Interior Department toughens regulation of offshore drilling

Nick Snow
OGJ Washington Editor

WASHINGTON, DC, Sept. 30 -- The US Department of the Interior announced two rules that toughen regulation of oil and gas drilling practices and equipment performance. The rules, which industry groups greeted with warnings about further drilling delays, join other DOI reforms since the Apr. 20 Macondo well blowout and rig explosion and subsequent oil spill in the Gulf of Mexico.

“Operators will need to comply with tougher requirements for everything from well design and cementing practices to blowout preventers and employee training,” US Interior Sec. Ken Salazar said. “They will also need to develop comprehensive plans to manage risks and hazards at every step of the drilling process so as to reduce the risk of human error.”

The drilling safety rule, issued under an emergency rulemaking process, makes mandatory several requirements Salazar outlined in a May 27 report to US President Barack Obama. It prescribes cementing and casing practices and the use of drilling fluids to maintain wellbore integrity, according to DOI.

The regulation also strengthens oversight of mechanisms designed to shut off the flow of oil and gas, primarily the BOP and its components, including remotely operated vehicles, shear rams, and pipe rams. Operators also must secure independent and expert reviews of their well design, construction, and flow-intervention mechanisms. The regulation will be effective immediately.

Michael R. Bromwich, director of the Bureau of Ocean Energy Management, Regulation, and Enforcement at DOI, said his agency soon would issue a standard rulemaking process that will include opportunities for public comment and consider additional proposals from Salazar’s late May report, including a requirement that BOPs have two sets of blind shear rams.

Workplace safety
DOI said the second rule, which addresses workplace safety, makes American Petroleum Institute Recommended Practice 75 (RP 75) mandatory. It requires offshore operators to have clear programs in place to identify potential hazards when they drill, clear protocols for addressing those hazards, and strong procedures and risk-reduction strategies for all phases of activity from well design and construction to operation, maintenance, and decommissioning.

RP 75’s 13 elements which DOI adopted cover safety and environmental management systems which also will address human factors behind accidents not covered previously. These include design data, flow diagrams and other facility processes, and mechanical components such as piping and instrument diagrams.

They also include work practices and procedures, such as changes in management, shifts, and contractors; written operating procedures; technical training and manuals, standards and rules of conduct to promote safe work practices (for contractors as well as well operators’ crews), and preventive maintenance and quality programs to ensure mechanical integrity.

Emergency evacuation plans, oil spill contingency plans, and other measures will be required and have to be validated by periodic drills. Procedures to investigate accidents and take corrective steps also will need to be in place. DOI said the rule also strengthens RP 75 provisions requiring an audit every 4 years to an initial 2-year reevaluation, followed by audits every 3 years.

Drilling safety
The new drilling safety requirements also start by making another API recommend practice, RP 65 Part 2, mandatory. It requires two independent test barriers, certified by an independent engineer, across each flow path during well completions; measures to ensure proper casing or liner installation, sealing, and locking; approval from BOMRE’s district manager before replacing a heavier drilling fluid with one which is lighter; and enhanced deepwater well control training for rig personnel.

Well control equipment requirements include submission of documentation and schematics for all control systems; independent verification that BOPs’ blind shear rams are capable of cutting any drillpipe in the hole under the maximum anticipated surface pressure; and installation of a BOP stack with ROV intervention capability with a minimum ability to close one set of shear rams, close one set of blind shear rams, and unlatch the lower marine riser package.

Other BOP and related requirements cover maintenance and continuously having a trained crew on each floating rig; auto shear and deadman systems on dynamically positioned rigs; minimum requirements for employees authorized to operate critical BOP equipment; and documentation of subsea BOP inspections and maintenance as outlined in API RP 53, Recommended Practices for Blowout Prevention Systems for Drilling Wells.

Additional requirements cover testing of all ROV intervention functions on a well’s subsea BOP stack during the stump test and testing of at least one set of rams in the initial seafloor test; auto shear and deadman system testing on the subsea BOP stack during the stump test, and testing of at least one set of shear rams in the initial seafloor test; and pressure testing if any shear rams are used in an emergency.

“Many companies objected to this common-sense rule when we put it out for public comment before Apr. 20,” Salazar said. “In my view, this rule is needed, and we will work to further enhance and refine it. There should be no gaps in an operator’s workplace safety program.”

Industry responses
Responding to DOI’s announcement, Erik Milito, API’s upstream operations director, said BOEMRE and DOI should ensure that the interim final rule on offshore drilling safety aims for improvements while providing a framework for producers to get government approval for exploration and production projects. He also called on the federal government to lift its deepwater drilling moratorium.

“There has to be a clear, practical, and certain process for project review that will protect the environment,” he declared on Sept. 30. “We cannot have an approval process that creates unpredictable delays that could place at risk the flow of domestic energy in our country. Operators want regulations that provide certainty. Unpredictable, extended delays in permit review and approval discourage investment in new projects, which hampers job creation, reduces revenue to the government, and restricts energy production.”

Independent Petroleum Association of America Chairman Bruce H. Vincent said, “Moving forward with the new regulations, [DOI] must ensure that unnecessary, bureaucratic delays in the leasing and permitting processes do not inhibit the production of these valuable resources, which will help America meet its future energy needs.”

Vincent, president of Swift Energy Co., Houston, also called for an end to the deepwater drilling moratorium. “Leaders in Washington should be focused on common-sense solutions that encourage more responsible homegrown energy production, not less of it,” he said. “While the Gulf Coast continues to fight to get back on its feet economically, it’s unfortunate that this administration is fighting just as tirelessly to impede that progress by maintaining its deepwater ban.”

National Ocean Industries Association Pres. Randall B. Luthi said offshore producers, contractors, and suppliers understand that the interim final drilling rule and the workplace safety rule impose new stricter requirements. “But the devil will be in the details and the ability of [DOI] to provide adequate guidance and actually process permits,” he added. “If recent history foretells the future, industry will need to seek further guidance as to what is meant by the new rules and how they will be implemented.”

‘De facto moratorium’
The shallow-water gulf, where no official moratorium was in place but where drilling already has slowed to a snail’s pace because of Notice to Lessees No. 5 and other regulations issued this past summer, is a case in point, Luthi said.

“This now makes it clearer that even after the official drilling moratorium ends, companies operating in the deepwater gulf may suffer even more from the effects of a de facto moratorium,” he said. “DOI is focusing energy and resources on beefing up its inspection force, and industry would like to see equal energy and resources focused on the permit approval process.”

Karen A. Harbert, president of the US Chamber of Commerce’s Institute for 21st Century Energy, said the new regulations will effectively keep the moratorium in place once it expires on Nov. 30. “While the ongoing important investigations into the gulf accident are necessary and may lead to new safety measures, requiring industry to navigate a tangled web of new regulations will only lead to increased uncertainty for businesses and consumers and less investment in America’s vast resources in the gulf,” she said.

Harbert said her group remains concerned that the administration has no idea about when drilling will resume in the gulf, as Bromwich indicated earlier in the week in an appearance before Obama’s independent oil spill commission. “The fact that the [BOEMRE] has not considered how the new regulations will affect the industry is a chilling example of this administration’s misguided approach that will have unintended consequences such as increased imports and fewer American jobs,” she said.

David Holt, president of the Consumers Energy Alliance in Houston, said voters deserved a message of hope and economic recovery in the Apr. 20 accident and spill’s wake but received only more regulations. “Instead, the timeline for this job-killing moratorium is blurred more than ever as it creates tremendous uncertainty for American consumers and those hard-working individuals whose livelihoods are tied to offshore energy activity,” he said.

Contact Nick Snow at nicks@pennwell.com.

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