Wednesday, October 27, 2010
While the industry welcomes new safety rules, it needs a streamlined and adequate permitting process to restart drilling operations. By Don Briggs
Throughout its long and arduous history, the oil and gas industry has remained the cornerstone of our state's economy. Plagued with volatile market conditions and cyclical economic ups and downs, Louisiana's oil and gas industry has always found a way to bounce back from tough times.
Wednesday, October 27, 2010
While the industry welcomes new safety rules, it needs a streamlined and adequate permitting process to restart drilling operations. By Don Briggs
Throughout its long and arduous history, the oil and gas industry has remained the cornerstone of our state's economy. Plagued with volatile market conditions and cyclical economic ups and downs, Louisiana's oil and gas industry has always found a way to bounce back from tough times. Today, the industry is faced with a magnitude of economic and political challenges unlike any we have seen. Issues such as the imposition of a federal drilling moratorium, the repeal of oil and gas tax incentives, the regulation of hydraulic fracturing and the EPA's initiative to regulate CO2 are only but a few that threaten the viability of our industry. Still, there remain some positive developments that could lead to an industry-wide turnaround in the future. The most positive and important development is the recent lifting of the drilling ban in the Gulf.
The greatest threat to Louisiana's oil and gas industry was the federal drilling moratorium imposed early this summer. After the tragic sinking of the Deepwater Horizon rig, President Obama and the U.S.
Department of Interior instituted a moratorium on deepwater drilling in the Gulf. As Washington decided how to effectively respond to the oil spill, the moratorium had a devastating effect on Louisiana's families, businesses and economies. Stagnant growth and uncertainty overshadowed Gulf Coast businesses of all sectors and sizes. With mounting pressure from industry and Gulf Coast elected officials, on Oct. 12 the Obama administration lifted the deepwater drilling moratorium for oil and gas development in the GOM.
The action to lift the ban is a positive first step toward reviving the threatened economies of the Gulf Coast region.
While imposed, the federal moratorium exposed Gulf Coast states and our nation to financial disaster. Prior to its enactment there were 55 rigs operating in the Gulf; within months there were only 13 rigs. With the rig count drastically decreasing in the deep waters, it was evident that the moratorium was stifling all operations, including shallow water drilling that was not supposed to be affected by this policy. In the final months of the moratorium, a total of six permits were granted by BOEM. To compare, 56 permits were granted in the three months prior to the administration's decision to enact the drilling ban.
In late September, the Interior Department instituted new rules to strengthen and improve drilling safety requirements. In addition, the new rules address workplace safety concerns to better manage safety hazards and environmental impacts in offshore oil and gas operations. Moving forward, companies must comply with these new rules in order to obtain a permit to operate in the Gulf.
Throughout its history Louisiana's offshore industry has maintained an impeccable drilling safety record and will continue to do so under these new rules and regulations. While industry welcomes the lifting of the ban and the imposition of these new rules, the administration must ensure that a de facto moratorium does not continue due to a delay in issuing permits for offshore exploration and production projects. It is imperative that it move toward ensuring a streamlined and adequate process for companies to attain permits necessary to restart their drilling operations.
American Petroleum Institute President Jack Gerard responded to the lifting of the ban by stating, "While we are pleased that the Interior Department has lifted the deepwater moratorium, even more needs to be done to get American workers back on the job of exploring for, developing and producing the oil and natural gas to fuel our nation's economy. Americans want and deserve improvements in offshore safety, and this can be accomplished without putting thousands of people out of work and increasing the nation's reliance on foreign sources of energy."
Recent steps taken by the administration are certainly in the right direction. However, any delays in the permitting process will continue to threaten the more than $100 billion economic impact the industry has in the Gulf Coast region and cost our nation more than 175,000 jobs a year.
Oil and gas operations in the Gulf account for more than one third of U.S. oil production and one-tenth of our nation's natural gas production. Nearly 80 percent of the oil produced and 45 percent of natural gas produced in the Gulf is from deepwater drilling. The viability and sustainability of Gulf Coast operations is important to our entire way of live. While we search for alternative sources of energy, one thing is certain: Our entire economy depends on sustained fossil fuel production. Without petroleum and petrochemicals, products like Crayons, printer ink, bubble gum, dishwashing liquids, deodorant, CDs and DVDs, car tires and heart valves would be nonexistent.
Moving forward, Louisiana's oil and natural gas industry will continue to be committed to safe and environmentally sound operations. The lifting of the ban and new rules for operational safety are positive steps toward reviving the offshore industry in our state. It's time we get back to work and allow companies to invest, explore and develop our vital energy resources in the Gulf of Mexico.
Don Briggs lives in Lafayette and has been president of the Louisiana Independent Oil and Gas Association since 1992. To comment on this column, email him at [email protected].