INSANITY: Bromwich Grasps At Double Regulation On Offshore Oil

Bureau of Ocean Energy Management, Regulation and Enforcement director Michael Bromwich, who has been caught repeatedly making statements which are patently untrue in congressional testimony and who has been under constant fire for his agency’s failure to resuscitate the offshore oil exploration business through the issuance of permits, made headlines yesterday by announcing that he wants not just to ride herd over the oil companies he’s tasked with regulating and permitting, but over the oilfield service companies as well.

Bromwich’s gambit would put contractors and suppliers under his agency’s management, at a time when he has already decried a lack of resources available to BOEMRE for its current mission of regulating the rig operators.

Bromwich stressed the move wouldn’t upset the longstanding principle that oil and gas companies are “fully liable for things that go wrong” offshore.

“There is a virtue in the clarity that we’ve had historically in being able to go directly against the operators even when it relates to contractors, but there are at least a small number of cases where we want to be able to go against contractors,” Bromwich said.

“Certainly in at least some cases, where the behavior of non-operators — that is, contractors – is egregious enough, we need to have the ability to move directly to enforcement actions, through the assessment of civil fines and through the other regulatory tools that we have.”

Bromwich said an internal review of current laws concluded that the agency already has “broad legal authority over all activities relating to offshore leases, whether it is engaged in by lessees, operators or contractors.”

Bear in mind, the kinds of things BOEMRE would attempt to fine or sue oil contractors for are already regulated. The operator of a rig is held responsible for compliance with federal regulations on the part of all of its contractors, suppliers and other business partners on that rig. Separate regulatory activity threatens a blizzard of paperwork that would put the industry at even more of a standstill – particularly given the current performance of BOEMRE, which has slowed permitting for drilling by 78 percent in deepwater since the Deepwater Horizon accident last April. Permitting in shallow water since February is off by 26 percent from the five months previous to Deepwater Horizon as of last month.

Randall Luthi, the head of the National Offshore Industries Association, said it’s unclear how the ocean energy bureau will assert its authority – especially given that its resources are already strained.

“Once you shift from just regulating the operators to the contractors, the universe could be huge,” Luthi said. “We’ve got an agency that – according to every report we’ve read in the last year – is chronically underfunded and doesn’t have the personnel to do what they were designed to do. And just as funding starts to come in, there is what looks like a push to do more.”

Sen. David Vitter (R-LA), who has become perhaps Bromwich’s chief tormentor on Capitol Hill, was enraged at the news.

“BOEMRE is perpetually failing at showing itself capable of handling its basic responsibility to issue permits.  The rate of permitting is abysmal and should be Director Bromwich and Secretary Salazar’s primary focus,” said Vitter.  “Instead, they’re diverting resources to expand their authority while adding more confusion to the process.  That’s not a recipe for lowering prices at the pump or getting Louisianians working again.”

Vitter fired off a letter to Bromwich today questioning his agency’s legal authority and available resources to begin regulating and investigating oilfield service companies – a letter which won’t likely find a happy reception at BOEMRE’s offices…

Dear Mr. Bromwich:

I have strong concerns with your remarks made yesterday in Houston regarding expanded jurisdiction at the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE).  It appears this expansion of regulatory authority will serve as another hurdle to expanding our domestic production by inserting even more confusion to the permitting process.  I would appreciate a detailed response on several items relating to your expansion of jurisdiction and responsibility in light of the fact that you have said publicly, on multiple occasions, that BOEMRE does not have adequate staff to handle permitting as an excuse for your agency’s abysmal pace of approving permits.  Expanding the reach of your agency while simultaneously claiming you are “understaffed” is nothing short of confusing.

Particularly, I request the followin

  1. A copy of the memorandum of legal authority that has been written.  The BOEMRE regulations currently apply to the operators because the regulations are incorporated into the lease contracts – in other words, the regulation has a contractual basis.  I am aware of no such privity of contract that exists between DOI and the support contractors.
  2. How can BOEMRE apply existing regulations to contractors when the proposed regulations specifically only applied to lessees?  Are there not legal problems with this expansion of jurisdiction beyond the current contractual authority?
  3. Your analysis of how the Outer Continental Shelf Lands Act authorizes BOEMRE to manage contractors.  I am very skeptical of a broad scale regulation of contractors by BOEMRE, especially with no new regulatory proceedings that give them the opportunity for notice and comment under the Administrative Procedures Act.
  4. Finally, please identify what staff you intend to direct away from their current responsibilities at Interior and explain why they could not better be utilized in the permitting process to get our energy industry and thousands of Americans back to work.

Again, you have on multiple occasions claimed to be understaffed, yet now – despite these claims – you appear to have adequate staff to expand BOEMRE’s jurisdiction and responsibility.  This announcement leaves Congress with no other reason but to believe that BOEMRE has always had the necessary means, staff, and flexibility to meet the rising challenges and demands on the agency.  Many of my colleagues in Congress would argue that includes the rising challenge of increased energy prices, a direct result of the lack of offshore drilling permits that could increase domestic supply.

I look forward to a detailed plan of how you intend to maneuver staff with this newly acknowledged flexibility to meet that very real need for increased permit approval.

In related news, the average gasoline price nationwide is poised to top the $4-per gallon mark by the weekend.

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