Imagine a scenario in which NFL officials - investigating an aggressive and illegal hit - decided to suspend all play by all teams for the entire season pending a full investigation into the adequacy of safety equipment. Now consider how those circumstances would play out if Commissioner Roger Goodell were President Obama, the league were America’s oil and gas sectors and the canceled season were the offshore drilling ban.
It’s not that federal regulators are asking the wrong questions; it’s that they’re going about resolving them the wrong way. This is a dilemma worth pondering, especially as the president’s National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling meets today and tomorrow in Washington to review the causes of the April 20 explosion. As is the case for most industries and the officials who oversee them, the U.S. energy sector and its federal regulators share a common goal: providing consumers an affordable, reliable product in a manner that’s increasingly efficient and safe. The Department of Interior’s adoption of an adversarial role instead of a cooperative one is putting continued achievement of that purpose in jeopardy.
The industry has drilled successfully more than 50,000 wells in the Gulf of Mexico since 1947. The track record of meeting increasingly high safety standards remains evident today. Just consider American driller Jeff Hart - the man entrusted by the Chilean government with the task of saving 33 trapped miners from what seemed like an impossible situation. This incredible feat is simply a highly publicized example of the impressive but little noticed work that U.S. firms undertake every day in resource drilling and exploration.
Why can’t the federal government work cooperatively with the energy industry? Many other agency/industry pairs exemplify the ways in which cooperation can benefit all involved. For example, the Federal Drug Administration (FDA) often includes data available from independent clinical trials and global regulatory reviews when working with pharmaceutical companies to expedite approval of new treatments. The agency even has established a separate, priority track for innovative treatments for life-threatening illnesses. Even the Federal Aviation Administration (FAA) - which has a slightly more contentious relationship with its target industry - doesn’t shut down all air traffic in response to an isolated accident.
Unfortunately, our traditional energy suppliers do not enjoy similar bureaucratic encouragement. Instead, the 9 million American workers supported by our oil and gas sector have been made to feel like pariahs.
So far, an estimated 20,000 Americans have lost their jobs as a result of the administration’s knee-jerk ban on deep-water drilling. Though the Interior Department has lifted its official moratorium, a de facto one remains. The Bureau of Ocean Energy Management Regulation and Enforcement (BOEMRE, the agency in charge of reviewing and approving drilling permits) has quietly put a chokehold on our ability to develop domestic resources, signing off this summer on only one-tenth the number of permits approved over the comparable time last year. This bottleneck shows no sign of opening anytime soon, as the BOEMRE has admitted it is significantly understaffed and has requested 200 new employees just to perform basic functions.
Other threats to the industry, including proposed tax increases, loom on the horizon. Attempting to levy upward of $36 billion in new taxes on U.S. traditional energy firms, the administration seems bent on bleeding the industry to death if it can’t strangle it first.
Just as companies must adapt to meet the changing demands of the global marketplace, regulators must evolve, too. If existing rules must be altered or new ones developed to ensure the safety of workers, so be it. But the costs of those actions must be weighed carefully against the perceived benefits. While a penalty flag was necessary for the Gulf oil spill, canceling the season was unnecessary roughness.
Bernard L. Weinstein is associate director of the Maguire Energy Institute and an adjunct professor of business economics at Southern Methodist University.