Macondo blowout & oil spill: One year on
No new legislation, but big regulatory changes
By Gary Gentile and Meghan Gordon
Within months of the April 20, 2010, BP Macondo blowout and oil spill, Congress was debating bills that would have applied the brakes to what some had charged was a runaway regulatory system that for years issued offshore drilling permits with little consideration of risk.
The bills, none of which ever made it to President Barack Obama's desk, would have mandated safer blowout preventers, required third-party certification of well designs and tripled the time regulators could take to consider company exploration plans.
One year later, the only spill-related bills in active consideration by Congress are part of a Republican push to hit the gas pedal on offshore leasing, requiring new sales off the Atlantic and Pacific coasts and forcing regulators to speed the approval of Gulf drilling permits.
The Congressional about-face might be due to what Interior Secretary Ken Salazar, Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, and others have called a sense of "amnesia" that has fallen over politicians, especially as constituents complain about skyrocketing gasoline prices and Middle East unrest raises the specter of dependence on foreign oil.
"The legislation demonstrates, in my view, a sense of amnesia," Salazar told reporters recently. "I don't have amnesia, neither does the president, neither does Michael Bromwich and the Department of the Interior."
It could also be due to the slow pace of Congress, which just last week finally passed a 2011 budget and, on issues such as oil, is torn as much by regional differences as partisan loyalties.
"Congress doesn't always move as fast as people would like," Bob Simon, Democratic staff director for the Senate Energy and Natural Resources Committee, said April 15 in a conference call with reporters.
Simon noted that the Oil Pollution Act of 1990, a major reform of procedures to deal with an oil spill, did not pass until 17 months after the Exxon Valdez spill in Alaska in 1989.
Simon said his committee was working on building bipartisan support for a new version of the bill that passed unanimously last year, but was never taken up by the full Senate. It is too early to say what provisions might be in such a bill, Simon said.
"We're very focused on getting this one right and bringing a bill forward that can have the same degree of broad bipartisan support in this Congress that we were able to get in the last Congress," Simon said. "I'm hopeful the legislative process will be able to address this even though we're in a very partisan environment on many issues."
Meanwhile, neither regulators nor industry groups have waited for Congress to act.
MMS renamed, split up
Regulators moved quickly to reorganize the Minerals Management Service, which they renamed the Bureau of Ocean Energy Management, Regulation and Enforcement. Salazar announced a plan to split the agency into three smaller groups, removing potential conflicts of interest by separating the revenue-collection arm from the groups responsible for setting lease sales and enforcing regulations.
And after a five-month halt on new exploratory drilling in the Gulf, BOEM issued a series of new regulations mandating safer operations, including a requirement that operators show the ability to contain and clean the worst-case scenario spill in the case of a blowout.
That requirement, among others, added an additional four months of delay, as operators grappled with the new regulations and industry groups scurried to develop capping stacks, collection systems and other systems designed to meet the new rules.
Two groups emerged to fill the need. The Marine Well Containment Company was formed with an initial $1 billion investment by five majors. The group now has nine members. The Helix Well Containment Group, formed by smaller exploration companies, has more than 20 members.
Finally, on February 28, the first of 10 permits for the resumption of Gulf deepwater drilling was issued to Noble Energy, which is relying on a Helix capping stack in the case of a blowout and spill.
Owen Kratz, CEO of Helix, said the technology to kill a runaway deepwater well existed before Macondo. But it took the disaster to rally the industry to make such systems more readily available.
"It's process. It's knowing what you need, where to find it, getting it contracted," Kratz said in an interview.
"That takes an incredible amount of time. Now we have the consortium of 23 producers. It's all been identified, procedures are all written, the contracts are in place. Theoretically if a crisis were to happen, everyone just responds and you'd shut it off in anywhere from three to 15 days."
For its part, the industry has begun to address one of the key recommendations of Obama's National Oil Spill Commission. The group, co-chaired by former EPA Administrator William Reilly and former Senator Bob Graham, urged the creation of an industry safety group that would promote best practices, fund research and apply peer pressure against poor performers.
The American Petroleum Institute will be the home to a new Center for Offshore Safety, which will be headquartered in Houston and walled off from the lobbying function of API. The group will be a companion to a new Ocean Energy Safety Advisory Committee, a government panel formed to assist the Interior Department with offshore safety issues. That group has its first meeting April 18.
Reflecting on the Macondo anniversary, Reilly said that, while much progress remains to be made, the offshore energy industry is safer today.
"It's too much to ask that one be fully prepared," Reilly said during an interview on Platts Energy Week TV show that aired April 17. But, "to the extent that we could be more effective in dealing with such a problem again, I think we are."
To subscribe or visit go to: http://www.platts.com
