Bromwich disputes drilling backlog

Russell McCulley
Friday, March 2, 2012

BOEMRE director Michael Bromwich vows that deepwater drilling will return to the US Gulf of Mexico in the coming months, marking a return of exploration all but shut down after the Deepwater Horizon disaster. But the oil & gas industry remains skeptical, as Russell McCulley reports.

BOEMRE director Michael Bromwich, speaking 11 February in Houston at a day-long conference hosted by the James A Baker Institute for Public Policy, said the stalemate between government regulators and an oil & gas industry eager to return to deepwater work boiled down to one issue: what companies would do to mitigate another Macondo-style oil spill if blowout prevention and well intervention efforts failed.

‘This containment issue, which has attracted a great deal of attention, especially in recent weeks, is the principal issue that has delayed our ability to issue deepwater permits,' said Bromwich, who took over as director of the Bureau of Ocean Energy Management, Regulation & Enforcement, then the Minerals Management Service, two months after the 20 April 2010 disaster.

‘The fact is that, although industry has been working hard, it has not yet been able to fully demonstrate that it has the equipment and systems in place to respond to a blowout in deepwater. It would simply be irresponsible to approve new deepwater drilling before we have an answer to the simple but compelling question, what if there was a blowout – how would you control it?'

The conference was billed as a forum to encourage a ‘constructive dialogue' between regulators, environmentalists and the industry. But the tone at times suggested that the parties involved might have some distance to go. Bromwich said he had held meetings with oil & gas companies since taking office, some of which recognized ‘the broader failure in both industry and government' to ‘ensure that advances in drilling and workplace safety kept pace with increasingly risky operations', and which led to the Macondo well disaster.

‘But there are other operators who seemed all too ready to shrug off Deepwater Horizon as a complete aberration, a perfect storm, a one in a million,' he said. ‘They point to the lack of a similar blowout in the decades before the explosion and spill, and suggest that the steps taken in response were an overreaction and unnecessary. Needless to say, that is disappointing, and in my view, shortsighted.'

Noting that UK offshore production dropped off significantly for two years following the 1988 Piper Alpha disaster, Bromwich defended the Obama administration's deepwater drilling moratorium imposed after the Macondo blowout and oil spill and the delay in issuing new permits since the drilling ban was lifted.

The holdup, he said, are new requirements that applicants demonstrate they have the means necessary to respond to a deepwater oil spill in place. The Marine Well Containment Company (MWCC) – a $1 billion effort by a consortium of IOCs to develop a rapid response spill containment system – and Helix Energy Solutions, which had several vessels involved in the Deepwater Horizon spill response – are developing systems that would be stationed in the Gulf of Mexico and which operators could keep on retainer to fulfill the requirement (OE August 2010). MWCC unveiled its interim capping device shortly after the conference (see Capping stack ready); Helix in January signed an agreement with the industry group Clean Gulf Associates making its Helix Fast Response System, which includes the Helix Producer I and Q4000 vessels, available to 19 CGA members for two years in exchange for a retainer fee.

Bromwich said companies would not be required to use either system as long as they can demonstrate that they have the equipment necessary to respond to a Macondo-like blowout.

‘It's been a little bit frustrating because we've been blamed for slowdowns and not issuing permits, when the industry knows that the containment capabilities are not there yet,' he said. ‘I think they will be there quite soon.'

Bromwich said the agency has five pending applications for drilling permits on the books and that the first permits should be issued before 3Q 2011. ‘There's a misperception out there that there are huge number of applications that are lying there un-acted upon,' he said. ‘That has actually never been the case since Deepwater Horizon and it's certainly not the case now. Now it may well be that a number of operators are holding back filing their applications to drill until they realize they're in full compliance with all the rules and requirements, including their need to designate what their containment capabilities would be. But there's no significant backlog, and there really hasn't been a significant backlog for the last eight months.'

A Helix spokesman said the company had notified BOEMRE that the Helix Fast Response System was operable and ready for deployment in the event of a well blowout in water depths to 5600ft, but that the agency had not responded or asked for a demonstration. Industry representatives and experts at the Baker Institute conference complained of a similar lack of cooperation between regulators and operators. ‘What I wish is [that] we would have an opportunity to demonstrate all the improvements that we've made,' said Chevron North America E&P president Gary Luquette. The industry has spent several months proving well designs and safety preparedness, he said. ‘But we would very much like an opportunity to demonstrate all this enhanced capability by getting permits and getting back to work,' he added.

Working on change
‘I think there's been a tremendous amount of learning happen,' said BP SVP Kent Wells. ‘I think we've made a lot of changes already. We're still working on some.'

Wells said communication between operators and US regulators was not the problem. ‘We're actually doing a lot of talking between one and each other right now,' he said. ‘What we're not doing is working together.'

Long before Macondo, the MMS was accused of working too closely with the companies it was charged with regulating. In 2008, the agency was rocked by accusations that employees had used relationships with oil companies to steer lucrative contracts to relatives, traveled on industry-financed junkets and, in some cases, engaged in sex and drug use with oil company employees. With reforms launched last year, the Obama administration began the process of breaking the agency's revenue collection, safety enforcement and offshore development missions into separate, independent agencies, and officials' public statements have often taken an adversarial tone.

Industry has responded in kind. Yet the two sides will need to work together to get deepwater activity in the Gulf of Mexico up and running again, as several speakers noted. Staffing could become a serious issue: Bromwich has requested a budget increase to hire more people, and if he gets it – a far from certain prospect, given the current budget-slashing mood – BOEMRE and the industry will be recruiting from the same diminishing pool. ‘It's a problem because they have trouble attracting qualified people,' Luquette said. ‘They can't compete, or at least they haven't in the past elected to compete, with industry on salary.'

Luquette suggested that operators and service companies could help by seconding employees to BOEMRE while the agency finds its footing, much as the UK oil & gas industry provided staff after Piper Alpha to help regulators implement new safety rules. ‘The problem we're having here is, industry can offer to help, but there's a tremendous amount of scrutiny right now on how close the regulator and industry get,' he said. ‘They've been accused of being too cozy in the past.'

Bromwich told oil & gas officials that he was ‘committed to continuing the dialogue'.

But even if the agency gets the staff increase it wants, and operators fall into compliance with the new regulations, it's doubtful that BOEMRE will ever resume its peak drilling application processing rate of about 15 per month, he said.

Categories: Deepwater Drilling Subsea North America Regulations

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