That the Macondo tragedy of last April would inaugurate a new era of offshore regulation was inevitable. The main questions were how tough regulation would become and how much the change would affect work. And, oh yes, how greatly the toughening would improve offshore safety. As a formal deepwater drilling moratorium ends in the Gulf of Mexico, answers to these questions are coming into view, with relevance far beyond waters off Texas and Louisiana.
To say no regulatory response is in order would be indefensible. A deepwater blowout, once unthinkable in the oil and gas industry, happened. Eleven workers died. Oil and gas streamed into the gulf from a broken well through most of a summer. Oil fouled beaches and wetlands. Gulf Coast tourism and fishing suffered. Something went horribly wrong, and regulation might have prevented it. Operators are working on several fronts to apply lessons from the Macondo tragedy to their operations and response mechanisms. Yet regulators are acting as though operators can't be counted on to make the right adjustments—and not just in the US.
Extensive changes
When it lifted the deepwater moratorium on Oct. 12, the US Department of the Interior highlighted the regulatory changes it has made and is contemplating. The changes are extensive. Operators will:
• Face toughened environmental review. They won't be able to use categorical exclusions from National Environmental Policy Act requirements as readily as before, if at all. NEPA reviews, which can kill projects, will be more frequent.
• Meet new standards for permitting. They'll need approval of plans for well design, casing, and cementing. They'll have to show they're prepared to deal with worst-case mishaps.
• During drilling and production, perform against toughened standards for equipment, safety practices, and environmental safeguards. They'll have to develop "comprehensive management" programs in these areas. Chief executives of drilling companies will have to certify their rigs comply with laws and regulations.
• Meet toughened standards under development for blowout preventers and spill response.
• Deal with expanded enforcement by an agency revamped under the assumption that its predecessor wasn't tough enough.
For operators, immediate concerns are how readily they'll be able to meet new permitting standards and what further demands may yet issue from a regulatory environment described by Interior Sec. Ken Salazar as "dynamic." Coupled with expanded NEPA review, the requirements will make approval to perform work much more difficult to secure than it was before the accident.
Across the Atlantic, regulators have been no less busy. On the same day Interior moved deepwater drilling from a formal moratorium into an approvals ordeal that might have the same effect, the European Commission proposed to elbow its way into offshore oil and gas oversight. Lamenting "heterogeneity" of licensing and regulation handled country by country, the EC said it will propose "comprehensive legislation" setting EU standards for drilling permits, operational controls, and equipment safety.
The EC hinted that drilling suspensions by member governments might be in order until new regulations are in place. And, asserting that "the impact of offshore accidents knows no borders," it promised to seek cooperation beyond its realm. "The ultimate aim should be a global system fixing common targets or benchmarks of safety and sustainability in offshore exploration and production," it said.
Chilling idea
EC proposals often die of political asphyxiation. But the mere idea of direct EU oversight of offshore drilling and production is chilling. European governments won't yield authority readily in these crucial areas. To whatever extent the EC succeeds, it will add a layer of bureaucracy to those in place at the country level.
In both Europe and the US, therefore, operators face the need to spend more time and money winning official approval to work. The inescapable result will be less work. A large, lingering question is whether the work allowed to proceed will be meaningfully safer, after all is said and done, than it would have been under pre-Macondo regimes.
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