the potential risk. the most important, it's clear who owns the management of change, and the subsequent risk management and every employee and contractor is important to that prosays. these ve deliberate well-established processes embedded in oims enabled exxon-mobile to ensue new resources and developing projects with the confidence we will do so safely and responsibly. such an approach is not only in the interest of employees and resource owners, but clearly it is in the interest of our shareholders which leads me to my next point. upholding the high standards of safety and operational integrity is not just the right thing to do. the phrase we sometimes associate with an act of selflessness, but it accompanies self-interest because it makes a more confident, productive employees in organizations.

the rigor, discipline, and degr of accountability reired to improve safety performance, are the same qualityings producing safety business results operationally and fiscally. safety is not proprietary, and we share these practices in our industry and other industries. we seek to learn from others. after the 2003 space shuttle explosion, they developed a team of experts to study the technological and organizational factors that may have led to the disaster and whether there was any lessons for operations. it is by learning and analyzing, but looking to best practice and other organizations and examining near misses of our own that we continually improve our own performance. i know in commission has heard a lot about the importance of deep

water supplies, but the technology enabling us to reach the oil is one the significant security develops over the last 20 years. deepwater production that didn't exist prior to to 1989 today makes up 15% of production. by the year 2030 it will grow to nearly 30% along with brazil and west africa, the gulf of mexico is one the most important deepwater provinces in the world. in 2008 there was more oil and gas discovered in deep water, than in on shore. for the sake of our economic growth and security, we simply cannot afford to turn our backs on this resource. neither can we miss the opportunity to improve safety in the gulf of mexico. the macondo caused money and

damage. if we don't learn from this disaster, it will have been a double tragedy. as chairman ryan said at this commission's first meeting in july, we must come to grips with the disaster so we can never see its life again. i spoke earlier about risk management being a constant challenge, well, exxon-mobile believes this should not happen if industry best practices are followed. the spill did expose that our nation and the energy industry uld have been better prepared for the possibility however remote of a deepwater blowout. that is why we're leading a multicompany effort along with my colleague today to build a rapid response oil system in the gulf of mexico. this system involves a $1 billion initial commitment from the sponsor companies is unprecedented in our industry. it provides preengineered,

constructings, and tested equipment to be deployed within 24 hours of a spill in the gulf. in addition, exxon-mobile and other operators in the gulf of mexico in conjunction with the department of interior instituted new reirements regarding inspection of blowout preventers, casing design, and cementing procedure. i believe that these steps in adtion to the inspections performed on deep water rigs will enable the gulf region and the entire country to continue to develop our nation's energy resources with confidence. in conclusion, i'd like to share this thought. exxon-mobile is viewed as a cautious company. we're sometimes criticized for beinto cautious, and yet meeting the growing demand for energy is risky. our employees operate some of the most complex technologies in somef the world's harshest

environments. how we continue to progress technologically with risk is that advancing human progress does not mean avoiding risk, but managing rk by identifying it, andtaking steps to mitigate it. no company, ngding my own, lays claim to a 100% success rate in this endeavor, yet that rains our clear goal. in closing, there's three points i hope you consider in deliberations. first, a culture of safety has to be born within the organization. you cannot buy culture. you have to make it yourself. second, make no mistake, creating a strong sustainable safety culture is a long process. if an organization is truly going to overall its approach to safety, it has to be committed from day one, but you can't start until you stop until you start and you'll never finish.

finally i want to return to oims. i mentioned there's 11 elements fundamental to health and safety of our company, but the bookends are the most critical. these are management, leadership, and accountability, and operations integrity assessment and improvement. without leadership by example and without thoughtful, honest, and objective sf-assessment, no system is sustainable. our nation and our world continues to face challenges. meeting the world's growing demand for energy safely and minimal impact on the environment is our biggest. in light of the incident, we are advancing our progress towards thgoal. we support your inquiry and remains committed to the safety of our company and beyond. thank you. >> thank you. i'd like to ask you a couple questions that go fundamentally

to the issue of whether or not your approach to safety can be replicated by other companies, and ask you to look back at the period before and then the period after the exxon-valdez tanker spill, and go into a little day till if you -- detail if you would abo what you did and whether you made any false steps, whether how fast you were able to raise the game, and go beyond compliance and get best practices, and what you think that may mine for other -- may mean for others in the industry to do like wise. >> as i indicated in my prepared remarks, up to the time of the valdez incident, we thought w were pretty effective, and the traditional metrics used to measure that effectiveness certainly led us to believe we were. what we had come to understand is the traditional met tricks

are -- metrics are just lagging indicators, and they just told you about the problems you have had, not how to prevent those problems, and so that was, i think, an important recognition early on. being an engineering and science-based company, it was natural then as we set about to understand how do we really want to change the way we manage risk to take various systems and process approach, and that's in fact what was undertaken, and i think in some of the early day there were some false starts in terms of how we went about understaing accountability and responsibility in particular in terms of well, who actually owns which piece of the system in the process? that has been something that has continued to evolve with time. as i said, we've been at this 20 years now, but we have now arrived at the point where

throughout the organization everyone understands they own it. they own the risk that surrounds their personal activities, and they own the risk for those around them, and that the only way we manage those is integrating all the elements of risk so n one element in it's overseen is going to cause a problem for us. evolving from that realizaon i think there were a lot of missteps if i can say that or learners, maybe part effort process of us learning and our organization learning how to do this, but i think clearly the thing that i give enormous credit to the leadership of the corporation at that time was the recognition that you weren't going to go out and bring a consultant in to do that, that the problem were ours. the problems were inside, and we're the only ones to

understand them and address them to make a change, and i think that was an important learning early on, and then just the relent less stick-to-itness and the recognion we had to get on th iand it was a never-ending process. this hob updated three times now and every five years it's reviewed and updated again. it's never ending. >> commission and staff studied your oims system, and would be interested if you describe your cold-eye inspections and some of the things part of daily life in the company. >> yeah. there are two aspects of that assessment that i mentioned as one of the elements. there are internal assessments where the operating unit looks at its own processes and makes

judgments about how effective they are. they do testing of how effingive -- effective they are and they steward the close sure of those gaps, but every three to five years depending on what the risk profile of the business is, there's an external assessment, and that's compromised of people with particular expertise in those types ofoperations that they're going to examine, and they are generally compromised of people from all over the world who then come in and undertake an exhaustive review of that unit's implementation of oims. they test the effectiveness through various means, and then they identify gaps that need to be closed. they give the unit an overall assessment, and those gaps are up through the management team as well were closure, and the

real value of that, one is to strengthen the system and ensure that it is dynamic and evolving in recognizing changes within that operating unit, but that is also how we share the learngs and best practices gbally because those teams on the assessments then go back and share what thaif seen in -- they have seen with similar operating units elsewhere so whether it's drilling, producing platforms, or office environments, all are assessed on a routine basis, and it's that process that's really crucial to the improvement process. assessments again are not about finding people that are doing things wrong. the assessments is how do we continue the improvement process. now, if a unit gets a poor assessment because the gaps are huge and they are well bind where they should be, then we deal with the local management u

, but that rarely happens. >> your company has a lot to do with the nuclear operations. that's what they try to do for the whole industry and they provide a grade, working with a regulator. have you had a chance to consider whether that kind of initiative would be valuable in the industry as whole in order to, in order really i suppose from your point of view more than anything to protect against someone else causing your rigs to be shut down for their misbehavior? >> well, you know, we have looked atmpoe, responsible care for the chemical industry, a number of other models. when i say we,t's part of the api joint industry task force, and i think there are elements of all of those useful to us as an industry to consid. there are distinct differences between the nature of the

nuclear power industry and the oil and gas industry and in particular deep water, the nuclear power industry, the facilities are, you know, they areixed sites, the conditions don't change significantly around those sites, o. there's a lot of similarities, most are regulated utility, so they operate in a difrent type of environment, most of the technology is well-known, so there's lill proprietary involved in those sites as opposed to our industry moving to different locations, different environments, evolving all the time, new technologies being introduced, and so i think we look at the principles around in terms of how you share best practices and assess whether the companies are operating at a certain level of competency. what we evaluate within the industry is capturing the best

elements of that, make a responsive to the fact that in our industry there's a lot of management of change going on all the time, and that's just the nature of the technology evolution that has been underway now for quite some time, how do we protect theproprietary aspects of compies and yet share the best practices of safety and operating practices 6789 i think the approach is one that is important. it is one that the industry is actively engaged in seeing if we can't construct something similar that would meet our objectives, yet protect everyone's competitive interest as well. >> do you have an opinion about how to address what has been a real disperty between the sophistication technologically in deep water and the expertise

level and the resources, the number of people who are actually charged with regulating that industry. doou have a sense of how one should deal with that? one possible advantage of something like that can supplement the expertise of the regulator and relieve them somewhat of this burden which seemto us as very often one that leaves them ill-equipped to understand a lot of new technologies. >> well, i think the elements of self-regulation which a lot of people kind of draw back when you use that term,ut i think elements of self-regulation have been proven effective in other parts of the world and have been proven effective even here, so i think to the extent that when we structure the approach, we accommodate the fact that it is in company's self-interest to improve in that area, and what

we're really wanting to do is provide systems and processes and framorks for them to do that, but as was evident in my remarks, at the end of the day you can give people procedures and tools and technology capability, but it's in the hands of human beings, and human beings have to make decisions. they have to take actions in response to events, and that involves getting at the culture of human behavior, and why, you know, why do people fail to act? why do people make poor decisions? that's the baffling challenge that all of us who work hard in this part of risk management struggle with all the time. as to the regulator, it is a significant challenge for the regulator to have people at competency levels come in to where the industry is

technologically. we in the industry are very competitively hiring the very best and brightest people out there,nd we pay them so they'll come work for us, and we invest a lot in their training after they come work for us, and most of the technologies are being developed within our industry, the step-outs, and pushing the envelopes further happen within our industry. you can't go to the academic world and find it because the academic world is a few years behind us, so it is a difficult chalnge for the regulator to have people who would have that same level of competency. i think it is realistic though to provide some help in training people within the regulatory agencies to a level of understanding in -- it's going to require engineers and scientists to have a level

of understanding to recognize when there is a risk exposure and are at least able to ask the questions of how is that risk being addressed? they may not be capable of performing the precise response, and they may not be necessary, but they need to be capable enough to say i see a risk, it's not clear how it's being managed, and say to us, how are you addressing that? that would be -- that's e enormously important to us as a industry. in my view, we want a constant regulator. they are part of the risk management system and redundancy in the system that canest are the risks being managed? they don't have to be capable necessarily of designing all the elements of a drill program, but they have to have a technical competency that they recognize there's a risk exposure in this operation. we need to address the risk by asking the right questions.

>> thank you. this has been very helpful. we wouldlike to continue to keep the conferring open, and if you have thoughts for us, we would welcome them. apeciate very much your being hereoday. >> my pleasure. >> you've given a lot to the commission. we had the advantage of richard sears and knows by name your colleagues and appreciates very much that we had the opportunity to sit down and look at your resources both in new orleans that i did 10 days ago with mr. boesch and senator graham. we're excited to have you hear and excited to hear your prosecution. >> thank you. i appreciate the opportunity to speak to you today and tell you a little bit about safety in shell. now, no one company can complaim

to have all the -- claim to have all the answer, and we don't makehat claim. i hope these remarks are useful to you. at shell we believe in relentlessly pursuing no harm to people or significant incidents. we call that journey goal 0. we expect everyone who works for us, employees and contractors to believe it is impossible to work without incident, and we have examples to demonstrate this is true. we have three overarching behaviors, complying with the rules, intervening when it feels wrong, and respecting people, the environment, and our neighbors. now, this provides a clear statement about the culture we aim to build. our health, safety, and management system has eight elements each with a specific role in ensuring that hse risk are identified and managed. now, among these elements are defined procedures, audits,

clear responsibilities, and come competencies for staff, hazard management, and a relationship in culture. i'll address how we manage safety through a combination of rigorous systems and the culture required to make those systems effective. safety systems essentially fall into two categories, those designed to protect the personal safety of our employees and contractors, and those focused on ocess safety or ensuring the saty and integrity of our operations and our assets. a personal safety systems include clear and firm rules. at shell, we have 12 life-saving rules. these are the do's and don't's covering activity with highest risk. protecting yourself against falls when working at heights.

our employees and contractors must comply with these rules. failure to do so is a choice knot to work for shell. th has been fundamental in reducing accidents. it is fairly easy to track in mechanisms with incident rates and participation in processes such as job safety analysis. process safety is also managed through a variety of tools such as well and facility design standards, established operating envelopes not to be exceeded, safety intervals for equipment, and an effective management of change process. our awe approach also requires that our drilling contractors develop a safety case to demonstrate major risks are properly managed. the safety case in deepwater drilling shows how we identify the hazards on a rig, establish the barriers to prevent and

control those hazards, how we aassign e critical activities designed to maintain these barriers. it gids the crews -- it guides the crew and especially those new to a rig. the safety case is owned by the drilling contractors, but it is reviewed by shell before we place the contract with the company. it is assured in practice before the rig operations begin, and it is audited at regular intervals while the rig is under contract to us. the case also includes bridging documents to our own hse management system. through these drilling contract ors works tomake sure the well plan and operations procedures are understood by both parties and assures ?erns that risks are properly managed.

it requires two barriers in place at all times to control each hazard. while abandoning a well in deep water, we found a secondary barrier that didn't ss our test, and therefore the work was stopped, installed a second mechanical barrier before proceeding with the job. a defined rule like these are important, but i believe that an organization with all the right systems and tools in place to nage and reduce risk to people and processes will fall short if it does not have a culture or safety theme felt in every aspect of the organization. the systems presses and culture must all work together. building a safety culture starts with leadership. this is actually the first element of the shell's lse management system, to create and sustain a culture to drive our commitment of no harm to people, the environment, or assets.

leaders must engage in promoting and recognizing safety behaviors and clearly communicate to all employees and contractors that safety is not a priority, but a core value. priorities can change with the business environment, core values do not. in shell, intervention or the stop work rule is another overarching principle. every employee and contractor at the shell site as -- has the right and obligation to stop work that feels unsafe. everyone knows about it, and we reward people who do it. it's a key part of job planning, and it works. our british platform in the gulf of mexico was shut in after an anomaly was noted and a vessel inspection. while the operators could have run follow-up inspections to confirm the initial finding, they instead decided to shut-in

this platform. later we found the inspections would have indeed avoided the need for a shut-in, but that wasn't the point. they made the right decision, and they received a hero reward as a result. the second example occurs a few days ago at our newest depp water production asset in the gulf of mexico. an operator noticed a small gas leak. it was too small to be picked up by the gas detectors, and nonetheless, they followed the protocol of getting out of the area, initiated emergency shut down procedures. the problem was insignificant as it turned out, and it was resolved without incident, still, the team was recognized with the proper response. these are not isolated examples. there are hundreds of recognitions we see every year of employees and contractors who intervened or stopped work in

potentially unsafe situations. while most interventions involve stopping and individual work task as opposed 20 an entire -- to an entire facility shut down, they create a safety culture at the rig level. awe audits are another part of the key story providing information about whether we are doing what we say we do in compliance and leadership. in 09, dupont administered their safety survey in our drilling organization comparing us as the best in other industries. we ranked world class overall, improvement areas were identified. for example, we received fedback that the structure of our tools tended to be too complicated. as a result, we con sensed the -- condensed the key points of the well site safety systems. audits such as tese are an important part of not only compliance, but continuous improvement.

the mind set is one of always seeking feedback and identifyin gaps with the ultimate goal of ensuring safety built into every aspect of how we do work. i do believe we are seeing this way of thinking take hold in the industry today, and it points to a path forward. this has been most visiblein recent months with industry and government taking steps to enhance capability and perfornce in three areas, prevention, subsea containment, and spill response. for example, we at shell applied macondo learnings in our alaska program. the limited program shallow water, our spill response assets has enhanced capability. you're aware of the marine well containment company formed, and x mentioned that earlier and the companies involved, and we hope everyone operating in the gulf of mexico will ultimately be involved in that system to

improve our preparedness in the gulf of mexico. industry members created a task force evaluating programs in the chemical and nuclear industries to identify best practices for a suitable program for deepwater drilling and completion. a safety initiativeith independent third party auditing that can bring about real change. crucially the department of interior began to buster their work force with rigorous changes intended to prevent the occurrence of another disaster. it is a decision they continue to improve. as the industry needs a robust, expertly staffed regulator to keep pace with and augment, industries technical expertise. a competent and nimble regulator is able to establish and enforce the rules of the road that ensure safety and commercial success. now, moving forward, we must

strive for a process yoind compliance and achieve a strong safety culture. an operation is not as safe as it can be unless the people doing the work share the same belief. i'll share one example from my recent experience. in the deep water of gulf of mexico, 8,000 feet of water, 2 miles offshore that started in 2010. it holds records and is an example of technology. however, i'm most proud of the fact this went from the initial design on paper all the way through to construction, the drilling of the well, the installation of the facilities, and the startup of production. it's almost four years and many of millions of hours worked with no lost time accidents to personl, shell or contractors, and no environmental incidents.

we see this being repeated around the world. now, most importantly, this demonstrates that it can be done and helps shelf staff and contractors carry this belief to all of our operations. yes, we've seen improvement in our safety and environmental performance in shell as a result of the systems and culture that i've discussed, but clearly do not claim victory, not by any stretch. this journey never ends. there is no room for come place sen sigh. you don't fix safety, and you can't put a price on the value of the safety culture. thank you for the opportunity to share these thoughts, and i welcome your questions. >> senator graham. >> thank you, mr. odum, and let me also join mr. reilly in our appreciation for mr. sears, an outstanding addition to our team and the many curtesies shell

extended to us particularly to our visits to the gulf. we have very much benefited by your assistance. >> thank you. >> you are one of the great international corporations of the world, and do business in almost every significant oil production region. what is your process both within your company and then across companies to share information on incidents, best practices, what new learning -- earlier today we had the deputy director of the former mms talk about an incident in australia which he suggested was quite close to what then happened here in the gulf on april the 20th,

and it was his sense there had not been much learning transferred from the australian incident to u.s. firms and therefore, there was not an advancement of the understanding of risk and how to respond to it. could you comment as to how that level of international cooperation on safety? >> i will, a i'll do it in the context of drilling and even deepwater drilling. my comments apply to all aspects of our business. we apply ourselves in a way that looks at all this business globally. we have a dweepwater drilling set of standards for the company that are not different in the u.s. than they are from the coast of africa. they are global standards and they meet or exceed the standards in any countries that we operate, but what we have in that organization then because of the design is a connected

organization worldwide, so this drilling group, if you will, global drilling group, one of its main obligations is to share examples, incidents, learnings, best practices across the world, and those are implemented immediately and always result in this same set of standards ross the world, so it is -- there's many mechanisms to do this, but this is one. when it comes to a particular incident, let's say something particularly notable happened, the process i described of having a group incorporated across the group happens quickly, but not quickly enough if you learn something very significant, and you want immediate action, and so we have a system of what we call alerts that go out across the company, and if something registers, and we keep this to few significant events because it's like an alarm an if it goes off all the

time, people don't pay attention to it, but if there's something significant to learn and they need to know it today, this comes in the form of an alert to all the people to cause immediate change. >> i would like to talk about what in military terms is rerred to as a layered defense where you have defenses backing up defenses backing up other defenses. in the industry it seems to me that one place to start might be with the individual employee. i was impressed by what you said in your prepared remarks about the employees who were willing to shut down the production rig in they suspected that something seriously bad was going on.

i would think that is a difficult culture to develop because in some companies the employee's reaction if i do this, it will cost the company a lot of money and that's not good for my career advancement. you mentioned that you have recognized employees who have come forward. are there other aspects to the way in which you have dealt with what would a peer to many -- appear to many to be the employees being actively and proactively engaged in safety? >> i think it's a critical topic which ishy i spent so much time on it in my remarks, and the other reason i spent so much time on it and i think i hear that in your question, it's not the natural bias of people to necessarily act this way, particularly contractors that

come in and work for us as a company and want to make sure they're t#>0 it is an expensive process, and it takes time to get it back up and running. it is important that somebody in my organization take a trip out there, recognize that person in front of individuals, and make sure we are clear on what we want, and those stories get around and make a difference. there are a number of ways we

try to make an impact. we do remove them from our but that is the main way we have been able to have an impact. >> there is the way in which this business typically does its business, which is at a single site, multiple contractors and subcontractors which are engaged in accomplishing the mission. we have heard about b.p., transocean, and halliburton out on the deepwater horizon. as strong as shell's individual culture is, how do you compare that with the people you are doing business with and bring them up to this same level and

then integrate all of that into a common safety culture at the site? >> that is a great question. if a contractor does not have exactly what we are looking for from the shell people, then it is not working. i will describe one of the tools that has a strong cultural aspects, particularly as we are talking about a drilling operation, and let me describe what that means when i say a safety case approach, because there is more than one way to get there. this would rely on the contract initially to identify all of the hazards and then it is to ensure that the barriers and mitigation is for each of those risks are in place and are effective, so they put that together, and we worked with them in an approach

so we both have a very good understanding of that, and if they do that and do that for shell, they have to understand what those are. there is a tremendous amount of interaction as they put the safety case to get there. you take that one step further, and this is what we look for to validate the system. is it absolutely clear who does what in all of these potentially risky areas. a contractor in a zone may have their own protocols. following the shell protocol or contractor's protocol. covering this ahead of time is critical to that. the kind of thing you see on a shelsite o a day-to-day basis is how are we taking that hazard

mitigaon and making sure the shell and contractor crew apply that on a day-to-day basis, and the way that looks is you don't do a piece of work on a rig without having a job safety analis and what we call a permanent to work. this is part of the multilayers that you talked about to prevent an accident. well, we ensure that the contractor is able to relay that back to the safety case, but it starts with the thinking of one of the major hazards flowing through to the work. it's not unusual for anyone in the organization, say myself, to visit a platform, go to an individual and ask if they know what to do in certain situations and what are the hazards you're directly related to be that is shell person or a contractor. ihink keeping it live like that is actually the most critical element to making sure that it works. >> in that discussion with those

three and particularly between bp and halliburton, one of the most glaring instances was in surrounding the cement of pore at the bottom of the well. there was disagreement at to who knew what about the laboratory samples of the concrete that was going to be poured. there were questions about the testing that was done after the pour by who was supposed to interpret it and how did you evaluate the result of that interpretation. how would you in your company deal with a specific incident like that how in this case it may have played a fundamental role in the ultimate explosions? >> i didn't have apportunity to har all the testimony and

comments on that, but if i understand your question, let me try to relate it to the area of who is responsible for those activities in a rig for shell in a drilling operation. basically everything you mentioned the person i hold responsible and we through the safety case development hold responsible explicitly is the shell person in charge responsible for all of those elements, so just to keep it very brief, that's my answer. >> another layer in the layer defense is the industry-wide commitment to a safety culture. ..

>> i heard it in some of the early testimony as i came in a little earlier this afternoon, that the sort of changes take time. these changes don't happen overnight. i think particularly to the safety initiative that the industry is now working on together, we have a joint task force type approach to did developing something here where it has come as rex said, building on the best things that we can take way that are out of double for info and from responsible care, and other elements. i think that what we can eect to see over time is that we will make a difference. and the elements out that the standout for me is that having

this safety initiative up and running and having it look different for the industry means there's a commitment there for the members of this, and these will be largely industry members that says we're committed to a certain set of principles around operating at the highest level of safety, around sharing best practices that around continuous improvement. so i see that as a step up from where we are today necessary. i think the idea that this would involve third party auditing and independent assessments of the operators in the gulf of mexico are doing, you know, i use the deepwater example, but in terms of how we are doing, do we really have effective safety manament systems, a new and different peace as i said in my prepared comments, i think it costs real change. because it's important we are all operating at that level. you know, one of the points i want to make is that ati is an industry by, and that

technical design, recommended practices, the technical standards element of api i think is unmatched anywhere in the world. we need to leverage that piece of capability. and so i would see something li this directly tied into the standard setting process, which already, by the way, i think it needs to be taken more seriously and emphasized more, but already has an avenue for participation by the regular and others in setting the standards. i think being sure that we leverage that capability in his safety initiative is absolutely critical. and again, will ad to improvements. >> and finally, the role of government in this layered defense on safe practices, what recommendations would you have from your experience, including your international experience,

in terms of how should the federal government organize itself to be an effective overseer of this industry, and protect,protection of the safety of our people and the safety of the environment? and what do you think the role of industry should be in its lationship with that government entity, or in to get? >> a couple of things that i'd like to say about that, and these are not necessarily in priority order, but i think it has to start when we ook at the system in the u.s. it has to begin with a wll funded and supported regulatory agency. and i don't think that's what been the case. m not sure the funny has always been the. the support h always been there to do what it needs to do. so i think that's an important element in all of this. you know, as some of this was

unfolding over the last couple of months i did hear a fair amount of conversation that said this interaction between the regulatory body and industry is a concern. and i understand wher that what was coming from, but i think what we actually need and what was in other parts of the world, maybe even better than we see here, is there needs to be more collaboration between the regular and th industry. around setting the standards using avenues like i talked about with the api standards committees where they can be regulatory, there's already a system to have regulatory participation in those. i think really stepping up the game in those areas, and getting very serious about this element of collaboration is a key piec of that. >> on your second point about the industry being willing to financlly contribute towards a more effective regulation,

mr. michael bromwich, the current head of boem, said earlier this afternoon that the president had recommended, i believe, $100 million in additional funding for his agency, and that that had been opposed by industry. and aof this time i guess either not adopted or adopted in a substantlly smaller amount. do you see industry -- is that an accurate reflection of industries position, vis-à-vis, funding of the new boem, and if not, what do you see apis future position relative to the industry as thunder of gulator? >> well, i mean, whether or not a couple of aspects. whether or not $100 million is

the right number, what is the right number, i don't know i have a strong view on that. i mean, i think the goal is around having an effective and strong regulator are t right goals to have. you know, i'm not, i'm not feeling like now is the right time, because it's such a big picture to say what's the best funding mechanism for the. i do think the functions come from the federal government. i mean, you know, to be fairly blunt, there's a very strong string of resources that come from the industry to the government that i think, you know, for that should be directed towards sporting agencies like the boem. and i think that's the first place what we need to look, you know, through the bonus payments, for the royalty structures we already pay on these activities. you know, surely that should be the funding source for the regulator. >> and i thank you for that answer, and although thank you for correcting my acronym.

i am still getting used to change, it is the boem. i have a final question. and that relates to the safety culture and other goals of te industry and shell specifically. some have said that asafety culture is contrary to corporate responsibilities such as profitability towards for its shareholds, overall international competitiveness. how do you see safety affecting those other corporate objectives? >> i ink, i think, first of all i want to i think rex said this extreme well, but as i look at health, safety and environment aspects of our business, i know to my core that without being very strong in each of those we cannot be a sustainable, strong, profitable company, period.

so i know to my core that that is critical. i think then goes into some of the comment you heard earlier, which is what we find, not only do have to perform well in each of those areas, but what we find is a company with a dicipline to perform well in each of those areas almost naturally performs better and virtually every aspect of being a business, making a profit r its shareholders. so i see them, we the company see them completely a reated, and completely part of the foundation for building a successful company. >> so you don't see fnds for all those layers of safety as being the version away from their other corporate goals, but a contributor to the achievement of those goals? >> no, absolutely. and is part f, well, i'm not sure i was quite a conscious in my thinking at the time, it's part of why i've used the examples that i've used here. most of the examples i used around stop work, for example,

were things that cost us more money than they may be would have necessarily needed to cost us, but it was the right thing do. and it demonstrates what we want people doing and it's the kind of thing that would prevent a significant and extensive excellence sometime in the future. so spending more moy to drill a well, in a particular way beuse it adds the safety margins that you need, is absolutely the right decision, even if it is a more expensive item as a single element. >> thank you, both of you, for these very important statements. i think one cannot emphasize enough that you have made clear that the safety commitments and records that you have achieved have also come in your views, de both your companies more profitable and successful. that's a message i think that is powerful and that needs to be

heard. it's one reason we wanted to invite you today, and you representrepresented those views very well. as i think about the challenges facing the industry and the government and the regulators, they are large i think with respect to both. and as i reflect on director bromwich's challenges, and think about what the nuclear industry did after three mile island, i'm reminded that a lot of oil company executives retire at 60. and info he is is people who've been in the nuclear industry, who have run reactors. that's one reason they're so respected by people whose reactor practices they inspect. they evaluate. and he has said that he is doing recruiting at engineering schools, and it strikes me that you might encourage some of your own graduates, who are well fixed in retirement can join

enterprise to try to bri up the game because we were really have to do that, i think, to keep pace with the evolving technologynd sophistication of the oil industry in water. many thanks to both of you for being here today. >> thank you very much. >> and thank you for the cooperation we've had with both of your companies. all right, i think that fred bartlit has the last word today. except for senators and my closing statements. >> somebody with two great-grandchildren, i do like the idea of retiring at 60 very well. [laughter] i think that something we need to weigh upon. there's one thing while richard is getting squared away i need to correct. mr. lewis said today that, i don't know the word to use, but he said maybe there was a rush, there was question, the panel was very interested in, why get

out of there on the 20. people asked tha mr. lewis said he had the feeling may be the had been heading to another area to keep from losing the lease. it turns out we have more information than mr. lewis does on the. we are all over that particular issue. we, as it stands today, it does not appear to us there was a rush to et to a nepalese, but we ae pursuing it, dve in it to earth, boring in on these guys, getting all the answers we can. and if we will have, we will report for a final report, but we are all over it. we have more fact tha mr. lewis have. we were surprised to hear him say that. just so the panel -- >> if i could, maybe i've been the one who has been asking that question themost. i wouldn't get diverted after a specic at what may be a really his suggestion as to why it happened. the fact is it happen. there was a whole series of

events which a prudent person might easily have said let's call time out here until we get this matter resolved before we go further. that didn't happen. so was there anything that was causg all the decision makers on that rig and back onshore to make judgments that not to defer increased knowledge and make riser judgment, but rather to try to get his thing wrapped up on the 25 april. >> that is such an important and obvious point. we have been all over. we pursued i. we have a lot of information on which we can provide. far we don't have an answer to that. so what we're going to do -- the next thing i want to say is, that we have, i want to make clear we hav welomed comments,

on all the information that we developed the last two days. i told one of my partners we produce more information yesterday that would only come out of a four-month, for which federal district court trial. there's a lot of information. we welcome comments. i particularly, and maybe the panel might feel the same way, i was intrigued by shell oil saying they never, never leave a well underbalanced. when they could really abandon it. and so we would welcome comments from the industry and anybody in the audience or any experts that are watching this on television as to the pros and cons of a rule saying let's never temporarily abandon a well underbalanced. that just seems that something we specifically should invite comments on. that's all i would say. commissioners. >> now, when you're going to do now is, richard sears and i are going to discuss some

overarching sort of safety type considerations that we have observed during the three or four months of very detailed work on this. we are not safety experts, richd and i. but this also, we collected comments of her home -- whole team of people and we've added a whole team of smart young and men and women born into this. as you can imagine, we set up that nicely what could've happened, what could we have done we want the commission to the benefit of these late night discussions with all the young men and women you met and with our staff, for what they're worth. and we do not claimto be somebody who would be teaching graduate-level safety, but we do have some common sense. at least we think would do. so that's what we're going to do. mr. richard sears, to visit degrees from stanford, 30 years at shell, vice president deepwater services, has been retired for 18 months, is a

visiting scientist at mit, has been the leader of our technical work. is achieved cooperation by all the majors, chevron, shell, of course, exxon. he has educated us inthings we did know. we turned them every day. we have one to dinner, what is this stuff, how do thes casings were? everything. he has traveled all over the gulf with us. if there is an indispensable team member here, a lot of the people are team to do with sean and i and sent to do, but nobody could do what richard has been. wehank you for the. i will miss him. i hate to say that but i will miss him. >>ou haven't seen the last of me. [laughter] >> so what we will do is now, we're going to go over, we have cold of these down and again, you know that they come from all of our discussions. one of our jobs is to just look at a spectrum of things to get the advice of everything we

know. so let's turn to number one. individuals should be trained to repeatedly question data, raise concerns, and doublecheck assumptions. so, richard, can you sort of pull forth that, summarized the discussion with that and give us some examples? >> i will do that. that he start by saying that as we go through these exaples d conclusions, i'm going to be pulling together danger for the last two days, my own experience and ideas, cmments from oher members. it's going to be a mix of facts and testimony and thoughts and ideas. and fred, if you ever want to know what space i'm in, just ask. >> i will ask you to make copies for this if you would. >> yes, sir. >> but also, i trying to reflect my own, and i think the commissions staff instinct about

things about what we've learned and the judgments we have made. so we start with this one. the idea that there's a lot of datawe have to be in an environment where concerns are raised. data, however good, is questioned. and we think about the assumptions that are being made come in place of an exquisite. for example, go to the first slide, which really just is where we is where we set the stage for this when we began. i'm going to use it to make an important point. here's my condo. the companies that are operating in the deep water gulf of mexico are headquartered -- headquartered in new orleans, houston, around the gulf coast are geographically where ever the rig i in the deep water gulf of mexico is geographically a remote operation. that's important. so things that are being done out there are being done remotely geographically. as even more important to that, if we go to the next life.

this is macondo, and prevent what macondo is that it's not a dot, a platform on the suface of the ocean. if we start the animation, which i can do with this laser by pointing there. macondo, as a welcome and all these deep water wells that are like that, 5000 feet of water. and the stuff that we are really interested in is right down there. we talked about drilling. geologist and geophysicists are not interested in going. they are interested in having a hole in the ground to access resources that in this case our 18,000 feet below the surface. and this is what's constructed in order to give it. everything that matters, from a geoscience perspective, from a resource perspective is way down here. now, back to the assumption, to the point at the beginning that we are in the world here where there's a lot of data. but a lot of the data is very indire data. and this was a world that i have

described many times as one of selective in partial knowledge. this is a very complex engineered systems, and a very complex natural system. we don't know everything about it, and the days that we have and the presumptions that we made and the conclusions tt we draw about what's happening down here are full of assumptions. and particularly when an operation is going down this hole, again, 18,000 feet long, at the bottom it's about seven inches, less than seven inches in diameter. the degrees of freedom you have from the surface is you can put things down, you can pull things up, you can rotate them clockwise or counterclockwise. and you can pump fluids. that's what you can do. and in doing that the industry is able to do and make happen a lot of things down there, and you've seen some of the ingenious kids they have designed to do. and there's a distance down there in order to measure what's going on. but the point is is rife with

assumption, there are important assumptions, andverybody involved in these operations has to be in tune to crushing those assumptions and think about what's actually happening. again, not to take on our hammer in but about anything, but just bring a few of the points that we have seen himthe previous few days, a couple of examples. next slide, please. this is a comment from one of the bp team members. and this was after the float equipment had fought convert and the pressure was lower, the secular pressure was lower than in education at the mottled, that it should be the and at the end of the day they decided the rig standby pressure gauge was incorrect that we don't know

exactly what they do discuss, talked about. what we have seen is this memo. what we haven't seen was, was there a long and healthy debate about that gauge and its act and the data that went into the assumption, what other possibilities might it -- >> did they put a new gauge on? >> we have no knowledge whether they did or not. >> again, the purpose of these, we're not even thinkinabout cost now. we are serng to illustrate as the commison, the proposition that you've got to question, question, check assumptions, not accept propositions like this. people have to get that through their head. it's sad like mr. odum, mr. tillerson gree with us. i was impressed. >> there are a couple more examples. the next slide. we heard a discussion of the bladder effect. again, we don't know what ctual conversations went on concerning the bladder effect. and the next slide i think -- >> what we say here, we don't

know if the bladdeeffe exists or not. ep claims, and trans ocean disagrees, that they were told there was a bladder effect. but maybe accepting that from one person on the rig, if the conversation took place, which we don't know, maybe it ought to be questioned that maybe someone should call shoreside when you 1400 pounds on the drill pipe and say it's anybody there ever heard of the bladder effect? this is the point we keep trying to make here. >> and what we do know from testimony at the joint hearings from one of the bp will cite team members, the next slide, this is something we showed earlier, go back one, then we are. did anyone say anything or disagree with mr. anderson's explanation that would be bladder effect? i don't recall anybody disagreeing, or agree with this explanation. so is the just there wasn't a lot of debate discussion.

and it could have been an interesting discussion. well, how to do that? how do you get 1400-psi? >> what is the map? >> let's think about. and at least that is the kind of questioning that leads to ultimate i think better solutions and a better path forward. and then one final example here in the same case of looking at assution. the surface cement plugging said 8300 feet below, below sea level, a little over 3000 feet below the seabed. a loud discussion and testimony here fm various hearings, and also from the five experts we had here today saying this is unusual, it's very unusual. and to varying degrees of feeling yesterday and today about how risky it is that i'm not going to judge a risky it was that i heard experts say they thought it was pretty risky. but i heard somebody else say, well, maybe not necessarily so.

the important point is, there's of evidence that all the sumptions that went into this come is there a better way to set that lockdown ringed? can we get 100,000 pounds? and we've heard other examples of we don't have evidence that that kind of healthy debate was taken on, and again come in this world that's the kind of discussion and debate that leads to fundamentally better solutions. >> there was a fundamental proposition that we don't like to set cement in that. people apparently set cement and much. they need to be a discussion the as to what's wrong with setting cement and mud? if you said it in mud you don't have to display. and go around in circles. it looks like some of these assumptions were accepted without a lot of digging in deeper into the artichoke. let's go to number two. greater retention should be paid to the magnitude of consequens of all anomalies, even similar

mind oe. because as we've learned under the circumstances, might anomalies can become major problems in a short order. richard, what can you tell us about -- richard is giving the views of our entire team as we've had both sessions about this into the evening. what c you tell us about that? >> well, as you just said, my anomalies have a way in this environment of magnifying and becoming major problems very quickly. and we will see more examples of that as we go through this list. budgets, any anomaly, particularly those that are recognized as a novelist need to be investigated, they need to be discussed and the need to be understood. what could be causing that? what of the very cities that could be happening, why is it happening? and this is really important, is making sure that happens is not using okay, everybody do it. you heard mr. tillerson and mr. odum talk about how you

accomplish that and how hard it is. it's a matter of leadership in setting the right tone from the top that it's a matter of training. in terms of making surethat people involved have the technical skills to know what it is. they should be thinking about, and how, how these things develop in this environment in deep water. it's about behaviors. it's about company culture. and it's about developinwithin the company and instinctual behaviors around these two points, about questioning assumptions, about him in a constructive way. and considering the consequences of various things. and two examples that we saw here, particularly yesterday, and spent quite a lot of time on because we believe they might have had some consequences for this well. here's t picture that we drew up for the float collar conversion, just before the pressure dropped from 3142-psi,

down to a few hundred psi and mud started security. now, we don't know why it happened. just before it happened, we are pretty sure the to become using the button, the two, the ball were up, and the pressure dropped we don't know what happened. the tube might have dropped. the valve closed. the ball might have popped out of the body because there's a retaining ring into that fail. we don't know. or perhaps the flow was never great enough to convert it. when junk food out of the bottom of the reamer shoe, it just established the circulation as what might actually be reasonable pressure in that circumstance about 340-psi or something like that. we don't know. but here's a case where, when it happened, and even with the comment i brought up in the previous boycott okay, the circling pressure is a little low, they get is wrong, it has finally converted let's move on. and there was an apparently a

healthy discussi of what else might have happened downhole, and what the consequences of that might've been. and then w saw one other example, and it was a negative pressure test. and it was a long period of time, three hours. there were a lot of tests, a lot of pressure measurements taken, a lot of fluids were bled off for various places, gaugeslook at various places. by the bottom line is,the successful negative pressure test in this situation would look like this. and the situation at mike honda when the pressure test was declared successful was that, 1400 per hundred square inch on th drill pipe, zero on the kill line. and it seems based on all of the day that we have that it was agreement of those imposition that this test was successful,

let's move on. spent and time gets into our proposition, if the commsioners please, that greater attention has to be paid to every single anomaly. i wonder if when people saw that they realized that that may mean that the cement job is kaput. and we are going to have an explosion on thisrig within an hour an and a half. i doubt of that. i don't think humans, these guys, i've been all over these weeks that i've met these guys did they are wonderful people. they work like crazy. they've got family. so when i say we have to teach people more about anomalies, i don't think they sat there and said, well, maybe this rig will be in fire into arctic was it an anomaly? they didn't explain it? they did that clarity appreciate what that could mean. okay, et's look at our next sort of overarching, i guess you don't have to be a safety expert to read some of these conclusions. individual risk factors cannot

be considered in isolation, but as an overall matrix. personnel cannot ignore anomalies after deleting they have addressed them. as we will see some of this, well, we all believed there was a tendency it is okay, we got that behind us, forget about it, and go into the next issue without realizing that maybe that wasn't fully resolved before. so what can you tell us about that, richard, please? >> i was to was something i said a few mites ago. what is a deepwater well? a deepwater well is a very complex engineered systems, embedded in a very complex natural system about which we don't know nearly enough. and we don't know nearly enough about the natural system, even complex ingenuity systems can behave in seemingly unpredictableways. so that perhaps in the previous two examples. all of that has beendealt with in the business of deepwater, and you've seen over two days, a lot of the engineering complexities that have been

dealt by the engineering in order to do this. and it is really impressive and it has always been a fun business to work in. we also heard today from the experts here this morning how long a time period it is that es into developing a deepwater drilling plan and the number of skills and disciplines that go into it. it can be a year or more. and certainly if you back up to geophysical work that led to making the maps that lead to buying the lease that led to then programming the well and developing the plan, this is a process that plays out over years. and in the drilling of the welcome and that ultimately heading to the production of oil and gas, which in deepwater environments can last for decades. so we are getting with complex skills, longtime friends. and all along there your developing a system, a very complicated system. and the point of this is that you cannot extract an individual

item from the system and look at it, no matter how smart you are, you deal with it, you esolve it. that's good. but then you can't put it on a shelf never to be considered again. it's part of the system and it hato be thought of as part of the stem, and the complexity and the system and thinking of the risks and all of the components of risk need to be considered. and you can get away with it. and i will take a good example. yesterday, and the next slide, i think the next slide, so here's a last o hours before the explosion. and this is something we heard yesterday speed is stop for a second, richard that we don't have a transcript of what mr. ambrose said yesterday, so this is, this is our best recollection. and if we got wrong, of course we will correct it. but yesterday mr. ambrose said

that sometime in this period, 2031, to 2140, write in here, the deal crew again saw the anomaly, and again saw 1400 psi. and i remembered earlier at the time of the negative test they had seen it, and sort of kind of result it. so let's pick up from there, please, richard. >> it's exactly that. here we are, about the time that hydrocarbons are you and the ri of ibp's calculatis, that they put out in their post-incident reprt. so before hydrocarbons are in the rise or about the time hydrocarbons are in the rise or, the crew on the rig notices something. something anomalous. that there is, if i remember hearing a critic of the the difference in pressure between the drill pipe in the kill line was about 1400 pounds per square in. and they look at it, they stopped, they bled off some pressure. they considered what could this be. now, i don't remember hearing

at it was resolved at. what i do remember thinking when i heard this yesterday was, well, wait. the negative test also saw 1400 pounds per square inch difference between the drill pipe and the kill line. and i'm wondering, was the negative test put on a shelf and now this comes off the shelf? way, what about passion and nobody is think about the negative test. here we are, and you can see what happens next in this timeline. that just a few minutes later, mud begins to overflow on the rig floor -- >> tell us the difference between the paies. >> wind that came out. that's fine, but i would just say i am looking at bp's calculations from the report that this is how fast something anomalous turns into something rather serious. from 2138, when hydrocarbons first into the riser, few three

minutes later, bp's calculations report 1000-barrel game, 1000 year old. that's half the volume, more than half the bottom of a 5000-foot rser. and that is what the influx seemingly minor has now turned to as it is, in the riser and is expanding because of the decrease in pressure. st a few minutes later, 2149, a time of the first explosion, bp calculates 2000-barregain. we don't know where that all went, but 2000 barrels is the entire byte of the 5000-foot riser, plus about half the volume of the production casing. >> there's 1 million questions come up from this, that i think listening to mr. tillerson and mr. odum, i think i know what their answers would be, should the crew have known that 1400 maybe was reservoir pressure, that they were seeing reservoir pressure up at the surface? should the significance of that number have been clear likes

that's why we say, there's a tendency to putting issues behind people, and then go on. and went another event happens, not go back an say, holy cats, now we understand what happened back there. but to basically deal with it almost from scratch. that's the point. they are itabletof more points your. >> in deep that if we look at the next slide is a list we put up yesterday. what we described as a situation at the time of the cement job on april 19. now, we can argue a lot about, is this list three items long or six or seven or 11 or 13? frankly, i don't care. how many it is that it could be five, you can add these together and compensated ways, and th's why. the point is that there was a lot happening that people with knowledge of the system, people's knowledge of cementing, should've been thinking about in rms of each of these, however you want to aggregate or disaggregate them, each of these have an impact on the cement

job, potential impact on the cement job. now, anyone a low, even several alone, perhaps not a big deal. all of these we said, the industry faces these everyday and has developed methods for gaining with them. the physical impact of these is what aggregates. and isn't what is a team that did in my thinking. was a cumulative is the risk of regime that they're opating in as one after another after another of these becomes an issue that somebody should be thinking of, that should as we put it heightened awareness as to what comes next that what comes next is at the test, the negative pressure te that would confirm the quality, robustness, the integrity of the cement job. and these together, get with the list of seven items long or 13 doesn't much matte these items and thse concepts should have heightened awareness about the importance of that negative pressure test.

and let me just take one in particular. the xt slide -- >> let me go back. >> okay, go back. >> i have a bad habit of trying to be very specific and not general. and take centralization of some thought that been resolved, others might disagree, but maybe when they started to see 1400 on the grill line, the drill pipe in the negative pressure test, maybe some of should've said let's go back. maybe that centralization issue is more of an issue than we thought it was. maybe we are to stop. maybe we have to see what's going on down there. we had a dispute with halliburton. we had a lot of runs. maybe we should have just put this behind us, but we should keep we evaluate the premise. okay, richard. >> the next slide is about centralization, and the slides that we showed yesterday, we highlighted, i would rather squeeze that get stuck -- that is a perfectly reasonable,

rational response to this notion of all these centralizers that might move around or come off, as they're put on this drill pipe that is being run in the hole. m going to be the first to say that these risky environment here is very complex, and it is changing, and you can't, you can't willy-nilly say put al those centralizers and ignore what you might do in terms of adding risk. but inmy case, what i want to focus on here is who cares, end of story. this should've been the beginning of the story. this should've been the beginning of the story of re discussion about the complexities of the cement job and where it was leading them. >> and its again, again, it is left by a smart engineer, okay, probably be fine, probably be fine. if it was the only barrier that existed when the well was underbalanced and the people on the rig thought it would probably be fine. next. i would further have to sueeze

to squeezing is of course repairing it. there is an awareness in the mind of this engineer that they might have to repair it. and again, that's behind us, you soliciting 1400, maybe someone should have said, i half, we should have squeezed it and started. that's the point the point we're trying to make. >> and this point was made also in bps post incident report, if we look at the next slide, and we showed this one i believe yesterday. a formal risk assessment might have enabled the macondo team to identify for the mitigation options, specifically speaking of some aspects of e cement job. a formal risk assessment would have at least elevated the level of discussion of thinking about the cement job and implications for going forward. and then they've actually, i can't say, i say, i don't know, but it might actually have had more impact than just whether to run a summit evaluaion log. it might have also had something to do wih a kind of thinking

that was going on. now i want to say, we are talking here about systems thinking. and i don't have this on a slide, but i was thinking about it as we'repreparing this. i do want to add it if we saw once led to a repeat dislike to you, and you may remember it, just take my word for it. it was in yesterday. there was a slide from a bp member, a member of the tp staff, billy boat deck i think was his name, and it was a slide where it was a long e-mail, and we exited, highlighted one line out of it what he was highlighting to partners. why they had decided to call tv this well at 183, instead of at the original program depth of 20,000 the. that's like, that is an excellent example of systems thinking, and my might that at least it's a good example, and it's where individuals on the engineering team looked at what was happening. they lood at the geology. they looked at the well as it

had been constructed to that pot. they thought carefully about the risks of going forward, the risks not only to that well and what it been done so far, but also its future purpose as a producing or and gas well. and well. and he made a very sound, what looked to me, a very sound decision to,et's call this td. we will have to stop here and the line i believe is we can go on without jeopardizing this well. that is a good example of systems thinking, where a lot of data is brought together from the past looking into the future, and a decision is made. >> let's go onto our our next point, number four. they are ought to be greater focus on how to respond to low frequency, high risk events. richard and i were talking last night and we said we've got all around the industry. we said to everybody, how often do you actually go overboard

with your diverter when these things happen. and people said gee, i've never done it. or they say, how often do you trigger the blind shear ram i suggested the drill pipe that they say gee, i never ask again. so gets to be kind of a big deal, and when you're dealing with events, how do y know it's bad enough to act fast? that's my way of saying that it has, there has to be more emphasis than its okay dude cut the drill pump, it's okay to dump overboard this tough when you're in a tough situation. and now what we are going to do is, i read the transocean handbook cover to cover. i thought it was, when i read i thought this was a billiant document. these guys killed themselveso get it right. and i gave it to richard and we look at it again. and yeah, it is all there, everybody so aspect of the kinds of things you can face were there. so we complement key over doing that, but as we read as normal

people, it seemed like it was all there but maybe, and i know mr. odum said today it could be too complicated, could be too complicated. and richard is going to go through the manual. and this is not by way of criticism. it could be too complicated, could be too complicated. and richard is going to go through the manual. and this is not by way of criticism. no, mr. tillerson said he learned from that other experience. so what we want to go through the manual. and this is not by way of criticism. no, mr. tillerson said he learned from that other experience. so what we want to do is learn. and when somebody does a job like you did on their manual we don't want to take them down for a. but we want to give our observations of what we saw about what somebody reading it, would they be able to know if it was bad enough to act fact that at's the point. >> and this is the manual. fred read it so i felt shamed into reading it my subject i never thought when i started, i would read a well control handbook but it is very good and very comprehensive. and it tells you a lot. and it tells you they thought a lot about the circumstances that they operate in. and some the specific

environments. the next -- >> it was not meant to be a thoroughgoing analysis for every page but it is supposed to be allowed to give. >> and this is not, one of these terrible slides when a person party says you don't have to read everything on it because of course you can't. but what you can see is there are lot of boxes. this is from a section on kick detection. and specifically, how to manage gas once it enters the riser, the shutting procedures for the well. >> we've already said many times from our experts at all that once gas enters the riser this is a potentially serious situation. so transoceann the wisdom and experience has put together the picture here of how, what the driller needs to do, what the staff on the rig needs to do in order to shut in the well and manage gas once it's in the riser. >> again i have to say, to t.o.,

we do not know about the specific training that's given in addition to the many. we have no idea about that. we look at the manual and with matched ourselves with somebody on the rig that had been handed the manual, and when you get a kick, you go through this sequence >> and the important point here, thiseally references the talks are mr. odum and mr. tillerson, there are a lot of actions on the chart from watching flows, closing annular zone closing shear rams, hanging off type, a lot of things that go on that make up the sequence of events. all of this, and you saw a few slides prevusly how quickly things happen once gas enters into the riser. so all of these things have to be instinctual for the drilling staff. i'm going to say the drug staff are probably very well-trained. it probably is instinctual for them but this highlights the complexity of the business that they're operating in, and how quickly they have to act and in their mind, what do i do next,

it has to be a habit for them and that means they have to be ained in it. we talked earlier today about the ability to simulate these things, and it's not like the simulations that the one in the airline industry, with pilots handling events. so there might be room, i'm just going to say, there might be room for improving how people on rigs are trained to recognize this. because again, we talked to thousands of years of experience from drill sites, rigs, platform installation managers. and really, can count on one hand from all about how many times people have actually diverted the flow over board, use a blind shear ram to cut the drill pipe, or operated the emergey disconnect system because of a well control problem. >> and if you never do something, it gets to be the exceion. i don't know if you want to say, that's not my business. th when you never, ever do

something, it is viewed as the be all and end all, you're probably wait maybe sometimes too long and how do you train people to have a state of mind that they are alert to these things that happen fast. that's not my job, but this is something we observed, that maybe there's not,hasn't been created at least in the paperwork, the sense of urgency, you better move because once he gets in the riser, bad. richard, you have another point. >> again, a couple of pages from the manual and i will blow up a couple of, 1 cents on the left there. and this is again, this is very good. in this manual there's 15 of 16 pages specific to deepwater environment and how to manage a kick any deepwater environ. very, very important. because deepwater environment has its own unique characteristic. and from this manual, clearly said, and this is consistent

with what we're yesterday, at any time if there's a rapid expansion of gas in the rir, the diverted must be closed and the flow diverted overboard. it's very clear. now, it would stay very clear, again, iam maybe making an unfair interpretation but i would say he would stay very clear we're not for the very next sentence. the very next sentence says, to for water based as was oil-based mud, an alternate system is using the mud-gas separator to move gas from mud as in the figure on the next day, and in the next two pages go on to give a very detailed constructinstruction about to condly gasout of the mud called and the riser using the mud-gas separator. by the way, i's probably all very good, and these techniques probably saved lives. i'm going to suggest that it might be a little less clear to the operating personnel that in helping them understand when an event is bad enough to be called

bad. because what we saw in macondo was they did go to the mud-gas separator. it overwhelmed the system, and we have had conversations with explosion experts from other oil companies who have said, it might have made a difference, it might have delayed the explosion for at least a short period of time if they had any of the that gas flow not to the mud-gas separator, but overboard. it's complex, but i think thers probably room here for helping, helping the drillers make some of these decisions. and also, the starting point on this, if it encounters rapid expansion of gas in the riser, it might be nice to know that before mike is coming out on the deck of the rig. >> let's look at the next light in that regard. people will remember this. this is the sperry-sun data turned sideways so you can see

it better, flipped around and expanded so you can see these trends. we have discussed drill pipe pressure increasing at constant pump rate, pressure continues to rise. mr. ambrose yesterday, and again, we don't have a transcript so this is my memory of this. mr. ambrose said something like, maybe the driller looked at the first part of this for a minute, and it looked okay and then he looked a way to do under the task. now, he doesn't know that. nobody knows what happened. but the point is that it seems that if there is a possibility, we think, that you hen't been, that there may be one of these low frequency high risk events, and, you know, the wll is underbalanced, maybe it's not enough, maybe, maybe it's the culture of the company is that somebody might think the driller would look at this line and in turn away and do something else.

maybe that's a symptom of something that needs to be addressed. >> i think that really describes it well. in this particular cse, if we take a second pressure rise when the pubs were turned off as even more diagnostic as an influx into the well, it's a period of about six minutes. and we heard that for the first minute and a half or so, minute, minute and a half, that behavior is actually pretty reasonable and consistentith all of the actions going on on the rig. and by the way, the last minute, minute and a half or so is also a pretty reasonable behavior of pressure given the various actions that were going on the rig as pubs were being turd back on. here we have a situation where, it's not really six minutes. 's sort of four minutes, or three minutes in the middle, where the right person with the right knowledge has to be lookinat the data at the right time, thinking the right spot. and as the, was yesteay, he might have looked at it, thought

he was behaving as expected, and then went off to light up bums for the next activity. that's probably a reasonable thing to be doing, except that in this case it might have made the difference between seeing something serious that was happening down the well and not seeing it. >> now let's look, please come at our sixth point. failure to develop or adopt their procedures for crucial end of the well activities. >> we talked a lot about this, and our judgment is that there's a body of evidence that suggests at the end of well, once the negative pressure test had been passed, that the job had been done, negative pressure test past. temporary abandonment procedure, it was perceived to be a very routine low risk operation. and it didn't appear to be, based on the changes that were going on and how this evolves

over time, there didt seem to be a lot of rigor around how this ended well, these end of whatrocesses were managed. this is dangerous. fundamentally dangerous. i think at the first commission meeting, hearings here in washington, d.c., you had the well delivery manager from a major operator to you specifically, accidents happen during routine operations. because people take their eye off the ball. they are less vigilant, they are less careful. accidents happen. in my own life, i think of this as if i could distinguish between with the entry risky and really and truly routine, which by definition i guess is not risky, then fine, i'm only going to drive my car when i'm doing routine things, not risky things. and, therefore, i don't ever ha to think about getting in an automobile accident. it's kind of many you take this by extension and it lead you down aath which makes no sense. so you can't distinguish

beforehand between what is truly risky. and, in fact, all of these, all of these actions on one of these deep water rigs are fundamentally risky. it is a fundamentally risky environment, as that well delivery manager said. those risks never go away. you manage them carefully so that you keep them under control. >> let's turn to number six. to me, as we worked on this case, this was one of the most important problems. and as i listen to mr. tillerson day describe how exxon as lily insists that the contractors and all their personal, personnel around -- are on the same page, that drove it home to me. porky mediation between operator and subcontractors deprived otherwise capable personnel of information necessary to recognize and address risk. elaborate on that, please,

richard. >> there's a lot that goes on on thes rigs. in most, all the time there's a lot going on. and there's a lot of information that needs to be shared. there's a lot of information that is shed. when we look at the list, don't go back and the slides, but think back to all of the situations during the cement job. some of those are known to one party, not others that yu are known to all parties. most of the list is known to one party. there needs to be better models for how to share information, not partitioned data into well, this is part of the cement job. we heard i think in some of the conversation today about monitoring flow. well, they wouldn't have known that because the blowout is going to the cement unit. that's perfectly reasonable. that's how operations happen, but here again is partitioning of the data so that possibly so, poibly critical data isn't available to the right person at the right time.

and maybe isn't being shared because there's not an awareness that it needs to be shared. and it was aspects of the nature of the cement job, it might come it might be reasonable to look at that and say, well, g., the cement a wouldn't necessarily have know about it well planning decision that was made a month earlier to manage traffic annular pressure. no reason to tell the cement about trapped annular pressure, wouldn't understand anyway. that's fine, but here you partitioned data and partition risk as if. >> a classic example was the centralized issue. we saw -- in fact, yesterday in the conversation, and a discussion at this table, the question was about to be december model that halliburton runs for the operator model

the risk of gas influx into the well, and the centralizers are important aspect of that. flow rate is an important aspect of that. prsure is an important aspect of that. to draw out what are the rameters, some of the parameters at least they go into this. and then ask, was the model we run with the right bottom whole parameters, with the right accurate flow rates, with them of centralizers where they will be, six of them, where did he was going to run them on that long string casing. and again can we do have a trce get but i the answer was from this meeting expert, it wouldn't have mattered, there still would have been severe gas influx. loss lasinflux. . .

>> you can read the port, but it really speaks to the quality of interaction between senior bp staff, senior halliburton staff, technical bp staff and technical halliburton staff. it doesn't matter if i put the right data in, there still would have been channeling.

there still would have been the risk of influx. that's actually a very, very important insielgt. we heard -- insight. we heard from swb a experience and -- somebody with experience and knowledge in these situations. what he shared with us was never shared with the operator i'm afraid that you have stacked up a bunch of parameters whether it's the long string length, whether it's the pressure in the bottom hole pressure or the small volume or pump rate, whatever it may be, what i heard him say is you stacked up a number of parameters that frankly won't matter. there is going to be channeling in the cement job. this is going to be a very difficult cement job to get right. now, the industry has tools to fix that, a they are got at fixing it, and while the primary jobs kg --

jobs are problematic, they can be done. >> as we heard yesterday, a man looked us in the eye and said we believed there would be challenging in our halliburton cement job and no hydrocarbon in the cement jobs. to , i bet my bottom dollar at shell or exxon, and i'm not cussing your butts, but you would expect a corroboration with the contractors and the people on the rig that if the cement guy absolutely believed that the hydrocarbon zone was not sealed off, and they were under balcing the well, you would exct the guy to raise a ruckus. you can dispute about how it was pointed out. you heard all the evidence, but to me you don't have the right team developed if somebody doesn't say, stop it now.

he said, we knew there would not be isolation of hydrocarbons. we poured it and fine, talk about a failure of communication. timely last point -- >> and no expectation apparently that this was something to be shared. >> finally, it was muddled lines of authority within bp and between bp and its contractors, and richard, you know, we all heard the arguments of who did what and when. >> there was a lot of that. here it was all very polite and heard it in our own interviews with company staff, and it was clearly confusing about where responsibilities lay, and what the expectations were for making decisions and sharing information and sharing the basis of those decisions. i -- fine, it's one thing to say, well, operator's responsible,

but the operate is getting expert advice from a nbe of other people and sharing the advice and basis for that advice is rather important, and there were muddled lines of authority between bp and the contractors, and i think there's a comment from, again, bp's post-job report. >> megan, please. >> maybe it was the previous slide. i'll read it. it was in the rept. it stated -- oh, theree are. they were unaware to the extent if any halliburton supervisor provided technical support on the well site, and the investigative team w unaware of direct ingaugements between

-- engagement between the well team in design of the macondo well job. in retrospect, here's a clear statement from bp saying it didn't work as well as it should have. >> thank you, richd, that finishes that segment. >> well, let me note -- >> i'm sorry. >> i want to finish with one less -- oh, really? [laughter] >> i do want to make an important statement. i think it's important and it really buds on this list. this is a very -- to me, this is a significant list that says quite a lot, and what we've done over the last four months, we've learned about what happened, and in the chair's opening statements yesterday and closing statements yesterday, we made strong comments, and i'm going to echo some of that. i don't pretend to know how all

of this can be made better. it is very complicated. it's a very exciting, complicated business, huge opportunity, and that opportunity rries risks. they need to be managed. i don't know how to do all of that well. there's a lot of people who need to be engaged in changing what needs to be changed. what i believe i've seen, and i believe our team has seen over the last four months is that leading upto april 20th, and this is not an april20th event, this is something that built over certainly hours, if not days, weeks, months, the company's involved each had data. they each had data. they were each responsible for operations. if data had been shared differently and if operations had been carried out differently, i believe this disaster could have been prevented.

i think we have seenhat, and for whatever reason, i don't know all the reasons. we don't know all the reasons, but for a number of reasons, stemming from the complexity of the well, the complexity of the environment, the complex nature of the operation, artesianing of data, responsibilities on the rig, for whatever reason, it didn't happen that way, and it's sad. >> if a commission will indulge me for 5 minutes, i want to make one more effort to get the point across to the press to the point i made yesterday if i may. somebody -- some smart person told me when i was a young man never get in an argument with people who buy ink by the barrel, and that's you guys in the press, and now you buy 0s and ones for nothing. i'll try one more time. this is our preliminary inclusion number 13, okay.

i said yesterday, at least eight times, we have seen no evidence of any decision in which a person or a group of people put safety on one side of the scale and money on the other side and consciously in their head chose money over safety. this is a relevantly modest observation. a bunch of the newspapers said bp didn't do anything for money. i didn't ev say that, guys. want to try one more time. we -- we are continuing to and have steadily investigated the extent to which there were a series of decisions at macondo that looking at them saved time or money and may have increased risk for safety. we've got a list of those. we've been working on them all

along. the commission asked us to do it. it's in process now. i could show it if you wanted to, but that's not the point. inferences can be drawn from that information from the commission. if there is a long series of decisions, there were always made in a way that would save time, the commission like any court, can draw inferences from that. that issue is still open. now, we have asked bp, to, and halliburton to provide us with examples of decisions they made that crease safety, decrease risk, but cost them more time and money. we have some information. we're waiting for more. we want to be sure we do a balanced job. we don't want to put up a long list when we haven't got all their information in ways they might have spent more money to increase safety.

they've got until november 19 to give us what other additional examples they have. the, you know, the fact is that we have a list. the list shows that there are occasions where a decision was made that there was a oice of ways to make the decision, and the decision was made in a way that saved time. we know that under these circumstances, time can be money. my point is not that this issue is resolved. all i said is that the men on the rig that night, these guys did not sit there and said, well, we made -- we blew up the rig, but we'll make the guys in lone dome some -- london some money. i'll talk to you until the cows come home. that's an important distinction we should get straight. the commission can put up the slide. you want to put it up tre?

>> i don't think so. >> okay, fine. never get in an argument with guys that buy ink by the barrel. i'm not trying to lecture, i'm just saying there is a distinction. please, you know, let's please get it straight this time. thank you. >> thank you, fred. thank you, richard. thk you for drawing it all together so great here at the end, and as i mentioned, we will look forward to having the written summary and make reference to that if we don't actually include it verbatim in the report. i'll turn now to senator graham for closing comments. >> thank you, bill, and i wish to extend my thanks and on behalf of all the commissioners to all those who participated over the last couple of days and to those of you who have had the tenacity to stick it out and absorb this information.

i think what we have learned among other things is that learning by going to actual experiences and drawing judgments from those actual experiences can be very valuable. the challenge that we have now as a commission is to take these conclusions drawn from actual experience and convert them into policy recommendations. among other things, that's going to include decisions as to at whichomponent of the multiple entities that are a part of this. individuals, individual corporations, come glom rats of entities performing at the same site, the industry at large, a then the relationship between the industry and the government to which one of those to we

assign these various judgments that have been made of the seven judgments that we just heard. i've assigned one two individual behavior, two to individual corporate behavior, and four of them to this interplay between multiple entities at the same physical site. i believe that, the fact thato many of them cme up under that one category reenforces what we heard earlier from mr. odum that this issue of how to achieve safety when you have entities that around under the same leadership may not have the same culture of safety, may have different objectives that they are seeking to accomplish is going to be a critical area for

our final report because it is the way in which this business operates. if this business operated as a vertically integrated one, it'd be a much simpler process than the reality of what we do face, but i think it's been a valuable couple of days. i thank fred and his team for the outstanding job that they have done in surfacing this information. again, mr. sears for his many ways in which he was been an invaluable contributor to our effort. we are soon going to hear from some members of the public, and i'm looking forward to what they drew from the exposure to this discussion that we've had yesterday and today. thank you very much. >> thank you, bob.

>> i would simply say that i echo the expressions of thanks to fred and sam and sean and richard. the fundamental obligation and expectation of this commission was to determine what happened, what the proximate cause was on the rig on april 20th, and i think we have made a great deal, a great contribution to the public's understanding of that event. more than any place else i have seen the loose ends, the indeterminant kinds of effects and decisions and the specific mistakes that were made and pretty much who made them i think is a lot clearer, lot more comprehensive and compelling now than it was 24 hours ago. i think the question that i had mentioned this morning of

whether or not this was a unique event or suggested a systemic problem to me now is more, escially given the role of the three respected companies very active throughout the gulf, in thizations that we know -- in the decisions that we now know were so wrong suggests to me 's a much more systemic problem than i had believed, and that being the case requires a systemic solution, and that's why i press so hard on the need for some kind of industry entity which can raise the game particularly of those companies who are not exemplars, who don't have the safety culture we heard described by mr. tillerson and mr. sears. i hope that will, the

expressions we've heard about the intention to have third-party audits and take some of the lessons from responsible care and some other industry initiatives including from the nuclear industry, i hope that will result in the kind of strong and independent organization that actually seriously polices activities, and does in fact, define best practice, and call people out when they don't exemplify it. the government challenge, i think, is really serious. i look at the present climate with respect to the availabily to likelihood of public resources, and i really wonder how the director will fulfill his expectations which i totally agree we must help him do. it would be very helpful if the

industry itself corporated in that enterprise, and maybe they will. i think it is actually true biased on my own -- based on my own experience that companies require regulators, and mr. odum hopes those resources required to raise the game of the engineers and inspectors are provided. he said they should probably come from police revenues or tariffs i suppose. i think we can make a case from that. it did seem ire irrational that a program that produced $18 billion last year has to raise money for envinmental studies and the like. finally, i guess i would just say that i think that transforming a culture does require leadership and long and

consistent priority, but there is nothing like a crisis to focus the mind and to compel reform. some of the best success is achieved in american industry have occurred after they have gone face to face with possible bankruptcy or with a major recall or an accident, so one has to hope that that will be the experience dra from this tragedy, this encounter, and at the company's that are exemplar of a safety culture can help reform those which are not and provide an example to suggest that there's really hope here. this is a hugely successful industry, absolutely vital to the economy and to the success of the united states, and safety habeen shown to be possible in

even the largest and most successful companies, and we have to hope thathat lesson is compelling to the rest, and we'll certainly do our part to recommend how that might be done. thank you all for spending these two days with us. we come back on the second and third of december in a deliberating session, and somebody is pointing at somethin what am i -- i'm aware. we're going to take 5 minutes now and then come back. i would ask mr. clemons, mr. hendricks to be prepared to come up. sit up on that ov there and we look forward to your comments. first we'll take a 5 minute break.

[inaudible conve for the update

>> thank you. host: joining us at the table is fred barnes. you wrote a piece in "the wall street journal," democrats can't blame the economy. making the argument that this is a realignment for republicans and this will have

a long-term impact down the road. why do you believe that? guest: well, i'm not sure how long the impact will be but it certainly is a reversal of the last two elections in a stark way. you could argue that the people shifted the most independents are quite fickle. voted democratic in 2006 and 2008. republicans now, they have one benefit. they're in line with what the public wants. the public wants smaller government. the majority has rebelled against the spending policies of the obama administration. and the public wants smaller government and less spending. they want to reduce the deficit. they want to bring down the national debt and republicans are in line with that. but they've got my one concern about republicans is whether they can sustain this or not. if you remember back in the 1990's -- i remember it, anyway, after the big republican landslide of 1994, republicans were very good on

spending the next couple of years. it then diminished in the 21st century. by 2006 and 2008, of course, they were being accused of spending way too much. so we'll see. host: your piece got some reaction online when you wrote this on november 2. media matters, fred barnes ignores polling really, really well saying this was about the economy. the number one issue is theid t guest: i think every other poll than ao h care shows that it commsion. i think it would depend on thee if it's 1-1 i think the republicans will vote against it. if it's 3-1 spending cuts to tax increases i think they

might go for it. this is a recommendation. remember, this is just a recommendation of a commission. it's not actuallyom mari indss i boehner a sitso ta, least. major oneon-amen milli d to pakistan, to harbor terrorists. health caranhat wr.re ok. fred barnes. gues i'm not se whahe t question was. mment on her particularly the pnt about pastouwhicnow. senng countrthat's almos out o ase is radicaem it's e, we're hopingome

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ked about tha ahe mission imssible banner. i want sorry -- accomplished">>g >> nquestion it' a mistake. ove. >> that happens when you're presiden know, get going, men and women. or something. i don't ow what it is but- host: ed barnes, what do you think about hishoughts looking back on that banne guest: i think he was very wise to say it s ait wis used agains him to fly i the way he did on a jet plane as i did, on t aircraft carrier, as i recl. and it was, as we know,hen,ne r

mistake is the mission hn't been accomplished byhen. so, look, i think political leaders from the president on doon -- of course, president busis no the white and that whole episode through the end of president bush's administration. t it's nice to hear him say it was a mistake because it so manifestly was. host: he talks about waterboaing d at comes ? guest: of course, the treatment of al qaeda prisoners have become a huge issue. i happen to think waterboarding is wrong thing.

lives were saved. i think it's defensible. i'm glad to hear that the decision was made by the president himself. host: and matt lauer asked about the legality. >> the lawyers said it was legal. it doesn't -- it's not in the anti--- you have to trust the people around you and i do. host: back to the phone calls and we ask about what's next with the republican geopolitical realignment. steven on the independent line. go ahead. caller: good morning, fred. guest: hi. caller: i'm one of those independents that got swayed right and i voted for obama. i had the pleasure of talking to david stockman and i agree with him that i don't want to

paraphrase his words but tax cuts is just another keynesian economic move to forgo. i can understand why they would do another tax cut to put it on the credit card but as far as spending money. we spent $14 billion to protect our troops from i.e.d.'s and german shepards won in the end. i want to put a plug in for ted kennedy jr. versus joe lieberman. i think that would be a good race for our state. and i'm very -- i'm -- i'm very concerned that the g.o.p.'s take my votes seriously. i know they got deconstructed by the tea party movement, but it's all about the economy with my vote. i'm extremely worried about the -- even paul crodman's

projections for 2025 are very concerning to me. i want to talk about the g.o.p. alignment and where they should go from here. guest: well, in the first place, if you agree with david stockman you're probably not going to agree with what they want to do and that is maintain the bush tax cuts and not let them expire at the end of this year and that means all the tax cuts from the wealthy all the way down to those who pay practically pay no tax. i heard david stockman, former budget director under president reagan, at least in reagan's first term, the things that those tax cuts have to be allowed to lapse. republicans don't agree with that. i don't agree with it either. i think it would be harmful to the economy and ultimately to the generation of revenues if you did raise taxes on everyone or even the top brackets. it would be economically

counterproductive and i think it would be a mistake to do that. the first thing we have to do in america is get the economy moving again and that means, look, the recession ended in june of 2009 officially but the economy's dragged along since then. we know the job creation has been -- has been very meager. it's not even up to the level that we'll cover the people just entering the economy. look, if you're going to raise taxes, if that happens if you let the bush tax cuts expire, then that's not going to help boost the economy at all and certainly not going to help on job creation. and that's what's important. host: new poll out today, front page of "usa today," i want to get your read on this. split on how to govern. they found that 49% choose congressional republicans. 41% obama but also about how they should govern. republicans are more than twice as likely as democrats to say it's more important for political leaders to stick their beliefs even if little gets done. how do you read that? guest: well, if they stick to

their beliefs, if republicans do, then a lot will get done, or at least they'll try to get it done if they stick to their beliefs, they'll cut spending, they'll reduce the size of government, they'll get the bush tax cuts fully to be continued for two or three or four years. whatever they can find an agreement with with the president. and democrats. so a lot will happen. if you -- for instance, if they have to agree with democrats and president obama then they could get a lot done but they wouldn't be sticking to their principles. look, republicans ran on principles. if you see the 22-page pledge to america, i mentioned earlier, they have a couple of specific things. mainly it outlines their principles and their principles are to have lower taxes and less spending and a smaller government. if they're doing the opposite they're going to get in real trouble. host: those independents that you talk about will swing back towards democrats because they will not like republicans are sticking so much to their

beliefs. the polls say 49% say it's more important to get things done. guest: i'm not sure what they mean by that. independents swung to republicans because of the issue of spending and the issue of health care. are republican going to be successful on repealing the health care bill? no. but they can be successful in getting a lot of spending cuts through, i think. host: connecticut. democratic line. you're next. go ahead. caller: thank you for c-span and thank you for taking my call. i'm very concerned about all of the stuff the republicans are talking about, cutting spending, cutting back government. this is going directly contrary to what we're hearing from economists about the role of government in a recession. and i don't hear very many people talk about this directly. let's say the republicans' dream comes true, they cut way back on government spending, they cut way back on all this stuff and the country winds up in a depression, i haven't

heard people talk about this possibility. and we go back to bush when he was bailing out -- when he was bailing out bear stearns, i guess it was, and i guess all this and boehner was pleading with republicans back then to support those bailouts. host: fred barnes. guest: democrats, including then senator obama, voted for tarp and the big bailout as well. and a lot of candidates this year ran who had not been in congress back then ran against bailouts. i suspect a good number of them would have supported in the crisis back in the fall of 2008. but, look, economists are divided. you have some more liberal economists who want to spend more. they think that's the answer. spending more money by the federal government and that will get us out of the first recession and then a weak economy. now, it hasn't worked. that's for sure. i mean, the economy is just

crawling along the bottom. what ronald reagan did, if you recall, was to cut taxes. cut taxes across the board, income taxes. it had a huge impact. this is what john f. kennedy did. his tax cuts that were passed under lyndon johnson. that's what calvin coolidge did. it's what countries did all over the world. the record is, and a couple of harvard economists looked into this, about 30 examples around the world, what worked? was it the government spending more to boost the economy or did tax cuts work? and in almost every case tax cuts worked, not more spending. i think we need less government and tax cuts that will spur -- offer incentives and spur economic growth and job creation. that's what's worked in the past. host: republican line, fort smith, arkansas. good morning. caller: good morning.

what is the chance of republican reforming the health care bill? the democrats should have stepped down the american people's throat that it's going to cost more than anticipated on. guest: well, that's certainly true. but, look, republicans want to repeal it. they are going to have a vote on repealing it. a lot of difficulty getting that through the senate which after all voted for the health care bill before and democrats are still in charge in the senate and president obama. it's his health care bill. you know he said in his press conference last week that he -- maybe they could tweak it a little, but repeal it, that's not something he's being to go along with. if you talk to republicans they'll tell you one thing, they cannot really repeal and then replace the health care bill until they won control all of congress and, two, the white house in particular. they'll have to elect a president in 2012 and then there will be a chance of repealing it. i would say it's going to be an uphill fight. if they do have a republican

president they'll be able to change it a good deal anyway. host: it sounds like a lot of action could be on the state level. "the washington post" reports this morning that new g.o.p. governors will steer this health care law saying that the states are given a lot of leeway when it comes to administering many key provisions. guest: that's exactly right, gretta. what governors can do in about, oh, half a dozen or more republicans elected as governors said they'll slow it down, they were against it, they were not going to help speed it along. it's supposed to come online, the health care bill, in 2014. states need to set up the state exchanges through which health insurance will be sold. and they can -- and they can make it difficult for president obama and -- in doing the things to help implement that bill. you know, half a dozen of these governors have said they will do that. host: and also the federally funded expansion of medicaid. a lot of states will have control over that aspect of the

bill as well. new orleans, henry on the independent line. good morning. caller: good morning. i just got a viewpoint take. i think the war on drugs have been lost. i think people who are on drugs need to be helped and we can create more jobs for people here and take the people that are attacking these people and locking them in prisons, costing us so much money to keep people in jail. we have more people in jail more than anybody in the world. it's time to start locking up some of these politicians that are breaking the law left and right. host: fred barnes. guest: i'm all for locking up politicians that are breaking the law and we could probably use more of that. the war on drugs, you know, i think the only thing worse than this war on drugs is decriminalization or giving up on the war on drugs. i'm not willing to risk legalizing marijuana or even

more hard drugs in this country because i think it would lead to a situation that would be worse, that would be much more widespread drug use. i can see that the war on drugs is not -- has not worked all that well. and if you talk to people about mexico they say the demand for illegal drugs in the united states is what has fueled these huge criminal cartels in mexico that have reduced that country to in some parts the start of a civil war. again, like supporting pakistan. it's a tradeoff. and the tradeoff here in my view, anyway, and there are lots of people who disagree with me, including a good number of conservatives who think that the war on drugs is so -- has been so unsuccessful that in their view we need to get rid of it and try legalization. it would be better and particularly better for mexico

as well. host: fred barnes is executive editor of "weekly standard." go to their website, weeklystandard.com, for more information. we'll go to dennis. caller: yes, mr. barnes, good morning to you. i watched you on various talk shows throughout the last 30 years. guest: that makes both of us. caller: yeah. i as a democrat am not discouraged by what happened a week ago. in fact, i have an address inco@democratz.com. i am going to disrupt my friends of the democratic party. i have decided that any liberal who wants to get a $10 minimum wage or more start calling up when these corporations in ohio -- you know, that's where

boehner has power -- and also call smuckers, the people that make peanut butter and jams and say to these two company c.e.o.'s, we're not going to buy your products until boehner gets a $10 minimum wage passed. we're going to disrupt the marketplace. corporations have taken over the legislative process and citizens of a liberal persuasion, we're going to sock it to them by disappearing. host: ok. we'll leave it there. guest: i get the point. i think you're wrong on this one. i'm against any minimum wage because what it does is reduce jobs. particularly at the entry level. and companies, anytime you raise the wage, and particularly if you did it to $10, what would be the first thing they do? they'll reduce their number of employees. they'll hire fewer entry-level employees. and that's what happens. it particularly hurts minority

youth who don't get hired. they'll have to say i'm against your plan trying to force smuckers and wendy's to raise their lowest wage to $10 an employee and i think it would be -- basically i don't think that whole idea of a minimum wage, and yours in particular, is particularly counterproductive. host: john on the independent line. you're on the air. caller: hi, fred. guest: hi. caller: i have to say i'm a republican because i can't say i'm a democrat. i'm moderate. i'm almost like right down the middle. guest: ok. caller: i'm watching these things going on and, you know, it's hard to put it all in words in 20 seconds here but my thought is, you know, john boehner, he would be my last choice for this job. i like eric cantor. there's a bunch of them out like like michele bachmann. i wouldn't want her to be my senator but i think she's

great. so, anyway. you know, on health care, i can't believe that, you know, they're trying to tell us that it's going to get cheaper and, of course, it's already going up and, of course -- if they had just dealt with immigration they wouldn't be dealing with health care. i mean, that's the way i see it. that's a personal opinion, probably. don't you see it -- i watched it for years and i think you're great. guest: thank you. caller: tell me your real personal opinion on john boehner. guest: look, i think john boehner -- you hear things about john boehner. he's not well-known. i have been told, anyway, by a number of republicans who dealt with him over the years and, look, you're going to have trouble believing this, beneath his partisan republican is the heart of a real reformer. look, we're going to find out. the reason he's moving up to speaker, everybody moves up a

notch. eric cantor moves from whip up to majority leader and congressman kevin mccarthy, who has been the deputy whip, will move up to whip. and michele bachmann, the number four job -- host: isn't that how the establishment works? guest: ok, that's the way the establishment works. host: what about anti-establishment and especially the tea party folks that they wanted things to be mixed up a little bit, so should michele bachmann and rand paul get leadership position? guest: well, i don't know. republicans can't just rely in their leadership role and in their leadership councils people that have been there 10, 20 years. .

question but a couple of calls ago about economist saying how detrimental it would be for the united states down to pull back spending all of a sudden. your answer was a typical

political answer. there are conservatives, economists, and liberal economists. but they did not have a gun in this political fiasco. i would like to mention that the person appointed under a republican president, i believe, comptroller had said that cutting spending as well as raising taxes is the only way we will get out of the deficit that we are in and on the pathway to correcting our whole deabt.

guest: you have characterized david walker's view. that is what he is for. in the short run, we could cut spending and we could cut taxes, or at least not raise them. i do not think republicans are proposing new tax cuts in the near future. they do want to continue the bush tax cuts. if they are allowed to lapse, it would be harmful to the economy. as the president said last week when the new jobs numbers came out, we need private sector jobs. we need more. 155,000 or something like that is a big improvement, but it is not nearly enough. still not cover the new people, the younger people coming into the economy.

we need investors and people who are going to create incentives to do that, to create more growth and more jobs. you are not going to do that if you have a big tax increase. host: kentucky on the independent line. caller: there is a major difference between economics and mathematics. i do not know if people who call this program can discern that. you have so many variable theories floating around. mathematics is an absolute science. i know something about mathematics. i have taught it for 27 years. what they do is they form an artificial perimeter and the do all their equations inside the

wall of the perimeter. it is an unclear picture. they take a series of variables and they make a series of projections. in mathematics, a projection is a guess. it doesn't matter so much when you're dealing with low-budget items. when you're dealing with trillions of dollars, you can forget about scoring this bill. guest: it comes down to someone economic projections are mere guesswork. they are often wrong. projections on how much some bill will cost. somebody pointed out that when medicare first started, the projection was that by 1990, it would increase from $3 billion to $12 billion.

it turned out to be &107 billion. -- $107 billion. host: we are with fred barnes "weekly standard." caller: i am against tax cuts and i'm against corporate welfare. i don't think any of the tax cuts should be passed. i do not believe in trickle- down economics. i don't believe you can give it to the corporations and they will give it to us. there is money sitting on the sidelines. we are scared out here. the economy is bad. do not need spending.

we don't the people who come on and talk real fast who contradict themselves. guest: are you referring to me? caller: yes, sir. we need people who will tell us the truth. guest: i agree with that. most of the people i talked to favored spending cuts and tax cuts. they are in favor of smaller government. maybe i misunderstood you. you had a little bit of a different take. the economy is in trouble in lots of places, particularly california. next to nevada, california has the highest unemployment rate in the country. california did not used to be in this situation. people of california would set political trends for the country.

now, the once it said have not been good ones, that is for sure. host: greg from florida. caller: good morning, mr. barnes. increased reagan deficits massively? could you answer that first? guest: he did -- deficits did increase, but the economy increase. as the economy grew -- the economy grew incredibly. and then jobs group. the economy grew at a fast rate under president clinton, and we got to a balanced budget. we need to have that kind of experience again. bt did go down. there were a couple of years

when there was a surplus. caller: you talk about the deficit -- or the economy growing with the deficit. that deficit never goes away. it becomes part of the national debt. every republican has increased the national debt. republicans talk about the de bt and the rally around the cause. i am a youngster. guest: what you're making is a fair point. host: michigan, sharon, independent line. caller: i am a first-time caller. i have two questions. would the one -- you say that in order to grow the economy you have to grow the debt. i have heard nothing but the

republicans talking about the debt left for our children. this has nothing to do with -- it has to do with home owners losing their homes. i would like to know what you think of a proposal that would force mortgage companies to have a 50-50 mortgage plant where 50% of the mortgage payments went to principle and not all of the money to interest. 50% to interest, a 50% to the principle on people's homes so that they would be able to stay in their homes, gain more equity in their homes quicker, and pay them off quicker, thereby solidifying the home basis. guest: you can do that by having

a shorter loan. my house in virginia, i had a 15-year loan. that means you pay off the principal much sooner than if the was a 30-year loan. but did you want to require banks to do that? i am not sure. i don't think we want to tell banks to do that. it would make it harder for an awful lot of people to buy a home the people who would be buying them would be the upper crust who could afford the loaned where they are paying off the principal in the shorter period of time. it sounds nice, but i would not be for that. the housing industry would go nuts. host: lake mills, wisconsin. caller: hello.

i keep hearing the democrats say we have to fund the tax cuts if we make them permanent for everyone. funded wheny be production ramps up? guest: if the bush tax cuts are extended, nothing would change. all the tax rates would stay the same, rather than refer to what they were before they were passed in 2001 and 2003. the problem is not that they will not create any new incentives for people to invest and promote economic growth and job creation. the tax on dividends would go from t 15to 39.6%, and the tax on individual incomes would go

up. that would be counterproductive in times of high unemployment. i think it would be a mistake. i am for reducing the capital gains tax are now, but the republicans are not calling for that. they want to keep all the bush tax cuts. host: bob in the bronx, new york. caller: i have a question and a statement. where was the tea party won the bush administration was running up the debt like drunken sailors? please bring aunt sarah palin. she is the gift that keeps on giving for the democrats. guest: sarah palin has

something that other politicians do not have. she is a star. she could be more of a conservative and a divisive force them democrats and some republicans like, but she is sort of a magnetic figure. whatever she does, it is always going to be covered by the media. she holds no office right now. if you do not like her, she is still going to be around. the other question -- where were the tea party people earlier? it might have been nice to have them around earlier when the deficit was going up and so was the national debt. this huge surge in 2009 of increased spending and dead and the -- and the debt and that is what prompted them. they tend to be conservative

people. when spending surged as much as it did and government grew, that is what prompted them. i wowould have liked to have actor jeff bridges and bill shore of "share our strength" on efforts to end hunger in the u.s. "washington journal" at 7:00 eastern here on c-span. later a discussion on the role of money and politics. speakers include charlie cook. live coverage begins at 10:00

a.m. eastern. congressman greg of oregon is chairing the transition commee as republicans prepare to restore the majority. then we'll talk with a reporter about the g.o.p. transition. >> our goal is to see how we can make this u.s. houmpts more open and frarntse to the american people. in terms of thousand improve legislative policy. how we can create jobs and

reduce spending. we're going to be reaching out to members of the other party and the staff to find out from them how we can run this place more efficiently to cut costs. as the small business owner in me, how we can make this a more efficient institution and how we can improve our costs and make it more trance parent and accountible. we have the people's business to do and the people have the right to watch that business being done. we have a big job ahead of us and we're going to break down into work groups and begin to drill down. when the entire conference is here they'll have an opportunity weigh in. as you know, we've got well over 80 members that will be

new to our conference coming here. a lot of them bring a lot of energy, intelligence and experience that we want to incorporate into how we rewrite the rules of the republican house and congress. we've got time for a couple of questions. [inaudible] >> a potential to thereon all the members. we all ran for election. but we have some dynamic young leaders coming into our conference, and you bet we are going to be listening to them. a lot of what we heard from americans is already redirected in our pledge that we intend to uphold and keep faithfully. >> from some of the members -- do you feel your voice is being heard?

[inaudible] >> this is an important opportunity for us as members of this new class. looking forward to what this congress looks like and trance parentsy being number one. >> any kind of minority outreach for the republican party? >> for us to realize the -- realize that we all -- together. for me it's always been about thousand build a foot print with no executions. -- with no exclusions. >> i know in 1994 there was a transition team. [inaudible] what were some of the things that you can learn from what they told you? what can you do better than the

transition of 1994? >> i think a couple of things are important. don't stweat small stuff. at the end of the day, the small stuff doesn't matter. get deep into the weeds. get it right. i think another important message was do unto others the way you would want to be treated. i think that's important in restoring some confidence in this institution to make it the best legislative body on the planet is to regardless of your party do things in a constructive way and keeping our principals in pledge of course, but making sure the opportunities -- if they came here they shouldn't be ignored because they have a different party label.

we need everybody pulling together to try and solve these huge problems our country faces. we have got to figure out a job streaming that works to get americans back together and reduce spending the reckless spending and i think we can find good participation. if brian has some great ideas about reform. he was a real leader in the 72-hour effort that we tried get done in the last congress, but it's going to be reached now. >> this is how it came about -- >> you know, i'd probably refer that to the leader, mr. president boehner. but you've got 80 incoming freshman members.

we want them at the leadership table, and they will be represented. >> thank you. thank you, everyone. >> one of the things we've heard from the house republican team is that they want to cut the cost of running the u.s. house. phillip rucker of the "washington post," any specifics on that? >> no. there's a 22-member commee head upped by the congressman from oregon and they are looking through a lot of suggestions and trying to find out where they might be able to find efficiencies. but today they didn't outline any specific cuts. we may hear from them later this week. >> what else are they talking about? >> they are talking about sort of mapping tout rules and

really the daily rhythms that they are going to be responsible for in congress. this is everything from the schedule from when members are going to be required to be in washington for the vote and when they are going to be home for recesses. they are talking about all kinds of other issues. really the kind of mundane operation that is govern the house and are hugely important in the house in determining when certain bills come to the floor and how they get voted on and how economies -- committees do their work. and all other corners of the capitol. >> you tpwhrite your story that the team meant to begin implying the party's promises. 4r0u that work out? >> it's a little unclear at this point. of course, they had their pledge that the republican house members unveiled a month

or so ago during the campaign and that had a lot of principals and themes with how they were going to govern, and this is really the first step in trying to adopt those themes in figuring out how they are going to govern the house. they are not talking about the tax cuts and policy, things like that. it's really about the bureaucracy of the house of representatives. it's a huge institution on the capitol that cos a lot of money to run and has a real schedule that the majority party can control and they are looking at what they can change and what they might keep. >> they also have a thick behinder of information. what's in it? >> i have not read the binder. i saw the behinder. all the members have this information. it's a lot of proposals and things about the schedule as it is now. the binder, interestingly

enough included some quotations from the house of representativess leader to be john boehner speeches where he outlined a lot of these principals. >> when is the next time we'll hear from this transition team? >> it appears they will be doing the press conference with john boehner tomorrow so, we'll see what they have to say there. phillip rucker of the "washington post," thank you. >> up next on c-span, a conversation on the tea party movement and the elections. after that, president obama at the university of indonesia talks about relations with the muslim world. on this morning's "washington journal," topics include jobs security.

that's live "money & campaigns" at 0k a.m. eastern. >> this morning john boehner and greg walden will talk to reporters about the republican agenda. live coverage begins at 11:45 eastern. with most election results final and winners preparing to govern, see what the winners said on the campaign trail and the 140 debates c-span covered. it's washington, your way. >> a number of republican house and senate candidates that were supported by tea party groups were elected. examming the future of the tea party movement. this is an hour.

>> we welcome those viewing us this morning through c-span. we would ask the last courtesy check that cell phones have been turned off in-house and we will post the program on the website for everyone's future reference. hoing is michael frank, vice president for government relations here at heritage. he oversees our outreach on capitol hill and the executive branch. he previously served for dick armey of texas and prior to

that he was the director of congressional relations. he sebbed in the office of national drug control policy and worked for william dannon meyer of california. please join me in welcoming my colleague, mike frank. [applause] >> thank you, john. welcome to the heritage foundation for where does tea party go from here? this is something we wanted to do not immediately after the election but give a few days for all the results to come in for people to form some results about the significance of what happened last tuesday. and then we wanted to invite folks who will shed an awful lot of light on this election. before i introduce -- and i wanted to lay out a couple of markers for the discussion that point to the significance of where the tea party had come from.

literally if we did this two years ago, people would say tea party what? where'd that come from? now everybody has an opinion about the tea party. first there are two major trusts in the parties. approval, and disapproval of the democratic and republican parties are both negative 10. the tea party nationally was 39 approved, 32 disapproved with the rest being neutral. so they actually had a net positive at the state level, and when you go into the state polls conducted. some cases there were more questions asked about the tea party than the two major parties which says something about the exit pollsters i think. the -- negative in 16 were the democrats and the tea party in

contrast was net positive in 17 states, negative in eight and split right down the middle in one. and also of interest to me was that there were 11 states where the tea party actually had a higher approval rating than one of the two major parties, so in california, ohio, washington, colorado and oregon the tea party was more popular than the g.o.p. in contrast in new hampshire, south carolina, kentucky and arkansas and arizona the tea party was more popular than the democratic party. so i think where we are at, we have a major force here, and today we're going to look at, from the perspective of this group, the sustainibility of the tea party movement. are we looking at a potential realign meant that politics? and how will we find the tea party's voice in washington? and what will be the focus and

passion and to do that we have speakersly introduce together. billy tucker, who is executive director of the first coat tea party in florida. and c.o.e. and executive coach of facilitator as well. served as c.e.o. as vice president of t.e.c., florida. and her experience of running businesses is of tremendous value to c.e.o.'s. she spent her entire career earning a repation as a point of motivation and coaching home the become more effective. maybe she can take her talents to washington, because we need a lot of that here, and billy is representative of some of the leaders that have emerged in the tea party movement and it's worth saying at the outset that there's role in leader of the tea party movement. the beauty of it is its spont

nayty and it led to many people that came from out of no where to having their voices heard and billy is a great spokeswoman for that dynamic. and a conservative political plog blogger, "captain's quarters in 2003, he's helped create a blogosphere. he also co-hosts a weekly talk radio show with a group of twin cities bloggers and has appeared on television and radio in the u.s. and canada and his daily readership is over 25,000 readers, and he'll be addressing some of those aspects and our cleanup speakers, byron york, from the washington examiner.

he provides congressmen tater from "the examiner." he was previously a white house correspondent for national review and a frequent guest on political talk shows. can't go a week without seeing byron somewhere on cable talk shows. i think i enjoy the titles. "the vast leveling conspiracy, the untold story on how liberal activists and assorted celebrities tried bring down a president and why they'll try even harder next time." that's a great title for a book. billy, go ahead. >> thank you. and i do want to take this moment for saying i'm just here representing a lot of people in this country that stood up on november 2 and before that to everybody says take our country back and then some say take it back to what. for those watching that are tea

party leaders in america, thank you, and i'll do my best to represent you. there is no leader to the tea party movement. that's what makes it so unusual and different and candidly many of us didn't even know we would be in this movement, which is exactly my story mandatory people's stories involved in it. we're now all asked what now? like we've been in jeckal island setting up the tea party movement in a secret room. that didn't happen. it just didn't happen that way. we were all called to this through a movement inside of our gut that told us something was seriously wrong in our country. and so all of you out there that are watching, thank you for letting me speak for you. i'll do my best to represent you well. i do want to tell you during this election campaign, when

the tea party movement first got started, we were really focused on the issues. that's really what the tea party movement is about. the issues in our country and we have a lot of them. a lot of you know that. we are in serious financial trouble and in a lot of ways we are in a decline here that we've never seen in our history. this is why people are waking up. because we know it. there are a lot of smart people out in america and i'm so honored to have worked with them. i've worked with c.e.o.'s who have brought huge organizations to this country from other countries, and then i thought they were smart until i started working with people in the tea party movement and found out how smart they were. americans are very smart people and have known for some time that something was going on in our country. last tuesday they spoke. our founders created this whole process by which we could do

that. and we put it into actions. and it was so cool to be a part of that. it was so phenomenal to be a part of it. listen, we are not smart enough to figure that strategy out. our founders did for us. and it worked beautifully last tuesday night, a week ago tonight. so i'm just here to tell you that people say what now for the tea party movement? we don't know. we didn't know what was down for the tea party movement when we got involved in it. again, we don't know. but we know one thing. we are not going away. we didn't give our lives up for two years, and that's what most of us did. what you don't realize is most of these that have been working, a lot of people in the tea party movement gave up their careers, walked away from any kind of financial way to create wealth for them. and they have created an

organization of loosely-connected groups all over this country without any big money. there was no big backer. we all put our own money in. we came to washington. we held signs and paid our own airline ticket to fly up here and say, say no to health care. this, don't do that. we wrote our congressmen and signed petitions. we did all that. we actually activated our citizenship in a robust way by paying for it out of our own pockets. we're all broke. two years of that. we're all broke. and we're all trying to regroup. tuesday night we had a great, great night. and all of our candidates. i'm from florida. we had a super night in florida. marcos coming to washington, d.c., because this tea party, and i will say this and some people in the g.o.p. will not like this but we're all about

telling the truth. the g.o.p. didn't get behind marco when he first went out. they were standing behind our governor, charlie crist who ended up being -- we don't know what he was. but they did not stand behind marco. marco showed up at our tea parties, driving his own car, coming to these tea parties. trying to get his message out. he had no money. i remember hearing a radio show one night when he was talking about he didn't have any money and the g.o.p. didn't get behind him but the tea party did and then the g.o.p. realized uh oh, we put our faith in the wrong person, and charlie crist lost and the g.o.p. had to scramble and start supporting marco. and that's who is coming to washington, and we're so proud. we're so proud he hadn't even gotten here and after obama's address, he gave the address.

that's phenomenal. we're so proud of that. we have a governor also in florida that the g.o.p. did not support at first. the tea party did. so there's a lot of that going on. we're not blaming the g.o.p., but we stood outside. everybody said do you want to be a third party? we said no. again, because we're smart. but we're going to put pressure on both parties. and that's what we did. we stayed on the outside and pressured them. and now they are saying now what? are you going to have a third party? >> no. we're going to keep pressuring you and make sthur democrats take back their party back from the aggressives and the republicans take their party back from the extremists. we're so thrilled about it. again, i said, i'm not the expert. i'm not the queen of the tea party. i'm just one person here in america that is standing up and

before i came i said guys i'm going to come to heritage. what do you want me to say? within six hours we had 90 people -- oops -- tons of emails like this. so i'm going to just share a few of those things with you. number one, we are not going away, so if you think we are, we're not. we're going to find a way, if we have to have garage sales to, fund this, we will. we are going to stay engaged. we're going to watch each and every new member of congress to make sure they are not going to be corrupted when they come up to d.c. something happens when people come up here. we don't know. they seem nice and then after a while they don't even look like the people we sent here. so heritage, we're going to ask you to keep an eye on them. and our membership. our membership has learned so

much. i've learned a ton. i cannot tell you how much i've learned in the last few years. here's the issues we're concerned about. the dine of our dollar. it is -- the decline of our dollar, the overreaching fed. the debt, out of control spending. they want you balance the budget. hello? this is common sense stuff. we don't want anymore pork. we don't want anymore ear marks. we want you to keep our taxes low. keep tax reform simple. we want you to reappeal the health care bill and finance bill because neither one of those fixed it. we want the congress to get back to the constitutional way. who ever heard of deeming bills passed? how about reading the bills? we did. we cut them up into sections

and we did that. read the bill? what are you talking about read the bill? it's all just craziness that went on. somebody put something in the water. and national security. [laughter] >> national security is a big deal out there for us in america. we don't feel safe. we don't feel safe with our money or our security. our borders -- this craziness that's going on, we have terrorism going on and we have terrorism with our money. so people are not feeling safe. it says in preparation for 2012 we want to outnumber the progressives. we want to triple or quadruple our membership. we want to create a new method of communicating. we don't know what it is, but we're going to do it. it's important that the people we send here stay connected to those back home. so we want you to check on the

regulatory agencies and we know what they are doing. we don't trust the e.p.a. or the department of energy or any of the bureaucracies up here. there's a huge level of untrust going on out there. we're going to stay loosely connected. there's no big organization or leader or board that tells us what to do, and we like it that way. we've done a pretty good job without being mappinged from the top down. but one thing we are doing, and this is in florida and all over the country, because we talk to people everywhere. the florida group. we googled every day. you know? and that's how we got it done in florida. but we were divided when we had our governor's race as to the g.o.p. or tea party candidate, and when the tea party candidate won, we all came together and we said we're going to get behind mr. president scott. and we did.

and he won. so we created a commoun indication that when we want to communicate with him it will be a coalition of tea parties. so we're organizing in a little way, but not from the top down. we're encouraging people to run for office. we're going to fight the liberals and focus on education and applaud good behavior. we're going to use technology and increasing our technology. we're going to broaden our base by using other organizations. we used heritage last year. we love heritage. they gave us so much information since we don't have a lot of money, pretty please, other organizations that helped

us, liberty central helped us understand issues that were going on. so we have a lot of partners out there. and i know i'm talking too much. but the number one thing, too, we want to focus on is the media. and i know there's media here, and they will probably not like us for that. but the media didn't really tell the truth. there were a lot of lies out there. and the people in the grass roots movement knew it and they did their homework so we want the media to be held accountible, too, as we move forward through process so, again, are we going away? no. do we know what we're going to do? no. but we didn't and we won. so that's it. thank you, very much. [applause] >> well, first off i want to

thank you for inviting me, and this has really been an amazing couple of years, mostly because it really reenforces the special nature of american politics. it's incredibly dynamic. american politics are incredibly dynamic. and sometimes we forget that because we operate in a paradigm where you have choice a or choice b, and in most cycles, that tends to cover most of the bases. and with some people, the two- -- the two-party system is constrictive and doesn't allow for honest grass roots movement but i think the american system is healthy, dynamic. and really worked in the last two years. you had, as billy just got done

saying, you got a mass of people who are very dissatisfied with not just way washington and the economy was working but with the options being offered by both political parties, and instead of checking out of the system and just staying home and being silent, what you had was a nationwide movement of people that was really started by i don't want the say started but by a rant on cnbc by -- who asked people who don't normally march to get involved in the political system and demand change. i've been on the side of being part of that. on the part of watching and writing about it. incredible, indreble movement ashes and really unlike

anything i've seen since maybe 1977 and 1978 in california when the tax revolt began with proposition 13. that was a groose roots-fueled citizen movement to freeze tax rates in california, property tax flates california. and it was on a specific issue of property tax rates but lit a grass fair to across the nation where it said not every solution shouldal involve taking more of our money, and it's in some ways very similar to what we've seen to the tea party, only smaller in scale. and so when you look at where do you go with the tea party after this? i think you have to look at the proposition 13 fight of 1978. that's really an analogy, because that was not a from the top down moveon.org

organization where they created sub organizations that got people out to the streets. this was an organization where people went out in the streets first and then had leaders emerge from it and eventually ronald reagan and the republicans in the 1980's. that movement lasted for a long time, and it did seem to peter out, unfortunately, in the late 1990'sened 2000's when we got away from the idea that big government is dead that bill clinton said then all of a sudden it was back. because people got comfortable. the an ty tax movement -- the anti-tax movement became part of what we did, and eventually it was marginalized. this is, i think, the same

thing, in the beginning stages. it's the same type of dynamic. you're seeing people getting out in the streets and looking for leadership. they are not going out in the streets because leaders toal them to do that or because somebody created a nice organization and had a great web site and it was pushing up against an unpopular president, excuse me, an unpopular government, it was during the clinton administration, but this was a populous vote in the clear sense of the word, so without organizations -- obviously there's going to be some limitations. there's going to be some -- i won't even say limitations. there's going to be some issues that movement has to overcome. organizations being one of them. because it's very easy for grass roots movements without organization to simply peter

out. especially after an election. this is why i think what happens in the next year or so is going to be so critical for the tea party movement. this was an extraordinary set of circumstances, an extraordinary economic upheaval. you had a congress that absolutely refused to listen to the people who sent them to washington in such an air gant manner, that i'm not sure that even has a parallel. i mean, it was an incredibly air gant congress. you had at the same time this encroaching regulation that was being imposed as part of that air gans. and all of those things really tend to motivate people into action. now what you're going to have is a republican congress that is going to come in. at least a republican house that is going to be able to address some of the spending issues. hopefully as a consequence of that we're going to see a

reduction in the regulatory environment. the question is. how much success will it take to take the steam out of the tea party movement? if you can. where success may be the big issue here. so let me put it to you this way. let's say the republicans get into congress and don't do what they promised. they don't slow down the regulatory expansion or spending -- i don't think there's much of a chance of that because the people elected, we're already starting to see good signs coming out of the republican majority -- john boehner said he's going to force a stand-alone vote on for instance increasing the debt limit. let's say that didn't all happen -- it would be very easy for the deep not just maintain

its momentum but grow its momentum due to the fact that once again you have more air row gans and people who aren't going to listen. so the question for the tea party will be, as the tea party succeeds, how do you keep the momentum move and build on success? and how do you keep people like billy, who, has supping an incredible amount of sacrifice into this movement, how do you keep folks like billy in the movement and working and sacrificing like that as we succeed? i think that's really going to be the big question in the next couple of years. [applause] sfoo >> i want to thank -- i want to thank you, mike and everybody at heritage for inviting me to speak. and i hope a -- i have a little bit to add after that.

i gave a speech at the federalist society, and the deal was for me to talk about some of the candidates i had met during coffering the campaign. and i talked about what i thought about was the really high quality level of the number of republican candidates who were just a good class, successful in their private lives. they had neveral thought about running for office, many of them, until the spring and summer of 2009 when they watched barack obama and the democratic leadership in congress enact one enormous government initiative after another. so each in their own way they came around to the idea of running and they aspired to be citizen legislaters and they rem didn't want to become professional politicians. it was incredible except the three guys i focused on all lost. up with was shawn belat who i thought ran a good campaign

against his opponent and the ln dennis who challenged nancy pelosi. after i did the speech i went back out and did the final trip for the campaign and went to illinois, wisconsin, and ended up in nevada. i think the most impressive person i saw during that trip was a man named ron johnson, the senator elected from wisconsin. very happy in his life as ceo of a plastics manufacturing company. never thought of our running for anything. is appalled by what happens in the first months of 2009 and invited to speak at a tea party rally in oshkosh where he live after he speaks people come up

to them and ask them why don't you run? he began to think about it. after a lot of thought he gets in the race and runs on an admirably simple platform. everywhere he goes he says i only had two things in my platform, i want to repeal obama care and reduce the size and scope of the federal government. obviously he will have to do other things when he gets here, but was an admirably sime platform. he is a very serious guy and i going to do what he said he is gog to do. i would expect that he will devote a lot of his energies to repealing obama care. the question would be what would be the tea pty's role in

policing ron johnson? the bigger question is a are all of the republican candidates going to be that way? the one thing we heard the most was we have learned our lesson. we really have learned our lesson. we're so sorry we strayed from conservative ways, but if you elect us again, we probably will not do it again. -- we promised we will not do it again. i give them some credit for that. i think some of them have learned their lesson. it seems to me they hav gone about their business in a pretty sober way. i think the question for the tea party is the future of the party is in the hands of the congress. what if republicans really have learned their lessons? what if they've performed

admirably over the next -- they perform admirably over the next two years? try to bring federal stilus back to pre-tarp budgets? i think if that happens, a lot of the passion with saul and te saw in the tea party rallies will dissipate. i think their actions will be seriously constrained by an energetic house of representatives, if that is what the republican leadership of the house chooses to do. i suspect that if republicans perform well, we will see a

dissipation of the energy that took place, which will be compounded by the beginnings of a 2012 presidential race. there is no clear, single person that every tea partier would get behind. i think it will disappoindissipe of the energy as well. and there are born to be performance monitors. they will keep their eye on everyone. i suspect that will take place, but i think you may have a situation where the success of the tea party creates a little dissipation and their energy. thanks. [applause] >> now we can go to some questions. i thought i would start off by asking billie, in terms of exctations, how do you think the two-parea party support woud

define congress and the next few years? where would they set the bar? >> we certainly want them to look at the health care bill. we want to see that actually take place. we want to see limited government. we do not want them intruding into our lives. we want our taxes to be less than what they are and what they're going to be. we want to see them do the things they said they were going to do. and we want them to fix the mess we're in financially. we are in a pickle. there is an article that i wanted to read. we have passed a milestone that is negative beyond the pale.

the u.s. now has exceeded this level. they have work to do. we are scared out there in america, and we want this congress to fix this mess. we will see if they are successful if they can fix that. >> questions from the audience. yes, sir. everyone identified themselves. >> [inaudible] if you look at the last 100 years of government, it is hard to argue thatongress alone can't solve the problem, because we have periods where conservatives may be in charge and where liberals are in charge. where is this tea party movement on the the idea of

constitutional reform? this is a question for anybody. where do think the people are on the idea that we need a constitutional reform if we are going to permit -- permanently limit the idea of fiscal responsibility? >> balance the budget is a big deal in the tea party movement. and we want to go back to our constitutional foundation. the big government is not working for us out there. we want go back to where we used to be at some point in our history. you know more than we do. we're not exports. but we know it has to go back to wehrwhere it was. >> i do not necessarily think you have of a balanced budget

amendment to have a balanced budget. the problem is congress. congress writes the budget. they are responsible for writing the budget. they are not going to balance the budget or lower debt just because there is a constitutional amendment to balance it out. it will just keep raising taxes. it is more incumbent on american voters to send people to congress that will spend less. he raised some very good questions, because a lot of the spending right now is automatically triggered. a key part of this will have to be entitlement reform. we will have to fix or replace social security and medicare. until you do those things, i am not sure a balanced budget amendment is going to address the actual problem. you can balance the budget and still exploit it. >> i think if you did aoll of

supporters, they would favor a balanced budget amendment. i think that they would be happy justo see significant progress in this area, because you talk about some hazy, lovely time in the past where things were bte 2007 might be a place to start. in 2010 that total federal expenditures are 3.7 trillion dollars. prior to 2007 the glut may be 100 billion per year. -- they go up maybe 100 billion per year. if i could say one thing in semi-defense of republicans, if the economic conditions that pre-date tarp and stimulus of

existed, i doubt many of them would have very passionate about being tea parties. -- tea partiers. the federal deficit is $160 billion. things were not nearly as bad. that is why i think the republicans got all lot of mileage by saying if we can just go back to 2008 spending levels. balancing the bget is certainly of gold, but making it better is probably something that would really satisfy most two-parea party activists. to>> you both talk about success dissipating in the movement.

i thought opposite. i think that tea party