A report last month by IHS CERA/IHS Global Insight blaming Department of Energy (DOE) regulators for delays in processing drilling permits in the Gulf of Mexico is incomplete, lacks an explanation of its methodology, and contains “a number of inaccurate and misleading claims,” according to DOE’s Michael Bromwich.
There has been considerable progress recently in Gulf operations, Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM), said in a highly critical letter to IHS CERA Chairman Daniel Yergin (see Daily GPI, July 22). In the five-page letter Bromwich details the errors and advises that “your report falls far short of accepted standards for impartial and balanced research.”
The report, “Restarting ‘the Engine’ — Securing American Jobs, Investment and Energy Security,” bases its conclusions on a very limited six-month time period, Bromwich’s letter says, starting with the lifting last October of the drilling moratorium following the disastrous Macondo well blowout and oil leak in the Gulf in late April 2010 (see Daily GPI, April 22, 2010). The report fails to adequately explain that the whole offshore permitting process has been revised to include new testing requirements designed to avoid a similar catastrophe, Bromwich said, and it “uses an arbitrary and unrepresentative period of time to present misleading conclusions about the current state of offshore oil and gas drilling.”
Bromwich notes a “fundamental change” in the new safety regime is that deepwater operators now must demonstrate in advance of drilling that they have the ability and equipment necessary to respond effectively to a subsea blowout. The fact that the industry was unable to make that showing until the second half of February 2011 meant that deepwater permits could not be issued before that time. That leaves only two months before the study cut-off in April for plans to be approved.
In fact, BOEM’s records show that from June 2010 to date nine new and six revised shallow water exploration plans and 13 new and 38 revised shallow water development plans have been approved. Also, 11 new and 32 revised deepwater exploration plans and eight new and 11 revised deepwater development plans have been approved. Many of the deepwater plans were approved only after site-specific environmental reviews, which means there is less risk they can be legally challenged.
Bromwich further noted that of the 25 plans approved that require subsea containment, only 18 have started drilling, “suggesting that approving permits does not immediately lead to drilling operations.”
The IHS CERA report had claimed huge losses on oil, money and jobs resulting from regulatory delays in returning the Gulf to full operations.
Claims by the IHS CERA report on shallow water permitting bear little relation to the facts, the Bromwich letter stated. Shallow water exploration and development permits had already fallen off significantly since 2006 when there were 284 permits to 2009 when only 95 were issued. The 67 permits issued from June 2010 to date are not out of line with the latest tallies, and certainly don’t equal the 80% drop-off that the CERA report claimed. Further, there are only five shallow water permit applications pending.
The report purported to be a summary only and in some cases used percentages rather than actual figures, so they could not be checked against BOEM records, Bromwich said, adding that despite several requests, IHS CERA has not provided the complete report nor a methodology as to how the study was performed.
“We do not understand why your release of a summary of the report has preceded the issuance of the full report and disclosure of its methodology,” the letter to Yergin said.
Bromwich also pointed out factual errors in the report as to the schedule for lease sales and the erroneous statement that there have been no new discoveries in the deepwater, when in fact there have been two, one by Noble Energy in the Santiago prospect and ExxonMobil’s discovery in the Hadrian prospect.
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