Drilling advances

Just when you thought the sailing would be a bit clearer, leave it to bureaucrats to muddy the waters. The latest example of outrageous regulatory over-reach, courtesy of the U.S. Bureau of Safety and Environment Enforcement (BSSE), involves the surreptitious expansion of the proposed and oft-delayed BOP rule.

The proposed federal mandate, which ostensibly was to cover the design and operation of BOPs, is finally set for release in March, or more likely April, at which time pertinent stakeholders can comment for the record before it becomes law. However, in what amounts to a bureaucratic sleight of hand, it now seems the industry will be considering much more than the shearing capacity or maintenance of a BOP stack. With its requisite pre-comment publication in the Federal Register on Dec. 22, the scope of the proposed BOP rule has been widened out of the blue, and now covers “Blowout Prevention Systems and Well Control.”

Surprise!

“They made it much broader, and we have no idea what’s in it,” says Lori LeBlanc, who wears a dual hat as executive director of the Thibodaux, La.-based Gulf Economic Survival Team (GEST), and director of the Offshore Committee of the Louisiana Mid-Continent Oil and Gas Association (LMOGA). “Normally, there’s a 60-day public comment period, and that’s not nearly enough time to thoroughly review what we expect to be a more than 300-page report. This is very scary, and it just depends on how long they give us before it becomes official.”

Upon publication after the required U.S. Office of Budget and Management (OBM) review, the proposal had been amended to read: “This proposed rule would upgrade regulations related to the design, manufacture, and repair of blowout preventers (BOPs) in response to numerous recommendations. In addition to BOPs, the proposed rule will address well design, well control, safe drilling margins, casing, cementing, real-time monitoring, and subsea containment.”

Outside of some select corner within the labyrinth of Washington D.C., exactly what the industry should expect is anyone’s guess. Will BSEE mandate that increased volumes of barite, of designated specific gravity, remain on stand-by throughout the well? Will all cements have to be reformulated? Should casing mills prep themselves for tightened metallurgical specifications? The possibilities are endless, and equally disturbing.

“BSEE has indicated the measure will be comprehensive and aimed at everything that is associated with controlling a well,” LeBlanc said. “A rule of this magnitude could have significant impacts on offshore operations. In this economic climate, we fear this rule could cripple the industry’s ability to put people to work and provide energy for our nation. This proposed rule will be very significant. GEST will be playing a huge role in making sure they have actually conducted an appropriate economic analysis of what it will take for companies to comply and what could be changed. We usually can find that one significant element of a proposed rule, that we can take to the director and say this will kill us.”

In yet another BSEE head scratcher, LeBlanc said the feds had earlier explained away the repeated delays in releasing this and other proposed offshore regulations, saying the agency first wanted to finalize the newly released Arctic rules. Now, I have no idea what metric the feds use to prioritize rulemaking, but obviously a comparative analysis of drilling and overall activity between the deepwater Gulf of Mexico and northernmost Alaska is not one of them. 

Bombshell No. 2. Obviously, BSEE takes its cue from the boss, as U.S. President Obama recently pulled a sly one of his own. In announcing his proposed 2016 federal budget, Obama saw fit to recommend disbanding the 2006 Gulf of Mexico Security Act (GOMESA), which could cost Gulf Coast producing states hundreds of millions of dollars. Under GOMESA, 37.5% of federal revenue from Gulf of Mexico production would be spread to the states of Texas, Louisiana, Mississippi and Alabama.

Up to now, coastal states have received a piddling amount, but with an appreciably larger portion of the Gulf now included, yearly distributions as high as $400 million are expected to be shared between the four states from offshore revenue that the feds collect in 2017. Louisiana, for one, has already dedicated its long-awaited windfall to coastal restoration, which was the intended purpose of the act, as written.

Obama, however, is suggesting GOMESA be scrapped and funds spread nationwide. Or, as Department of the Interior Secretary Sally Jewel says, “Funds will, instead, be directed, in part, to programs that offer broader natural resource and conservation benefits for the entire nation.”

My, it must be terribly comforting to folks along the Gulf Coast to know that they may have to share their production revenue with California, where an offshore rig is about as welcome as a frac spread in Yoko Ono’s backyard.

“Louisiana and these other states are the ones who build the infrastructure and support offshore development,” LeBlanc said. “We send $5 billion to $8 billion to the federal government every year and yet, in all this time, Louisiana has received about one-half of 1% of that revenue. This (GOMESA) is not a pork barrel, but a fair sharing of revenue, and here we finally were on the cusp of getting that revenue, and Obama wants to take it away.”

Fortunately, the concern may be for naught, as the President’s sneaky jab has to pass congressional muster, and the U.S. has a less-than-stellar record when it comes to passing budgets. “It will probably never reach reality, but demonstrates once again, the administration doing what it can to hurt the Gulf states,” Le Blanc said. “It just shows that our greatest threat is not low oil prices, it’s the federal government.”  

About the Authors

Jim Redden

Contributing Editor

Jim Redden is a Houston-based consultant and a journalism graduate of Marshall University, has more than 40 years of experience as a writer, editor and corporate communicator, primarily on the upstream oil and gas industry.