What the Offshore Drilling Industry Can Learn from Three Mile Island

Transcription

1 After the Blowout What the Offshore Drilling Industry Can Learn from Three Mile Island by John H. O Neill and Mark L. Farley Q&A Mark L. Farley Environment, Land Use & Natural Resources mark.farley@pillsburylaw.com John H. O Neill, Jr. Energy john.oneill@pillsburylaw.com Mark L. Farley leads the Environment, Land Use & Natural Resources practice section in Pillsbury s Houston office and advises on internal investigations and crisis response. John H. O Neill is a former Navy nuclear engineer, senior partner in Pillsbury s Energy practice and member of its Board. Pillsbury s Nuclear Energy practice and its Oil & Gas practice have both been recognized by Chambers Global and other surveys of leading international energy law firms. As offshore drilling faces renewed scrutiny following the Gulf of Mexico oil spill, Pillsbury partners Mark L. Farley and John H. O Neill describe applicable lessons from the nuclear power industry, which established a model safety culture after the 1979 Three Mile Island accident to successfully reinforce safety and quality control across reactor operators decisions and operations. Mark Farley: John, you have been engaged in the nuclear energy industry for your entire professional career first as a nuclear engineer in the Navy submarine program, and now as a senior energy partner at Pillsbury. For many years, I have counseled energy companies and chemical manufacturers on safety issues and helped clients investigate major industrial accidents. In the aftermath of the Deepwater Horizon explosion and oil spill, you and I have both seen analogies casually made between the current challenges in the Gulf of Mexico and the 1979 reactor accident at Three Mile Island (TMI) Unit 2 outside of Harrisburg, Pennsylvania. Let s look more deeply at the comparison. Farley: For the benefit of those born after 1979, or whose memories have combined TMI with the movie The China Syndrome, can you summarize the immediate causes of the TMI incident? John O Neill: TMI Unit 2 was a large nuclear reactor operating on an island in the Susquehanna River in Pennsylvania. A chain of events that included equipment failures and improper operator actions led to a loss of coolant in the reactor, extremely high temperatures and partial melting of the nuclear fuel. Unlike the fictional threat of The China Syndrome, the melted fuel was contained in the plant s reactor building (or containment) and relatively little radiation was actually released to the environment. President Carter s Commission charged with investigating the accident at TMI Unit 2 concluded that in spite of the serious damage to the plant, most of the radiation was contained and the actual release will have a negligible effect on the physical health of individuals. The major health effect of the accident was found to be mental stress. Farley: What investigations and reports were made by the companies involved, by the Nuclear Regulatory Commission (NRC), by Congress, and by the industry generally? Pillsbury Winthrop Shaw Pittman LLP

2 Environment, Land Use & Natural Resources O Neill: The immediate response by the utility, the NRC, the Governor of Pennsylvania and that state s agencies, the reactor vendor, and the nuclear industry was focused on addressing the accident and putting the plant in a safe condition. This was followed by numerous extensive investigations and reports instituted by the President, congressional committees, the state of Pennsylvania, the NRC, and nuclear industry groups. Notable among those were the Report of the President s Commission headed by Dartmouth president John Kemeny and the report to NRC Commissioners prepared by NRC staff and an outside law firm led by Mitchell Rogovin. The reports were made public and undertook to evaluate, explain and make recommendations. Subsequent reports prepared under the direction of the NRC focused on the lessons learned and post-tmi accident changes to the design, operation, and emergency planning for existing and new nuclear plants. The Kemeny Commission concluded, however, that the basic problems are peoplerelated. Farley: Clearly, an organization s operational and safety management systems need to anticipate that people will make mistakes or bad decisions. We often refer to this as consideration of human factors. Can you summarize key findings from TMI? O Neill: The Kemeny Commission opined that the equipment was sufficiently good that, except for human failures, the major accident at Three Mile Island would have been a minor incident. There was plenty of blame to be shared. The Kemeny Commission treated the reactor vendor, the operating utility, its parent company, and the NRC harshly. All shared the blame for deficiencies in operator training. The vendor and the NRC were criticized for failure to communicate to the industry lessons learned from an incident two years earlier at another plant of the same design as TMI Unit 2, where prompt operator action had prevented the chain of events that occurred during the accident at TMI Unit 2. The NRC was criticized for poor management, misplaced priorities and complacent attitudes. The Kemeny Commission charged that the NRC sometimes erred on the side of the industry s convenience rather than carrying out its primary mission of assuring safety. The Kemeny Commission submitted a list of forty-four recommendations of vital importance. Importantly, the Kemeny Commission Report and the Rogovin Report and many other independent studies found no adverse health effects from the TMI accident. Other than the plant itself, the accident did not damage property in the region. Farley: After major industrial accidents, it has become common for the government to immediately initiate worker endangerment and environmental criminal investigations. Was this the case in TMI or was the focus solely on civil liability? How did the investigations and testimony in the public settings affect any civil and criminal proceedings? Were there private actions by or against the utility? O Neill: The NRC issued Notices of Violation relating to events leading up to the accident and imposed a substantial civil penalty on the utility. The NRC conducted investigations into allegations of wrongdoing and referred certain matters to the U.S. Department of Justice. Criminal charges were sought and settled against certain individuals who had either allegedly provided false information or attempted to cover up falsified tests. No criminal charges were brought against the utility. The utility sued the vendor. That case settled after a number of months of trial. Numerous suits were brought against the utility by outside parties. Other than damages relating to the panic and evacuation that ensued from the accident and the significant economic damage incurred by the utility from the destruction of its nuclear unit, there was relatively little economic impact from the accident. Farley: As you know, I was a lead lawyer for the BP U.S. Refineries Independent Safety Review Panel that examined BP s safety culture and oversight systems after the Texas City Refinery accident in The Panel s review represented the first time that the concept of safety culture was considered in connection with the investigation of a non-nuclear industrial accident, even though the concept was developed by the nuclear industry many years before. How did safety culture affect the industry after TMI? O Neill: One significant change that occurred within the nuclear industry after the TMI accident was the introduction of a focused safety work environment that we now know as Safety Culture. The NRC defines this concept as that Pillsbury Winthrop Shaw Pittman LLP

3 After the Blowout: What the Offshore Drilling Industry Can Learn from Three Mile Island assembly of characteristics and attitudes in organizations and individuals which establishes that, as an overriding priority, nuclear plant safety issues receive the attention warranted by their significance. This definition embodies the principle that plant safety drives every decision and action. Moreover, the concept includes a work environment where employees are encouraged to identify and raise safety issues. After the TMI accident, nuclear plants invested in their work environments through training and the adoption of programs and policies to ensure that a robust safety culture permeated their organizations. These programs and policies have continually evolved and improved over the last three decades. Today, nuclear utilities continually assess their safety culture and benchmark their peers to identify opportunities for improvement. Farley: We work with many companies who now see the evaluation of safety culture as an opportunity to learn lower on the incident pyramid and correct deficiencies even before they have a near miss, let alone an incident. What other changes occurred after TMI? Did the industry come together and develop joint solutions and safety ventures, recognizing that an incident at one plant affected everyone? O Neill: Within days of the TMI accident, the TMI Ad Hoc Nuclear Oversight Committee was formed by the Edison Electric Institute, American Public Power Association, National Rural Electric Cooperative Association and Atomic Industrial Forum to coordinate the industry s response. The immediate action was to provide help to the TMI site and to begin to identify and implement lessons learned for all nuclear plants throughout the country (and indeed throughout the world). Two new organizations were established the Nuclear Safety Analysis Center (NSAC) and the Institute of Nuclear Power Operations (INPO) the purpose of which was to improve the safety of nuclear power plants through improved safety analysis, plant design, operating procedures and personnel training. NSAC was tasked with collecting and coordinating the large volume of information about the accident, understanding what happened at TMI, identifying the contributing factors to the accident, and reporting on the implications for generic safety issues and remedies at all other nuclear plants. In parallel, INPO was formed to be the industry s self help organization to ensure the highest quality of operations in nuclear power plants and encourage excellence in every aspect of operations. A mutual insurance company was also formed to provide property insurance and outage insurance to spread the risk of nuclear incidents. A model emergency response plan was developed to address deficiencies identified by the utility, state, local and federal responders. The utilities recognized that a serious accident at one nuclear plant would have dire impacts for all nuclear plants. The industry understood that NRC regulations could no longer be considered as the goal for good operating practices, but only the minimum level. Rather, operating at a level of excellence was required if the nuclear industry was to prosper. Farley: It sounds as if recognizing the commonality of interest was the key. We have not seen that so far after refinery accidents, but the Gulf oil spill may be different. The drilling moratorium declarations have made it clear that the administration perceives actions by one company as being representative of the industry s risk. Were the nuclear industry s initiatives successful? O Neill: INPO has been successful in identifying best practices that have become the norm of nuclear plant operations. The organization established educational and training programs for nuclear plant operating personnel. INPO teams regularly audit all nuclear power plants and report the results of the audits to the highest levels of utility management, or if necessary, to the company board of directors. Changes encouraged strongly by the industry and those mandated by the NRC have resulted in significant improvements in safety, as measured in part by reductions in unintentional plant shutdowns (SCRAMS), precursor events to an incident, and occupational radiation exposures. In addition, plant performance has improved dramatically, from average capacity factors of about 65% at the time of the TMI accident to greater than 90% in the last decade. At the time of the TMI accident, nuclear power provided 13% of the nation s electricity; today 104 operating nuclear plants provide just under 20%. U.S. plant operations lead the world in safety and performance. Farley: Accident investigations often conclude that the regulatory scheme is inadequate and agency

4 Environment, Land Use & Natural Resources enforcement prior to the incident was lax. The U.S. Chemical Safety Board, for example, has harshly criticized EPA s and OSHA s regulation of process safety. Preliminary findings from the Deepwater Horizon accident also questioned whether the U.S. Interior Department s Minerals Management Service (MMS), since renamed the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), has done enough in connection with offshore safety. What about the relations between industry players and NRC? Did TMI cause changes in the regulations, inspections and audits by NRC? O Neill: The NRC was stung by the criticisms of its performance and complacency. It sought to demonstrate more effective regulation. The NRC accelerated and expanded its program instituted in 1977 to have permanent resident inspectors at each nuclear plant. The NRC imposed new regulatory requirements to address lessons learned from TMI, including instrument intelligibility, hydrogen control, radiation monitoring, control room layout, training and plant supervision. More stringent licensing requirements were established for reactor operators. More extensive use of reactor simulators was required for training programs. The NRC inspections and audits were more frequent and more questioning. The relationship between the industry and NRC became more formal and at times considerably more adversarial than during the previous decade. Farley: Did NRC divide its regulatory enforcement and facility permitting functions, as is currently proposed for MMS/BOEMRE regarding offshore drilling? O Neill: The Energy Reorganization Act of 1974 had split the functions of the Atomic Energy Commission into two agencies: the NRC was responsible for safety and regulation, and the Energy Research and Development Administration, now the U.S. Department of Energy (DOE), was responsible for further development of nuclear power for both commercial and government uses. At the time of the TMI accident, the Office of Inspections and Enforcement (responsible for inspections and enforcement of regulations and license requirements) was a separate office within the NRC and not directly connected with the Office of Nuclear Reactor Regulation (responsible for reactor licensing). Subsequently, significant organizational changes were made within the NRC to strengthen its investigations and enforcement. A new Commission enforcement policy was adopted in Later, the Office of Inspections and Enforcement was split into what is now the Office of Enforcement (inspections and enforcement) and the Office of Investigations (investigation into wrongdoing). A new Office for Analysis and Evaluation of Operational Data was established to systematically review information from, and the performance of, operating plants. (This action reflected the recognition that malfunctions similar to those at TMI Unit 2 had occurred at other plants, but the information had never been assimilated or disseminated.) While the Kemeny Commission and Rogovin Report both criticized the five-commissioner organization, neither the NRC nor Congress adopted the recommendation that the NRC be led by a single administrator. Farley: What about the insurance market and the system of strict but limited liability created by the Price- Anderson Act? Did the liability cap and the insurance premiums increase after TMI? O Neill: The total third-party liability claims resulting from the TMI accident amounted to $70 million and were well within the primary insurance coverage that the utilities were required to maintain under the Price-Anderson Act. There were no calls on retrospective premiums of other reactor licensees under the secondary insurance coverage established by Price-Anderson. Over time insurance requirements and the amount of retrospective premiums have increased, but not directly as a result of the TMI accident. Rather, the TMI accident demonstrated that while third-party claims were not necessarily a significant risk, on-site property damage and significant outage costs were a major expense. This led the industry to create a mutual insurance company to provide additional coverage for the latter. Farley: The dollar numbers are significant. In my experience, though, the reputational harm that an organization suffers after a major accident sometimes can dwarf other liabilities. Pillsbury Winthrop Shaw Pittman LLP

5 After the Blowout: What the Offshore Drilling Industry Can Learn from Three Mile Island If the facts are egregious enough, stakeholders even begin to question whether the organization should even be allowed to conduct operations. How does an industry affected by this kind of incident secure, maintain and enhance government and public trust? How has the nuclear industry communicated its superior performance and improvements, in both safety and economic terms? O Neill: One of the early actions of the TMI Ad Hoc Nuclear Oversight Committee was to form the U.S. Council for Energy Awareness to educate and inform the public. An early initiative was to follow Jane Fonda and Tom Hayden on their nationwide anti-nuclear tour and correct misstatements and inaccuracies at every stop. The Nuclear Energy Institute (NEI) (as the successor to the Atomic Industrial Forum and U.S. Council for Energy Awareness) continues to this day to provide factual information on the benefits as well as risks of nuclear power. NEI conducts a broad campaign to educate, using TV and radio, as well as print and online media. Each utility has its own public outreach initiatives. However, as recent news articles on the offshore drilling accident attest, the media can have a very difficult time getting facts right relating to complex technology. Public information programs, advertising, and outreach are necessary (but not sufficient) steps to earn and maintain public trust. The foundation is actual performance. Strong performance by the nuclear industry over the three decades since the TMI accident has resulted in very significant public support for nuclear power particularly in the vicinity of existing nuclear plants. There are exceptions, but operating nuclear plants are considered fine neighbors and valuable assets for reliable power, particularly in this era of concern for global climate change. Farley: The potential for significant economic and reputational harm is why executives and boards of directors have become so focused on systems for risk and safety management. It is especially important to review the means by which an organization assures itself that its systems are functioning as intended and actually mitigating the risk. Given the magnitude of the Gulf oil spill, the actions taken by the nuclear industry after 1979 should be carefully studied by the companies, agencies, policymakers, and the public for the offshore drilling industry after O Neill: Actions taken by the nuclear industry after the TMI accident to aggressively drive for excellence in operations and safety have improved the performance of nuclear power plants across the board. Safety consciousness and quality control are in the forefront of every decision, every activity, and every moment. Both the government regulator and the industry s selfregulating organizations demand it of every nuclear operator. Hopefully, similar lessons will be learned by the offshore drilling industry as the aftermath of Deepwater Horizon plays out, and the actions taken by the nuclear industry will be emulated. Emerging Trends Q&As are a monthly feature from Pillsbury Winthrop Shaw Pittman LLP highlighting emerging complex legal or business issues that potentially increase risk, require new or additional compliance efforts, or present new opportunities for corporations and other entities. If you are a journalist and would like to receive our Emerging Trends Q&As on a regular basis or speak to one of our attorneys for a news story, please contact Sandi Sonnenfeld, Pillsbury's Director of Public Relations, at or via at sandi.sonnenfeld@pillsburylaw.com. Pillsbury Winthrop Shaw Pittman LLP 1540 Broadway New York, NY ATTORNEY ADVERTISING. Results depend on a number of factors unique to each matter. Prior results do not guarantee a similar outcome Pillsbury Winthrop Shaw Pittman LLP. All rights reserved.

6 Pillsbury Winthrop Shaw Pittman LLP