GOM Permits Delayed

Disaster Unmitigated

One month after the tragic loss of the Deepwater Horizon drill rig in the Gulf of Mexico, President Obama signed an Executive Order establishing the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling.

Even as BP and federal officials struggled to stop the flow of oil into the Gulf there was recognition that the nation needed a full accounting of the events leading up to and following the explosion and sinking of Deepwater Horizon. Perhaps more importantly, we needed to understand what occurred so we could prevent it from happening again.

The president appointed former Florida governor and senator Bob Graham (D) and former Environmental Protection Agency Administrator William Reilly, who served President George H.W. Bush, as co-chairmen.

In addition, he appointed five commissioners:

  • Frances Beinecke, president of the Natural Resources Defense Council.
  • Donald Boesch, president of the University of Maryland Center for Environmental Science.
  • Terry Garcia, executive vice president of the National Geographic Society.
  • Cherry Murray, dean of the Harvard School of Engineering and Applied Sciences.
  • Fran Ulmer, chancellor of the University of Alaska Anchorage.

The Commission delivered its final report Jan. 11, 2011. It found that the explosion aboard Deepwater Horizon and subsequent disaster was “foreseeable and preventable.”

“Our investigation shows that a series of specific and preventable human and engineering failures were the immediate causes of the disaster,” Reilly said in a written statement. “But, in fact, this disaster was almost the inevitable result of years of industry and government complacency and lack of attention to safety. This was indisputably the case with BP, Transocean and Halliburton, as well as the government agency charged with regulating offshore drilling – the former Minerals Management Service.

“As drilling pushes into ever deeper and riskier waters where more of America’s oil lies,” the statement continued, “only systemic reforms of both government and industry will prevent a similar, future disaster.”

The Commission’s recommendations and explanatory text fill a 63-page booklet. Among 15 “key” recommendations:

  • They call for an updated federal regulatory structure and improved offshore safety culture.
  • They want to see establishment of a separate safety agency within the Department of Interior and creation of an industry-funded safety institute.
  • They recommend additional funding for science and technology R&D.
  • They want a significant increase in liability for operating companies, including a risk-pooling program to enable smaller operators to continue working offshore.

Reaction to the Commission’s recommendations was swift.

The American Petroleum Institute said it was “deeply concerned that the commission’s report casts doubt on an entire industry based on its study of a single incident.”

“This does a great disservice to the thousands of men and women who work in the industry and have the highest personal and professional commitment to safety,” API Upstream Director Erik Milito said, noting also the additional steps the industry had taken since the disaster to reinforce existing best practices and procedures.

The National Offshore Industries Association rejected the notion that there was a “systemic” problem in offshore energy production, and pointed out that the industry’s enviable safety record in the Gulf of Mexico was “not because the industry has been lucky.”

In addition, “the report is not an indictment of offshore oil and gas production,” noted NOIA President Randall Luthi. “While many opposed to offshore exploration will undoubtedly use the report to bolster their calls to stop offshore oil and gas development, even the Commission members themselves recognize the importance of moving ahead with additional development.”

Unfortunately, however, that development has yet to resume.

The administration lifted the moratorium in late 2010, but as of February has yet to approve a new deepwater drilling permit. This has forced companies to relocate drill rigs to other parts of the world, and created more economic uncertainty along the Gulf Coast.

In mid-January Michael Bromwich, director of the Bureau of Ocean Energy Management, Revenue and Enforcement (BOEMRE), said permitting would likely resume before the middle of 2011.

But only a few days later Bromwich was quoted saying, “I don’t want to hazard a guess as to exactly when the first deepwater permits will be issued,” but he hoped they would “be approved before too long.”

Meanwhile, Congress is conducting hearings on the Commission’s findings and considering possible legislative remedies.

The Administration continues its reorganization of BOEMRE into two separate bureaus – one focused on safety and the other focused on leasing and resource management. Collecting revenues from oil and gas development on federal lands had already been separated from BOEMRE late last year. In addition, Interior Secretary Ken Salazar announced the formation of an Offshore Energy Safety Advisory Committee.

But as a recent analysis by consultancy Wood MacKenzie shows: “Nearly one-third of U.S. deepwater production could be rendered uneconomic [by deepwater permitting delays], which could significantly impact deepwater production, resulting in less energy production, less investment and less revenue to government.”

That is no recipe for enhanced energy security and economic vitality.

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Washington Watch

Washington Watch - David Curtiss

David Curtiss served as the Director of AAPG’s Geoscience and Energy Office in Washington, D.C. from 2008-11.

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Policy Watch is a monthly column of the EXPLORER written by the director of AAPG's  Geoscience and Energy Office in Washington, D.C. *The first article appeared in February 2006 under the name "Washington Watch" and the column name was changed to "Policy Watch" in January 2013 to broaden the subject matter to a more global view.

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