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Wrangle over OCS drilling continues Salazar announces re-jigged moratorium after 5th Circuit court upholds injunction against earlier 6-month deepwater drilling ban Alan Bailey Petroleum News
On July 12, in a move presumably designed to trump court decisions against the Department of the Interior’s attempted six-month moratorium on deepwater drilling on the U.S. outer continental shelf, Interior Secretary Ken Salazar announced that he is directing the Bureau of Ocean Energy Management, Regulation and Enforcement to issue a new moratorium that will apply to all drilling from floating facilities requiring the use of blowout preventers. That would, in effect, ban the drilling of new deepwater wells while, for example, allowing shallow-water drilling from a jack-up rig and field development-related drilling that does not require a blowout preventer.
“More than 80 days into the BP oil spill, a pause on deepwater drilling is essential and appropriate to protect communities, coasts and wildlife from the risks that deepwater drilling currently pose,” said Secretary Salazar. “I am basing my decision on evidence that grows every day of the industry’s inability in the deepwater to contain a catastrophic blowout, respond to an oil spill and to operate safely.”
Nov. 30 The new moratorium will last until Nov. 30 unless the Interior secretary sees fit to lift it earlier. And the moratorium will only apply to the Gulf of Mexico and the Pacific regions.
But, in announcing the new moratorium, Salazar said that as more information becomes available he may modify the criteria for what drilling will be banned. And during congressional testimony in June, Salazar said that Interior would refine the terms of the original drilling moratorium, seeking ways to perhaps allow drilling in relatively safe situations.
“I remain open to modifying the new deepwater drilling suspensions based on new information, but industry must raise the bar on its practices and answer fundamental questions about deepwater safety, blowout prevention and containment, and oil spill response,” Salazar said in his July 12 announcement.
In a decision memorandum to Michael Bromwich, BOEM director, Salazar spelled out his reasons for requiring the new moratorium, saying that the moratorium end date of Nov. 30 allows for the likely time needed to acquire necessary information about the risks of deepwater drilling; the timing of reports from various investigations into the Gulf of Mexico oil spill; the time at which the out-of-control Macondo well is likely to be shut-in, thus releasing oil spill response equipment to support contingency plans for other wells; the likely timing of the end of the hurricane season; and the time required for BOEM to develop new offshore drilling safety rules.
A pause in drilling will allow time for the collection and analysis of key evidence concerning the Gulf of Mexico spill; an assessment of strategies for making well blowout containment resources more available; and the submission of evidence by Gulf of Mexico operators, to demonstrate that they have the capability to respond to another oil spill, Salazar said.
Earlier appeal In early June a number of oil service companies launched an appeal in the U.S. District Court of the Eastern District of Louisiana against Interior’s original moratorium, announced in May, claiming that the imposition of the moratorium was illegal and that the drilling ban would result in irreparable economic harm.
On June 22 district court Judge Martin Feldman, siding with the plaintiffs in the appeal, imposed an injunction against the moratorium until the appeal is resolved. The court is likely to find that the imposition of the drilling moratorium was “arbitrary and capricious,” Feldman said.
The Department of the Interior immediately appealed the injunction and, hence, elevated the case to the 5th Circuit court. But on July 7 a panel of three 5th Circuit judges said that the injunction needed to remain in place until the appeal against the injunction had been heard.
The judges, in a majority decision, said that Salazar had “failed to demonstrate the likelihood of irreparable injury” if the injunction were to be lifted, and that Salazar needs to show that renewed deepwater drilling is about to start in the absence of the injunction.
On July 8 the 5th Circuit court issued a revised schedule for the appeal, with oral arguments scheduled for Aug. 30.
But on July 12, in parallel with the new moratorium announcement, Salazar and Bromwich requested both the 5th Circuit court and the Louisiana district court to lift the injunction, saying that the injunction is now moot since the earlier drilling moratorium “has been rescinded and superseded by a new agency action that is based on new information, separate analysis, and a separate administrative record.”
Arctic uncertainty Interior imposed the original drilling moratorium in May as part of a series of safety-related measures in response to the Gulf of Mexico oil spill disaster. The moratorium applied to all OCS drilling in water depths greater than 500 feet. Interior also placed a six-month ban on all OCS drilling in the Arctic, regardless of water depth, thus nixing planned drilling by Shell in the Beaufort and Chukchi Seas in 2010.
In testimony before Congress Salazar has said that he views the Arctic moratorium as part of a more general moratorium on OCS drilling, although there appears to be some lack of clarity around this situation, given that the notice to lessees for the original deepwater moratorium does not mention the Arctic. And the new directive does not appear to apply to the Arctic OCS either.
Sen. Mark Begich, D-Alaska, latched onto this issue in a July 12 statement in response to the new moratorium announcement.
“Shell’s exploration plans for the Beaufort and Chukchi Seas were put on hold this summer at the same time of the deepwater moratorium,” Begich said. “Shell, as well as ConocoPhillips and Statoil who also hold valuable Alaska OCS leases, needs to know how to proceed. We have yet to have any engagement from the administration on next steps.”
Salazar has justified a drilling moratorium on the grounds that the U.S. administration cannot risk another major OCS oil spill and that the causes of the Deepwater Horizon accident in the Gulf of Mexico need to be understood before deepwater drilling can be allowed to continue. Rather than letting drilling continue as before or alternatively banning it altogether, Interior has “hit the pause button,” Salazar has told Congress.
Enforcing a pause in drilling will “allow us to learn the lessons from the Deepwater Horizon explosion and to deal with the issues of standards and enforcement, and also make sure that many measures that are supposedly in place to prevent this kind of thing from ever happening again are in fact in place,” Salazar told a U.S. Senate committee on June 23.
But, although some U.S. lawmakers have expressed sympathy with the moratorium concept, others, especially from Gulf states where the oil industry is a major economic driver, criticized the blanket nature of the original moratorium, questioning why the drilling ban does not take into account the relative risks of drilling in different circumstances and expressing concern about the potentially huge economic impact of a continuing halt to all new drilling.
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