BOEMRE moves 13 cos. step closer to drilling

It didn’t cleanse the industry of all its problems, but the Bureau of Energy Management, Regulation and Enforcement’s clarification last week on the steps 13 oil companies need to take in order to resume deep-water drilling in the Gulf of Mexico at least offered a semblance of relief and predictability.

BOEMRE released a statement last Monday saying it had notified 13 companies they can return to drilling activities approved before the BP oil spill without submitting revised exploration or development plans to satisfy National Environmental Policy Act reviews.

“Going forward, we’re substantially enhancing our environmental reviews and analysis under NEPA,” BOEMRE Director Michael Bromwich said in the release. “But as we move forward, we are taking into account the special circumstances of those companies whose operations were interrupted by the moratorium and ensuring that they are able to resume previously-approved activities.

“For those companies that were in the midst of operations at the time of the deepwater suspensions, today’s notification is a significant step toward resuming their permitted activity.”

The companies will individually be allowed to bypass NEPA reviews as long as the company’s required oil spill response plan is vast enough that it encompasses the amount of potential oil that could flow during a hypothetical worst-case discharge, an estimate required to receive a permit.

The 13 companies BOEMRE named were ATP Oil & Gas Corp., BHP Billiton Petroleum (GOM) Inc., Chevron Corp., Cobalt International Energy, ENI U.S. Operating Company Inc., Hess Corp., Kerr-McGee Oil & Gas Corp., Marathon Oil Company, Murphy Exploration & Production Company n USA, Noble Energy Inc., Royal Dutch Shell Plc., Statoil USA E & P. and Walter Oil & Gas Corp.

Although the oil industry community welcomes the streamlined opportunity to resume drilling in the Gulf of Mexico for some, they continue to wait for the federal government to permit more activity.

“It only impacts a very small portion of the activity the industry would like to do out there,” said Andy Radford, senior policy advisor for the American Petroleum Institute. “It’s a start, but it’s certainly not by any means the pace of activity the industry is looking for.”

Shell declined an interview, but released a statement via e-mail.

“The BOEMRE’s announcement is a good first step in restoring energy production in the Gulf of Mexico and returning people to work,” the global oil company said. “During these turbulent economic times, the need for jobs, revenues and secure energy supplies remains our shared objective. More government action is needed, however, to improve the timeliness and efficiency of the permitting process and to help ensure that drilling rigs and support vessels do not move to other areas of the world.”

Louisiana Oil and Gas Association President Don Briggs indicated it was a welcome announcement and said the NEPA reviews could add “five to eight months” to the process of securing a permit.

“[Last Monday’s] announcement of the 13 rigs maybe going back to work, that’s some of the better news because besides that, it was very bleak as far as this is concerned because it takes months and months to redo these permits, and that’s what this is all about.”

Briggs added the concession may have come because of the government’s fear of litigation stemming from the hundreds of millions of dollars spent to purchase the contracts, survey the prospects and drill the wells.

“All of a sudden, the government shuts you down,” he said. “What happens is, if you don’t develop the leases, you lose them. The government, under lawsuits, would have to pay back all the money they had gotten from those companies already.

“The government has a contract with those companies, and they’re breaking the contract. They really need to let them get back to work, or the loss would be tremendous. I’m glad to see it. There was a brief sign of reasonableness that came into the administration.”

The Department of the Interior imposed a deepwater drilling moratorium May 6 in response to the fatal BP Macondo prospect well blowout and subsequent oil spill, the largest in U.S. history. When it was enacted, there were 33 active rigs in the Gulf of Mexico.

Although the ban was lifted one month ahead of schedule on Oct. 21, a murky process, handled by BOEMRE, failed to produce permits to allow companies to resume Gulf operations.

The BOEMRE release reiterates the fact that the 13 companies must still take steps to resume drilling, namely compliance with the following requirements handed down in wake of the BP oil spill: NTL-N06 and N10 and the Interim Final Safety Rule, a 111-page document that codified the post-BP oil spill requirements when released in December.

Radford was optimistic that a promise to not enact new regulations that came attached to the Interim Final Safety Rule would give industry executives the chance to muddle through the opaque process now that “presumably, the moving target can stop moving.”

“They’ve issued a guidance document back in December, but in reality it didn’t provide a whole lot of additional guidance to industry on what that needed to do other than what was stated previously,” Radford said. “Hopefully, we’ll have a stable set of requirements and regulations to meet so that we can get the information in with the permits so that they can approve those permits.”

NTL-06 requires hypothetical worst-case discharge calculations for a blowout scenario, including a flow-rate estimate, total volume and maximum duration of a blowout, and the plan to contain the blowout in addition to the assumptions and calculations used to predict the worst-case scenario.

NTL-10 requires an “authorized company official” to sign a statement included with each application “stating that the operator will conduct all authorized activities in compliance with all applicable regulations.”

The Gulf Permit Index released last Wednesday its fifth report on permits issued since the moratorium was lifted. The GPI said the two deep-water permits issued since the ban was ended are down from the historical average of 5.8 per month.

Shallow-water permit issuance has recently increased, but the 6.3 issued in the past three months are still down from the 7.1 permit per month historical average.

Prior to last Monday’s announcement, the future of drilling operations in the Gulf of Mexico was unknown, utterly unpredictable. More than two months after the moratorium was lifted, drilling had not resumed and BOEMRE was quiet regarding the clarification of the permit process.

The uncertainty over when activity would begin led to rigs leaving the Gulf of Mexico, including Statoil, one of the 13 companies drilling when the moratorium was enacted and who later moved the rig to Egypt.

“They’ll just have to get back in line for another rig when it becomes available,” Radford said.

Marathon Oil, another one of the companies addressed in the BOEMRE release, began drilling the Innsbruck well at 19,800 feet in the Gulf of Mexico in April of 2010 before suspending operations due to the moratorium and releasing the rig on June 16, Lee Warren, manager of external communications at Marathon, said in an e-mail.

Marathon recently terminated a contract with Noble Corp. to operate a rig in the Gulf of Mexico due to “Noble’s failure to timely meet the acceptance criteria.”

Noble said in a press release it believes the contract should have been accepted by Marathon.

“We are disappointed by Marathon’s actions,” Noble CEO David Williams said in the release. “Fortunately, the Noble Jim Day is one of the most capable rigs in existence and there are already a number of potential customers interested in a unit of this caliber.”

Although it was informed it could bypass NEPA reviews, the Marathon does not currently have a rig in the Gulf.

“I don’t have any specifics on when drilling might resume,” Warren said.

Oil Companies Cleared to Drill:

• ATP Oil & Gas Corporation

• BHP Billiton Petroleum (GOM) Inc.

• Chevron Corporation

• Cobalt International Energy

• ENI U.S. Operating Company Inc.

• Hess Corporation

• Kerr-McGee Oil & Gas Corporation

• Marathon Oil Company

• Murphy Exploration & Production Company n USA

• Royal Dutch Shell Plc.

• Statoil USA Energy & Production

• Walter Oil & Gas Corporation