Shutdown? Government closure doesn’t stymie drilling today, but future is uncertain

 Government shutdown


Offshore oil-and-gas permitting and production have largely continued without disruption since a Congressional impasse shut down the federal government Oct. 1, but an elongated break would increasingly impact future exploration and development, an industry lobbyist said Monday.

Two federal agencies – the Bureau of Ocean Energy Management and the Bureau of Safety and Environmental Enforcement – regulate energy extraction along the Outer Continental Shelf. Both provide short-term services and programs that are exempt from the shutdown, such as permitting and safety inspections, but the departments have also stopped several programs required for future projects.

“As other agencies are dealing with the shutdown, for the short term, they’ve been able to manage it. In the longer term, we’re very concerned as an industry about (the shutdown) and where it may go,” said Chris John, president of the Louisiana Mid-Continent Oil and Gas Association, a trade group representing oil and gas in Louisiana and the Gulf of Mexico. “We don’t have the answers; no one really does.”

At its least harmful, according to John, the shutdown has contributed to long-term “uncertainty,” an industry buzzword since the Macondo prospect blowout in 2010. Investors and drillers are just coming to grips with what is required of them per stringent safety regulations attributable to the Deepwater Horizon rig disaster, John said, and now future projects are in a state of limbo until Congress can resolve its gridlock.

“I think the unfortunate challenges that we have in the oil and gas industry, we fight Mother Nature and a lot of elements,” John said. “This is kind of an unforced error on us.”

In the immediate future, BSEE’s operation as the safety enforcer and permit grantor is most important to the industry. The bureau, with 369 employees furloughed, is still processing applications for drilling permits and conducting routine inspections of ongoing operations and those needed to commence new drilling, according to its contingency plan.

Meanwhile, services and programs BSEE has ceased are:

– Training programs at the National Oil Spill Response and Research Renewable Test Facility.

– Drafting of new regulations.

– Scientific studies not related to “major ongoing activities.”

BOEM manages environmental and economical aspects of OCS mining. Most of this department is shut down.

Employees will continue to support BSEE’s ongoing permit-related activities. The department will also be available to respond to emergencies.

However, Ocean Energy Management has stopped all work on National Environmental Policy Act-required impact statements and environmental assessments, which would hinder planned operations should the shutdown linger. NEPA approval is required to begin lease sales and plan reviews, vital benchmarks to begin new projects.

BOEM’s review of high bids from the western Gulf lease sale in August has also ceased, which will delay the actual transaction of leasing the property. Analysts labeled the sale as modest, as it drew about $102.4 million for 301,000 of 21 million available acres.


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