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Trump Signs Order Reversing Ban on Offshore Oil, Gas Leasing, Seeks Review of Well Control Rule

President Trump signed an executive order (EO) Friday directing the Department of Interior (DOI) to consider allowing oil and gas leasing in several offshore areas, including the Atlantic and Arctic oceans, the Beaufort and Chukchi seas, Alaska's Cook Inlet and the Gulf of Mexico (GOM).

Seven years after the Macondo well blowout, the EO -- titled "Implementing an America-First Offshore Energy Strategy" -- also calls for a review of the proposed Well Control Rule, which DOI's Bureau of Safety and Environmental Enforcement (BSEE) developed in response to the disaster.

"Today we're unleashing American energy and clearing the way for thousands and thousands of high paying American energy jobs," Trump said at a signing ceremony. "Our country is blessed with incredible natural resources, including abundant offshore oil and natural gas reserves. But the federal government has kept 94% of these offshore areas closed for exploration and production. And when they say closed, they mean closed."

The EO directs DOI Secretary Ryan Zinke to "give full consideration to revising the schedule of proposed oil and gas lease sales" so as to include, to the maximum extent possible, several Outer Continental Shelf (OCS) planning areas, which are managed by DOI's Bureau of Ocean Energy Management (BOEM).

Specifically, the EO calls for annual lease sales in the Western GOM, Central GOM, Beaufort Sea, Chukchi Sea, Cook Inlet, Mid-Atlantic and South Atlantic planning areas. It also orders DOI to ensure that any changes do not affect ongoing lease sales currently scheduled as part of the BOEM's OCS Oil and Gas Leasing Program for 2017-2022, which was finalized last November during the Obama administration.

Obama removed the Beaufort and Chukchi seas from the five-year leasing program last November, but at the time he kept 10 potential lease sales in the GOM and the Cook Inlet. One month later, he issued a presidential memorandum to withdraw 115 million acres in the Arctic OCS and 3.8 million acres in the north and mid-Atlantic OCS from future oil and gas drilling.

The EO calls for DOI to coordinate with the Commerce Department to create a streamlined permitting process for privately funded seismic data research and collection in the offshore areas. It also ordered Commerce to refrain from designating or expanding any national marine sanctuary in the offshore.

On the issue of the Well Control Rule, the EO stipulates that the DOI secretary will "take all appropriate action to lawfully revise any related rules and guidance for consistency" with a new national policy of encouraging energy exploration and development, including on the OCS.

The EO also calls for DOI to review the Offshore Arctic Drilling Rule, which BOEM and BSEErevisedlast July, partially in response to Royal Dutch Shell plc's misfortunes in the Arctic. The rule could ultimately be suspended, revised or rescinded.

The Well Control Rule called for requiring oil and gas drillers to outfit blowout preventers (BOP) with double-shear rams, a technology already widely adopted by the industry. The rule also required the shear rams to adhere to a design that allows drill pipe to be centered during shearing operations. Other requirements included more rigorous third-party certification of the shearing capability of BOPs; real-time monitoring of deepwater and high-temperature or high-pressure drilling activities; and requiring the use of accepted engineering principles for drilling and completion equipment.

Meanwhile, the Offshore Arctic Drilling Rule created a new regulatory program covering floating drilling vessels and jack-up rigs. Operators would be required to design exploration plans specifically tailored to the unique conditions of the Arctic OCS, and would also be required to submit an integrated operations plan to BOEM at least 90 days before filing an exploration plan.

Vessel operators would be required to deploy a second, separate rig near their project so that a relief well could be drilled in the event of a blowout. Operators would also be required to predict, track, report and respond to floating ice and adverse weather conditions; manage and oversee any third-party contractors; and be able to promptly deploy equipment and personnel to contain an oil spill.

The latter rule appears to be a response to the Kulluk, Shell's offshore drilling unit that ran aground off the coast of Sitkalidak Island, AK, at the end of 2012. Despite spending billions in the Arctic, Shell ultimately decided to pull out of the region after disappointing results from an exploratory well in the Chukchi in September 2015.

Reaction

Jack Gerard, CEO of the American Petroleum Institute, said the U.S. should take a close look at possibly developing oil and gas resources in the Eastern GOM.

"Exploration in this area is critical to our national security, and we continue to see our neighbors in Mexico and Cuba pursue these opportunities," Gerard said Friday. "The Eastern GOM is in close proximity to existing production and infrastructure, and opening it would most quickly spur investment and economic activity, which could create thousands of jobs and provide billions of dollars in government revenue."

Although conceding that "much remains to be done over the next several years," Karen Harbert, CEO of the U.S. Chamber of Commerce's Institute for 21st Century Energy, said Trump "has made it clear that developing and producing more American energy is a win for the economy and for American families...

"The Trump administration is stepping in to take immediate action that will bring back production in parts of the Arctic and Atlantic that was taken off limits, and also conduct a more comprehensive review of our offshore policies. We are hopeful that this evaluation will lead to opportunities for production in the Mid-Atlantic, the GOM, including the Eastern GOM, and expanded access in Alaska."

Dan Naatz, senior vice president for government relations and political affairs for the Independent Petroleum Association of America (IPAA), called the EO's signing "a step in the right direction for America's energy economy and national energy security.

"With a proven record of offshore production that can be done safely and responsibly, IPAA has long-advocated for increased access to our offshore resources to support economic development, American jobs, and expanded energy production here at home."

In another move that could potentially affect future oil and gas development, Trump signed a separate EO last Wednesday affecting the Antiquities Act of 1906. The president and other cabinet officials accused the Obama administration of abusing the law to designate millions of acres as national monuments, thereby setting the land aside from possible energy development.

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