The US House of Representatives, by a vote of 209-193, passed legislation in response to the Apr. 20 well blowout, rig accident, and oil spill in the Gulf of Mexico. Several producing-state Democrats joined Republicans in voting against the measure, HR 3534.
The bill's passage by 16 votes came after the House approved a companion measure, HR 5851, which would extend whistleblower protection to workers at offshore oil and gas rigs, by 315 to 93 votes. The two bills now will be combined and sent to the US Senate, where it already has broader energy legislation including offshore oil spill provisions which Democratic leaders said will be considered after Labor Day.
"We want to ensure that offshore drilling is done efficiently, while protecting both the environment and our number one natural resource: the brave men and women who help power this great nation," said Natural Resources Committee Chairman Nick J. Rahall (D-W.Va.), who sponsored HR 3534, the main bill.
"In this day and age, in this America, whether it is a coal mine in my congressional district or an oil rig deep in the Gulf of Mexico, there is no room for an environment where working men and women leave their homes in the morning, and do not know if they will return in the evening. That is what this legislation is about," he maintained.
Republicans responded that both bills went too far and were unnecessary in some instances. "While the bill will cost billions in new taxes and higher spending, the real toll is on potential lost jobs because of [its] actions of this bill," said Doc Hastings (R-Wash.), the committee's ranking minority member. "American jobs will be lost and many will be sent overseas because of this bill."
Bans development
Oil and gas industry groups had similar reactions. "This is an anti-jobs, anti-consumer, and anti-energy bill," declared American Petroleum Institute Pres. Jack N. Gerard. "Instead of addressing the risks of offshore development by improving safety and establishing a robust system for covering the costs of possible future accidents, this bill effectively bans development and sends thousands of workers in offshore communities to the unemployment line."
The bill's unlimited liability provisions will drive most US producers out of US waters because they won't be able to get insurance coverage, Gerard said. Those that remain will be subject to significantly greater costs, he said, adding, "The inability to develop in the deepwater Gulf of Mexico, whether through an explicit moratorium or through policies that create a de-facto moratorium, will cost more than 175,000 jobs a year, the majority of them in already hard-hit Gulf Coast communities."
National Ocean Industries Association Chairman Burt A. Adams said, "We remain opposed to this bill becoming law. The House has christened a ship that, should it reach its destination, will drive up the costs of producing homegrown oil and gas and make it more difficult for independent energy producers to compete in the domestic market. Fortunately, House members now head home where they will get an earful from those whose jobs and lives will be adversely affected."
Other provisions in the bill impose financial responsibility standards, a $2/bbl tax to fund unrelated programs, subsea blowout preventer (BOP) and well design standards, and more reviews and clearance create an overall burden that would drive many upstream independents out of business, Adams said, adding, "It is truly death by a thousand cuts." Adams also is chief executive of OGRS LLC, a Morgan City, La., oil and gas equipment rental company.
'No safety value'
Jim Noe, executive director of the Shallow Water Energy Security Coalition, said the bill, formally called the Consolidated Land, Energy, and Aquatic Resources Act (CLEAR Act), would make it impossible for most shallow-water producers to continue operating because it does not recognize the differences between their activities and those in deep water.
"The CLEAR Act also imposes 'one-size-fits-all' requirements for [BOPs] that are not only nearly impossible for shallow water drillers to meet, but that add no safety value to current operations," Noe said. "The required equipment, which does not account for water depth, well pressure, or whether the well employs a surface or subsea BOP, does not exist and would compel drillers to redesign and retrofit their rigs in order to install the unnecessary new equipment."
Noe pointed out that wells have been drilled in the gulf's shallow waters for more than 50 years in well-known, predictable formations in mature reservoirs using traditional equipment and techniques. "BOPs on shallow-water rigs are installed above the surface of the water on the deck of the rigs, making them accessible for constant inspection, maintenance, and repair, and in emergencies can be controlled either remotely or by human hands," he said.
Democrats from producing states saw similar problems and joined Republicans in voting against HR 3534. "If you want to eliminate jobs and shut down hundreds of small businesses, vote for this bill," said Gene Green (Tex.) during the bill's floor debate. In addition to the unlimited liability provision, he criticized the measure's provisions unrelated to offshore production safety including one imposing requirements for producers to get federal stormwater discharge permits for onshore well construction activities. "These provisions have nothing to do with responding to the BP oil spill," Green said.
"While we need to take steps to ensure that a disaster like the gulf oil spill does not happen again, this legislation imposes unreasonable requirements and restrictions that will ultimately force New Mexico's smaller energy producers to cut critical jobs at a time when our nation simply cannot afford that," said Harry Teague (NM). "It's my job to make the difference between Big Oil and the independent producers here clear and to work to protect the livelihoods of our responsible independents. The provisions in this bill, like the $2/bbl tax and elimination of the liability cap, will force many of our smaller producers to plug their wells."
The House adopted by 399 to 8 votes an amendment he introduced to keep independent producers in the gulf by letting them form pools to obtain liability insurance. "The problem with the current requirements for the Certificate of Oil Field Responsibility [COFR] is that smaller operators will be unable to establish the $300 million necessary COFR to even begin exploration and development," said Sheila Jackson Lee (Tex.), who cosponsored the amendment. "By allowing smaller companies, [which] frequently work together in joint ventures, to pool their resources for COFR purposes, we will prevent the gulf from becoming the exclusive province of companies big enough to self-insure and allow the small businesses of the Gulf Coast communities to continue to provide jobs and drive our economy," she explained.
Initial indications were, however, that the amendment would not solve problems for independents operating offshore if liability limits are eliminated. "It obviously was well-intended. It would offer more flexibility to companies operating offshore," Joel Noyes, director of government relations and industry affairs at the Independent Petroleum Association of America, told OGJ on Aug. 2. "But at the end of the day, it was not enough to move the ball forward because of the inclusion of unlimited liability."
Moratorium amendment
The House also adopted by 216 to 195 votes an amendment proposed by Charlie Melancon (La.) and Travis Childers (Miss.) that Melancon said would remove US Interior Sec. Ken Salazar's offshore drilling moratorium if a producer meets new federal safety requirements and safely passes a full inspection. "An indiscriminate, blanket moratorium punishes the innocent along with the guilty for the actions and the poor judgment of one reckless company," he said on the House floor. "Our amendment will lift the moratorium in a responsible way and allow our workers to continue producing energy, and it will still hold companies accountable for higher safety standards."
Another House member from Louisiana, Republican Steve Scalise, disagreed. "If you talk to people on the ground in Louisiana, they will tell you this moratorium will do more economic damage than the spill itself," he said. Scalise said language was added to the original amendment giving the Interior secretary additional statutory authority to issue more moratoriums, which would create additional uncertainty for offshore producers. Recommitting the entire bill would be more effective, other House GOP members from Louisiana suggested.
Noe said, "We were encouraged by comments made during the House debate highlighting the devastating impact of the secretary's deepwater moratorium on the economy of the Gulf Coast. However, as we have seen first hand, even if the moratorium is ultimately lifted, it does not guarantee that drilling will be allowed. Because of bureaucratic delay and ambiguity in new standards, over one third of the shallow water fleet sits idle. Unless [Interior] changes course and returns to processing applications in an efficient manner, the vast majority of the 49 marketable jack up rigs will be idled within the next month."
Democrats who supported HR 3534 hailed its provisions. Energy and Commerce Committee leaders noted it included portions of HR 5626, the Blowout Prevention Act of 2010, which it approved in a 48-0 vote on July 10. The adopted provisions include new standards for subsea BOPs, well designs, and cementing; a requirement for companies' chief executives to certify that these requirements have been met and that the proposed well has a realistic and effective blowout prevention and spill control plan, and independent certification paid for by producers.
Chairman Henry A. Waxman (D-Calif.) said the committee held nine hearings after BP PLC's Macondo well blew out and the Transocean Ltd.'s Deepwater Horizon semisubmersible rig sank, killing 11 workers, on Apr. 20. "Based on what we found in our investigation, it is time for Congress to act," he said. "Investigations are ongoing and will continue to provide more details about the causes of this accident. But we know enough already about the weaknesses in the regulatory regime to craft common-sense legislative solutions."
Flagging provision
Transportation and Oversight Committee Chairman James L. Obserstar (D-Minn.) said HR 3534's other provisions addressing liability for offshore spills were necessary. "For example, the committee received testimony that the Deepwater Horizon was built in South Korea and registered in the Marshall Islands by an entity based in Reston, Va.," he said, referring to the bill's requirement that oil vessels exploring for and producing oil and gas in US waters be domestically manufactured and registered. "It was therefore not subjected to as rigorous a vessel safety inspection by the [US] Coast Guard as a similar US-flagged vessel."
Bill Cassidy (R-La.) said that this so-called "buy American" provision was one of the bill's most egregious features. "We haven't built a deepwater rig from beginning to end in over 10 years in the US," he said. "By June of 2011, we would have to create the infrastructure and put out the rigs in order to drill. Now, what we do is the high value-added, high-tech buildup on top of the hull type job. Those are gone because we don't have the capability to build the hull. This bill is supposed to help the Louisiana gulf coast. The Louisiana gulf coast says, 'Keep your help. We would rather have our jobs.'"
The final bill also would increase the minimum level of financial responsibility for a semisubmersible drilling rig operating in US waters to $300 million, except in instances where the US president reduces the requirement to at least $100 million for a deepwater well or $30 million for a shallow-water well, according to Oberstar. The president also would be required to review an offshore facility's minimum financial level every 3 years and raise it to reflect the potential risk of a leak or spill, he said.
He said the Transportation Committee also investigated the use of more than 1.8 million gal of chemical dispersants in response to the subsequent oil spill following the Apr. 20 well blowout and rig fire. "We have called into question the potential short and long-term impacts that increased use of these dispersants may have on the gulf and its natural resources," he said.
Republicans support whistleblower protections for offshore oil and gas workers and believe the existing federal Occupational Safety and Health Act provides the best means for accomplishing this, Kline continued. "It has improved over time through congressional and administrative action," he said. "And by incorporating oil rig workers into existing protections, they will automatically be included into any future changes of the law."
Jerrold Nadler (D-NY), a Transportation Committee member, said the bill's provision requiring the US Environmental Protection Agency to study dispersants' effects and ban their use until it is completed is one of its most important features. "Let us never again conduct an uncontrolled experiment with a huge population of people and an entire ocean as the experimental test vehicle," he urged. "Let us be sure that the dispersants are safe before we subject the marine life and the human population to them."
'Bad actor' provision
Miller also sponsored the companion bill, HR 5851, which would extend whistleblower protection to workers at offshore oil and gas rigs.
HR 3534 also contained a provision that would bar any company with a bad safety record from obtaining new federal offshore leases. "The fact is, [BP] does not fit Americans' expectations of a how a responsible company should act," said George Miller (D-Calif.), who wrote the proposal. "BP or any other company that fails to adhere to worker safety and environmental laws and that fails to learn from its errors and clean up its operations will be denied the right to new leasing and drilling off American waters. Actions should have consequences, and, until now, BP clearly has not been held accountable for its actions."
Miller also sponsored the companion bill, HR 5851, which would extend whistleblower protection to workers at offshore oil and gas rigs. The bill is also necessary to ensure proper operation of some of the industry's most complicated and dangerous facilities, he said. "A whistleblower may be the only thing standing between a safe workplace and a catastrophe," Miller said. "No worker should ever have to choose between his life and his livelihood. Under my legislation, workers on offshore oil and gas operations would be protected to report safety concerns without fear of losing their jobs."
John Kline (R-Minn.) said that the measure creates new and confusing regulations as he moved to recommit it. "Legal confusion and uncertainty are never good when it comes to workplace safety," he observed. "Last month, the Education and Labor Committee heard from federal officials who could not answer whether offshore oil rig workers have access to basic whistleblower protections. To date, the committee has not received a response to a request for clarification. Virtually every American worker enjoys these important protections, yet federal officials did not know whether maritime law, federal safety and health law, or some other law was fully protecting oil rig workers."
Republicans support whistleblower protections for offshore oil and gas workers and believe the existing federal Occupational Safety and Health Act provides the best means for accomplishing this, Kline continued. "It has improved over time through congressional and administrative action," he said. "And by incorporating oil rig workers into existing protections, they will automatically be included into any future changes of the law."
Miller angrily disagreed. "These men and women have no protection and deserve more than second-rate protection," he said. "There is a choreography that takes place among these workers on those rigs that's unbelievable, and it can be lethal. Workers put themselves in jeopardy every day. Chains can snap. Pipes can break and fall. This is a very dangerous profession. They're entitled to modern whistleblower protections." Kline's motion to recommit was defeated by 234 to 171 votes.
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