Oil Company Interest Return to Oil Rich in Gulf Mexico

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Moratorium on drilling for oil in the Gulf of Mexico has been lifted, companies interesting in returning to the oil-rich region aren’t rushing to do so. The reason, top industry representatives say, is the uncertainty of what demands will be placed on them by the federal government.

Companies welcome tighter safety requirements but still are uncertain of all the regulatory requirements, said Chris John, executive director of the Louisiana Mid-Continent Oil and Gas Association, and Gifford Briggs, vice president of the Louisiana Oil and Gas Association.

“When you’re contemplating the investment of hundreds of millions of dollars in a project, uncertainty doesn’t bide well,” said John, whose organization represents major oil and gas companies. “We hear a little chatter of people starting to tip-toe back into the Gulf,” he said.

Applications are being filed for new wells and to resume drilling wells that stopped when the moratorium was issued following the BP explosion and massive oil leak into the Gulf. The Bureau of Ocean Energy Management, Regulation and Enforcement is a revamped Department of the Interior division that replaced the heavily criticized Minerals Management Service with an agency more focused on drilling safety.

A new set of BOEMRE regulations and permit requirements replaced the moratorium that had shut down Gulf drilling after the BP disaster.

The agency began accepting applications Oct. 12 for oil and gas drilling at different depths, according to its website. Applicants must comply with all rules and requirements and must show that they have adequate blowout containment devices.

John said companies were starting to get familiar with the requirements but two weeks ago, Judge Martin Feldman, who had ruled that the moratorium was illegal, struck down the regulations. His ruling said, “Notice and comment were required by law. The government did not comply.”

“There’s enormous confusion,” John said. “There’s no one on the planet who can sit down and tell you what you have to do to get a permit.” “There’s a lot of risk going out there — a lot more than in the beginning of April,” said Briggs, whose group primarily represents independent oil and gas companies. The BP well exploded April 20. “There’s a lot of risk going out there — a lot more than in the beginning of April,” said Briggs, whose group primarily represents independent oil and gas companies. The BP well exploded April 20. “The majors have the capital, but it’s a lot for independents to shoulder,” he said. “You’re not going to see a rush of companies going out into the Gulf,” until things are settled.

Briggs said that doesn’t mean independents aren’t interested in drilling in the Gulf. “The profit margin is there, but the risk is extremely high.” Companies drilling in less than 500 feet of water must comply with rules and regulations in place as of June 8.

The BOEMRE website shows that 20 applications for new shallow-water wells were filed since June 8, and 13 of those were approved by Nov. 4. Another 43 permits for revised well plans were approved. The largest number of permits (1,076) issued were for modifying wells — conducting workovers, completion, abandonment or any other non-routine operations.

Only one permit application for a new deep-water well had been filed since Oct. 12, but as of Nov. 4, the report shows six were pending. The agency explained that some permit applications were filed before Oct. 12 for “deepwater drilling activities that were allowed under the suspensions.” John said “folks are gearing up” to return to the Gulf, but “it’s not like turning a light switch on and off. It could take months to get a drill ship in place” to resume drilling at the 33 wells that were shut down by the moratorium. “Those are the sites that I believe will be the first to see some activity,” he said, but four left the Gulf to drill in other parts of the world.

But while the industry confers with federal regulators to “make sure we’re singing from the same hymnal,” as John put it, environmental groups are fighting the resumption of drilling. The Sierra Club joined the federal government in fighting against the oil industry lawsuit to lift the moratorium.

But since that suit is no longer active, Sierra Club attorney Devorah Ancel said the group is now watching another lawsuit filed by the Center for Biological Diversity. The CBD is suing the government for lifting the moratorium. Ancel said the Sierra Club is not joining that lawsuit.

“We certainly want the federal government to take further steps to assure safety,” she said. “The Sierra Club opposes all new offshore drilling” in the Gulf of Mexico and in other locations. “There’s still a lot to do to make sure offshore drilling is protected.” John said the environmental challenge is yet another “holdup” in getting back to oil production.