Sam Fletcher
Senior Writer
The moderator of a panel discussion spoke of federal officials "reaching out" to the industry at the Offshore Technology Conference in Houston during the first week of May. But to this observer it seemed more like a professional fighter reaching out to tap a weaker sparring partner as government and energy leaders discussed in at least 11 OTC sessions the regulatory fallout from last year's Macondo blowout.
In one address, lawyer Michael Bromwich said he's decided the Bureau of Ocean Energy Management, Regulation, and Enforcement that he directs has broad authority over virtually any offshore activity related to oil and gas, including the right to regulate service company contractors. He claims the old Minerals Management Service always had that right but never exercised it—possibly because MMS knew producers under standard contracts usually indemnified contractors.
Bromwich, who was appointed to office, says BOEMRE will continue to hold operators fully responsible while also pursuing regulatory actions against contractors for any violation of agency rules. "We will be careful and measured in extending our regulatory authority to contractors," Bromwich said. No doubt as "careful and measured" as the administration was in its reaction to Macondo when it shut down all US offshore drilling.
"We can exercise such authority as we deem appropriate," Bromwich told an OTC luncheon, which must have spoiled a lot of appetites. It prompted one trade publication—not OGJ—to headline its report of his speech, "Bromwich cracks whip."
Government grumbles
That brought complaints from Ned Farquhar, deputy assistant secretary for land and minerals management in the US Department of the Interior. As a participant in the final OTC panel discussion on May 5, he groused that such a headline was inappropriate for the "reasonable" regulations—whatever they may be—that Bromwich eventually will impose on contractors.
Farquhar also grumbled over "unfair" charges of "permitorium" leveled against the BOEMRE and the DOI by industry executives and elected officials of Gulf Coast states because of the slow issuance of drilling permits for the gulf. With a straight face, Farquhar told energy professionals, "Political people don't pay attention to individual permits. They don't interfere with permitting for political purposes."
It seemed a strange claim by a former senior advocate who developed strategies for the Western Regional Climate Initiative for Mountain West Energy-Climate with the Natural Resources Defense Council. Isn't a lobbyist's primary function to provoke political interference?
Revenue generated by DOI from commercial development of federal land previously was second only to the income tax in funding the federal government. At OTC, Farquhar said the General Accounting Office for the first time has included Interior's oil and gas program in its high risk category among government agencies that may not meet their goals. He didn't address the possibility the cash reduction may relate to slow permitting of offshore drilling in the gulf, but he did raise the issue of whether Interior has "the staff, time, and information" for proper analysis before issuing drilling permits on government lands.
Farquhar noted that "so much of the process" BOEMRE is "trying to inculcate" into the oil and gas industry is "thinking about safety." He said, "Risks can be reduced by sensible regulation."
Strange—in more than 30 years of covering OTC and meetings of the American Petroleum Association, the Independent Petroleum Association of America, the International Association of Drilling Contractors, and all other industry groups, safety was always their primary concern. It's not something the government needs to teach them.
Meanwhile, Barclays Capital Equity Research analysts report the market for ultradeepwater rigs is expected to tighten in this year's second half as the pace of tendering activity increases, particularly in Brazil—a country from which President Barack Obama is eager to buy oil. Demand for midwater rigs also is picking up with tendering activity improving in the UK North Sea, southeast Asia, India, and West Africa—but not in the US segment of the gulf, one of the hottest spots on the globe only a year ago.
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