The National Ocean Industries Association (NOIA) believes the drilling suspensions announced by the Department of the Interior do very little to lessen the confusion and uncertainty surrounding offshore energy exploration in the Gulf of Mexico.
Now termed 'suspensions' by the Department, the moratorium does not prohibit drilling specifically by water depth, as did its predecessor, but rather prohibits drilling operations that use subsea blowout preventers (BOP) or surface BOPs on floating facilities until November 30, 2010. The suspensions do not apply to anchored facilities using surface BOPs. Such facilities are generally used in shallow water, which makes the new suspension glaringly similar, if not even more restrictive than the original moratorium. It is not immediately clear how many facilities will be impacted.
The new moratorium also leaves the door slightly ajar to the possibility of earlier removal of restrictions if industry provides assurance acceptable to the Secretary that adequate containment and response capabilities are in place. The problem for industry is that it is unclear what exactly it will take to convince the Administration that such capability exists.
In fact, NOIA, the American Petroleum Institute, the International Association of Drilling Contractors, the Independent Petroleum Association of America and the United States Oil and Gas Association and industry have joined together and convened task forces to address these very issues on containment and spill response. At this time, the Department of the Interior has not indicated how they will work with these task forces to assure that all information useful to them will be made available. NOIA and its members stand ready to provide assistance and suggestions outside the courtroom to find a safe and sensible solution. We welcome the opportunity to provide constructive input to the Department during their upcoming meetings with industry.
"The practical effect is that whether you call this a suspension or a moratorium, there is not a clear path for deepwater exploration companies to follow, and until such a path exists, exploration is at a standstill and more jobs will be lost," said NOIA Chairman Burt Adams. "If it looks like a moratorium, acts like a moratorium, and the effect is the same as a moratorium, it is a moratorium."
This announcement also fails to mention the legally challenged moratorium currently under appeal. "At least for the sake of some clarity, the Administration should only have one moratorium in play at a time," said Adams. "It's the classic shell game. The Administration keeps moving the shells around, only to reveal a new moratorium under the shell that is picked. However, in this case, there appears to be a moratorium under every shell."
The bottom line is that as long as there are lengthy delays and confusion a de facto moratorium exists and jobs continue to erode in the Gulf of Mexico, which is already reeling from the other economic effects of the spill.
Meanwhile, members of NOIA and the oil and gas industry as a whole have been working tirelessly to assist in the containment and clean up of the oil since April 20. In addition, the industry has done a top to bottom review of safety procedures to guard against a similar accident now and in the future. As part of this top to bottom review, industry has voluntarily suggested additional safety checks and backups to regain the public’s confidence in offshore exploration.
There was another path, a path for the Administration to constructively sit down with the oil and gas industry, not under the shadow of either a suspension or moratorium, and reach a sensible agreement that would allow exploration to proceed in the safest possible manner. However, it appears that the desire to reach an amicable solution is not as appealing to the Department as the urge to install another political moratorium, which may invite continued legal challenges, and continue to appeal the existing moratorium.
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