U.S. Offshore Drilling Industry Feeling the Pressure - New Rules to Tighten Safety

In the months after BP finally managed to contain the oil disaster in the Gulf of Mexico, political leaders made a lot of speeches about how this can never happen again, and promised change.

While there are never any guarantees, some progress appears to be coming. U.S. regulators have begun to take the first steps in the direction of strengthening safety requirements for offshore drilling operations.

U.S. Department of the Interior has just proposed a set of new rules that are designed to upgrading safety equipment, well control systems, blowout prevention practices on offshore oil and gas operations, and improving workplace safety. Eleven people died on the Deepwater Horizon oil rig.

Interior Secretary Ken Salazar, was blunt in a speech at the Woodrow Wilson International Center for Scholars, saying “The Deepwater Horizon oil spill laid bare fundamental shortcomings in the oil and gas industry’s safety practices on the Outer Continental Shelf.

“For thirty years, under the oversight of both the Democratic and Republican administrations and Congresses, (the drilling) industry ventured into deeper and deeper waters without adequate oversight. We are (now) raising the bar for safety, oversight, and environmental protection at every stage of the drilling process.”

Part of the new oversight plans being proposed include giving regulators the authority to decide where on the outer shelf companies will be allowed to drill. Right now, all scheduled lease sales in the Arctic have been canceled. Also, the North Atlantic, Pacific, and Bristol Bay, Alaska are off limits to development.

It’s also planned that once the U.S. determines that areas of the outer shelf are appropriate for leasing and development, proposed lease sales and drilling projects will need to undergo environmental reviews.

Mr. Salazar added in his speech that, “Operators must meet new standards for well design, casing, and cementing. Their drilling plans have to be certified by a professional engineer.

“Moreover, before receiving a permit, operators need to show they are prepared to deal with catastrophic blowouts. A loophole that previous the administration established in 2003, exempted certain operators from worst-case discharge requirements in their exploration plans. That loophole has been closed.”

New plans are expected to require blowout preventers - like the one that failed on the Deepwater Horizon rig - to be recertified, inspected by third parties, and meet new testing requirements.

An initiative is also in the works to build an independent agency to police offshore oil and gas operations. Right now, the drilling moratorium is still in effect that began after the Deepwater Horizon disaster.

The drilling suspensions “are providing us the time needed to bring the industry’s safety practices, blowout containment capabilities, and spill response strategies to the place they need to be for deepwater drilling to resume,” said Mr. Salazar, adding that, “We will only lift the suspensions when I am comfortable that we have significantly reduced those risks.”

To no surprise, the oil industry is unhappy about this. “Every day the moratorium remains exacts an economic penalty on the people of the Gulf and our nation. The costs are already too high. We continue to urge the government to end it as soon as possible,” said a statement by Erik Milito, upstream director of the American Petroleum Institute, which represents over 400 oil and natural gas companies.

On the regulatory process of creating new rules for the industry, Mr. Milito criticized, “We cannot have an approval process that creates unpredictable delays that could place at risk the flow of domestic energy in our country. Operators want regulations that provide certainty.

“Unpredictable, extended delays in permit review and approval discourage investment in new projects, which hampers job creation, reduces revenue to government, and restricts energy production.”

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