Currently, the deepwater drilling moratorium in the Gulf of Mexico (GOM) still remains in place. Many may not be aware that there also remains a de-facto moratorium on shallow water drilling in the GOM. While the Administration made it clear that only deepwater drilling would be affected, in the past four months, the federal government has granted only four permits for shallow water drilling.
An issue of great concern is the federal government’s ability to effectively implement new rules and regulations. One of the roadblocks to complying with the new regulations set by the BOEM (Bureau of Ocean Energy Management), formerly the MMS (Mineral Management Services), is the “worst case discharge” rule. Prior to the Deep Horizon blowout, a company requesting a permit to drill a well on the shelf (shallow water Gulf of Mexico) would have to provide proof that the company could respond to a worst-case scenario of 200%. In other words, to calculate this estimate a company must identify what would be the very most the well could blowout and then multiply that by 200%. The concluding estimate would then be what the company must be capable of responding to. The current rule is 200%, however, the BOEM’s new proposed rule for worst-case scenario response is 400%.
The 400% ruling is a deal killer for most all companies operating on the continental shelf. On a recent conference call the BOEM and a group of operators discussed the current issues concerning shallow water permitting. Specific to the conversation, operators asked the question to BOEM officials, “How did you come up with the number of 400%?” The BOEM official replied, “We did it internally. We got together and came up with 400%. We needed to do something and that’s what we did.”
It’s clear that the BOEM, in spite of what they say, are delaying and blocking the process. Michael Bromwich, Director of the BOEM, said in a recent hearing in New Orleans, “We have no desire and nobody has secretly instructed me to slow-walk these shallow-water drilling applications.” Bromwich continued by adding, “It’s in everyone’s interests to get these [permits] processed and approved and get those people back to work.” Although Bromwich’s words sound encouraging, the BOEM’s actions and implementation of new regulations prove differently.
Industry is working with the assistance of Lt. Governor Scott Angelle and others to collaborate and find common sense ways to move forward with permitting in the shallow waters of the Gulf. Unfortunately, the results of these efforts are not resonating with the feds. According to Angelle, “The talk of a federal government draft document that requires oil and gas companies to possibly have a oil spill response plan with a multiple of 400% greater than worst case discharge is another overreach and will surely end the role of the independent producer.”
There is no question that the oil & gas industry is being held to standards that other industries are not. The moratorium in the deepwaters and the subsequent de-facto moratorium on the continental shelf are keeping tens of thousands of hard-working Americans out of work. Companies and employees are waiting on the sidelines while their government decides whether they can get back to providing for their families. How could this possibly reflect the American Dream? It’s time the federal government gets out of the way and lets our people get back to work.
Don Briggs is President of the Louisiana Oil and Gas Association.