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As offshore drilling moratorium nears an end, questions about what's next

By Juliet Eilperin and Steven Mufson
Washington Post Staff Writers
Thursday, September 30, 2010; 12:17 PM

Interior Secretary Ken Salazar is getting ready to take his finger off what he has called the "pause" button on deepwater oil drilling, with environmentalists and oil industry executives alike worried about what comes next.

Salazar received recommendations Thursday from Michael Bromwich, head of the Bureau of Ocean Energy Management, Regulation and Enforcement, based on information gathered at public forums and private meetings in the wake of the BP oil spill. Salazar could act on the BOEMRE report well before the drilling ban's expiration date, Nov. 30.

While many Gulf Coast lawmakers and residents have been badgering the Obama administration to lift the deepwater moratorium, key industry and administration officials are struggling with the larger questions: not when drilling will resume, but how and where.

"We're stuck between 'drill, baby, drill' and the 'BP drilling disaster,' and no one knows which argument will win," said Athan Manuel, director of the Sierra Club's lands protection program.

Separate from Bromwich's report, Salazar on Thursday announced the federal government was adopting two new regulations for offshore drilling, including a drilling safety rule and a workplace safety rule. Both would impose new requirements on operators in the gulf and elsewhere.

The drilling rule dictates specific procedures aimed at preventing a blowout, including cementing and casing practices and the appropriate use of drilling fluids. It also increases oversight of mechanisms--such as the blowout preventer--that would shut off the flow of oil and gas in an accident, and requires operators to secure independent and expert reviews of their well design, construction and flow intervention mechanisms.

The workplace safety rule forces offshore operators to have what an Interior Department statement describes as "clear programs in place to identify potential hazards when they drill, clear protocol for addressing those hazards, and strong procedures and risk-reduction strategies for all phases of activity, from well design and construction to operation, maintenance, and decommissioning."

Energy industry officials said they would review the regulations and offer comments as part of the rule-making process. The drilling safety rule will take effect immediately on publication. Erik Milito, upstream director for the American Petroleum Institute, said, "Getting a good offshore safety rule in place is critical to the nation's energy future. The gulf and other parts of the nation's offshore areas are vitally important to helping meet the nation's future energy needs. The rule will affect every offshore energy project for years to come. It has to be right."

In the report Bromwich submitted to Salazar Thursday, he proposed new rules for drilling, as well as contingency measures to bolster the industry's response to any future spills.

Oil and gas executives are steeling for a slower and more costly permitting process that could hinder drilling even after the moratorium is lifted. And they worry that they won't be able to develop new areas - from Alaska to the East Coast - that President Obama outlined when he unveiled his five-year leasing plan on March 31, a few weeks before the BP blowout.

Environmentalists, in contrast, are hoping that the congressional limits on offshore drilling that expired two years ago are reimposed, or at least that the pace of development is slowed.

And the administration faces difficult questions about whether - and under what circumstances - it will allow leasing in areas from Alaska to off the coast of Virginia before Obama's first term ends.

"I'm confident that the moratorium will be lifted," said Gary Luquette, Chevron's president of North American exploration and production. "The question is: Will we be able to get permits?"

Luquette, who is also chairman of the American Petroleum Institute's upstream committee, has been making suggestions to Bromwich and other administration officials. "We think there's a way to streamline the [permitting] process that makes sure we benefit from the lessons learned" from the BP spill, he said.

'Tell us where the bar is'

The moratorium has introduced an element of uncertainty about regulations that the big oil companies are eager to see end. "If we can get clarity, the industry will meet it," Luquette said. "Tell us where the bar is, and we'll jump over it."

Four of the biggest companies have tried to reassure regulators and the public by announcing the Marine Well Containment Co., a $1 billion consortium that is planning to stockpile equipment that would be needed in the event of another spill, thus avoiding having to fabricate devices the way BP did. One company official said the consortium plans to refurbish equipment given by BP and to have containment devices ready by the time the deepwater drilling moratorium expires.

Companies are also continuing with plans for the development of earlier discoveries. Shell announced Wednesday that it will launch a multibillion-dollar project to tap oil from eight blocks in the Mississippi Canyon in the Gulf of Mexico. The platform, called the Mars B, will be about 130 miles south of New Orleans; it is expected to start production in 2015 and ultimately produce 100,000 barrels a day. The Mars field is not far from where BP, which has a 28.5 percent interest in the new Shell platform, was drilling when its Macondo well blew out.

"We have confidence that we can take this forward and take on any of the regulations that come out," said Mary Grace Anderson, the Mars Basin development manager for Shell Upstream Americas.

But the BP oil spill will alter the landscape for offshore energy exploration in a more profound sense. Bromwich cautioned this month that the industry will face "a very dynamic regulatory environment in which there are going to be a number of modifications and changes, and I think that's completely appropriate."

Seizing the opportunity, environmentalists and their allies are pressing for more detailed scientific and regulatory reviews before any new drilling, along with possible restrictions on routine, small-scale pollution from rigs.

Once it addresses the moratorium, the administration must also decide what to do about leases it has suspended in Alaska, as well new drilling there and elsewhere in the country.

"The right thing for President Obama and Secretary Salazar is to figure out what they need to do to fix the problems that have been made evident by Deepwater Horizon, get the necessary science and make decisions based on that science within a new regulatory framework," said Michael LeVine, Pacific senior counsel for Oceana, an advocacy group.

'Another reason to fight'

Even Luquette acknowledged that the spill dealt a setback to hopes of opening new areas for exploration off Alaska or off the East Coast. "Just as we were starting to think about opening up these areas, we've given all the people opposed to that another reason to fight," he said.

Rep. James P. Moran Jr. (D-Va.), who chairs the House Appropriations Committee's interior and environment subcommittee, said that if Democrats retain control of the House in the midterm elections, he will press for a moratorium on drilling in the mid-Atlantic and off Alaska.

"The gulf is going to go back to drilling. That's just the nature of the gulf," Moran said. But he added, "I think we have at least a 50-50 chance of protecting the Atlantic and Pacific coasts."

Such efforts will encounter resistance from key Republicans such as Reps. Fred Upton (Mich.) and Cliff Stearns (Fla.), who intend to vie to chair the House Energy and Commerce Committee if their party wins control in November.

"Congress and the White House should work on making us less dependent, especially on Mideast oil," Stearns said.

And Upton warned against overreacting to the gulf explosion. "We had a pretty good record for the past 40 years until BP," he said. "Assuming the safeguards are in place, we ought to experience another 40 years like we did before the BP spill."

eilperinj@washpost.com mufsons@washpost.com

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