The Bureau of Ocean Energy Management, Regulation and Enforcement’s (BOEM) permit-issuing process for deepwater drilling is gathering steam. The Interior Department agency last week approved two more permits for drilling in the deepwater Gulf of Mexico (GOM), bringing the total permits issued for resumption of activity in the deepwater to five. One of the deepwater permits — to Chevron USA Inc. — is the first to allow completely new exploration since the federal moratorium was lifted last October.

This “[Chevron] permit approval further demonstrates industry’s ability to meet and satisfy the enhanced safety requirements associated with deepwater drilling, including the capability to contain a deepwater loss of well control and blowout,” said BOEM Direct Michael R. Bromwich. “We will continue to review and approve those applications that demonstrate the ability to operate safely in deepwater.”

The revised permit will allow Chevron to drill a new well for its Well No. 1 in Keathley Canyon Block 736 in 6,750 feet of water, approximately 216 miles off the Louisiana coast. Initial drilling on Chevron’s Well No.1 began in March 2010, but was halted three months later as a result of the explosion aboard the Deepwater Horizon rig and subsequent spill (see NGI, April 26, 2010). Chevron has contracted with Marine Well Containment Corp. to use its capping stack to stop the flow of oil should a blowout occur.

Also last week ExxonMobil Corp. was issued a permit to resume deepwater drilling in Keathley Canyon Block 919, approximately 240 miles off the Louisiana coastline south of Lafayette, LA. This was the first permit approved that designated the Marine Well Containment Corp.’s system as its containment solution, according to BOEM.

Moreover, the BOEM has approved permits for ATP Oil & Gas Corp., Noble Energy and BHP Billiton to resume drilling in the deepwater Gulf (see NGI, March 21). The permits for these producers, as well as ExxonMobil, allow for the continuation of drilling that was interrupted by the moratorium. They do not permit new drilling.

The BOEM last Monday also approved the first new deepwater exploration plan — for Shell Offshore Inc. — since the Macondo well blowout and resulting oil spill. Approval of the exploration plan is the first step. Shell still must apply for drilling permits. To get those it will have to demonstrate that it could contain a deepwater well blowout. It also will have to pass an environmental assessment for the three exploratory wells it plans to drill in 2,950 feet of water in the Augur Field, about 130 miles off the Louisiana coast.

Permit approvals for drilling in the deepwater GOM are slowly on the rise. But drilling services companies told attendees at CERAWeek in Houston earlier this month that the shock waves from the U.S. government moratorium are likely to reverberate for many years to come, even after the permitting flowrate gets back up to speed.

Although not included in the moratorium, producers who drill in the shallow waters of the GOM are reeling from its impact. In an op-ed column in The Washington Post earlier this month, Randy Stilley, president of Seahawk Drilling, said his company declared Chapter 11 bankruptcy last month and sold its assets to Hercules Offshore (see NGI, Feb. 21) because “we found our customers unable to secure permits for work in the Gulf of Mexico despite the fact that both our industry and our company have excellent safety records.”

Following the explosion aboard the Deepwater Horizon rig in the GOM, “it became clear that Seahawk’s greatest rival was no longer our industry competitors but the U.S. government,” Stilley wrote.

The federal government “has all but crippled the industry. The survivors (for now) like Hercules are staying afloat largely thanks to revenues from operations outside U.S. waters,” he said. The BOEM has issued a mere 37 permits for new shallow-water wells since April — an average of just three per month. Before April 2010, an average of 7.1 permits were approved each month during the year before the blowout and oil spill, he said.

“The fundamental problem our companies face is that regulators at the [BOEM] insist on painting the entire offshore industry with a broad brush, ignoring key distinctions between deep and shallow-water drilling in their new [safety] requirements and standards,” Stilley noted.

Furthermore, BOEM’s Bromwich “has expended significant effort reorganizing his agency, but it has come at the cost of fulfilling the agency’s statutory mandate to develop U.S. offshore resources. Continuing along this route will only drive more companies out of business, or at least out of business in the United States — an outcome we naively believed our government would make a concerted effort to avoid.”

With respect to BOEM’s reorganization, Bromwich said last Monday that the agency is taking steps to ensure a stronger firewall between the agency and those companies that it regulates, such as oil and natural gas producers.

“To address conflicts of interest, we…issued a tough new recusal policy [last September] that will reduce the potential for real or perceived conflicts of interest [between BOEM and industry]. Employees in our district offices must notify their supervisors about any potential conflict of interest and request to be recused from performing any official duty in which such a conflict exists,” he said (see NGI, Sept. 6, 2010).

“Soon we will be issuing a broader version of the policy that applies these ethical standards across the agency. I know that this will present operational challenges for some of our district officials in the Gulf region, which are located in small communities where the primary employers are offshore companies. But the need for tough rules defining the boundaries between regulatory and the regulated is necessary and compelling.”

As for the BOEM’s new Investigations and Review Unit, Bromwich said “it will promptly and credibly respond to allegations or evidence of misconduct and unethical behavior by bureau employees,” and “it will pursue allegations of misconduct against oil and gas companies involved in offshore energy projects.”

Bromwich said he plans to tour 10 universities nationwide to discuss changes at the agency. He further noted that the BOEM will be hiring environmental scientists in the coming months to work in fields ranging from environmental studies to National Environmental Policy Act review to environmental compliance, which are critical to the balanced development of offshore resources.

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