This opinion piece presents the opinions of the author.
Last week, the Financial Times wrote an article with the headline "Experts attack plan to speed oil permits." The thrust of the article was to critique a proposal by Republican presidential candidate Mitt Romney to give states authority over oil drilling and permits on federal lands. According to the article's author, "regulatory and environmental experts" oppose the plan because they perceive it could open the door to lax oversight of the oil industry. Once you read the article it becomes evident that the "experts" are Michael Bromwich and Heather Taylor-Miesle, people with clear agendas not supportive of the oil industry.
Mr. Bromwich now is a litigation partner with the law firm of Godwin Procter in its Washington, D.C. and New York City offices. He is also the Founder and Principal of The Bromwich Group, a consulting firm that offers crisis management and strategic advisory services, as well as more specialized services relating to offshore energy and law enforcement. Before these positions, he was the head of the Minerals Management Service and was tasked with reorganizing the agency to deal with its organizational shortcomings such as conflicts of interest in supervising offshore regulatory inspections, sloppy stewardship of Indian royalty income, and the ineffective granting of offshore drilling and production permits. These problems contributed to the firing of employees for their laxness in supervision and conflicts of interest, which some believe created a permissive drilling regulatory environment linked to the Deepwater Horizon disaster and resulting Macondo oil spill. Ms. Taylor-Miesle is the director of the NRDC Action Fund, the activist arm of the environmental group National Resource Defense Council that is a strong opponent of the oil and gas industry.
The criticisms of Mr. Romney's energy proposals focused on: 1) the development of a "fast-track" process with fixed timelines for regulators to approve exploration and development permits that "significantly increased" the risk of another Macondo; 2) the delegation of permit-granting authority to the individual states creates a "race to the regulatory bottom" in which companies choose where to operate based on the most permissive regulations; 3) the inability of state governments to attract and compensate skilled personnel required to conduct reviews; and 4) the "uneven laws and oversight" that could lead to increased litigation between states.
The other three criticisms were cited by Mr. Bromwich. His first one raises the question of knowledge versus competency. If the reviewers are trained they should be able to approve or disapprove a permit application within a reasonable time. Plus, the timelines would have to be agreed upon by BSEE and the industry. The idea that the oil and gas companies view permissive regulation as an ingredient for successful operations really depends on the regulators. Permissiveness may actually reflect greater local knowledge such that extraneous rules and regulations are not needed. That does not make the regulation any less safe, but it may make the state more attractive since it could lead to less costly operations, without sacrificing safety. Lastly, to suggest that only the federal government pays enough to attract top quality regulators is a stretch, since we know the Interior Department had to request an exemption from federal pay scales in order to compete on salary with the industry while trying to hire petroleum engineers.
What we recognized in the arguments attributed to these so-called "experts" is the foundation of arguments to be made in the next major energy war – hydraulic fracturing. These criticisms are the backbone for why activists and environmentalists desire the federal government regulate hydraulic fracturing activity in order to insure it is conducted "safely."
G. Allen Brooks works as the Managing Director at PPHB LP. Reprinted with permission of PPHB.
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