New rule would reduce GOM appeal: GEST

Even at $80/bbl oil, the well control rule proposed by the U.S. Bureau of Safety and Environmental Enforcement (BSEE) would reduce Gulf of Mexico exploration by as much as 55% each year, according to a recently released Wood Mackenzie study commissioned by the Gulf Economic Survival Team (GEST) of Thibodaux, La.

While BSEE put the cost of compliance at $883 million, the Wood Mackenzie macro analysis concluded that the rule would reduce industry investment up to $11 billion per year. The 60-day public comment period ended last July, and despite intense lobbying, GEST Executive Director Lori LeBlanc said industry was only given a 30-day extension. “They gave us 90 days to review a 264-page document that took BSEE over four years to draft,” she said. “Industry did as much as it could, but we believe the (BSEE) economic analysis is severely flawed, and especially the impact it would have on Gulf Coast communities. The Gulf would become less attractive,” she said.

Citing the proposed drilling margin, cementing and other stipulations in the rule as written, an industry survey of 175 Gulf of Mexico wells drilled since July 2010 found that, under the new requirements, 63% could not be drilled as designed.

In early February, the rule was forwarded to the administration’s Office of Management and Budget (OMB), which has economic oversight. “We’ve requested a meeting with OMB and we’re going to ask that they take a close look at these economic numbers, and ask BSEE to re-evaluate the economics of this rule,” LeBlanc said. “This rule would not only intensify what we’re going through now, but even if the price of oil comes back, we won’t be back to business as usual, if this is adopted.” 

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.