Unreasonable regulations threaten Gulf energy production

Five years after the deepwater drilling moratorium shut down offshore exploration and threatened to devastate domestic energy production, the Gulf of Mexico has risen like a shining star in America’s energy picture. Last month, I wrote about the offshore energy industry’s resiliency in the face of oil price fluctuations and current rig activity since the moratorium demonstrates this industry’s ability to effectively respond to economic challenges.

In October 2009, about seven months before the 2010 moratorium, there were 28 active rigs in the Gulf. While that number dipped to zero during the moratorium, it rose to 32 active rigs in September and up to 36 active rigs as of February. With this high level of investment in the Gulf’s energy resources in the face of low global oil prices, it may or may not surprise you the greatest threat to this energy boom is our very own federal government. In fact, through proposed new air and well control regulations, and an intent to scuttle an offshore revenue sharing program that would benefit coastal energy states, recent administration efforts could bring all of this powerful economic activity to a crawl.

In January, the White House unveiled plans to address global warming by cutting methane gas emissions from the oil and gas industry by up to 45 percent of 2012 levels by 2025. Only 10 percent of all ozone-forming emissions currently can be attributed to methane, of which less than 30 percent comes from the production, transmission and distribution of oil and natural gas. In addition, emissions from the oil and gas sector are down 16 percent since 1990 due to voluntarily practices implemented by oil and gas operators. An added layer of burdensome requirements would not only curb the record levels of energy production we are now experiencing but could actually slow down industry’s progress in reducing overall emissions.

Another overreaching proposed regulation, known as the Blowout Preventer (BOP) and Well Control Rule, was originally intended to focus on the design, manufacture and repair of BOPs in response to the Deepwater Horizon incident. However, the new rule — to be released this spring — has grown in scope to broadly address all areas of well control and even well design. The Bureau of Safety and Environmental Enforcement (BSEE) has indicated the measure will be “comprehensive” and aimed at “everything that is associated with controlling a well.” In fact, another Department of the Interior official indicated the rule will include new well design requirements as well as real-time monitoring of well operations.

A rule of this magnitude could have significant impacts on offshore operations. In this economic climate, we fear this rule could cripple the industry’s ability to put people to work and provide energy for our nation.

The communities where thousands of energy workers call home will suffer the most in the administration’s plan to divert dedicated offshore revenue funds away from coastal energy states and into the general budget.

Congressionally approved in 2006, the Gulf of Mexico Energy Security Act provides for five Gulf of Mexico states, including Louisiana, to share in 37.5 percent of federal offshore royalty revenues beginning in 2017. Louisiana plays a significant role in supporting offshore oil and gas development for the nation and the funds are critical for restoring Louisiana’s vanishing coastline. Louisiana fought long and hard for its fair share and now this administration is attempting to pull it right out from under us. Meanwhile, states with onshore energy production share 50 percent of royalty revenue from drilling on their public lands. Anybody who travels coastal Louisiana and visits Port Fourchon can see how Louisiana proudly supports the offshore energy industry. We do it willingly, but we also demand we are compensated our fair share so we can reinvest it in our natural resources and our critical energy infrastructure.

You can be assured the Louisiana Mid-Continent Oil and Gas Association will be working to advocate for reasonable and appropriate regulations and against these overreaching rules and policies that threaten the progress of America’s offshore oil and gas industry in America’s Gulf.