Interior Secretary Ken Salazar Wednesday told a Senate subcommittee that he would consider narrowing the scope of the sweeping moratorium on deepwater drilling in the Gulf of Mexico (GOM), but he did not indicate precisely when.

“We will in the weeks and months ahead take a look at how it is that the moratorium in place might be refined,” Salazar said during a hearing of the Senate Appropriations Committee’s Subcommittee on Interior, Environment and Related Agencies (see Daily GPI, May 28).

“It might be that there are demarcations that can be made based on reservoirs where we actually do know the pressures and the risks associated [with them] versus those reservoirs which are exploratory in nature [and] where you don’t know as a company what it is that you are drilling in,” he said.

“So the moratorium order that we will issue will include as a criteria under which it is appropriate to take a look at the lifting of the moratorium. We will also work with the president’s Deepwater Horizon commission to get their views on when they believe…it’s appropriate for us to lift the safety button.”

The Interior Department will “make whatever adjustments are appropriate” to the deepwater moratorium, but only after the GOM well, which has been leaking oil for more than two months, is killed; evidence on the failure of the blowout preventer has been gathered; and Michael Bromwich, head of the new Bureau of Ocean Energy Management, Regulation and Enforcement (BOE), formerly known as Minerals Management Service (MMS), has had a chance to familiarize himself with the agency, Salazar said.

Salazar’s comments came one day after a federal judge in New Orleans granted a motion for a preliminary injunction barring the federal government from enforcing its industrywide moratorium on deepwater oil and natural gas drilling in the GOM for six months. The White House signaled that it planned to immediately appeal the judge’s ruling (see Daily GPI, June 23).

Bromwich, who has a reputation for fixing broken and corrupt organizations, said he plans to make sure agency employees and companies that do business with BOE walk a straight line. He said he is creating an internal investigations and review unit, which will not only probe allegations of misconduct within the agency, but “also [will] pursue with aggressiveness and diligence allegations that the companies who are under the regulatory supervision of my agency are not doing what they’re supposed to do, have violated the terms of their leases and may have made false statements or engaged in other misconduct in order to acquire those leases.”

Bromwich said he was “going to try to stand that [unit] up absolutely as soon as possible.” He noted that the unit would be modeled after a similar one he set up in the Department of Justice’s Office of Inspector General, which, among other things, investigated the Federal Bureau of Investigation laboratories.

The MMS “is no more,” Salazar told the subcommittee. Under the umbrella of BOE, the new agency will consist of three distinct units: the Bureau of Energy Management, which will handle leases and be involved in the drafting of the five-year leasing plan; Bureau of Safety and Environmental Enforcement, which will handle the inspections of rigs and platforms and will issue penalties for violations; and a third office to be created will collect revenues from oil and gas production on the federal Outer Continental Shelf (OCS).

Salazar said 380 existing employees could be moved into the Bureau of Safety and Environmental Enforcement, but he estimated that at least 220 more would be needed to properly inspect GOM facilities and enforce violations.

Currently there are only 60 inspectors to cover 3,800 platforms in the GOM, of which 1,000 are manned. “That will have to be significantly expanded.” Salazar said he plans to submit an amended budget request so additional inspectors can be hired.

In a related development, legislation (S. 3516) introduced this week would restructure the former MMS in much the same way that Salazar has proposed. The bill, which was crafted by Sen. Jeff Bingaman (D-NM) and Sen. Lisa Murkowski (R-AK), would require Interior to establish “not more than two bureaus” to carry out the leasing, permitting and safety and environmental regulatory functions. A separate office would be established to carry out royalty and revenue management functions.

The directors of the bureaus/office would be appointed by the president “by and with the advice and consent of the Senate.” The bill is one of several that will be considered at a hearing Thursday of the Senate Energy and Natural Resources Committee, which Bingaman chairs and on which Murkowski is the ranking Republican.

The measure would bar producers from bidding on future leases if they have failed to meet the “due diligence, safety or environmental requirements” on other leases; are the responsible party for a vessel or facility that leaks oil; and have failed to provide “compensation for removal costs and damages.”

In addition, it will require producers to be far more detailed in exploration plans that they submit to Interior. They would be required to provide a complete description and schedule of exploration activities; description of the equipment to be used for the exploration activities; description of the drilling unit; statement of the design and condition of major safety-related pieces of equipment; description of any new technology to be used; statement demonstrating that the equipment to be used meets the best available technology requirements; a map showing the location of each well to be drilled; a scenario for the potential blowout of the well involving the highest potential volumes of liquid hydrocarbons; a complete description of a response plan to control a blowout and manage the accompanying discharge of hydrocarbons; technology and the time line for regaining control of a well; and the strategy, organization and resources necessary to avoid harming environment and human health from hydrocarbons.

For leases issued after March 17 of this year, the bill would give Interior 90 days to approve a submitted exploration plan. But “if the secretary makes a finding that additional time is necessary to complete any environmental, safety or other review,” he would be allowed as much as 180 additional days. For leases issued on or before March 17, the bill said Interior, “with the consent of the holder of the lease, may extend the deadline applicable to the lease for such additional time as the secretary determines is necessary to complete any environmental, safety or other reviews.” Interior would not be allowed to issue a drilling permit to a produce until a full engineering review of the well system is completed.

The bill also would give the National Transportation Safety Board, acting at the request of Interior, the authority to conduct an independent investigation of any accident occurring on the OCS.

And it authorizes the collection of nonrefundable inspection fees from offshore producers, which would then be deposited in an Ocean Energy Enforcement Fund. Companies that violate any provision in the legislation would face civil penalties of up to $75,000 for each day that the violation continues. The penalty amount would be adjusted annually to reflect increases in the Consumer Price Index.

By no later than May 1, 2011, and every five years afterwards, Interior would be required to review minimum bond amounts for mineral leases. And not later than one year after enactment, Interior is required to carry out a review of and report on royalty and rental rates in offshore oil and gas leases. A more comprehensive review of all aspects of the federal offshore oil and gas fiscal system, in conjunction with the Department of Treasury, would be conducted two years after enactment of the bill.

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