New U.S. Drilling Moratorium: Same Song, Different Verse

Secretary of the Interior Ken Salazar on Monday directed the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) to issue new suspensions of deepwater drilling on the Outer Continental Shelf (OCS), including the Gulf of Mexico and Pacific regions through Nov. 30 of this year.

The new drilling suspensions marks Salazar and BOEM's second effort to suspend deepwater drilling operations in the U.S. Gulf in response to the BP oil spill. The first moratorium, issued in late May, was lifted by a district judge on June 22; a panel of federal district judges refused BOEM's appeal to reverse the lower court's decision.

The new suspensions would apply to drilling operations that use subsea blowout preventers (BOP) or surface BOPs on floating facilities. Secretary Salazar has further directed BOEM to cease the approval of pending and future applications for permits to drill wells using subsea or surface BOPs on a floating facility.

While the May 27 moratorium suspended drilling activity by water depths, the new moratorium would not suspend activity based on water depth, but on the basis of drilling configurations and technologies.

"While the new version is effectively the same as the old one, it appears the DOI's legal team used the new version as a rebuttal to the recent legal proceedings, with more evidence to address the deficiencies of the old moratorium," said Jefferies & Co. Inc. Analyst Judson E. Bailey in a recent report. Bailey described the new moratorium as the "same package wrapped in different paper."

Salazar said the latest suspensions are based on new evidence regarding safety concerns, blowout containment shortcomings within the industry, and spill response capabilities that are constrained by the BP oil spill. Salazar also said this information indicated that allowing new deepwater drilling to commence would pose a threat of serious, irreparable, or immediate harm or damage to the marine, coastal and human environment.

"More than eighty days into the BP oil spill, a pause on deepwater drilling is essential and appropriate to protect communities, coasts, and wildlife from the risks that deepwater drilling currently pose," said Secretary Salazar. "I am basing my decision on evidence that grows every day of the industry's inability in the deepwater to contain a catastrophic blowout, respond to an oil spill, and to operate safely."

In a decision memorandum to BOEM Director Michael R. Bromwich, Salazar said that a temporary pause on deepwater drilling will provide time to implement recent safety reforms and for:

  • The submission of evidence by operators demonstrating that they have the ability to respond effectively to a potential oil spill in the Gulf, given the unprecedented commitment of available oil spill response resources that are now being dedicated to the BP oil spill;
  • The assessment of wild well intervention and blowout containment resources to determine the strategies and methods by which they can be made more readily available should another blowout occur; and
  • The collection and analysis of key evidence regarding the potential causes of the April 20, 2010 explosion and sinking of the Deepwater Horizon offshore drilling rig, including information collected by the Presidential Commission and other investigations.

In his decision memo, Secretary Salazar said that the inspection of blowout preventers on the new Macondo relief wells identified unexpected performance problems. During ROV hot stab testing, the Lower Marine Riser Package disconnect function was unsuccessful because of a leaking shuttle valve.

Inspections also found that a failed shuttle valve caused an unsuccessful test of the All Stabs Retract function; a failure of the dead-man test was found because a shuttle valve was installed that should not have been; and a broken solenoid connection was encountered on the blue pod that prevented that pod from closing the casing shear rams.

In this period, the Department and BOEM will also be issuing and implementing interim safety rules in accordance with recommendations in the 30-Day Safety Report that Secretary Salazar submitted to the President on May 27, 2010.

The new decision by the Secretary also establishes a process through which BOEM will gather and analyze new information from the public, experts, stakeholders, and the industry on safety and response issues, which could potentially provide the basis for identifying conditions for resuming certain deepwater drilling activities.

"I remain open to modifying the new deepwater drilling suspensions based on new information," said Secretary Salazar, "but industry must raise the bar on its practices and answer fundamental questions about deepwater safety, blowout prevention and containment, and oil spill response."

Shallow water drilling activities that use different technologies do not present the same type or level of risks as deepwater drilling operations and can continue to move forward if operators are in compliance with all safety and environmental requirements, including new safety and environmental requirements implemented through recent Notices to Lessees. Production activities in federal waters of the Gulf are not affected by the deepwater drilling suspensions.

BOEM has been tracking shallow water drilling permit requests and well modification permit requests that are required to include the information outlined in NTL-N05 (Safety NTL) and/or NTL-N06 (Environmental NTL).

For those applications required to comply only with NTL-N05, 16 applications have been approved and 16 are pending. For those applications required to comply with NTL –N05 and NTL-N06, 12 requests are pending.

In addition, since June 8, BOEM has approved 18 other shallow water permits, and 4 others are pending, to which there were no permit-specific requirements in either NTL. However, the applicants had to comply with NTL-N05's general (company-wide) certification requirements before these applications could be processed.

Bailey said the new moratorium to halt drilling will result in continuing uncertainty on offshore drillers and Gulf of Mexico-centered offshore supply vessel companies as the moratorium does not provide a meaningful likelihood of deepwater activity resuming before early 2011.

One bright note is the new moratorium's official end date of Nov. 30, 2010, which is a couple of months shorter than the earlier moratorium's implied deadline and follows the newly established report deadline of Oct. 31. "The Secretary did allow some wiggle room in the time-line if he receives sufficient evidence of information that justifies a modification to the deadline," Bailey said.

While Bailey expects the new moratorium to be challenged in court and quite possibly be overruled again, "we expect to see continued movement of floaters outside the GOM, further force majeure declarations and contract renegotiations for rigs staying in the GOM."

Houston-based drilling company Diamond Offshore has announced that two of its floaters, Ocean Endeavor and Ocean Confidence, will leave the Gulf for drilling contracts offshore Egypt and the Congo. While Ocean Confidence is expected to return to the Gulf for its original work scope in Africa, Ocean Endeavor is not expected to return, Bailey noted.


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John | Jul. 19, 2010
STOP policy is reinforced on every rig we set foot on. With the reported safety disagreements it appears that BP drove thru several yellow lights with destination as the primary objective. Perhaps the MMS should have had an umpire in the game reviewing critical steps and listening to comments from all onboard? After 3 months we should expect more answers regarding what went wrong. If, as reported, there were shortcomings in BOP redundancy, casing, cement, etc. why cant we correct such deficiencies and get back to work? It appears that each side is more interested in offense and defense strategies for future legal and political battles rather than getting the oilfield industry back to work. At this rate of progress most of us will be out of business and/or retrained for (hopeful) other careers.

MSC | Jul. 18, 2010
It amazes me that there is no mention what-so-ever of Transocean in the media. The media even report that the Deepwater Horizon belongs to BP! What responsibilities do Transocean have. It was their rig, their BOP, their maintenance on the BOP, and I believe have the ultimate say, ie the overuling of the company man if they believe what is being carried out is not safe, correct or following procedures. Doesn't the OIM have final say? Is really BP to blame 100% or should Transocean take some of the blame and the cost? Could it be Transocean is seen as a US company but BP is seen as a British company? (Neither is true).

mostafa mabrouk | Jul. 17, 2010
I think this is the first time in history of oil and gas industry that happens blow out of a rig , lets think wisely ,shall we destroy this industry and lose thousands of jobs and money income for thousands of families and import oil that means cash outflows the biggest beneficiary the oil producers ,yes there is a mistake but government can put stringent rules to avoid or new criteria required to prevent accidents but rush moratorium is not in the right place

Fred Korneman | Jul. 16, 2010
Stop Pounding Toni Hayward and BP. Now that the finger-pointing and accusations are in full swing, it seems we finally have found a culprit to blame for the ‘Deepwater Horizon’ disaster, but it’s naïve to think that one man and or his company can be made responsible and blamed for a catastrophic calamity of these proportion and the tragic loss of eleven lives. This accident could have very easily been prevented if all the Government Agencies (Safety Inspectors), upper and lower Operator and Contractor Management, Engineers and Supervisors had lived up to their responsibilities but they have not. All we do now is blame Toni Hayward and BP. and make him the fall guy. The problem in the Oil-patch these days lies much deeper but it always points to inept management. Let’s see the kind of people we have now pitching the ball. Not long ago I read an article from an VIP. proclaiming the good times have arrived in the Oil-patch. We now have a Cyber Chair to sit on, a Joy-stick to play with, and Engineers are running the rig from an office hundreds of miles away from the location. Roughnecks the backbone of any rig, are now being called Softnecks, because there is little or nothing left for them to do. As a veteran of almost 40 years I knew this statement was a perfect invitation for disaster and it happened almost instantly. As complacency sets in, discipline, morale and ethic values will disappear. And before to long it will happen and it did. Now since the oil has arrived on the beaches, we have nothing else to do but blame one man and his company for the fiasco but Toni Hayward is not alone. There are dozens of people right now trying to cover their tracks and crying fool with Ken Salazar leading the pack. What had me mostly struck when I read this trash was the complete absence for disapproval from the Oil-patch Community (Managers and none Managers alike) about this kind of nonsense. Not one feather was ruffled, not one eyebrow was raised. In other words they were all in full agreement or simply to ignorant to understand the danger what a stupid remark of this kind will have. All I have to say now is clean your own doorsteps first before you point your fingers at other people and ‘Stop pounding Toni Hayward and BP’.

Bill Atkerson | Jul. 16, 2010
All of oil, jobs and the environment is important. Shouting out labels like "radical environmentalists" is only intended to inflame the situation, not help it. What I want to know is why all the oil companies, including BP, who do deep water drilling off the US coast do not put together their own proposal to avoid such a devastating environmental catastrophe in the future. Their sitting on their hands rather than having their own meetings among themselves to come up with a proposal that will work to protect the environment and allow for continued exploration and production. You can yell all you want, but why aren't you yelling at all the non-BP oil companies for doing nothing. My 2 cents.

HS | Jul. 16, 2010
If you see all the committees set up by Obama administration to probe Deepwater Horizon and the newly formed substitute for MMS, more than 75% of the guys are hard core radical environmentalists. Obama is wanting to control each and every business under him. If you observe the time leading up since he got elected, everyone he appointed in any position is either a Harvard Law School graduate (as he himself is), or radical environmentalists, or wall street guys.

Donna Davis | Jul. 15, 2010
Including shallow water ~66,800 wells have been drilled in the GOM, not counting Mexican waters. There are about 4-6 million employees and contractors in the oil industry and related firms. The problem is that the government and public are anti-oil industry. We have allowed ourselves to be Demonized by the Press, public, and government. We need to fight back. As an industry we need to represent to the public: who we are; what we do; how we do it; and why we do it where we do it. We also need to stop giving Wind and Solar a free ride as as "Simon Pure" Green Industry. We need to stop being afraid of pointing out the known and putative severe environmental and economic effects of Wind and Solar.

Audie Hebert | Jul. 14, 2010
This is unbelievable due to the fact that if BP doesn't take short cuts and MMS does their job and not approve the permits for BP due to the well plan there is no blow out or fatalities. Failure of compliance by BP and MMS caused this failure and now the Federal government is developing new regulations when the compliance of the regulations in place weren't followed by BP or MMS. The regulations isn't the issue, compliance with the regulations is the issue. There will always be opportunities for improvement and the industry should continue seeking those opportunities with committed staffs.

Chuck Bedell | Jul. 14, 2010
The new head of the BOEM has absolutely no training or experience in ANY industry, let alone the offshore industry, nor is he a safety expert. He is a Harvard Law School graduate though, so I guess that makes him capable of doing any job. Maybe he even stayed in a Holiday Inn Express last night! His reputation at the Justice Department will make him feared by everyone in the former MMS and in industry. He will keep them from working with companies to understand and resolve potential problems for fear of being accused of being corrupt. When people can't talk to each other, safety will suffer. What a nightmare!

Xiongying Yu | Jul. 14, 2010
BP oil leak and spill accident is terrible indeed, which is resulted from many factors , cementing , BOPs , and operation procedures and skills etc. We should obsorb the lessons from the event, such as emergence centers and procedure training . However , we should not stop deepwater drilling due to this event. The World needs oil . So far Oil is the main kind of energy of our world. Obama does not know the economics and productions of a country. He is a baby level.

E P Miesch | Jul. 14, 2010
I wonder if Salazar can read or listen attentively. How many times does he have to read the facts that have been given to understand that this was caused by stupid decisions that would not have been made by any competent Rig Manager. He says he wants to prevent something like this from happening again. Does he think he and Obama are the only ones in the world that don't want something like this to happen again. A Stupid Decision can wipe out almost any kind of Planning, particularly when there are multiple Stupid Decisions stacked one on top of another.

Bill Hamilton | Jul. 14, 2010
It upsets me that folks who are not in this oil and gas business can put hundreds of people out of a job for one failure. When we had all the explosions in the refineries some years back we did not create a ruling to stop oil and gas refining. I hope the ruling is overturned again. and the people in Washington will keep leave our lively hood alone here on the Gulf.

W R Odom | Jul. 13, 2010
The rules and regulations are there, the problem, persons in charge are not following the rules. Deep water Horizon problem should not have happened. Somebody did not follow the rules. If these persons are alive, they need to be put in jail. I have worked most of my life on offshore drilling rigs and have overcome some problems with difficult well formations. We followed procedure that are in place to control drilling any oil well. Salazar doesn't have a clue what takes place in the oil field. Salazar, take a look on the internet and see the by-products that come for oil. Remove these items from your house and the place will be bare.

obaidur Rahman | Jul. 13, 2010
Basically government has right to ban any activity which is against the nature and which creates pollution onshore, as well as offshore. It is fault of totally operator side. Guys did not follow specific procedure in operation. Which every oil industry whether in Offshore or onshore is following. There is laid down rules for each and every step in oil & gas drilling. We must follow it. To issue a moratorium is not a solution. There must be experienced auditor who should audit equipment and documentation time to time. If you want to give some punishment, give to auditor, why equipment all 7 barriers failed?. failed procedure

Bryan | Jul. 13, 2010
Just another knee jerk reaction. Another political posture for the Obama administration to push their Cap and Tax bill. The federal government doesn't have the slightest clue what it takes to drill a well. Have they even looked at the industry safety record over the last 30 years? It's a hell of a lot better than the airline industry's safety record. I've worked in this industry since 1974. I've seen the changes made in the industry to make it safer. I've also seen the results of environmentalists restricting access to leases on the shelf. We wouldn't even be in deepwater if not for the ban on drilling in certain parts of the GoM. If you want us to be independent and not rely on foreign oil, then QUIT TYING OUR HANDS WITH POLITICALLY MOTIVATED REGULATIONS AND DRILLING BANS !!!

Mr. Kim Himel | Jul. 13, 2010
It is a bad sign by a person(Mr. Salazar) that is in experience in the oil field operations of oil companies because over the years (35+) worldwide that I have been in this business there was never any company any where in this world that hasn't taken every precautions on all operations from drilling to final production before starting a project. It is simple and straight forward BP used in experience personnel on this drilling project plus they cut corners where ever they could to save a buck. It is funny any other company (Shell Oil, Marathon Oil, OXY, etc) would have fired that person that made these mistakes but just like a British Company they will only promote this person to make another mistake either in USA or some where else around the world. In the deep water projects there is double checks on every part of the projects before it is goes to construction for all the companies that I have worked with over the years. It is very up setting that the president of this country(USA) will use this spill as a political stepping stone instead of actually helping the states clean up this mess like a good president would do. Plus by stopping these skimmers that can suck up this spill from getting a permit is almost like he wants the Gulf Coast to disappear because he doesn't want to hear the truth or either it was planned by BP and the federal govt all along? When will he ever get a president in office that will work for the USA and not foreign countries like what is happening right now?

ESTUS LARON LADNER | Jul. 13, 2010

THOMAS JONES | Jul. 13, 2010
The oil and drilling industry must build emergency response centers in probably 4 to 5 areas of the Gulf of Mexico that will train, monitor, store supplies and equipment to respond to the hazards that exist in the deep waters of the GOM. The locations might be in Corpus Christi and Port Arthur, Texas. Grandisle,Louisiana, Pascgoula, Mississippi, Pensacola and Naples, Florida. The industry shouldn't waste time shooting at the messenger but getting its act together demonstratively!! Just Do It .... If they make this effort effectively they wont need "Walrus Insurance"

Scott Maddox | Jul. 13, 2010
This Salazar fellow is a moron on his best day. One incident and the world shuts down. It is unfortunate that the government has such a strong hold on oil and gas yet demand foreign oil dependence freedom. The administration is right, they will ensure there are more jobs, but not for Americans. Nice.

Sam | Jul. 13, 2010
I think that this man, Ken Salazar, has probably never been on an offshore drilling rig and has no idea what he is talking about. I also do not believe that Obama knows what he is talking about. I have worked offshore for the better part of 30 years and this is the first blowout that I have ever seen. Why punish the whole industry for the indiscretions of one operator?

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