NOE: Issuing excuses, not drilling permits

Obama policy chokes off shallow-water energy resources

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At a news conference held after the November midterm election, President Obama expressed interest in expanded natural-gas drilling in the United States, asking rhetorically: “We’ve got … terrific natural-gas resources in this country. Are we doing everything we can to develop those?” Based on the problems encountered by companies that drill natural-gas wells in the Gulf of Mexico’s shallow waters, the answer is clearly “no.”

So what’s holding up the process of developing the mature, accessible reservoirs of natural gas that lie just offshore?

Surely, it’s not safety or environmental concerns. We’ve been drilling shallow-water wells safely and without major incident since 1949, when Harry Truman was in the White House and the Lone Ranger was debuting on television. Shallow-water drilling takes place in mature, predictable and well-known reservoirs. We use proven technologies and well-control equipment, with our blowout preventers located right on the rig, allowing for immediate access and constant inspection and maintenance. Over the past 15 years, more than 11,000 shallow-water wells have been drilled in the Gulf, with a grand total of 15 barrels of oil spilled in blowouts during that time.

What’s actually holding up the process is little more than good old-fashioned bureaucratic sluggishness and gridlock. According to the website of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE), the majority of shallow-water permits that have been submitted in recent months have been approved. Yet this statistic, routinely cited by Interior Department officials hoping to demonstrate that Gulf drilling is proceeding as usual, masks deep-seated problems in the agency’s regulatory approval process that are quietly suffocating the industry’s long-term prospects.

To better understand what’s behind the delays, let’s take a close look at the BOEMRE’s permit-approval process.

As of this writing, just 16 permits have been approved since April 20, an average of a little more than two per month over the past seven months - a significant decrease from before April 20, when an average of 7.1 permits were approved monthly. Moreover, behind the scenes, the BOEMRE is sitting on numerous other permit applications; the agency’s website reveals that a slew of permits have been exiled into a bureaucratic Neverland in which permits that are “submitted” somehow don’t reach the status of “pending.” In fact, the BOEMRE site suggests 21 permits for new wells are stuck in this category along with 2,661 submissions for an array of other shallow-water-related approvals.

A big hurdle for companies at present involves the uncertain future of the Interim Drilling Safety Rule, Interior’s recent stab at laying out new requirements for offshore drilling. The rule took effect upon publication, without the benefit of prior public comment, and applied to operations already planned and under way. By virtue of the rule’s interim nature, no one knows if it will stand as written, be amended or eventually be challenged in court. The net effect of the resulting uncertainty is an atmosphere in which companies are discouraged from filing new plans.

Perhaps the most fundamental problem plaguing the permitting process is the agency’s continued insistence on painting the entire industry with one broad brush, ignoring fundamental, scientific distinctions between offshore operations - natural gas versus oil drilling; shallow versus deep water; operations in mature and predictable reservoirs versus exploratory drilling in new and deeper fields, etc. Given the admirable safety record of the shallow-water industry, it is simply a misuse of limited regulatory resources to assign shallow-water operations the same level of risk as vastly more complex operations.

A graduated risk-analysis model based on a tiered evaluation of permits promises the safest and most efficient continuation of energy production in the Gulf. Clearly, common sense should guide our permit-review process; a tiered approach would enable the understaffed BOEMRE to direct limited resources to the highest-risk wells while maintaining an elevated standard of safety for all permits.

On Nov. 2, Houston-based Seahawk Drilling announced that because of the current lag in permitting, it would “consider possible strategic alternatives for enhancing shareholder value,” including a sale of assets, a recapitalization or a merger. Tragically, this announcement merely foreshadows the fate of the rest of this proud industry, which comprises of “Made in America” companies such as Seahawk, many of which have operated in the Gulf for decades.

Unless the Department of the Interior stops claiming that all is well with the offshore drilling process and makes serious moves to establish a transparent, stable and systematic process for the approval of new offshore drilling operations, Mr. Obama’s desire to make the most of our country’s plentiful natural-gas resources will remain far from fulfilled.

Jim Noe is executive director of the Shallow Water Energy Coalition, a coalition of companies that provides shallow-water offshore contract drilling and related services.

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