07/07/2010
Noelle Straub, E&E reporter
The Obama administration has asked a federal appeals court to reinstate the six-month moratorium on new deepwater drilling, saying it needs time to appeal a lower court’s lifting of the ban and to issue a revamped moratorium.
Because oil continues to spill into the Gulf of Mexico, “with catastrophic consequences to the environment and local economy — despite repeated efforts, using every available technology, to stop it,” the Interior Department had to take immediate action to minimize the risk of another spill, the department said in a court filing to the 5th U.S. Circuit Court of Appeals.
“The stakes are even higher now that it is hurricane season,” the department wrote. “The suspension orders give Interior time to further implement 22 already-identified new safety measures and to develop others as it gathers more information. Therefore, that decision was a rational exercise, under emergency circumstances, of Interior’s substantial discretionary authority under the Outer Continental Shelf Lands Act and its own regulations for suspending lease operations.”
The administration has been crafting a revised proposal since a federal judge struck down its original drilling ban.
President Obama in late May halted approval of new deepwater drilling permits and suspended drilling at 33 exploratory wells while an independent panel conducts a six-month study of offshore drilling safety. Hornbeck Offshore Services, an oil-field service company, sued over the moratorium, saying it would have severe economic consequences.
U.S. District Judge Martin Feldman agreed with the company and ordered the administration on June 22 to lift the moratorium, saying the government had not provided adequate reasoning for it and that it would have a permanent and harmful effect on the economy of the Gulf region.
The administration requested a stay, but Feldman two days later reaffirmed his order and gave the administration 30 days to comply.
In its request to reinstate the moratorium, Interior says it is “simply not true” that the department did not provide reason for the ban. The department says most of the country’s cleanup resources are already devoted to the current spill, and a second spill would further stress those efforts.
“Interior must protect the long-term public interest of the Nation in the prudent and safe exploitation and management of the OCS’s resources to ensure their viability for the future,” the filing says. “A short-term suspension of deepwater drilling while safety regulations are updated is necessary to achieve that goal.”
Interior also disputed claims the oil industry would collapse due to the moratorium, saying wells in production are unaffected and that the department must consider the effects of a second spill on the long-term health of the environment and economy.
The administration also said it would issue a new moratorium with some modifications, possibly including differentiating between areas where pressure and depth are known versus exploratory areas.
Last Wednesday, White House spokesman Robert Gibbs said a revised moratorium would come “in the next few days,” but the court filing said Interior would issue it “soon.” An Interior spokeswoman today declined to specify a timeline.
Industry and Gulf state politicians have strongly criticized the moratorium, saying it will serve as an economic blow to an already struggling region.
U.S. demands BP notice of sales
BP PLC confirmed today that it received a demand from U.S. authorities for advance notice of any asset sales or significant cash transfers, the Associated Press reported.
Assistant Attorney General Tony West, who heads the Justice Department’s Civil Division, wrote to Rupert Bondy, BP’s general counsel, on June 23. Normally, the U.S. Justice Department does not require advance notice of such deals.
BP has not yet responded to the letter, a company spokesman told AP.
The letter asks BP to inform Justice in advance of “any planned or contemplated events that may involve substantial transfers of cash or other corporate assets outside of the ordinary course of business,” Agence France-Presse reported.
U.S. authorities should also be told of any “corporate restructuring, reorganisation, acquisitions, mergers, joint ventures, sales, divestments or disbursements,” it demands.
BP chief visits Middle East
BP CEO Tony Hayward flew to the wealthy emirate of Abu Dhabi to meet officials amid speculation that the oil giant is looking to raise cash to cover cleanup costs from the Gulf of Mexico oil spill, the Associated Press reported.
Hayward arrived in the capital of the United Arab Emirates yesterday and would be staying “a couple of days,” a BP spokesman told AP. But he would not say whether Hayward planned to sit down with the region’s powerful investment funds, which have provided needed cash to Western multinationals in past times of crisis. BP has a long-standing partnership with the state-owned Abu Dhabi National Oil Co., which is responsible for crude oil production in the Arab emirate.
BP has approached sovereign wealth funds with a view to securing a strategic investor to fend off takeover bids while it deals with its massive U.S. oil spill, Reuters reported yesterday. BP executives have held talks with a number of sovereign wealth funds, including funds in Abu Dhabi, Kuwait, Qatar and Singapore, according to Reuters.
Hayward visited Azerbaijan yesterday and Russia last week to reassure the countries that the company is committed to investments there.
BP said it has no plans to issue shares to help pay for the spill.
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Mike Soraghan, E&E reporter
There are probably a lot of things Interior Department officials would like to change about the how they looked at BP Exploration and Production’s drilling operations.
They’ve found one thing that they can change — their website.
BP’s status as a finalist for the “Safety Award for Excellence” from the disgraced and now-renamed Minerals Management Service has been deleted from Interior’s site.
Before the April 20 blowout at BP’s Macondo well fouled the Gulf of Mexico with millions of gallons of oil, MMS had announced that BP was a finalist for the prize, known as the SAFE award. The other finalists in the “high-activity” drilling category — meaning those that produce more than 10 million barrels of oil a year — were Eni U.S. Operating Co. and Exxon Mobil Corp.
A Google cache snapshot of the MMS website shows the page as it appeared on June 6, 2010. Click here for a larger version of the image.
The winner was to be announced at an MMS-sponsored awards lunch during the 2010 Offshore Technology Conference in Houston on May 3. But the awards lunch was canceled, and the winner has never been announced.
The drilling conference, whose sponsors included BP and Halliburton Co., was not canceled. And MMS has since been renamed the Bureau of Ocean Energy Management, Regulation and Enforcement.
Interior officials failed to respond to messages asking why BP’s name was deleted, except to e-mail a copy of the notice canceling the May 3 lunch. Interior spokesman Todd Hughes said the award has not been given out because the lunch has not been rescheduled.
BP has won the award once before, in 1992, when it tied with Conoco. BP was also a finalist in 2009, when Exxon Mobil won.
Transocean Ltd., which drilled the blown-out well from its Deepwater Horizon rig, won in 1999 and 2008. The company was nominated in 2007.
The department has been giving the award for 25 years. The current awards lunch and program at the Houston offshore conference began in 1999.
The award is intended to recognize offshore companies for outstanding work on safety and preventing pollution “by adhering to all regulations, employing trained and motivated personnel, and going the extra mile to enhance safety and environmental protection,” according to MMS materials. It is also designed to “encourage voluntary compliance.”
Much of the agency’s safety program for offshore drilling has been based on such voluntary compliance.
MMS adopted a voluntary approach to safety and environmental compliance in 1994 during the Clinton administration. Last year, BP joined with other oil companies such as Exxon Mobil to oppose a plan to switch to a more regulatory approach involving audits and unannounced inspections. The rules have not been not implemented (Greenwire, April 27).
The safety records of BP and other companies have taken on increased importance as the Obama administration and the industry try to determine the appropriate long-term response to the BP spill.
Other companies’ safety records were similar to BP’s
When U.S. District Judge Martin Feldman lifted the Obama administration’s moratorium on offshore drilling last month, he suggested that Interior Secretary Ken Salazar should have examined the safety records of the other companies that were hit by the moratorium (Greenwire, June 24).
“The secretary’s determination that a six-month moratorium on issuance of new permits and on drilling by the thirty-three rigs is necessary does not seem to be fact-specific and refuses to take into measure the safety records of those others in the Gulf,” Feldman wrote in his preliminary injunction. In a footnote, he noted that Interior’s “blitz” inspection after the explosion found all 33 other rigs in deep water to be safe.
But a Greenwire analysis of Interior safety records showed there was little difference between BP and its peers drilling in the Gulf. BP ranked a close third in penalties for safety violations. And statistics compiled on injuries and fires show that BP’s records were comparable to those of other deepwater drilling companies (Greenwire, June 24).
The plaque and citation that accompany the honor recognize the company’s performance in the prior year. Companies that have a fatality, a major spill or other serious problems during the award year are not eligible for that year’s award, indicating that BP and Transocean would likely not be eligible next year.
The SAFE Award finalists are selected through a process that includes analyzing safety inspection records, looking at the quality of the companies’ safety technology and the recommendations of MMS district, regional and headquarters officials.
“Only the top candidates who show outstanding performance in each of their respective OCS Districts will be considered a finalist for the National SAFE Award,” according to the department website.
Special thanks to Richard Charter