GEST still shedding light on federal permitting quagmire

In an ideal world, it would be out of business by now. Yet, 18 months after it should have been disbanded, a grassroots coalition in southern Louisiana continues to wade through the muddled waters of the federal offshore drilling permit approval process.

For the 50 or so members of the Thibodaux, La.-based Gulf Economic Survival Team (GEST), their work should have ended when the offshore moratorium ostensibly was lifted in October 2010. However, the GEST leadership still finds itself spending as much time in Washington D.C. as some legislators, trying to convince federal regulators to speed up the permitting process. While the higher rig count in the Gulf of Mexico deepwater and shelf areas suggests progress is being made, GEST Executive Director Lori LeBlanc says the pace of plan and permit approvals remains unacceptably slow. 

“The plans that were pending in January had been in the queue for an average of 175 days, so that is a cause for concern,” said LeBlanc.  “GEST will continue to track the data to determine progress and consistency,” she added, following yet another presentation to regulators. “We continue to focus on facilitating the discussion between the industry, the state and the federal government to resolve these regulatory issues that are hurdles to getting these plans and permits approved.”

In a related development, additional ammunition for the GEST lobbying efforts came in late January. At that time, the Greater New Orleans, Inc. (GNO), economic development agency released results of a multi-parish study, that illustrated the impact of the moratorium and subsequent drilling slowdown on small and mid-sized companies. Half of those firms responding said that they had laid off employees, while 82% of the business owners said they lost personal savings as a result of the stoppage. Another 46% reported that they had moved all or a large portion of their businesses away from the Gulf of Mexico.

Meanwhile, LeBlanc said that near the end of 2011, it was taking well over 224 days to get a plan approved, compared to the typical 50 days required pre-Macondo. As for permits, LeBlanc said a primary effort last year was to clarify the somewhat disingenuous numbers that regulators are quick to tout. She pointed out that while government officials gush over the number of new permits issued, they fail to mention that some wells now require multiple permits, thereby diluting the numbers being handed about.

“When you go to their (government agencies) website and see these numbers, you think we’re doing fine, we’re back to work, but when you start drilling down it’s another story,” LeBlanc said. “For example, on the website, they say they have issued 233 permits since the moratorium was lifted. That’s fine and dandy, but in the world we live in now, many wells require more permits than they’ve required in the past. Some wells could require five permits— so we’re not talking about 233 new drilling permits. We have been able to break it down to the point that as of Jan. 1, 2012, out of those 233 permits issued, only 22 were for what we term unique new wells.”

“We’ve been able to shed some light and clarification around what the numbers really mean,” added LeBlanc. “When the government goes to the media and says we’re back to normal, we’re trying to set the record straight.”

She added that GEST also is working with the federal authorities to find a solution for the so-called “just in time” permitting issue that sees operators receiving approvals just as they have a rig under contract. “Smaller independents are really struggling with that business model, because if you have to pay those rates to get a rig under contract, you need to be assured you have a permit. This poses a huge risk for the independents,” she said.

Since its inception in June 2010, a month after the moratorium was enacted, GEST has been setting the record straight through meticulous tracking of permitting and plan trends that LeBlanc said have opened more than a few eyes in Washington. The alliance was spearheaded by Scott Angelle, now secretary of the Louisiana Department of Natural Resources (DNR), who remains a central cog in the organization comprising representatives from local governments, industry and the state, among others.

Early on, GEST targeted leaders of the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMR), which last year split into the independent Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE), Fig. 1. With that, GEST then set its sights on the new BOEM and BSEE directors, Tommy P. Beaudreau and Rear Admiral James A. Watson, respectively. “Both directors have expressed a willingness to work with GEST and DNR Secretary Scott Angelle on our continued efforts to get folks back to work in the Gulf of Mexico,” said LeBlanc.

To further reinforce the urgency of hastening the approval of plans and permits, GEST last year commissioned IHS Global Insight (USA) and IHS CERA to examine the national economic impact of a more proactive regulatory pace. The IHS study concluded that hastening the permitting process in 2012, alone, would account for more than $44 billion in U.S. gross domestic product (GDP), including nearly $12 billion in tax and royalty revenues, and up to 23,000 jobs. 

LeBlanc noted that the recently released GNO study adds further reinforcement. “As the GNO report makes clear, the ability of government to implement an efficient and predictable regulatory process ultimately determines the vitality of U.S. energy activity, and the economic health of the companies that support the oil and gas sector.”

During 2011, she said, considerable time was spent on linguistics, trying to convince regulators that “should” and “must” have entirely different meanings and extremely profound effects. “This is crazy, but they put out a rule, in which they took some 80 guidance documents and arbitrarily changed everywhere that it said ‘should’ to ‘must,’ ” explained LeBlanc. “When you just arbitrarily change from ‘should’ to ‘must,’ what you are doing is taking away the discretion of an engineer to make a professional engineering decision,” she said.

Chett Chiasson, executive director of Port Fourchon and a GEST member, said that this is but one example of why the industry desperately needs clarification on precisely what the new regulations mean. “We’re not necessarily trying to change the regulations. We’re just trying to get them to where they’re workable, and where oil and drilling companies can actually work through them.”