Thursday, September 30, 2010

DOI Issues New Rules To Address OCS Drilling & Oil Spill Issues

Sep 30: The Department of the Interior (DOI) announced two new rules which they said will help improve drilling safety by strengthening requirements for safety equipment, well control systems, and blowout prevention practices on offshore oil and gas operations, and improve workplace safety by reducing the risk of human error. DOI Secretary Ken Salazar, who announced the rules in a speech at the Woodrow Wilson International Center said, "These new rules and the aggressive reform agenda we have undertaken are raising the bar for the oil and gas industry's safety and environmental practices on the Outer Continental Shelf [OCS]. Under these new rules, operators will need to comply with tougher requirements for everything from well design and cementing practices to blowout preventers and employee training. They will also need to develop comprehensive plans to manage risks and hazards at every step of the drilling process, so as to reduce the risk of human error."
    The Drilling Safety Rule and the Workplace Safety Rule join a host of reforms that DOI has undertaken in the five months since the Deepwater Horizon oil spill that touch every stage of the offshore planning, review, permitting, drilling, and development processes. In his speech, Salazar said, "The Deepwater Horizon oil spill shook us as a people. Eleven men died. The public watched as oil spilled into the Gulf of Mexico for 86 days. And armies of citizens, volunteers, and public servants battled to keep oil off our shores, to save birds and turtles, and to seal off a well below 5,000 feet of ocean. It took the best engineers, our top scientists, and the relentless response of the United States government to beat back the oil and kill the Macondo well."

    Michael R. Bromwich, director of the new Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) said, "These two rules are part of a broader series of reforms we are undertaking to reduce the risks of offshore energy operations. We are substantially raising the standards for all offshore operators, and are doing it in an orderly and responsible way. We will continue to move forward with other changes and reforms in what will remain a dynamic regulatory environment. We owe the public nothing less."

    The Drilling Safety Rule, effective immediately upon publication, makes mandatory several requirements for the drilling process that were laid out in Secretary Salazar's May 27th Safety Report to President Obama. The regulation prescribes proper cementing and casing practices and the appropriate use of drilling fluids in order to maintain well bore integrity, the first line of defense against a blowout. The regulation also strengthens oversight of mechanisms designed to shut off the flow of oil and gas, primarily the Blowout Preventer (BOP) and its components, including Remotely Operated Vehicles (ROVs), shear rams and pipe rams. Operators must also secure independent and expert reviews of their well design, construction and flow intervention mechanisms.

    The Drilling Safety Rule is being issued under an emergency rule-making process. Director Bromwich said that BOEM will soon move forward with a standard rulemaking process that includes greater opportunity for public comment and that considers implementing additional recommendations of the Secretary's May 27th Safety Report, such as the requirement that BOP's have two sets of blind shear rams.

    The second regulation, known as the Workplace Safety Rule, requires offshore operators to have clear programs in place to identify potential hazards when they drill, clear protocol for addressing those hazards, and strong procedures and risk-reduction strategies for all phases of activity, from well design and construction to operation, maintenance, and decommissioning. The rule also requires operators to have a Safety and Environmental Management System (SEMS), which is a comprehensive safety and environmental impact program designed to reduce human and organizational errors as the root cause of work-related accidents and offshore oil spills. The Workplace Safety Rule makes mandatory American Petroleum Institute (API) Recommended Practice 75, which was previously a voluntary program to identify, address and manage safety hazards and environmental impacts in their operations. BOEM indicated that it will undertake additional workplace safety reforms, such as requirements for independent third-party verification of operators' SEMS programs, through an additional rulemaking process that BOEM will be launching soon.

    In his speech, Salazar also outlined the Administration's plans to move beyond oil. He said, "the Deepwater Horizon oil spill also lays bare a more fundamental challenge that we must confront as a nation. Our energy policy has failed us, time and time again, for decades. Our economy relies too much on foreign oil. We are falling behind China and India in the race for clean energy technologies and clean energy jobs. And our oceans, our coasts, and our climate are at risk. So where do we go in the post-Deepwater Horizon world? President Obama has charted a path to a safe, secure, and clean energy future. He understands that the jobs of tomorrow are in clean energy. Those jobs are in places like Holland, Michigan, where the Recovery Act's $2.4 billion investment in advanced battery technology has helped get a new battery manufacturing plant under way. 300 people are helping build the plant, and another 300 will find jobs when it opens. . ."
    And then he discussed the new regulations being implemented. He said, "The Deepwater Horizon oil spill laid bare fundamental shortcomings in the oil and gas industry's safety practices on the Outer Continental Shelf. For thirty years, under the oversight of both Democratic and Republican administrations and congresses, industry ventured into deeper and deeper waters without adequate oversight. Drilling technologies accelerated, but safety technologies and the government's regulatory framework were left behind. That gap is unacceptable. That is why we have launched the most aggressive and comprehensive reforms to offshore oil and gas regulation and oversight in U.S. history. We are raising the bar for safety, oversight, and environmental protection at every stage of the drilling process. . ."
    The API upstream director Erik Milito commented on DOI's interim final offshore rule and said the Agency should ensure that the rule establishes an effective process to improve safety performance while providing the framework needed for companies to get approval from the government for exploration and development projects. He said API would review the rule and provide analysis during the comment period.  He also called for ending the deepwater moratorium.

     Milito said, "The rule must serve the interests of improved safety and energy development. There has to be a clear, practical, and certain process for project review that will protect the environment.  We cannot have an approval process that creates unpredictable delays that could place at risk the flow of domestic energy in our country. Operators want regulations that provide certainty. Unpredictable, extended delays in permit review and approval discourage investment in new projects, which hampers job creation, reduces revenue to the government, and restricts energy production.

    "Getting a good offshore safety rule in place is critical to the nation's energy future.  The Gulf and other parts of the nation's offshore areas are vitally important to helping meet the nation's future energy needs.  The rule will affect every offshore energy project for years to come. It has to be right.

"We also still have the issue of the Gulf deepwater moratorium. Every day the moratorium remains exacts an economic penalty on the people of the Gulf and on our nation. The costs are already too high. We continue to urge the government to end it as soon as possible."

    Access a release from DOI including fact sheets on the new rules and BOEM recent reforms (click here). Access the full text of Salazar's speech (click here). Access a release from API (click here).