Offshore Regulation Could Grow

Offshore Regulation Could Grow

Wednesday, April 13, 2011
Houston Chronicle
by Jennifer A. Dlouhy

The Obama administration is exploring whether to expand federal oversight of offshore drilling beyond oil and gas companies to rig suppliers, oil field services providers and other contractors now outside regulators' reach.

Michael Bromwich, the director of the Bureau of Ocean Energy Management, Regulation and Enforcement, told reporters Tuesday that the existing system imposes artificial limits on what his agency can do to make offshore drilling safer. Its enforcement power now ends with oil and gas companies that hold leases to drill in U.S. waters.

"That dramatically limits the scope of our oversight," he said. "It is very important for our regulatory oversight to extend as broadly as possible to all of the entities that are operating offshore and not for us to be artificially limited just to the individual operator that applies for permits and submits exploration plans."

Bromwich said that approach may have seemed adequate before the lethal blowout of BP's Macondo well nearly a year ago -- which killed 11 and started a multimillion-gallon oil spill -- but isn't compatible with the regulatory agenda that arose from the disaster.

"We are very interested in pushing that in an aggressive and in a responsible way," he said, "and if that requires us to extend our scope beyond the operator, that's something that needs to be seriously considered."

Last year's accident sharpened lawmakers' and regulators' focus on the broad spectrum of companies involved in offshore drilling.

According to the presidential commission that investigated the oil spill that began last April 20, the disaster was the result of a series of decisions made by BP and its contractors at the site, including Transocean, which owned the Deepwater Horizon drilling rig, and Halliburton, which did cement work.

 

Opposed by GOP?

Any move to expand the ocean energy bureau's regulatory powers would probably require congressional action, according to a preliminary review by Interior Department officials. And it seems unlikely that key lawmakers would be eager to bolster the bureau's rule-making authority, especially in the House, where Republicans are moving to limit the agency's discretion.

The bureau can impose requirements on equipment used and work done by contractors, but oil and gas companies operating offshore are ultimately responsible for whether those mandates are fulfilled.

 

No immediate position

"Even though a lot of this stuff is done by somebody else, the requirements still apply to the activity," said Erik Milito, upstream director for the American Petroleum Institute, which didn't take an immediate position on expanding the agency's authority. "As far as who is ultimately responsible for that, generally it is the operator."

Separately, the government is reviewing how to consider companies' safety records and other factors in weighing their proposed offshore drilling projects.

Bromwich said the ocean energy bureau is evaluating the evidence "that ought to factor in as to whether a company can continue to be a player" but said it could include disciplinary records, history of violations and past fines.

 

More funding

The government imposed a swath of new safety and environmental mandates after the Deepwater Horizon disaster, including a requirement that companies prove they have the equipment and know-how to harness crude from any future deep-water well blowout.

The ocean energy bureau can count on a big boost in funding -- at least for a few months -- under the budget deal congressional leaders and the White House reached last week.

The legislation to keep the government running through the end of fiscal year 2011 on Sept. 30 includes $47 million more for the bureau than it got in fiscal 2010.

That's about half as much as the administration wanted to add to the agency's fiscal 2011 funding, but the boost came amid cuts totaling $40 billion in many non-defense programs.

 

Hiring more inspectors

Even other units of the Interior Department didn't fare as well. For instance, funding for the Bureau of Land Management, which handles onshore oil and gas leases, would be trimmed $18 million from the fiscal 2010 level.

The administration has asked Congress for $358 million in fiscal 2012, which would allow the bureau to hire 116 new offshore inspectors, triple what it has now, and 41 new permitting personnel, nearly doubling the current 50-member team. Much of the administration's planned funding increase would come from proposed new fees on oil and natural gas producers.