This document proposes a research project to develop a new business model for contractor management in the oil and gas industry. It aims to provide a systemic solution using coordinated management between operators, contractors, and service providers. The model would utilize market forces to re-engineer safety towards a risk-based approach. Phase I would demonstrate the model and evaluation methodology. Phase II could help transition companies towards high reliability status characterized by mindfulness, flexibility, and prioritizing frontline expertise. The project expects to provide cost savings, quantifiably reduce risks, improve relationships, and help industry transition to more proactive safety practices.

1. BUSINESS MODEL TO RE-ENGINEER SAFETY
UTILIZING COORDINATED MANAGEMENT & MARKET
DRIVEN FORCES: RESEARCH PROJECT FOR RISK
BASED CONTRACTOR MANAGEMENT
Industry Issue
Problem to Be Solved
Project Overview
Functional Evaluation
Completed Evaluation Feedback
Phase I Deliverables
Phase II Steps Towards High Reliability
Project Benefits

2. 2012 Year of the Pipeline
• Oil producers could lose $72 billion over a nine-year-period if a pipeline to
carry Alberta bitumen to the West Coast isn't built,
• Easy access to international markets could add up to $131-billion (U.S.) to
Canada’s GDP between 2016 and 2030,”
o Expansion of Kinder Morgan’s existing Trans Mountain Pipeline
o Enbridge Northern Gateway Pipeline
• At stake is the ever widening differential between Brent crude and West Texas
Intermediate,
• Billions of dollars in potential investment that could be deferred,
• Ability to provide additional product to US Market – TransCanada Keystone,
and
• Numerous high profile events are eroding public trust and creating
increased regulatory pressures.

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

4. Customer
Contractor Subcontractor
Customer
Customer
Customer
Questions 2000 plus
Compliance Review
Quarterly metrics
Audit Verification (3-5 days)
Currently poor or
NOT managed
Training Review
Leading Indicators
Work/Stewardship
Inspections
Investigations
Rule Enforcement
Permits
Status quo – Passive Compliance Model with
Evaluation & Mitigation
• Focus is on administrative tasks
• Not sustainable by customer or contractor
– expensive and labor intensive,
• Empirical evidence demonstrates a 100%
false positive return creating a false sense
of assurance, and
• Direct experience supports ineffectiveness
of approach.
Impacted multiple
customers with
various scoring
schemes
Safety Leadership Training
Contractor Orientation
Pre-Qual list

5. Use of contractors has been identified as a significant contributor to a company’s risk
profile. Louis Auger of Shell Canada states “80 percent of his company’s safety incidents
involve contractors”. Contractor risk is well known throughout industry and was further
verified with the investigation in the Gulf of Mexico disaster with recommendations that
include:
• “Implementing much greater oversight of contractors current practices; and
• Requiring contractors to develop and implement audit-able safety processes, including
identification of key indicators --- processes which BP can review.”
• Although the investigation team has taken a broad approach to making recommendations within
the intent of its terms of reference, the team believes that as the findings in this report are
considered and discussed, they may give rise to broader systemic responses or
recommendations associated with broader industry issues. These issues might include industry
working practices; training and competency assessment; and interfaces among operators, drilling
contractors and service providers.”
Need to Think & Operate Differently

6. Contractor Management Survey
• Survey document finalized and trial data gathered
• Scores are out of 7 ( 1 – strongly disagree to 7 – strongly agree)
• Contractors report little operational value with current contractor management systems
0
0.5
1
1.5
2
2.5
AVG
MODE

7. Problem To Be Solved
• Status quo approach is not working,
• There are broad systemic issues impacting the ability to reduce serious injury and fatality rates,
• Traditional audits focus primarily on management systems not verification of actual practices. Correlation
between audit results and incidents show very little predictive value.
• Current health and safety evaluations are propagating a false sense of assurance,
• A reliance on a safety approach that only addresses problems after they manifest is wholly inadequate to
ensure safety,
• Conventional illness and injury rates are not adequate indicators of catastrophe,
• Over 50% of fatalities involve Contracting Companies/Contractor relationship
• Need to implement a much greater oversight of health and safety current practices, and
• One of the most important challenges in trying to measure safety performance is how and what we measure.

8. Project Overview

9. Project Abstract
• Demonstrate a business model that provides a systemic solution via contractor
management strategies,
• Enabling methodology of the project provides a high degree of confidence with
respect to accurate safety evaluations and effective risk mitigation,
• Utilizes a coordinated management structure between Associations, Operating
Companies, Contractors and Industry Service Provider(s),
• Makes use of vested interests and market driven forces to re-engineer safety
towards a risk-based management model, and
• Encourages the development and sustainability of a high reliability organization

10. Research is based upon work conducted by:
• Andrew Hopkins “The Problem of Defining High
Reliability Organizations”,
• Cooke and Rohleder “Learning From Incidents: From
Normal Accidents to High Reliability” and
• Nancy Levenson et.al. “Moving Beyond Normal
Accidents and High Reliability Organizations: A Systems
Approach to Safety in Complex Systems”.

11. A Critical Disconnect
The Legacy of the High Reliability Organization Project March 2011
Mathilde Bourrier - Department of Sociology, University of Geneva.
There is a wide gap between the level of knowledge published
and debated in the academic circles on these issues and the level
of knowledge transfer that has actually occurred from these
circles to the industry or regulatory circles.
Hopkins (2001, p. 72) is right when he observes that ‘this is not
just a theoretical debate. There are practical consequences for
the way we go about accident prevention’

12. Applied Research Paper
Documentation
Approval
Recruitment of
Participants
Functional Evaluations
& Surveys
Participant Debrief &
Mitigation Action Plan
Aggregate Data for
CEPA
Submit Paper for
Publishing
Milestones & Timeline

13.  Focus on practical value first and always with respect to operation
o Emphasis on evaluation process first; transparency and collaboration tool second
o 6 critical audit-able processes
o It is about “on-the-ground safety”
o Creates an active/directive system to produce continuous improvement.
 Demonstrates functional cultural attributes
o Mindfulness – always asking “what can go wrong?”
o Organizational Learning
o Sensitivity to Operations – risk identification and control integrity (exposure)
 Simple and efficient
o Tell, show and demonstrate;
o Strips away extraneous activities (minimum data entry produces maximum value)
 Basic terms of reference
o Aligns objectives for all stakeholders to provide common measuring criteria
o Provides capability to measures “HOW” the process of doing safety.
o Ability to leverage commonly agreed upon measurements
Functional Evaluation

14. Game Changing Differentiators
Passive Compliance Active Compliance
• Emphasis is on “what” elements of SMS are in
place. (Necessary but not sufficient)
• Examines “HOW” program functions as to
INTENT. (Adds sufficiency to SMS)
• Compliance to administrative requirements. • Compliance to effective process.
• Uses injury statistics (TRIF, DAFW) to determine
success.
• Uses risk based measures to determine
success.
• Relies on correlation for appearance of
effectiveness.
• Uses cause & effect demonstrated through the
process of creating safety.
• Relies on an approach that only addresses
problems after they occur. Challenged in
obtaining near miss reports.
• Achieves between 600% and 800% increase in
reporting hazards before they manifest.
• Provides superficial indications of culture • Provides objective (deep rooted behavioral)
measures of culture.
• Creates a false sense of assurance • Provides an accurate assessment and a highly
focused and directive risk mitigation strategy

15. Completed Evaluation
It was refreshing to see where CEPA is trying to take conventional
thinking in the HSE world…We will know what our high risk
hazards are, what tasks would be considered critical and be able to
design our engineering solutions, training and competency programs
and other controls to those concerns. I fully support this approach. I
would encourage industry to move to a set of key performance
indicators that are designed to drive the right solutions. This should
be the reduction of risk, not the manipulation of the total recordable
injury rate.
Post Debrief

16. Phase I Deliverables
• Demonstrate a business model that provides a systemic solution to Health
and Safety Evaluations and contractor management strategies.
• The enabling methodology provides a high degree of confidence with
respect to accurate health and safety evaluations and effective risk
mitigation processes with shared risk activities.
• The solution utilizes a coordinated management structure between,
Operating Companies, Contractors and Industry Service Providers.
• It makes use of vested interests and market driven forces to re-engineer
safety to a risk based management model.

17. Phase II Steps Towards High Reliability
Phase II (pending approval) runs concurrently with a few chosen
companies that are forward thinking and want to evolve their organization to
one of high reliability status. High reliability organizations are characterized by:
 Ability to provide high quality and high reliability
 Capability to work in high risk environments with high efficiency,
 High sensitivity to operations,
 Ability to constantly confront the unexpected and operate with remarkable
consistency and effectiveness,
 Exhibit “mindfulness” a combination of high alertness, flexibility and
adaptability
 People at all levels of the organization value quality
 Defer to experts on the frontline
Achieving a state of ‘high reliability’ provides significant competitive advantages.

18. Project
Benefits

19. Opportunity to Control the Conversation
• Demonstrate leadership, while everyone else is talking CEPA is taking action,
• CEPA is seen as taking meaningful, universally understood and scientifically
supported action to reduce high consequence exposure both internally and with
contracting companies with shared risk scenarios,
• Ability to control the conversation:
o Provide meaningful results – better data with risk based performance
metrics,
o Speak directly to culture demonstrated through the process of creating
safety,
o Supported by documentation that meets commonly held terms of
reference, and
o Capability to impact industry systemically to create an environment that
encourages and sustains the creation of high reliability organizations.

20. CEPA Member Benefits
The Operating Company accrues seven key via the business model:
1. Opportunity to outsource HSE contractor management and obtain significant cost
savings,
2. Significant and quantifiable results in reducing shared risk to as low as reasonably
practicable,
3. Removes operators from the situation of having to dictate solutions,
4. Reduces or reallocates head count for greater returns on safety investment,
5. Provides practical value for both Operators and Contractors improving the relationship,
6. Reduces threat of increased regulatory measures by focusing attention to “on-the-
ground” methodologies to identify and mitigate high consequence risks, and
7. Fully utilizes an existing resource and infrastructure to provide cost effective solutions.

21. We Need Concrete Solutions That
Work In The Real World With
Meaningful Results
Victor Hugo said you can stop an invasion of armies, but you can never stop
an invasion of ideas. There’s nothing more powerful than an idea whose time
has come.