There is much rejoicing in the oil patch today over the news that the Obama administration’s Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) approved the first deepwater drilling permit since the Deepwater Horizon explosion.
The permit went to Noble Energy for a well at the Santiago project, approximately 70 miles southeast of Venice, La., not far from the Macondo well that the Deepwater Horizon was working on.
Here’s the thing, though – this isn’t a permit for a new project. The permit issued to Noble was for a bypass of an obstruction in a well they’d already drilled before the Deepwater Horizon accident. It took 314 days to get that well back online with this administration.
From Noble Energy’s press release on the subject…
Located in 6,500 feet of water, the Santiago exploration well had previously drilled to a depth of 13,585 feet at the time of the moratorium. Drilling operations are anticipated to resume in late March 2011, targeting total drilling depth of approximately 19,000 feet. Results are expected by the end of May 2011. The Ensco 8501 rig, which performed completion operations on the Santa Cruz and Isabela discoveries at the Galapagos project during the second half of 2010, will perform the drilling at Santiago.
“This permit was issued for one simple reason: the operator successfully demonstrated that it can drill its deep-water well safely and that it is capable of containing a sub-sea blowout if it were to occur,” BOEMRE head Michael Bromwich said. “We expect further deep-water permits to be approved in coming weeks and months based on the same process that led to the approval of this permit.”
Noble has contracted with Helix Energy Solutions Group to use that firm’s collection system (due to go online by the end of March) in the event the well’s blowout preventer fails. Helix built a system to deal with well control in just such an eventuality, as did the industry consortium Marine Well Control Corporation, which announced a little over a week ago they had completed an interim system to deal with a wild deepwater well.
No new project has been issued a permit by BOEMRE yet. Shell has applied for one, and a decision on it is supposed to be made any day now. But Bromwich touted today’s announcement as a big deal in any event at a press conference this afternoon.
“This is a new well in the sense it is going into a reservoir and therefore was barred under the moratorium,” Bromwich said. “So we treat an application for a bypass like this much as we do for new wells. I don’t think it’s right to say, ‘Oh it’s just a bypass so its not as significant as a permit for a new well.'”
It’s not a new well. It’s a well Noble had been drilling for four days when the Deepwater Horizon rig exploded, and it’s a well that would have been online and producing oil but for the 314-day delay in getting a permit from the administration. That Bromwich wants the same credit for issuing this permit as for a new well is very instructive.
Louisiana Sen. David Vitter was cautiously joyous in reacting to the Noble permit having been issued. He said he’s not going to release his hold on the nomination of Dan Ashe, President Obama’s nominee to head the U.S. Fish and Wildlife Service under the Department of the Interior, for a while yet, though – a hold he has the support of the state’s other Senator, Democrat Mary Landrieu, in continuing.
“There are concerns of $4.00 per gallon gasoline in the near future, and while one deepwater permit is a start, it is by no means reason to celebrate. I’m still demanding that the Obama administration allow at least 15 deepwater drilling permits before I release my hold on an Interior Department nominee. The Interior Department has destroyed jobs in Louisiana, has contributed to the bankruptcy of at least one major employer and is breaching contracts with other employers while potentially putting taxpayers on the hook for billions of dollars,” Vitter said.
Vitter’s mention of $4 gasoline seems to be a noteworthy one. With consumer angst about high fuel prices and the collapse of several governments in oil-producing Arab states, even Northeastern liberals on Capitol Hill are beginning to make noises about domestic drilling.
Rep. Charles Boustany, whose voice has become more and more angry over the months as the moratorium and permitorium have ravaged his district’s economy, sounded a similar tone today.
“This first deepwater permit is critical to restoring jobs in Louisiana, especially at a time of rising gas prices and turmoil in the Middle East,” Boustany said. “The United States cannot afford to continue its reliance on foreign energy when so many of our natural resources sit idly by in our own backyard.
“The people of Louisiana are united in their voices – they are ready to return to work,” Boustany continued. “This is a major step toward getting American energy production up and running again. This is important for the Gulf Coast, but there is a permit backlog and BOEMRE must approve other permits without delay.
Bromwich said now that the ice is broken, there will be a flood of permits issued.
“Industry has been waiting for signals that deepwater drilling would be able to resume and I think they’ll take this as that signal,” he said.
Perhaps so. Perhaps the industry will be more interested in Mr. Bromwich’s signals when his department complies with Judge Martin Feldman’s order of 11 days ago directing him to issue or deny five permit applications by Ensco Offshore in the deepwater Gulf that have been sitting idle for more than four months. When his agency acts on those permits, then the industry will believe things are back to normal.
If it believes otherwise, it’s foolish. And the oil industry is not foolish.
UPDATE: Rep. Steve Scalise is even less impressed than we are…
“Rather than being a one-hit wonder just because the Secretary is coming to testify before Congress this week, the Administration needs to implement a consistent policy for approving permits and jumpstart the permitting process across the board, which will allow people who play by the rules to quickly get back to work and reduce our dependence on Middle Eastern oil.” Scalise said.
UPDATE #2: Louisiana Oil & Gas Association President Don Briggs had this to say in a press release:
“The Obama Administration approved the first permit to drill a deepwater well in the Gulf of Mexico on Monday. The issuance of this permit marks the first deepwater permit allocated since the enactment of the federal drilling moratorium imposed after the BP oil spill last spring. The permit allocated to Noble Energy represents a significant landmark for offshore oil & gas companies and the federal government.”
“The Administration’s decision to issue this permit is positive news for offshore oil & gas companies, and also great news for many people in the Gulf Coast region. Since the enactment of the federal drilling moratorium and the subsequent de facto moratorium, businesses of all sizes and hardworking individuals have felt the negative impacts of economic uncertainty and job loss.”
“While the issuance of the first deepwater permit is certainly a positive step in the right direction, the federal government must ensure that a streamlined process is established to issue additional permits to all companies that meet the new offshore safety standards and requirements.”
“In addition, it is imperative that the Administration also works to alleviate the ongoing de facto moratorium that has shutdown shallow water operations in the Gulf of Mexico. The intention of the federal drilling moratorium was to only affect deepwater wells. Since the moratorium was instituted in April of last year, only 37 shallow water permits have been issued.”
“We commend President Obama and officials at the BOEMRE for moving forward with the issuance of this permit. However, much work must be done to ensure that companies who have met all federal requirements receive permits. Without a streamlined process established we will continue to see job loss, a rig exodus, and curtailed domestic production. With rising energy prices and turmoil in the Middle East taking a turn for the worst, it is more important than ever that we get back to work in the Gulf of Mexico and ensure our nation’s energy future.”
Meanwhile, this from Rep. Bill Cassidy…
“Finally. Let’s hope more is to come.”
“With the Middle East unstable and gas prices approaching $4 a gallon, news that the Administration is allowing new domestic energy production is welcome and needed.”
And this from Louisiana Gov. Bobby Jindal…
“This is a good first step, but we must quickly get to a level of issuing permits that represents a critical mass so thousands of oil and gas industry workers can get back to work fueling America again. I spoke with Department of Interior Secretary Ken Salazar today and we’re pleased to see that the administration recognized the oil and gas industry’s efforts to create a first-of-its-kind well containment solution.
“We’ve been working aggressively to push the federal government to finally issue permits. Indeed, we dispatched Department of Natural Resources Secretary Scott Angelle to Washington, D.C. and formed the Back to Work Coalition – a group of oil and gas industry trade organizations and companies – to work with BOEMRE Director Michael Bromwich in order to grind through the new regulations and help put the industry in a position to get new permits.
“The deepwater and shallow water drilling industries support tens of thousands of jobs in Louisiana alone and represent a critical part of our state’s economy. We’ve already watched seven deepwater rigs leave the Gulf of Mexico for other countries because of the moratorium. It’s time to reverse that trend and get the Gulf back to work.”
UPDATE #3: Jim Adams, who heads up the Offshore Marine Service Association, put out a statement on the Noble permit calling it a good start…
“The Offshore Marine Service Association (OMSA), representing thousands of Americans providing essential services to domestic energy production, welcomes today’s announcement that the Obama Administration has approved the first deepwater drilling permit in nearly a year. But granting a single permit will have no practical impact on the thousands of workers left idle by the White House’s de facto moratorium on deepwater oil drilling,” said Jim Adams, president and CEO of OMSA.
Mr. Adams continued, “It’s puzzling that the administration claims to be acting ‘diligently’ and yet only seems to act when forced by Congress or the courts. A federal judge has held the Obama administration in contempt and ordered it to start acting on applications for drilling permits. It’s notable that the permit approved today was involved in that litigation.
“Much more is needed, and soon. There are over 100 deepwater development plans that have yet to be cleared to even become eligible for a permit.
“Stopping all permits, and then approving a single one, only prolongs the suffering of thousands of workers and their families. It’s a manufactured energy crisis for Americans, who are stuck paying skyrocketing gasoline prices.
“President Obama and White House officials claim that the moratorium on deepwater drilling is over. But Americans know a moratorium when they see one, and approving a single permit doesn’t change that.”
UPDATE #4: Welcome, Michelle Malkin readers!