Up to 20 deepwater oil rigs could be leaving the Gulf of Mexico,
unless federal regulators step up permitting efforts, according
a
new report from investment bank FBR Markets. The existing
backlog of permits that have been approved, but not activated,
would need to reach about 60 to support the current rig count in
the Gulf, FBR concluded.
As the Pelican Institute for Public Policy
previously reported, at least 10 oil rigs have left the Gulf
since the Obama Administration imposed a moratorium on deepwater
oil and gas drilling in May 2010. The moratorium came in
response to the explosion of British Petroleum’s (BP) Macondo oil
well on April 20 of last year. The accident resulted in the death
of 11 workers and caused an estimated five million barrels of crude
oil to spill into the Gulf.
They oil rigs that have departed include: Stena Forth,
Ocean Confidence, Ocean Endeavor, Transocean Marinas, Ensco 8503,
Ensco DS-4, Noble Clyde Boudreaux, Discoverer Spirit, Transocean
Amirante, Noble Paul Romano and Ocean Monarch.
Sen. David Vitter (R-LA) has sent a letter to Obama
administration officials that expresses concern over the current
pace of oil drilling permits in the Gulf.
The letter is addressed to Department of Interior Secretary Ken
Salazar and Bureau of Ocean Energy Management Regulation and
Enforcement Director Michael Bromwich and it attached in full
below:
The Honorable Ken Salazar
Department of the Interior
1849 C Street, NW
Washington DC 20240
Director Michael Bromwich
Bureau of Ocean Energy Management Regulation and Enforcement
1849 C St., NW
Washington, DC 20240
Dear Secretary Salazar and Director Bromwich:
I write to stress my ongoing concerns with the pace of permitting
for offshore production in the Gulf of Mexico. In light of
the President’s “jobs speech,” perhaps you could help me better
understand how the Interior Department is facilitating the
President’s objectives. A cursory glance of Interior
Department activity shows an agency dedicated to a contrary agenda
in relation to job creation. Accordingly, I would appreciate
complete responses to my concerns.
The following questions focus on deepwater production in the
Gulf of Mexico (GOM):
1. As of last week, there were
19 floating units working in the GOM, up from a low of
4 in the third quarter of 2010, and down from an
average of 28 from 2007-2009. Unfortunately,
without a higher volume of additional permits, the number of active
rigs will decline. In the three-year period from 2007-2009,
an average of 84 deepwater permits for new wells were granted
annually. That shows 2011 permitting at well below historical
rates (when you exclude permissions to modify which are essentially
meaningless, yet you decide to calculate as a functional
equivalent). Further, the annual number of deepwater permits
should be going up over time, not down, because of the general
movement by industry into deeper waters. Given the
impossibility of deciphering the BOEMRE permit webpage, can you
please attest to the accuracy of these numbers, delineating between
new permits to drill and permissions to modify?
2. Given that Interior’s press
office has repeatedly attempted to indicate publicly that
permitting is at nearly pre-Macondo levels, why is there not a
pre-Macondo level of rigs working in the Gulf?
3. In 2007-2009, the permitting
regime accommodated an average working fleet of 28 rigs. A
rough estimate would suggest that each rig consumes 3 permits per
year in order to stay actively working in the Gulf (28 rigs divided
by 84 permits equals 3 permits/rig). Given that a typical
deepwater well takes approximately 120 days to drill, one can also
assume that the roughly estimated numbers are fairly
accurate. Accordingly, at Interior’s 2011 pace of permitting
what is the anticipated attrition rate of rigs from the GOM?
Over the next two years, what are the anticipated production and
employment impacts from the current pace of permitting?
Please do not hesitate to source your information from outside the
Interior Department, including the Energy Information
Administration and the FBR analysis I have provided.
4. Is it accurate that at the
current run rate, assuming 2011 numbers, BOEMRE will approve 35
deepwater permits per year, supporting 11 or so rigs on an annual
basis, representing a decline in drilling activity of approximately
60 percent?
5. I am told that operators have
filed and re-filed permit requests at an average of 3.6 times, with
multiple permits exceeding 8 times. How does this compare to
historical numbers? What is your current estimate of the
backlog of exploration plans and how do you achieve this
number?
6. It has been noted that a
backlog of non-drilling work has kept some rigs working in the Gulf
that would otherwise not be there given Interior’s permitting
pace. How long do you see that non-drilling work lasting?
7. For each rig not operating in
the Gulf of Mexico, what is the multiplier effect on the Gulf
economy? How are small businesses, including but not limited
to helicopter firms, restaurants, welders, carpenters, marinas, and
hotels impacted by the loss of each rig? How is our economy
impacted if in 2012 there are 1/3 the drilling rigs working in the
Gulf than there were in 2009?
8. Do you believe that the current
pace of permitting provides certainty in the market and will not
affect the potential revenue generated from the upcoming lease sale
in the Western Gulf scheduled for late this year or early next
year?
9. How many staff at Interior were
dedicated to permitting prior to the Macondo incident? How
many staff are currently dedicated to permitting? Please
provide the data for Interior’s budget in fiscal years 2007 through
2011, including MMS/BOEMRE.
10. On June 9, 2011 the Natural Resources Defense Council,
Defenders of Wildlife, Center for Biological Diversity, Sierra
Club, Inc., Gulf Restoration Network, Inc, and Florida Wildlife
Federation filed suit challenging BOEMRE’s approval of Shell’s
drilling plan. Can you please provide the total amount in
attorneys’ fees that Interior Department has awarded these
environmental groups under the Equal Access to Justice Act and
Judgment Fund for fiscal years 2008 through 2011?
- I was pleased to read EIA’s latest Short Term Outlook
(September 7, 2011) which points out that “domestic crude oil
production, which increased by 110 thousand bbl/d in 2010 to 5.5
million bbl/d, increases by a further 140 thousand bbl/d in 2011
and by 60 thousand bbl/d in 2012.” Please explain the GOM’s
contribution to the increase in domestic oil production in actual
and percentage terms.
Again, I reiterate the frustration of my Gulf constituents with
the disparity between the President’s rhetoric and the Interior
Department’s actions. Perhaps your thorough response to these
questions will shed some light on where consistencies do exist.
Sincerely,
David Vitter
United States Senate
