The administration’s point man for oil and gas drilling regulations, Michael Bromwich, sharply questioned the House bills and defended the cautious approach taken since the end of last year’s five-month moratorium.
“There is a real risk that . . . we’re going to end up unraveling and undoing many of the reforms we’ve worked so hard to do over the last 10 months,” he said in an interview. “And that would be a tragedy.”
House Natural Resources Committee Chairman Doc Hastings (R-Wash.), who has shepherded three bills through his committee aimed at boosting oil and gas production in the gulf as well as off both coasts and the Arctic, said he is confident public pressure will provide the political momentum his legislation needs to make it into law. On Thursday at a roundtable with constituents in Yakima, Wash., farmers expressed concern about how the cost of fuel would affect their operations.
“What will get the Senate to act is the rising price of gas at the pump,” Hastings said in a phone interview. “If my colleagues are hearing what I’m hearing in my district, clearly there has been a mood change.”
The bills would overhaul the permitting process to make it faster, which in some cases means jettisoning the more exacting reviews put in place after the BP spill. One measure would require the interior secretary to act on a permit to drill within 30 days; if no decision is made after a maximum of 60 days, the permit would be granted. It also would restart within 30 days gulf permits that were approved last year before the spill. Eleven exploration wells that were suspended in the gulf have been given permission to drill again, according to the Bureau of Ocean Energy Management, Regulation and Enforcement.
While the measure would require the interior secretary to conduct a safety review of permit applications, it would use the environmental analyses from before the explosion — which have since come under criticism as inadequate.
Another bill would expand drilling by establishing the first national production goal as part of Interior’s five-year offshore leasing plan; it would include lease sales in the areas containing the greatest-known oil and gas reserves.
American Petroleum Institute president Jack Gerard, whose group represents major U.S. oil companies, said the bills are “a direct outcome and consequence of the political and economic reality we face.”
“What you’re hearing from the public is overwhelming support for the production of American energy by Americans and for Americans,” Gerard said.
But Democrats and environmentalists say that in a global marketplace, such moves have far less impact on prices than unrest in Libya and other geopolitical factors.
“We have limited capacity to affect the price of gas, despite what you might hear people bloviating on the Hill or elsewhere,” said Deron Lovaas, transportation policy director at the Natural Resources Defense Council, an advocacy group. “We’re shackled to a global oil market.”
Rep. Edward J. Markey (D-Mass.) said Democrats will question why companies have yet to produce oil and gas on the majority of the 75 million acres where they hold federal leases.
“I don’t think a bill would pass the Senate and be signed by the president that puts a clock on reviewing the safety and environmental issues for permitting operations in the Gulf of Mexico,” said Markey, who held a news conference on the issue last week at a gas station in his district.
The permitting process had already begun to ease, however. Production in the gulf dropped significantly after BP and other companies suspended their operations there: In December, the region was producing 1.58 million barrels a day, according to the Energy Information Administration, compared with 1.7 million barrels in December 2009. But BOEMRE has now issued 51 shallow-water permits and deepwater permits for a dozen unique wells in the gulf.
The administration plans to hold lease sales in the central and western gulf by the middle of next year. It has extended nine different leases affected by the moratorium and is considering others on a case-by-case basis. While those in the industry such as Jim Noe, executive director of the Shallow Water Energy Security Coalition, want faster permit approvals, he said he’s been encouraged by “the tone of late between industry and the regulators.”
“Particularly with the run-up in gas prices, there is a lot of pent-up demand for drilling,” he said, adding, “The industry feels better today about the future of drilling in the Gulf of Mexico than any other time than in the last year.”
On Tuesday, the research firm FBR Capital Markets recommended investors buy stock in the drilling firm where Noe serves as senior vice president, Hercules Offshore, saying it would soon have 87 percent of its rigs working in light of the improved regulatory climate.
While Hastings’ bills are likely to pass the House, it remains unclear how they will fare in the Senate. Democrats there continue to negotiate over how to raise the oil spill liability cap of $75 million per incident without jeopardizing the viability of independent oil and gas producers, while Senate Energy and Natural Resources Committee Chairman Jeff Bingaman (D-N.M.) is preparing to introduce legislation that would include new safety requirements for the industry.
The Senate may also vote to eliminate some tax breaks for oil companies in light of their record profits this year, an idea that both House Speaker John A. Boehner (R-Ohio) and House Budget Committee Paul Ryan (R-Wis.) have tentatively embraced.
Robert Dillon, a spokesman for Bingaman’s GOP counterpart on the committee, Lisa Murkowski (Alaska), said his boss is looking for “a balanced approach” on the issue.
“We’re definitely in favor of increasing safety so we can drill safely,” Dillon said. “But then, let’s drill.”
William K. Reilly, who co-chaired the presidential commission on the BP disaster, said he still held out hope that Congress would adopt some of the safety proposals the commission had offered in its final report in January.
“We need to keep some perspective on how Congress operates,” Reilly said. “It does not turn on a dime. I’m not yet ready to say I’m discouraged by the failure of Congress to respond.”