Deepwater moratorium ends; groups fear further slowdown

By OGJ editors
HOUSTON, Oct. 12
-- Offshore oil and gas producers warned of a de facto moratorium on deepwater drilling in the US Gulf of Mexico as the Department of the Interior lifted a formal moratorium in effect since shortly after the Apr. 20 blowout of the Macondo well in 5,000 ft of water off Louisiana.

Interior Sec. Ken Salazar said Oct. 12 that a drilling resumption was in order subject to “tighter rules, stronger oversight, and in a regulatory environment that will remain dynamic as we continue to build on the reforms we have already implemented.”

He made his decision after receiving a report from Bureau of Ocean Energy Management, Regulation, and Enforcement Director Michael R. Bromwich and considering other information on offshore oil and gas safety reforms.

Like Salazar, Bromwich stressed the likelihood for further controls over offshore oil and gas work.

“More needs to be done, and more will be done to continuously improve the safety of deepwater drilling and to bolster the ability of the government and industry to respond in the case of a major blowout,” Bromwich said. “But we believe the risks of deepwater drilling have been reduced sufficiently to allow drilling under existing and new regulations.”

BP’s Macondo well, the blowout of which destroyed the Transocean Deepwater Horizon semisubmersible and killed 11 workers, remained uncontrolled until July 15 and was killed Sept. 19.

Interior has issued two important notices to lessees indicating the shape of regulations still under development. Changes will include more rigorous environmental reviews and toughened safety and environmental protections at the permitting stage as well as toughened requirements for blowout preventers and spill response capability. Industry groups have said they didn’t expect drilling to resume immediately when the formal moratorium ended (OGJ Online, Oct. 11, 2010).

Faster action
After Interior’s announcement, they were quick to push for faster action by the government.

American Petroleum Institute Pres. and Chief Executive Officer Jack Gerard echoed Bromwich with a different message when he said “more needs to be done” to return Gulf of Mexico workers to their jobs.

“Without additional resources and a serious commitment by the government to process and approve permits and other requirements expeditiously, the moratorium will give way to a de facto moratorium, which will continue to cripple the already hard-hit gulf region and cost more than 175,000 American jobs a year,” he said in a statement.

Independent Petroleum Association of America Chairman Bruce Vincent welcomed the end of what he called a “misguided and economically devastating moratorium on responsible deepwater offshore oil and natural gas production” and issued a similar warning.

“The massive amounts of new, unworkable regulations and layers of burdensome red tape laid out by the Interior Department, which will add no environmental benefits, will make certain that a de facto moratorium on offshore energy development remains intact,” said Vincent, president of Swift Energy Co., Houston.

Randall Luthi, president of the National Ocean Industries Association, said, “Our companies remain doubtful that this announcement is anything more than symbolic until permits are actually issued for new drilling.”

He noted the recent drilling slowdown in the gulf’s shallow waters, where the post-Macondo moratorium was lifted quickly.

There, Luthi said, “Permitting slowed to a snail’s pace under the government guidelines imposed this summer, some of which are now codified in the Interim Final Drilling Safety Rule announced by DOI last week. It is therefore not a stretch to assume that, despite today’s action, companies operating in the deepwater Gulf may suffer a similar de facto moratorium.”

He also expressed worry about Salazar’s reference to a dynamic regulatory environment.

“It introduces another level of uncertainty to a regulatory process that has come to be less predictable than in many underdeveloped nations around the globe,” he said. “When billions of dollars of investment are at stake, a ‘dynamic’ regulatory process could be as dangerous to future offshore energy development as an outright ban.”

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