Vast divide over Gulf permitting woes

The gaping divide between oil-and-gas operators and the expedient permitting process they seek is mirrored by an equally sized chasm between regulators, politicians, operators and the federal government over who or what is to blame in the Gulf of Mexico deepwater energy production slowdown.

The Bureau of Ocean Energy Management, Regulation and Enforcement was reorganized shortly after the fatal BP Deepwater Horizon oil spill last year and, while the government enforced a ban on deepwater exploration and development in the Gulf, began unveiling stricter permit application and procurement standards aimed to lessen the chance of a future blowout.

Oil and gas interest groups have focused on the pace of permitting compared to historical averages over the past year, lamenting the discrepancies and calling for reform.

At least 26 rigs, including some but not all that were allowed to return to work without resubmitting plans after the moratorium, have been permitted for work in the deepwater Gulf since the ban was lifted. Not all worked continuously.

Ten companies have received 62 permits for 12 deepwater well-development projects during the same time.

In the last 31 days, BOEMRE has issued 25 deepwater permits to 10 companies leasing 14 rigs.

Eighteen of the 25 permits have been for new wells or revised new wells and four were for development work. One, to Shell Offshore’s Noble Danny Adkins on Sept. 6, was for new well development.

In 2009, the year before the Macondo blowout, 18 permits were issued to 10 companies leasing 14 rigs between Aug. 21 and Sept. 21. Fifteen of the 18 permits were for new wells or revised new wells and eight were for development.

Two permits were for new well development.

In total, since the moratorium was lifted, BOEMRE has issued 176 deepwater permits for 40 unique wells since the moratorium.

“You can slice and dice those numbers a lot of ways,” said Andy Radford, senior policy advisor for offshore issues with the American Petroleum Institute, an oil-and-gas trade association. “We sort of need to get past that and get to making the process just efficient so we start submitting the things they want to see and they start processing them in a timely manner that we’d like to see.”

There’s no debating that the pace has been slow. Instead, the contention is over how slow and why.

A study released last month by IHS Global Insight and IHS CERA claimed the backlog of pending permits increased from a historical average of 18 to an average of 65 post-moratorium. The number of deepwater plan approvals is down 80 percent, IHS said.

The study aimed to find the economic impact of the “activity gap,” and found that the slowdown in permitting could carry a price tag of 229,000 would-be new or retained jobs and $44 million to the Gross Domestic Product in 2012 alone.

Last week, analysts with FBR Capital Markets said up to 20 rigs could leave the Gulf to drill for oil outside of the American borders if the pace of activity doesn’t increase, another forecasted blow to the domestic economy.

Nineteen rigs are active in the deepwater Gulf, said U.S. Sen. David Vitter (R-La.) in a letter mailed to the permitting agency last week with a list of 11 questions regarding the pace of permitting and staff data.

“The administration’s policies have led to massive deficits and job losses, especially in Louisiana, and it’s time for the president to stop lecturing about job creation and allow our energy industry workers to get back to work,” Vitter said.

BOEMRE Director Michael Bromwich said the problem lies more with the quality and depth of operators’ applications than politicians and special interest groups care to admit.

While speaking in Washington D.C. last week, the permitting agency head said his agency recognizes the Macondo blowout as a “seminal event in the history of offshore drilling,” and said, “industry needs to step up its game if it is genuinely interested in a more efficient process,” according to the New Orleans Times-Picayune.

“We cannot afford to have critics take liberties with the facts and act as though the only things that matter are the rapid approval of plans and permits, whether or not they comply with the standards and requirements that help ensure safety and environmental protection,” Bromwich said.

The API has surmised that BOEMRE doesn’t have “an adequate staff to evaluate the plans and permits,” Radford said. The policy advisor said between 90 and 100 exploration plans, each of which can carry between one and five wells, are consistently pending.

“Until those plans get approved, you can’t get a permit,” Radford said. “If you have a backlog in plans, you’re going to have a backlog in permits because when the plan does get approved, you submit your permit and there’s a bit of a backlog there.”

More than 50 plans were pending or under review by the agency as of Friday.