Post-Moratorium Woes De facto drilling ban claimed by oil experts

Tuesday, Nov. 16
November 16, 2010
Neighbors angered over blight
November 18, 2010
Tuesday, Nov. 16
November 16, 2010
Neighbors angered over blight
November 18, 2010

“Yes, it does exist,” said Lori Davis, owner of Houma-based Rig-Chem, regarding speculation that a shallow water drilling ban has been in place even before a deepwater drilling moratorium, enacted by the Obama Administration on May 28, was officially lifted on Oct. 12. Davis is not alone in her belief.

The Independent Petroleum Association of America released a report Oct. 6 that cited a study, conducted by the SMU Cox School of Business, that noted a “marked slowdown in the issuance of permits to drill new shallow water wells in the Gulf of Mexico … .”

In effect, no drilling was being allowed at water levels less than or equal to 500 feet, just as it had been ordered to stop at deeper ocean sites. A significant reduction in the number of permits being issued, which has persisted even after the lifting of the deepwater ban, has prompted oil and gas industry experts to claim that their businesses are being shut down by the government.

That observation was made in contrast to the White House’s claim that a deepwater drilling ban, following the April 20 explosion of the Deepwater Horizon oil rig and the subsequent oil spill, would have no impact on shallow water petroleum production activity.

The Bureau of Ocean Energy Management came out early rejecting those claims. BOEM Director Michael Broomwich even went so far as to tell Louisiana Lt. Gov. Scott Angelle and members of a shallow drilling coalition that no moratorium exists on shallow water activity. Broomwich claimed the slowdown was simply a matter of delays in processing a large number of drilling applications.

“I understand the frustration that people feel because we are not able to review and approve applications as expeditiously as we have in the past,” Broomwich said for the record. “But the simple fact is that it has taken time to submit and verify the additional required information. We will not approve applications until and unless they fully comply with new requirements.”

Added regulations, which the federal government put in place as it lifted the deepwater ban, have caused oil producers and support services to be bogged down in red tape, which some have suggested could be part of a political agenda to intentionally stall the industry as a whole.

Last Wednesday, Sen. David Vitter (R-La.) reacted to an Inspector General report that revealed that the Department of Interior manipulated the findings of a 30-day study to justify the moratorium on offshore drilling, which in turn prompted a dragging of the feet approach to issuing any permits for petroleum and gas exploration and production.

“This report reveals exactly what I suspected all along n Obama Administration officials appear to have deliberately disregarded the Information Quality Act to push their destructive moratorium that has crushed job growth along the Gulf Coast,” Vitter said. “I initially requested this investigation on June 16 because I wanted to make sure the federal government was basing policy decisions that would directly impact so many Louisianians on science n not politics. Unfortunately, this report reveals the contrary.”

Terrebonne Economic Development Authority CEO Mike Ferdinand expressed disappointment regarding a drilling ban that was never officially claimed, but which appears to be taking place based on the lack of activity now being witnessed.

“It affects two prime fields of our economy, which are fisheries and oil services,” Ferdinand said. “It puts us at a competitive risk with the rest of the world.”

According to BOEM data, there were 20 shallow and deepwater drilling permit applications submitted between June 8 and Nov. 12. Of those permit applications, 13 were approved and nine are pending. There was no designation as to how many permits might have been issued specifically for drilling off the coast of Louisiana.

At the same time, The Foundry reported that it could be months before the federal government will issue any new permits. In a Nov. 3 report it was told that approved shallow water drilling permits had dropped 53 percent compared to this time last year.

The report also revealed that BOEM had issued 3.8 fewer shallow water drilling permits per month since August than it had for the year preceding the Deepwater Horizon oil spill.

As for deepwater permits, none have been issued since May. Before the oil spill an average of 5.8 permits were issued per month.

Lafourche Parish President Charlotte Randolph was asked about the drilling moratorium and lack of permits being issued. She called government figures “misleading” and said she had only heard of two permits that had been granted since the deepwater ban was lifted.

“I blame that squarely on Carol Browner who advises the president on environmental issues, and she is totally against continuing n in any way shape or form n oil and gas exploration,” Randolph said.

Randolph said that it is not the large companies that are being hurt the most, but the small independent oil producers and service companies that are least likely to be able to afford changes that came with new federal regulations.

“I truly believe that this is a way of phasing out the small independents,” Randolph said.

Terrebonne Parish President Michel Claudet had previously gone on the record when he said that hurricanes hitting the region are one thing to deal with, but that a drilling moratorium is quite another.

“We are being impacted and affected by the de facto moratorium,” Davis said of her business that manufactures and distributes specialty drilling additives, work over materials and drilling fluids.

“Until some of these regulations are straightened up and until people know what is to be expected … there is not a whole lot of clear understanding,” Davis said.

IPAA President and CEO Gary Russell said in a printed statement that the Obama Administration “continues to slow walk this permitting process” at the peril of thousands of families and small businesses.

According to the findings of a Senate Small Business Committee hearing in September, no economic research or analysis on the impact a drilling moratorium might have on the oil producers or support companies took place before the ban was issued.

Now, business owners that have been impacted worry what an unofficial moratorium will mean for them in the long run and where they will be at this time next year.