U.S. to Require Environmental Reviews for Drilling

Aug 17th, 2010 | By businessnews | Category: Business

August 16, 2010, 4:58 PM EDT

By Jim Efstathiou Jr.

(Updates with shallow-water drilling beginning in first paragraph.)

Aug. 16 (Bloomberg) — The U.S. released environmental guidelines subjecting oil and natural-gas drilling in deep water to full environmental reviews while offering assurances that operations in shallow waters can proceed.

Blanket exemptions such as one granted to BP Plc before its Gulf of Mexico spill won’t be allowed for deep-water projects during a pending review of environmental requirements, Interior Secretary Ken Salazar said today in a statement. Such categorical exclusions from the reviews required by law will be restricted to drilling projects that involve “limited environmental risk,” he said.

Shallow-water drilling using technology different from BP’s Macondo well, where a blowout preventer failed 5,000 feet below the surface, remains eligible for exemptions, according to the statement. The Obama administration halted virtually all energy production in the Gulf after the BP spill, including less risky operations that aren’t in deep water, according to Jim Noe, general counsel for Hercules Offshore Inc., the largest owner of shallow-water rigs in the Gulf.

“It certainly removes a question mark,” Noe said in an interview today. “I hope that they start issuing permits now.”

The Interior Department gave BP a categorical exclusion in 2009 for the Macondo well, which blew out April 20. An estimated 4.9 million barrels of oil leaked before the spill was stopped on July 15, according to government scientists. BP’s exploration plan for the well called the prospect of a spill “unlikely.”

‘A Fresh Look’

“In light of the increasing levels of complexity and risk, and the consequent potential environmental impacts associated with deep-water drilling, we are taking a fresh look,” Salazar said in today’s statement. “Our decision-making must be fully informed by an understanding of the potential environmental consequences of federal actions permitting offshore oil and gas development.”

Following the spill, President Barack Obama announced a drilling moratorium in water deeper than 500 feet during a study into what went wrong. Confusion over the ban among regulators at the Interior Department’s Bureau of Ocean Energy Management and industry effectively halted permits in shallow water as well, Noe said.

Noe said permitting staff at the bureau, which replaced the Minerals Management Service in a reorganization, asked themselves, “Will they lose their job, will they be scrutinized or questioned, if they allow the use of categorical exclusions?”

The guidelines announced today will allow regulators “to move forward with new permits” in shallow water, the Interior Department said in the statement.

Stretching Timetable

The new environmental guidelines followed the release of a report today from the White House Council on Environmental Quality, which called on the regulatory bureau to review its use of categorical exclusions.

An industry group said new deep-water drilling, already under the administration’s moratorium, may face further delays for environmental reviews.

“We’re concerned the change could add significantly to the department’s workload, stretching the time line for approval of important energy development projects,” Erik Milito, upstream director for the Washington-based American Petroleum Institute, said in a statement. “We’re in favor of targeted changes to regulations that enhance safety and environmental protection, provided the changes allow for the efficient moving forward of energy development and job creation.”

–With assistance from Jeff Plungis in Washington. Editors: Larry Liebert, Steve Geimann

To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net.

To contact the editor responsible for this story: Larry Liebert at LLiebert@bloomberg.net.

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