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.
United States Senate