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Looking at the new landscape for OCS New regulations for offshore drilling have come into effect as BOEMRE continues to re-organize itself after Gulf of Mexico disaster Alan Bailey Petroleum News
As 2010, the year that saw the worst ever oil spill in the United States, draws to a close, the oil industry is still assessing the impact of the changing regulatory environment in the wake of the explosion of the Deepwater Horizon rig in the Gulf of Mexico. The U.S. Minerals Management Service has morphed into the Bureau of Ocean Energy Management, Regulation and Enforcement; a bevy of new offshore drilling regulations has emerged; and in Alaska Shell is still waiting for permission to drill in the Arctic outer continental shelf.
In a keynote address at the First International Oil & Gas Law Conference in New Orleans on Dec. 8, Michael Bromwich, director of BOEMRE, reviewed the various changes that the U.S. Department of the Interior has implemented in response to the Deepwater Horizon accident.
Immediately after the accident “it became abundantly clear that there were significant shortcomings in drilling safety practices and equipment and that industry and the government collectively lacked the ability to quickly gain control over a wild well in deep water,” Bromwich said. “Once oil started flowing into the Gulf, spill response capabilities were taxed to the limit.”
Two new rules Bromwich summarized two new offshore drilling rules that BOEMRE issued during the year in response to the accident.
The first rule, the drilling safety rule, mandates “tough new standards” for well design, well casing, well cementing and well control equipment, such as blowout preventers, he said. Drilling operators also must now arrange an independent inspection and certification of each stage of the drilling process, and an engineer must certify that each blowout preventer used in an OCS drilling operation meets new testing and maintenance standards, and that the shear rams in the blowout preventer can sever the drill pipe at anticipate levels of well pressure, Bromwich said.
The second rule mandates the implementation of a safety and environmental management system, or SEMS, for any oil and gas operation in federal offshore waters, Bromwich said. A SEMS protocol, already voluntarily used by many companies, requires the identification of potential hazards and the development of risk-reduction strategies for all activities, he said.
To supplement its regulations, BOEMRE has also issued several notices to lessees, Bromwich said. One of these rules, designated NTL-06, requires oil spill response plans to include a well-specific blowout and worst-case discharge scenario, including information about the assumptions and calculations used for the scenario. Another rule, NTL-10, requires an operator seeking to drill in deep water to provide a corporate statement, signed by an authorized company official, certifying that the operator will comply with all BOEMRE regulations; this rule also confirms that BOEMRE will evaluate whether the operator has submitted sufficient information to demonstrate access to the necessary equipment and resources, to be able to promptly respond to a deepwater well blowout.
BOEMRE is preparing a guidance document, to help clarify permitting procedures under the new rules and regulations, Bromwich said.
The agency is also engaged in a review of the use of “categorical exclusions,” the procedure whereby certain oil gas activities could be permitted with minimal environmental scrutiny — in August BOEMRE banned the use of categorical exclusions for new deepwater oil drilling.
Major reorganization In parallel with issuing new rules and regulations, BOEMRE is undergoing a major reorganization, separating the old MMS structure into separate entities for promoting offshore energy development, regulating offshore drilling and collecting offshore oil and gas revenues.
“In the past these three conflicting functions resided in the same bureau, creating the potential for internal conflict and an increased risk of a pro-development bias,” Bromwich said. “This will no longer be the case.”
The simpler part of this reorganization, the splitting off of the revenue arm of the old MMS, has already been accomplished through the formation of the Office of Natural Resources Revenue. However, disentangling the previously intertwined functions of OCS leasing and OCS regulation is a complex operation that remains a work in progress.
“As part of our reform effort we have created 11 implementation teams that are responsible for analyzing various aspects of BOEMRE’s regulatory structure and helping to implement the reform agenda that I have for BOEMRE,” Bromwich said. “These teams are already hard at work analyzing various aspects of our organization and laying the foundations for lasting change to the way BOEMRE does business.”
BOEMRE has also introduced a new recusal policy, requiring employees to notify supervisors of any potential conflicts of interest, prohibiting inspectors from inspecting the facilities of former employers and requiring inspectors to report any attempt by industry to exert undue influence over inspection activities.
And in June, immediately after his appointment as BOEMRE director, Bromwich announced the formation of a BOEMRE investigation and review unit, to investigate any allegations of misconduct by agency staff or by companies involved in oil and gas leasing.
Culture of safety In reviewing the various reforms that BOEMRE is enacting, Bromwich said that everyone must be open to developing a necessary culture of safety.
“In the past industry has in many instances reflexively opposed new regulations,” Bromwich said. “That is no more responsible than the mindless multiplication of new requirements for their own sake. We must strike a new balance that fully involves industry in the regulatory process but that recognizes the need for us to exercise independent judgment.”
And, while BOEMRE will be introducing some further new safety measures, including additional requirements for blowout preventers and remotely operated vehicles, the agency will introduce these measures through the standard rulemaking process, involving public notices and public comments, Bromwich said. In the absence of any significant new revelations from ongoing investigations of the Deepwater Horizon incident, BOEMRE does not anticipate any further emergency rulemaking for oil and gas permitting, he said.
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