First new drilling permits issued since moratorium was lifted


Nearly a month after the federal government lifted its deepwater drilling moratorium, regulators have approved the first two permits for wells in the deep Gulf of Mexico, but neither would have been prevented by the summer-long drill ban, and the industry says it is struggling to get the most critical oil and gas exploration work approved.

The Interior Department’s Bureau of Ocean Energy Management, Regulation and Enforcement approved a permit Wednesday for Australia-based BHP Billiton Petroleum Inc. to drill a new well in the Shenzi oil field, about 100 miles south of Grand Isle. The project is for shooting water into the rock formation, a process that helps bring oil to the surface and that was allowed under the moratorium. BHP will use Transocean’s Development Driller I.

Also, BOEMRE approved a permit last month for Stone Energy to drill a sidetrack well, in which an existing well head is used to drill diagonally to a new target. The work is planned for a fixed platform less than 20 miles off the mouth of the Mississippi River. The Stone Energy permit is for work from a fixed platform with ablowout preventer at the surface, operations that were allowed tocontinue under the moratorium.

Neither permit would have been prohibited by the moratorium, which came in the wake of the BP oil spill in the Gulf. BOEMRE approved a water-injection permit for Chevron in September, while the five-month moratorium was still in place.

Drilling companies, which are gathering for their annual industry meeting in San Antonio through Friday, found the issuance of these permits a pyrrhic victory.

“They’re not approving any plans for deepwater wells that will lead to new discovery of oil and production,” said Lee Hunt, executive director of the International Association of Drilling Contractors. “Everyone’s kind of shaking their heads. This just shows again what a politically inspired public-relation spin game this is for (President Barack Obama’s) administration.”

Hunt said Gulf of Mexico operators are struggling with the new permitting process imposed during the summer. Similar to shallow-water drillers who were not technically affected by the moratorium but couldn’t get permits approved, deepwater permits are getting tied up over worst-case spill estimates, Hunt said.

The problem, once again, is that oil companies dispute the government’s demand that they have containment and spill response at the ready for four times the worst-case daily discharge from the oil field they’re drilling into.

On the other hand, BOEMRE has received only one new-well permit application since the moratorium was lifted.

Hunt said that’s because companies are struggling to understand the four-times worst-case rule and other aspects of the permitting process.

New rules require companies to have resources to handle half the reported worst-case discharge figure on site within 24 hours and enough to contain the full amount in place in 36 hours, something Hunt said is nearly impossible.

It’s still unclear how the slow movement will affect oil exploration companies, most of which kept their leased rigs on standby and their crews in tact while they waited to see what would happen with the moratorium.

Hunt said the spring is the new target date.

“Most people in the deepwater, when they renegotiated standby contracts, they were generally good through the first quarter of 2011,” he said. “So, if no permits are approved then, there will be nothing for the existing rigs in the Gulf of Mexico.

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Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
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