FINALLY, A Positive Answer On Deepwater Exploration From Interior…Sort Of

Today, the Obama administration can, at long last, finally deny they’re perpetrating a moratorium on deepwater drilling without being laughed out of the room. And they’d almost be right.

That’s because the Bureau of Ocean Energy Management, Regulation and Enforcement finally issued an acceptance letter on an application for a new deepwater drilling project. It’s the first “yes” granted for a deepwater project that wasn’t already ongoing at the time of the Deepwater Horizon accident last April. Three other permits were granted to resume drilling already underway at that time – one of them to the president’s friends at Petrobras.

Today’s lucky plan, submitted by Shell Offshore Inc., is the first to comply with the new site-specific Environmental Assessment (SEA) implemented in August 2010. The application is not a drilling permit; rather, it’s an exploration plan – not the same thing as a permit to drill. An approved EP is an intermediate step toward the approval of applications for permits to drill, in fact. An exploration plan describes all exploration activities planned by the operator for a specific lease or leases, including the timing of these activities, information concerning drilling vessels, the location of each planned well, and other relevant information that needs to meet important safety standards. Once a plan is approved, additional new applications for permits to drill can be issued, though at this point the thing to watch for is an environmental group racing into court to file a lawsuit attempting to stop a drilling permit from issuing.

Interior Secretary Ken Salazar crowed about the approval today.

“The reforms we have implemented have set a strong new standard for safety and environmental protection for offshore operations,” he said. “This exploration plan meets the new standards for environmental review and marks another important step toward safer deepwater exploration.”

“The successful completion of this environmental assessment, and the resulting approval of Shell’s exploration plan, unmistakably demonstrates that oil and gas exploration can continue responsibly in deep water,” said BOEMRE Director Michael Bromwich. “Shell’s submission has satisfied the heightened environmental standards that we are now applying and I am confident that other operators can satisfy the same standards.”

Shell’s plan is actually a supplemental application, in that it proposes activities that were not included in an original exploration plan for the same lease – located in Shell’s Auger field – which was approved in 1985. This supplements the original plan by proposing to drill three exploratory wells in approximately 2,950 feet of water about 130 miles off the Louisiana coast.

BOEMRE’s release on the permit gave an indication of just how obnoxious its new rules on environmental assessments actually are…

The SEA included new scientific information that had not been previously available for consideration or analysis. Based on its review, BOEMRE found no evidence that the proposed action would significantly affect the quality of the human environment. Therefore, BOEMRE determined that an Environmental Impact Statement (EIS) was not required and issued a Finding of No Significant Impact (FONSI), which allowed the supplemental exploration plan to be approved.

Meanwhile, in Louisiana the mood was largely unchanged toward the administration’s regulatory policies, particularly given the president’s statements in South America over the weekend.

“We saw a policy breakthrough on February 28, when the first permit was issued in compliance with the new containment standards,” Louisiana Department of Natural Resources Secretary Scott Angelle said. “Today, we see a similar breakthrough in that the first plan that meets the new environmental assessment standards has been approved, which should pave the way for future permits and for the Gulf’s energy industry to get back to work.

“However, as I said in my testimony to the U.S. House of Representatives Committee on Natural Resources last week, the industry will continue to look forward to the day when the approval of an exploration plan or the issuance of a drilling permit will no longer be considered rare and newsworthy in America.”

Angelle’s point is fairly well taken, as with Shell’s permit application being accepted there are still some 13 similar exploration plans pending. “We’re well aware that with the approval of this one, many more may be filed in the near term,” Dow Jones quoted Bromwich as saying.

But Rep. Jeff Landry, who has become Louisiana’s point man of sorts in the House on offshore oil, wasn’t satisfied at all. Landry’s Irish was still up over comments President Obama made over the weekend in Brazil touting that country’s efforts at deepwater offshore production and promising America would be a large customer of the Brazilians in the future, and today’s announcement didn’t change that at all.

“The President’s comments this weekend clarified everything: the President would rather use more foreign oil than get hard-working Americans back to work,” Landry fumed. “Thousands of Americans have lost their jobs because the President has issued only 3 permits and 1 exploration plan in nearly a year. Instead of focusing on ways to utilize our natural resources and put our people to work, the President advocates oil production in Brazil and restricts it here. The man is clearly out-of-touch with America.”

Landry’s gripe about Obama’s Brazil statements was echoed by Sen. David Vitter, who last week took up the subject of what return the government has realized on the $2 billion loan it gave to the Brazilians to facilitate offshore drilling.

“We have abundant energy resources off Louisiana’s coast, but this administration has virtually shut down our offshore industry and instead is using Americans’ tax dollars to support drilling off the coast of Brazil,” said the Senator.  “It’s ridiculous to ignore our own resources and continue going hat-in-hand to countries like Saudi Arabia and Brazil to beg them to produce more oil.  We need to get serious about developing our resources here at home and working towards lower gas prices and long-term energy independence.”

Shell is the first to get clearance for a plan to drill new wells. The regulator previously allowed Noble Energy, BHP Billiton and ATP Oil & Gas, to resume work on wells on which work was suspended after BP’s April 20 spill.

The National Ocean Industries Association, a trade group representing companies involved in offshore oil drilling, called the approval “a huge first step” toward “new operations and a rapid return to work for the thousands of people employed by our member companies”.

The approval “reflects Shell’s robust and comprehensive approach to responsible offshore development and demonstrates Shell’s strategic focus on progressing new sources of domestic energy”, the company said in a statement.

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