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August 26, 2010

Bipartisan Policy Center makes recommendations on ending moratorium

Both the API and the Shallow Water Energy Security Coalition have found things to like in a report submitted to the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling by the Bipartisan Policy Center.

The Bipartisan Policy Center (BPC) is a non-profit organization established in 2007 by former Senate Majority Leaders Howard Baker, Tom Daschle, Bob Dole and George Mitchell to "develop and promote solutions that can attract public support and political momentum in order to achieve real progress." It says it "acts as an incubator for policy efforts that engage top political figures, advocates, academics and business leaders in the art of principled compromise."

On July 27, 2010, the National Commission requested that the BPC "assist thee Commission in its consideration of the use of moratoria as a method for mitigating future harm in the immediate aftermath of a spill." In particular, the Commission requested that the BPC identify the appropriate questions for the federal government to consider in determining which of the suspended activities could safely resume if the moratorium were lifted.

The BPC submitted its report to the Commission today.

Among its conclusions:

The Department of Interior's drilling moratorium has served the productive purpose of allowing time for both industry and government to prepare for a safer, more vigilant, and dependable future for U.S. offshore drilling. We believe DOI and the industry have used this time effectively to develop a new regulatory regime for drilling in the Gulf of Mexico. At the same time, we readily agree with the oft-made point that drilling risks cannot be reduced to zero. But we are satisfied that compliance with the Interior Department's NTLs 5 and 6 and other actions by the Department will achieve a significant and beneficial reduction of risk. If industry is diligent in incorporating these requirements and DOI is vigilant in oversight and enforcement, we believe this new regime will provide an adequate margin of safety to responsibly allow the resumption of deep water drilling in the Gulf of Mexico.

It is important to reiterate that compliance with these new requirements will pose greater challenges for some operators than for others. Moreover, it is possible that the costs and technical sophistication needed to comply with these new requirements may discourage some rigs and companies from future operation in the Gulf of Mexico. Although this outcome would be unfortunate, we believe it is imperative that all companies be held to a consistent and rigorous set of safety requirements. While we appreciate the costs of delay, we urge DOI to use all due caution to ensure effective compliance with this new regulatory regime. Moreover, a focus on resumption of deepwater drilling should not distract from the need to implement longer-term measures identified [in the report].

You can download the report HERE

API COMMENT:

Erik Milito, head of the American Petroleum Institute's upstream group, "wholeheartedly agrees with the Bipartisan Policy Center's conclusion that new rules issued in June by the Interior Department provide an 'adequate margin of safety to allow the resumption of deep-water drilling.' "

"The Bipartisan Policy Center report is another indication of what we've been saying for some time: We need to lift this deepwater moratorium, which is having the effect of further harming an already-struggling Gulf community. The oil and natural gas industry quickly went into action and developed enhanced safety, equipment and operational procedures to elevate safety and environmental performance. These measures have been adopted by the government and are now requirements for offshore drillers. The industry has led the way to get back to work and it is now up to the government to do the same. We hope the Interior Department will move forward with lifting the moratorium because thousands upon thousands of jobs, billions of dollars in revenues and our energy security are at risk if the moratorium continues.

SHALLOW WATER ENERGY SECURITY COALITION COMMENT:

While characterizing the use of a deepwater moratorium as "something of a blunt response," (p. 4), the Center also noted that official Administration policy always has been "to permit continued shallow water operations.' (p.4). The Center then considers the "Safety Case" as a regulatory model going forward while acknowledging uncertainties and the need for a "significant transition for both the regulator and industry." (p.4).

From the perspective of the shallow-water industry, the Center makes some important findings (p.7):

1) There are "substantial differences between drilling operations in shallow and deep water;"

2) "Almost all shallow water permits for new wells are still pending. Only three permits for new wells, as opposed to side or workover wells, have been issued" since the Macondo incident;

3) The Interior Department should "identify the causes of this delay and consider their relevance" and should "adopt a strategic approach to reviewing industry compliance" with new requirements; and

4) The "safe resumption of drilling" should "not take an undue amount of time."

The Shallow Water Energy Security Coalition is continuing to analyze the findings of the Center and the deliberations of the Commission. We look forward to participating in the Commission's fact-finding process. But it is essential for energy security, the production of clean fuels, and the economic recovery of the Gulf Region that shallow-water drilling resume as soon as possible."


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