Rep. Doc Hastings (R-WA), chairman of the House Natural Resources Committee, Wednesday said he intends to introduce legislation that would put oil and natural gas producers and support service companies in the Gulf of Mexico (GOM) back to work.

Moreover, he said he intends to take legislative action to reverse the Obama administration's imposition of an offshore moratorium on oil and natural gas activity outside of the GOM.

"For months and months and months permits have lingered at the [Department of Interior] without action...These hearings will lead to action by this committee," Hastings said.

Interior's Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) has issued only two permits to drill in the deepwater GOM -- to Nobel Energy and Australia-based BHP Billiton -- since it lifted the moratorium last October, and awarded 37 permits to drill in shallow waters of the Gulf (see Daily GPI, March 15). Because of the sluggish pace of the permitting, Republican lawmakers, state regulators and producers contend that a de facto moratorium remains in place.

Last week, oil and gas drilling services companies told attendees at CERAWeek in Houston that while the effects from the months-long de facto moratorium on GOM drilling are already being felt, the shockwaves from the U.S. government action are likely to reverberate for many years to come, even after the permitting flowrate gets back up to speed, (see Daily GPI, March 10).

The moratorium at the federal level was "lifted in name only," Elizabeth Ames Jones, chair of the Railroad Commission of Texas, told the House panel. Interior has a "permitorium" in place in the Gulf. She does not believe that the issuance of the deepwater permits to Noble Energy and BHP Billiton represent a thawing in the permitting process.

"These [deepwater drilling] permits were for the re-entry of wells that had already been partially drilled [prior to the moratorium]. They were not, I repeat not, new wells," Jones said. With these deepwater permits, "somebody is putting lipstick on a pig," she said.

But Rep. Edward Markey (D-MA) the ranking member of the House panel, countered that the oil and gas industry was to fault for the slow permitting process. "The fact is that from October until earlier this month no oil company was able to demonstrate that they actually had the capability to contain or respond to a deepwater blowout. That was the holdup in issuing new permits, not the administration," he said.

The federal moratorium in the Gulf "was an overreach," and "deemed arbitrary and capricious by the courts," said Scott Angelle, secretary for Louisiana's Department of Natural Resources.

"Deepwater exploration remains at a "standstill," and even shallow water activity "remains crippled," he said. "We support that it cannot be business as usual [following the explosion aboard the Deepwater Horizon rig]. But we also believe that we can have regulation [of the industry] without strangulation," Angelle told the committee.

The economic fallout from the permit freeze has been significant, he said. In addition to Seahawk Drilling Inc., a major GOM shallow water driller, filing for bankruptcy in mid-February, he said that R&D Enterprises of Harvey, LA, a supplier of offshore equipment, is living off of its savings, and Coastal Distributors Inc. of Houma, LA, another offshore supply firm, may have to shut down in May if the situation in the Gulf does not improve (see Daily GPI, Feb. 15).

"Many employers are being pushed to the edge of a financial cliff," Angelle said.

He reported that 25 deepwater drilling rigs are currently stacked with no prospects of work. Seven have left the GOM and more are destined to depart, he said.

Unlike the federal government, Angelle and Jones said their respective states have made adjustments to the safety regulations for drillers in their coastal waters without having to shut down drilling operations. "We are always revising our rules and regulations regarding the offshore," Jones said. She estimated that there are approximately 1,000 wells" operating within the state's jurisdictional reach -- 10 miles offshore Texas. "We've had a good safety record."

Both Angelle and Jones were asked which new federal safety regulations they would change. The "well-by-well environmental assessment, which is a new requirement by not a necessary requirement," Angelle said. This will be a "cumbersome and very slow process," he said.

"There are so many things that I could suggest. Right out of the gate they have got to establish a time line for issuing permits and live up to that time line," Jones said.

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