ensure audits. just to spend a few minutes on those, operators and contractors how to manage their companies to achieve safety objectives and continually take the effectiveness of their match our programs. we talked about there really is a need for indicators to identify major hazards and safety culture. and worker input is also essential. this is something talked about

less than the u.s. and the other ocd oecd countries. vastly more input in the worker safety program. rich talked an awful lot about about what the role of poor communication was in the macondo accident. and this shows up on accidents. it shows up in our accidents in all industries. usually basic medication problem. there's communication among their regulators, but also operators and contractors. and some of that communication during operations, but also the collection in the maintenance of comprehensive and verifiable incident databases as senator graham just brought up. we certainly don't have comprehensive incident databases that one could learn from and rely upon. and international standards. we need an effort now to identify bad standards and apply them internationally. and these campy lowest common denominator's, which is how a lot of people describe the

standards we have today. and these can't really be options papers. we do know how it to do things best for the industry knows how to do things someways our best, someways or better in some way chissano k. they shouldn't be having options papers on this. ..

never lose a summary again. and the beginning of all this was the leadership in the industry came to the realization that they were only as safe as the weakest link and the agreed to hold themselves and peers accountable for safety within the set up mechanisms to make this real. >> can i make an observation? there was another thing that could happen and that was a consolidation it used to be there were a dozen or so companies that made commercial airlines, lockheed martin, douglas. today basically there are too, there is going and there is airbus.

do you think we are looking in terms of achieving the level of safety that we want here towards a similar consolidation, and that may have something to say about this issue of liability insurance, which has tended to revolve around how we protect the smaller? >> i've looked up some of the recent literature, and the analysts predict more consolidation in the oil and gas industry. as rich said there has been a lot of consolidation even before this accident and the analysts predict there will be more consolidation. it's doubtful it will consolidate in a healthy way down to just the majors. i haven't seen anybody that thinks we could have a healthy and efficient oil and gas exploration and production industry that's just a handful of companies out of the gulf, and that comes to them how we have to be careful about the

liability, which isn't as much the issue as much as the strategic and financial responsibility, how those provisions are handled, and then on the industry side particularly how they are going to demonstrate that they can prevent accidents and then demonstrate that they are prepared if an accident does happen to respond and contain it, and that is containment is one of the proposed solutions but there is another set of industry consortiums the independence are pulling together. the government should require an industry on their own should demonstrate the have the capability to get in there and respond and country and this bill that does get past. all of their best efforts which as of now are not good enough to prevent spill from happening so it could be a financial plus physical demonstration of how to prevent their being a large

spill. >> let me make a comment i don't know if there haven't been industry qualifies me as an analyst but i will try the current players will be continued consolidation because the natural part of and the business cycle but believe that there will always be small players bringing up to bring up assets that these larger consolidated players just don't find they just don't fit their business, their business model gwader capitalized and some within the operating community, i think there will be consolidation there will always be small players that create themselves out of small groups of assets because a small asset can sustain, even a deepwater operating company and a small level. where it might -- where you might not see that happening is with the service companies. the service companies have been

consolidating over the course of time if you look at the landscape now, even names that were active on the deepwater horizon rig, sort of cascade up to a couple of large holders of big service companies and it might be that the service industry sees more consolidation. it's much harder to grow a boutique service company and capitalize it properly and it is to grow avery small operating company. >> i was going to bring up almost just the point, but also the point that i understand in the airline industry and maybe you have looked at this. there is a very tight relationship -- there are a lot of contractors. there is a very tight relationship between the -- let me call what the operator who is designing the planes and the entire design of all components and contractors.

and i'm wondering if we could learn something like that here. as rich pointed out, this seems to be a little communicates a mismatch between what's going on with the contractors, which are an incredibly important part of this operation on any rig, and the operator or the onshore people. do you have anything to comment about that? >> i think if i look up the analogous part of the industry, when large oil companies large and small are building facilities i think they do have that kind of close relationship with the construction and equipment supplier communities. and companies have developed a very tight alliance contract with suppliers of equipment because they found that there was a more efficient, more effective way to produce better platforms, better structures,

more resilient and robust facilities. so i think terry is a parallel of that in the oil industry. now when you look at the physical plant. but that's different than the operating world. >> i would like to do a time check. do you want me to try to do the rest of the slides or -- >> yeah. >> okay. so the analogy -- we did with the aviation industry, and there are a lot of good analogy is and where we can learn from it. we looked at the states with the analogy that seems most at right now was the institute of nuclear power which emerged from the 1979 meltdown of the three mile island nuclear power plant. the first recommendation that emerged from the president's commission that investigated the accident free yet a clear social mandate for the industry to

improve. and i won't go through what they said because i'm going to come back to that. i'm not going to go through with a set of this point. i'm going to come back to it in a few slides. imposed today is a very -- it is a 400 person staff with a 100 million-dollar budget. it has a lot of detailed technical work. 250 of its staff are nuclear engineers or scientists. and so they are -- they have a lot of value to the nuclear operators. and their influence is interesting. we did sort of an informal 360 of info because we read a book about them, we heard from the managers at inpo, and what we wanted to find out for ourselves, everybody thought it is we talked to the chairman, the former chairman of the nrc and another nrc commissioner and the insurers and some companies that are members of inpo and some of the ngos that follow

the nuclear issue and against nuclear power, so the sense that i get is that inpo is very important and freddie thinks we are safer because of the existence of inpo. for all their technical work think it's a lot of technical scores that are rolled up into a metric from 1-5 and they are announced the yearly meeting of the utility ceos and and a public setting that includes the nrc commissioners and other nels writers the companies that get high scores are announced and inpo one would get an academy award for a nuclear engineer were utility ceo. whereas in a smaller meeting and a private meeting of the inpo for are announced, and that has been described by companies to get them as the walk of shame, and the ceo and the chief nuclear officers who get inpo

have to stand in front of their peers and explain why the system is failing essentially, the total system safety engineering is not good. and usually whoever is in charge, the highest level of management loses a job for having an inpo four and of course inpo five needs to be shut down. there's nobody talking about why they got to inpo five because the manager lost their job. then a particular industry's scores and details results aren't shared with anybody of particular companies aren't shared with anybody else, but of the lessons learned are shared widely across the industry with a number of different ways, and just to reiterate the bottom, everybody complement's the role -- of record complement's the role of inpo but the say it couldn't work if there were not the nuclear get a free commission doing its role, some

sort of a tripartite thing. you've got the company being influenced by both inpo and the nrc. >> they must share the information with insurance companies. >> they do. >> what about with the governments that have received your response obligation. do they inform then ads to the safety of the plant? >> it's a very interesting and subtle relationship. they apparently will let the nrc read the full report but the nrc never gets control of it. >> but i mean, for instance in florida there are three forms of nuclear plants. there is the safety response plan for each one of those three. the plan might be different if you knew that it was of one as opposed to four in terms of the inpo standard. >> i wasn't smart enough to ask about the state level safety responders. the sense i get is one can know

generally what a score is and that performance. the nrc might be the one to share with the state i can follow ups and you'll know that. i'm sorry, sir, i can't answer the question about how it's shared with the state regulators. and i know that the inspections are coordinated with the of the federal agencies like osha and i can't imagine they wouldn't have to cord meet with state regulators as well. >> just quickly by the numbers for the skills of inpo, there are 104 units operating across 66 sites. the inspections are serious. they are two weeks on-site, but the inpo inspection and audit team take a couple weeks to get ready and then there is a week of rioting of the report and

then have infil report screen. so these are serious efforts, and although it's sort of contradictory with getting an academy award, because 40% of the actors don't actually get an academy award, 40% of the plants to gideon inpo one they are not great of on a curve, so maybe it is a matter that this has worked over the past decade at constant upward improvement. so, the recommendations we are making to you is that you challenge the oil and gas industry to create a similar kind safety institute for oil and gas, and i felt that the wording from the three mile island commission was fined and the nuclear and put the oil and gas industry must dramatically change its attitude toward safety and regulations, and at the same time it's the regulatory agency in preus, the industry must set and police its own standards of excellence to ensure the effective management and sales operations of offshore

oil and gas. you don't know how much i had to fight the editors who kept trying to fix my slight because i had to cross up -- [inaudible] weeks ackley . [laughter] >> could i ask a quick question about this recommendation. it makes so much sense based on what you have already told us, and as was noted previously by the co-chair of the industry should have an interest in doing this because as you pointed out, an industry is only as safe as its weakest link. but i am trying to imagine why or how we would transition from where we are today with representatives of the oil industry like api basically saying we are not sure we need more regulation even this kind of regulation of self policing to replace somebody might actually get greeted and have to take a walk of shame. that's pretty stunning stuff, so why is it the nuclear industry is willing to do this?

i am trying to tease out of that what could translate into the oil and gas industry and what i see the point of insurance, for it simple, that their ability to get insurance and the rates that they pay to their reaching under the system, you can see the connection. you can see at least one of what may be several motivators for the industry to participate in this, but also to do better job and increase their safety. again, in the oil and gas industry where you have self insured or multiple insured, and when you have liability limits you have a very different situation. so, if you have fought about this, nancy, can you give us a little bit of your thinking about how we might get the industry to see that this is, you know, long-term best interest in the nation's best interest and be willing to take what could be a very big risk for several of them any way,

maybe many of them. >> i think that you have hit on the challengers' course as a government panel we can't -- you can't tell the industry what to do. the question is what would motivate them, what motivated the nuclear industry to do it is we think they felt they feared much stricter regulation or potentially even a federal takeover because france operates the nuclear industry as a national system and that wasn't an unreasonable model you might have considered it think the situation we are in now with oil and gas is that all the companies are losing a tremendous amount of money. they have worked really have kept very high cost running tomatoes contracts on equipment they need and to not lee of staff so they are all hoping they are going to get their permits and their permits are stuck for a lot of reasons.

so overarching regions though one could explain is the public and the government doesn't trust them to operate safely and so part of this proposal was do something new that shows your taking system safely seriously and that looking backward what you have had in the past doesn't do that. now why do have to say the rules insurance doesn't seem to be that important in inpo today. it's they're structurally, but it's not as big a driver. what seems to bite the could drive the inpo is the pure competition and the added value and its reviews and audits. so it is there but it is not as big a driver as it might have been at the inpo inception. and i don't know what to say over than they are stuck now, they don't have permits, it's

becoming extremely expensive to keep the operation dillinger without being able to actually do the work and they should recognize that there is nothing has really fundamentally changed. they don't know if everybody else in their operating is going to operate as safely as the each think that they are doing there is a complacency i think most operators think they are operating safely and i don't think they should be that confident in themselves. they should undertake this kind of pure auditing to make sure that they are. >> nancy come in one of the hearings, api testified and i think they suggest they are the self policing mechanism to the industry and this kind of a leading question. anybody other than api believe that there would be inappropriate response? >> maybe that is a statement in the form of a question to the estimate it might be. >> you don't have to answer it. [laughter]

>> our recommendation is for various reasons it shouldn't be api. as the staff we would recommend that it not be api primarily because we think that this panel, the safety institute should do nothing but promote excellence and safety. and in most other industries there are multiple industry associations like the nuclear industry is the nuclear energy institute, there is inpo, there's another one coming and they do different things and this is actually quite normal. we think that the oil and gas industry needs something that focuses on nothing else but safety. second, we think that for credibility this institute can't lobby, and one of the main things epi does is lobby and every industry has a right to have a lobbying organization as a part of the american system. but the safety institute can't lobby and then the third thing is that the api is the american petroleum institute and we think

that safety in american waters and in the arctic will be accelerated faster if there is immediate international cooperation to get to best practices were excellent practices and in that case we think it's better to create something new that's really focused on the best so it is for those three reasons and the fourth is that a epi's culture is a culture of consensus and we would like to see the industry said something that isn't based on consensus that has the kind of tough love built into it that all inpo has. it can be quiet, tough love but somebody needs to tell the truth to the operators or the contractors that they are really not operating at the top of their game. >> all compelling reasons to be >> since you asked. [laughter] >> so, we have moved past this a

little bit, but there's been a lot of the wintry -- the industry has been guided by voluntary industry standards and subject to government regulation and oversight as we talked about repeatedly in the deepwater horizon accident showed the system hasn't worked well and enough, we need something new. it didn't protect the workers or the economy and it hasn't protected the broad public interest. and again, the panel after this one will detail a lot of staff recommendations for how to improve the autonomy and regulators but the questions we are talking about now is whether the industry can up its own game without waiting for the government to tell what it has to do and also, i see one of the co-chairs mentioned can the companies figured out the need to support their resources and policies in order to get a good constant federal regulator and

will demonstrate a commitment to the safety excellence by creating this complementary institution that can really to the government and to their own companies in this nuclear regulatory commission and inpo relationship kind of way. okay. so a lot of questions are prefaced with what is on this slide. people are saying there is a big difference between oil and gas on the one hand and nuclear on the other that oil and industry is more heterogeneous, there are more service providers, more types of technology, so therefore it is not a great model. or -- this is the point - is more important, industry structure is much more complicated. there is a small number of large companies and then a large number of smaller companies and so the cost for something like this and the influence of something like this will be more complicated and my answer to

that is yes it will be more complicated and i don't think we can design this for them providing they can handle that. there are issues of competition among across the operators and confidentiality, but again, this is about safety, and our understanding from interviewing people is the competition of oil and gas is about the geology, it is a finding of the elephant, finding the reserve, not about operating safely to confirm the exploration you have and then extract them, and then there is a special antitrust background that has to be dealt with, but it can probably be managed. on antitrust, just note that the industry, the leal and gas industry has cooperated on a number of safety and technology issues in the past and so we think that they can work it out in this case and just to stress

this will be focused on safety and they should be able to work out the other technical issues. the new safety institute should have a core mission as i was saying before, to achieve excellence and safety across the whole industry. the companies have proposed when they think about it that they would have a third party auditing and i am not entirely sure what they mean that we think that they would go to externals third parties as not part of the safety institute like some of the third party auditors. we would strongly recommend that they build the capability within their own institute for a number of reasons, including that is where they get that here relationship, and also when we look back for a sample gough third-party auditing of the food

safety industry and the united states there are just issues there. it doesn't look to be as clear without conflict of interest as we see in the inpo relationship with the companies and that is what we would like to see develop. because of the lobbying a reason as well as the others that i laid out, we don't think this can be in the of the existing organizations, and there are many member organizations, but api is the one that suggested the previous hearing it could be them. for this work the company ceo and board of directors have to provide leadership and then they would insure in gate of the employees with this organization because it is going to be intrusive to work and it has to be empowered to use sanctions to help the industry players overcome with the nuclear navy, the organizations of the navy calls the enemies of safety, a

current, not knowing what you don't know, arrogance, thinking you can do it without being sure and complacency. >> but it will only be effective of the companies are really dedicated to it and remember, keep in mind one company's accident affects all of them. if they figured out how to improve safety this speaks to the major independent and small independents and contractors is a lot of value added about working out some of these barriers to safer operations not just at the design phase, but there is some legal issues associated with who can do what in order to manage the risk well between the operator and the

sere enter to the koza mentor tecum -- cementer her this is a good place to work through that. it has to be bureaucratically effective and autonomous. that is the kind of lima way of seeing the need to hear a good leader and resources with money and staff. i mentioned here inpo didn't get the credibility that it has today across the industry until the effectively got the leadership of one of the utility's fired because they didn't respond to the recommendations for improving the conscience and recommendations to improve safety the wind over the head to the board of directors and said you're operating a plant is unsafe and that is the leadership and the rest of the company started paying attention and of course, it has to be

coupled with a proactive federal safety regulators and this will help. if we believe there is this institute industry institute it will help us get to this new balance between baseline prescriptive regulation and comprehensive risk-based performance we want to get to. >> can i ask a question? >> yes, sir. >> under the protective use a single federal agency responsible for safety we had a brief discussion yesterday about the issue of whether which is of the higher value, the singularity of the regulator or the competence in more specialized areas. i was interested that osha regulates the safety net power plants. are there areas of where

specific competence is required where the will of the single agency should be finally it? >> well, i am going to leave that the next panel because they have an hour and a half and i only have five minutes. [laughter] but i will say we spent a lot of time talking with the author national regulators about this and there are -- i don't want to say trade-offs' but one has to work this out and it is complicated when you're talking about how to regulate the rigs offshore and in the end you have to resources whenever regulator you are going to put in charge with not just the financial resources with the skills to review the permits and to the investigations and the auditing so wherever you put the authority you have the skills to follow on that authority.

>> i know you only have a second. if you could comment on how you see the transition. if we make this recommendation we need this kind of a safety culture in the industry but where is the less rich to get them to actually move forward quickly to do this? is there leverage in conditioning access to the offshore retirement based on whether you are a participant in a safety institute where you are pulling best practices and improving standards they are operating? as a commission looking at the recommendation of the recommendation of requires their willingness to do eight, but because it is a public resource they are getting access to should we be considering that access to what we would proceed to be high risk areas depends on

actually moving forward on this? is that something that you have discussed or we should discuss here? >> i think that is a good discussion for two to deliberate over. [inaudible] >> i think it is something we should consider other ways where is the leverage? >> what is your relationship between portales and one for exceed all? are the rigs sword fight according to the 4,001 standards in the plants are run the country and if so how many? >> ips so? 14,001. >> 14,001, sorry. >> not yet. >> i am getting a model from shirley. >> they don't certify they are not qualified or doesn't apply to them? >> okay well i just wonder how something like that might relate to this but i don't want to hold you up on that. why don't you complete your

presentation. >> i just have a couple more slides. this is a slight we haven't talked about extensively in the industry discussion and will come up later in the presentation on response and containment, but the industry twist on this we know the oil is a strategic resource and imports into the security and the whole economy but the drilling in a reckless manner threaten american lives, jobs, businesses and environmental resources. it's time for the national energy strategy that reflects our dedication to energy and economic security safety, environmental protection. there is an industry rule, the industry needs to do a better job of protecting jobs and livelihood across the regions in which they operate. the need for oil and fishing jobs and tourism jobs and the environment is the natural and fourth system. drilling down on that, that

means industry needs a strategic approach to prevention, to contain it and response so that it is ready when it is needed. the two main consortium the have put together in the past don't have good records of responding to the big events. one is the consortium that was ineffective in responding to the exxon valdez spill and then the firm marine spill response company under resources and maybe wrongly under resource to respond to the macondo spill. we need companies individually and together to demonstrate the have the ability to prevent spills or blow up or any other kind of accident and then respond to it contained a worst-case spill through a number of not just paper exercises. they need to get out there the way that in my view the navy does and other emergency

responders. the need to have this muscle memory capability to go through the drills and exercises, simulation, strategic planning, scenario building, equipment testing and maintenance, research and demonstration of new equipment and procedures and instrumentation. the three leaf flag on all of this and i think this goes towards what would be the size of the maximum worse case still in the future and how confident we can be in and the ability to prevent and respond to a spill in the future and that starts to speak to the liability and the certificate of the financial responsibility and the companies are starting to look at this. they have to do this cooperative please and the suggestion is don't wait for the government to tell you how to do this, do it and don't plan on the industry this on paper. and this is the conclusion the accident undermines the public faith in the energy industry and

government regulators and even in our ability as a nation to respond to crises and this shouldn't happen again. other companies, of relations have responded to accidents like this and made the decision that it should never happen again. we need to make the decision in a very practical way. so that the offshore oil and gas industry needs to make the decision and we've made some recommendations of the can demonstrate the truly made the decision. >> this excellent and thorough presentation. let me ask if question falling on frances beinecke's. to drill in the north sea subject to the norwegian sovereignty, the safety case must be demonstrated. you cannot even become certified to lease unless you have demonstrated safety case. is the right?

>> the system is called the safety case but it's clear to it. >> the british call it -- would do the norwegians? [inaudible] [laughter] >> it's very similar. they are very clear that the company holds the operator particularly but then there is also a responsibility, the driller the private-sector holds the responsibility for operating safely in norwegian waters it the completely after their big accident shifted and as a regulator they want to responsibility. >> essentially there is a certification consequence to which to drill in norwegian waters. you have achieved the first hurdle of showing you have special sensitivity to safety and do so specifically to the

regulator. >> yes. >> so there is a precedent for this, for the requiring not just recommending, but for the government requiring a safety base be demonstrated? >> absolutely. it further goes they will will get a company's operation and mom and norwegian waters and factor that into their decision as to whether an applicant is likely to offer a safely and norway's waters and they might recommend a couple of with a operator that the norwegians have more confidence in for a while to the estimate how long did it take inpo to become a credible recognized and trusted enterprise in the whole nuclear fuel? >> i'm going to have to come back but it was almost in the decade from 79 was three mile island, and it was into the 88 peach bottom. >> when did they get the ceo

fired? >> that was 88, so they had no credibility, but the was according to the historical record when all of the companies took them. >> do you have a sense of what kind of transition period we can contemplate when we go down this road? >> on the private side for the institut? >> yes. >> it depends upon -- i think the criteria are to couple of the leading companies, and i hope would be the independent and the major, working in the coming few months and decide they want to do this and find the kind of leader they need a particular leader type to step in and then resource with the money they should be able to get this up and running and then what it does next i don't know if it is going to take, what it's going to take to get that kind of credibility. as the magazine's the burden of your presentation is we are talking about management, we are not talking about central lasers. we are talking about the whole

orientation toward the enterprise and recognition of how to complete and comprehensive understanding this has to be and how the fer communication among the people who manage them have to be. that strikes me as a business school fodder this stuff that ought to be more understood broadly and as you discuss it is in some, but not yet adequately in this one. >> maybe it is a combination of business school and system safety engineering. there is a lot from the engineering schools. the place i see this done the best is in aviation and aeronautics. and in the some of the military applications. we don't want to stress too much in the military but when we were researching this is the simple but seems to be coming out of the definitions coming out of the air force and thus of safe.

one thing that struck the is apparently every year the leaders of some safe listen to the recordings of the pressure going down. it is no mistake about what they are about. they will never let that happen again because they have the recordings of the sub been crossed and the board crew don young and there was a failure. somebody used the wrong material. similarly, we found out in our research that the managers every year look at the video the chemical safety board made of the texas city refinery plumbing of and they make all the managers watched that. so they don't forget what their job is, and their job is to not -- no matter what the bottom line is that they have to make, they won't forget they have to keep everybody safe and something like this can't happen again. so when we look at the good practices of the industry in the companies that have decided safety is at the top, it is a value, not a priority, and one

of our witnesses said at the last hearing, that's the kind of thing they seem to do. it's something deep inside that they recognize that everybody from the top down through the company passed to appropriate the inside how do you create an outside institute to do that part of it is going to include setting up this internal auditing function. that's why we want internal, not externals. it's not somebody else going out and telling them you need to do better. the need to create your own club. >> we heard from director tellers and, finally having made a mistake of trying to get the consultants to help them transform the decided they had to do it themselves. the other lesson seems to me comes from this conversation is this won't happen without a really much more effective regulator. you've got to have standing behind in the industry self policing along with the

government and it makes clear there are very serious consequences that go well beyond the industry itself and the government is watching very closely and presumably using information about the low grade companies to incentivize performance do not access to certain sensitive areas and decisions we seem to be called from. this is a very good. >> can i just raise one concern with your second point? i don't think we can tell the american people would ever we do that this will never happen again. this is a high-risk operation. and another high risk area by the thinnest of threads, we have avoided a successful terrorist attack inside the united states since 9/11. but i think most people who are in the business recognize that

there's going to come a time when the thread breaks and its way to be successful, and if the american people have been told that there will never happen, that will be a further disintegration of public confidence in their government. and so i fink we need to be a little bit temperate in using phrases like never for something which, you know, in all likelihood will in fact occur, and the american people shouldn't think that when there is that breaking this red means the whole system has collapsed. it just is the reality of the rest ratio that is involved in activities like this. >> but it is with the industry should strive for. >> it's an aspiration, but it's an aspiration which is almost certainly not going to be fully attained. >> on that real world of, thank

you on behalf of the commission. these are very needy subjects and we will not take a break until the 11:05. [inaudible conversations] >> i'm going to make some opening comments based on what the subcommittee that's been looking at the regulatory oversight has been doing and i think kuran might have additional comments, too. what we just heard on the industry approach and the need to get more pro-active approach to safety in the industry this is very much in parallel to what

we need to see happening on the side. chairman graham opened by talking about this resource of both the ocean and the oil supplies and the ocean are public resources and the federal government has a responsibility to provide some direction and oversight of those resources and how that resource is managed is very much under the authority of the federal government and i think in the aftermath of the deepwater horizon disaster certainly the public is looking to us as a commission to really focus on how to ensure that the federal government carries out its responsibilities in the most complete way. so on the regulatory side, we have spent the last four months investigating how the current system of regulatory oversight operates. but the process are that have been filed and with the resources are that are available to the agency to carry out these

responsibilities. we've really tried to analyze whether the current regulatory system of regulation is adequate to address the current practices in the deepwater and also looking to the future and other fragile environments. we included the extent to which mms resources were adequate from a budget and staffing perspective to cover the increase of activity in the past 1520 years as the industry is moved into the deepwater. we look to the exploration development plans have been developed the oil spill contingency plans, what the inspection procedure have been, how human safety responsibility is managed the fact that osha doesn't have a presence on the offshore rigs and the extent to which other agencies with statutory responsibilities effectively shifted the oversight to mms through the memorandum of understanding and

looked carefully what has been going on and other countries which some of it was discussed in the panel. earlier particularly the north sea and canada and in australia what we consider to be the pierre hardee leaders and particularly how practices have changed as a result of offshore accidents which were listed in the previous panel by nancy. we look to the risk management approach that has been adopted and these other countries and how it is forced industry to consider serious risk in a particular and demonstrate how those risks will be managed. we will be looking with the structure is and the interior department and minerals service and how that could be improved to ensure that there is a direct, much direct and affirmative approach to safety

and also leader conversations today we are going to be looking at with an internal review provisions are with particular focus of the arctic which is of course an issue of real concern. so i think before we get into that and other details of what our recommendations are it would be good, fran, if you want to address the same issues. >> thank you. i would like to make just a couple comments to put this discussion in the context of american history because i think it's important we look at how we is the regulation of deepwater drilling working and what changes what we like to see just taking a moment to reflect on the fact in the early 1970's starting from the celebration of earth day and the call to action to have a more comprehensive way of analyzing and protecting the environment we have put in motion a number of pretty significant pieces of

legislation the clean water act, clean air act, etc. and strangely or perhaps predictably in the 1980's the pendulum swung in a different direction and the direction was more in the direction of, you know, we have too much regulation of this country we want to do you regulate and started deregulating a lot of things and we have been sort of like half the last 30 years of particularly in this industry assuming the industry could more or less police itself, and there has been attention i would suggest and putting in context what you're about to talk about between an industry that is very sophisticated, very technologically enhanced and government agencies that are supposed to be regulating them for purposes of safety, not only environmental safety but process and human worker safety we're

just a resource come from to support the regulatory regime that would be sufficient, adequate, prepared, capable, competent to the industry. chairman riley mentioned in his remarks about failures of mms and to remember mms over the last couple of decades actually tried to change the way in which they regulate the industry with the adoption of regulation that were recently adopted it was only just in the last couple of months, but it was actually a number of administrators of have tried to change this balance between the industry and regulators to try to require a higher level will save performance and what didn't

happen? it wasn't mms's fault. was pushed back from the industry. was political pressure from congress and state and local officials that were afraid it might have too much of a chilling effect on oil and gas to a one of. so, the balance of power between regulators and industry is what is on the table in this discussion in my opinion. we spent the last couple of hours talking about how important it is that the industry stepup its game, teacup responsibility. and involve itself in a very active way in setting high standards of operations, operational safety. at this point in time, we need to think about what is the appropriate balance between industry and government and regulation, and what are the appropriate standards for how not only in ns, nabil iain, the department of federal agencies, but support they need from

congress come from an administration and from the american public because as co-chairman and graham pointed out, this is a public asset we are talking about. there is a national interest. it isn't a private preserve. it is a national interest. so, that is the context that i would just like us to think about this discussion about regulation. we can't simply blame mms. we have to take responsibility ourselves as a people for the attitude of complacency and the notion that it really isn't somehow a responsible and important function to regulate to the highest available standards, and without further ado, shirley, can you put in context both what we have learned about how the industry has been regulated and what

recommendations it will have for us? >> ephriam, before you turn it over to shirley can i just add, it? i think the word regulation has a number of meetings in maybe the macrosense it means the degree to which an outside entity can influence the standards and activities of another entity. we tend to think of regulation in the sense of a government agency developing standards and then and forcing those standards. i guess i'm suggesting that we should stay at the macrolevel. i believe much of what we want to accomplish could be accomplished by things like we talked by yesterday, having the sun setting of standards on a periodic basis so people were forced to reexamine whether the

standards of five years or ten years ago are still relevant. things like using the lease agreement or aggressively as a means of asserting the standards and the conditions executions which has a big interest in the sand a lot of expertise, so i think as we used the word regulation we don't want to construct it to the narrow concept, but to the range of instruments in the orchestra that are available to the common object of getting a symphony produced its safe and environmentally protective. >> i think it is an excellent point that you need a variety of carrots and sticks to make things happen in which we want them to happen which is a robust and healthy industry that operates of the highest local

safety pins used to make just one point before shirley starts, of course since accident in april, the mms commonality boer has been making significant changes along the way and we have been in regular conversations with them, with mike brown much, the head of the department who's testified i think every hearing we have had so we have been monitoring the changes are. i think what we want to do is talk about where we need to go beyond where they have already taken themselves, and also to senator graham's print, the point of leverage, what we can recommend that can actually assist the changes and move them more rapidly so if we can focus not only with the specifics are but how to actually design and then in the likelihood of them happening are higher than they might otherwise be. shirley?

>> i would like to add on to the commissioner beinecke's, into the progress that has been made. i will be going over some things we have learned in our research that is based on historical studies, management reviews, etc. so i just want to clarify that because we definitely think that they have been moving aggressively in recent months. my presentation is intended to frame a research finding and team up some points for discussion. through the discussion i am going to be referring to the agency as mms. it has in fact been renamed to. part of it has been reorganized but part of the reorganization is yet to be done so for simplicity i'm going to refer to mms but it will be done on revenue piece i'm going to put up a number of slides that have

information just for context. i won't go through them. a couple of points i wanted to make on this initial slide is the outer continental shelf that affects offshore development of oil, gas and renewable energy now and we need not forget that renewable energy has become a significant part of the agency portfolio in the last few years and we're focused on the oil and gas aspect. the other point i want to point out was the agency was not created in the statute, mms was not come it was the creation of the secretary of interior in 1982 and the secretary combined the royalty functions for all onshore and offshore mineral development and offshore oil and gas activities into one agency

so it doesn't have is called an organics statute so some of these aspects have evolves over time. the other piece is because and i think this is natural back in the 1980's we didn't have the communication mechanisms we have now so the agency was largely organized on a regional basis rather than a functional basis and this will come to understand more and more why the decision and 82 has had such an impact on how things are today >> before to leave, you have listed under leasing four, five all of which seem to be economic judgments like the qualifications, antitrust, ensure the resources are produced in a way they are optimized recovery. are there in the safety factors

in the current conference? >> to the qualification? no. >> is there a reason they are not? >> under the determination as to the cease operations happens leader of the permanent stage. in other countries as discussed earlier there are qualification requirements before a company can even have a license or concession to operate. >> so that's a major area to focus on because that is where you have the greatest leverage is access in the first place. >> absolutely. >> the first finding i will go over is the fact of the thing that this becomes so clear to us is there is too much regulatory coordination required in the offshore. as one of the of the regulators who's been through this pointed out, overlaps to result in colin