While BP Eyes Return to the Gulf, Safeguards Debated

The U.S. government is issuing new deepwater drilling permits, ending a moratorium imposed after the spill in the Gulf of Mexico, even as it acknowledges the need for more changes to safety standards.

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BP sought to assure investors this week that it expects to resume drilling in the Gulf of Mexico by the end of this year, but debate continues over the rules of U.S. offshore oil exploration—and whether new standards are sufficient to prevent another disastrous spill.

In fact, the federal government itself says that more needs to be done on deepwater drilling safety: "More change will surely come," Michael Bromwich, director of the U.S. Department of Interior's Bureau of Ocean Energy Management, Regulation and Enforcement, said in a speech in Washington, D.C., on the eve of the first anniversary of the BP spill in the Gulf.

(Related: Gulf Oil Spill: One Year Later)

But Bromwich maintained that it is a "huge advance" that oil companies operating offshore in the United States now must have a plan in place for handling a deepwater blowout, as well as a demonstrated ability to capture oil from a runaway well.

(Related: "BP Well to Stay Sealed After Gulf Spill, Experts Predict")

The agency's confidence in that capacity—embodied in two containment systems, or "capping stacks" that the industry has readied near the Gulf of Mexico—paved the way for the 12 new deepwater drilling permits that the government has issued since the beginning of March. Those permits mark the first return to deepwater exploration in the Gulf since a moratorium was imposed soon after BP's Macondo well blowout on April 20, 2010.

But none of those permits so far has gone to BP, which before its Deepwater Horizon rig explosion clearly saw its Gulf operations as a key generator of future growth. Although BP is still the largest producer and leading resource holder in the deepwater Gulf of Mexico, the company said in announcing its first quarter results this week that continuing restrictions on its operations there had contributed to its 11 percent drop in oil production. The company's profit growth for the quarter lagged far behind that of its industry peers.

BP told investors it has asked the U.S. government for permission to drill 10 development wells that were halted by the moratorium, but noted that its return to the Gulf of Mexico would depend on proving to regulators that it meets new safety requirements.

Here's a rundown of what has changed—and what hasn't yet changed—in the safety picture for BP and all companies seeking to drill on the U.S. outer continental shelf.

Capping Stacks

In February, two energy industry consortia announced that they had readied subsea containment systems. Last year, BP had to scramble to get contractors to construct a huge array of steel and valves to cap its out-of-control Macondo well. Now, there are systems ready to be deployed to any blowout in the Gulf.

The Marine Well Containment Company—a consortium of large oil companies including ExxonMobil, Shell, Chevron, and BP—has developed one of the systems. The other system was developed by the Helix Well Containment Group, which has 22 member oil companies. The capping stacks are stored in Houston, where both companies are based, a city connected by shipping channel to the Gulf of Mexico, about 50 miles away.

Bromwich says that the availability of these systems cleared the way for the first U.S. deepwater drilling permits since the Deepwater Horizon spill, and the oil companies—which have been pressing the government to ease up on restrictions—say this change is substantial.

"Most of the equipment used in Macondo had to be manufactured on the fly," Andy Radford, a senior policy adviser at American Petroleum Institute. "We now have a much better understanding of what to expect and have designed equipment to contain that type of incident were it to happen again."

But some environmentalists question whether the systems afford enough protection. The Helix system, for example, can be deployed immediately, but could take 10 to 15 days to control the spill, according to Helix spokesman Cameron Wallace.

Regan Nelson, a senior oceans advocate at the Natural Resources Defense Council, noted that one of the companies to obtain a new deepwater drilling permit, Houston's Noble Energy, included a worst-case scenario estimate that 69,700 barrels of oil could leak from its well per day in the case of an accident. If it takes 10 days for a containment system to control such a spill, that would be a minimum of 29 million gallons leaking into the Gulf—an amount far less than the Macondo spill, but more than double the amount of oil dumped into Alaska's Prince William Sound by the Exxon Valdez in 1989.

"My concern is if it takes between 10 days and three weeks to get out to a site to begin containing that spill, within three weeks you could have a major oil spill on your hands," Nelson said. "That's not a sufficient response in my eyes."

Well Integrity

Last October, the U.S. government instituted on an emergency basis a new "drilling safety rule" for offshore wells that includes much more detailed mandates for operations than companies had to supply in the past.

For example, the rule requires that two independent cement barriers, certified by a professional engineer, must be constructed across each potential oil flow path when a well is being completed. BP's Macondo well relied on only one barrier, the cement that was used to plug the bottom of the well. The root technical cause of the blowout was the failure of that cement plug, according to the chief counsel's report of National Commission on the BP Deepwater Horizon Oil Spill.

(Related Quiz: "How Much Do You Know About The Gulf Oil Spill?")

The new rule also requires oil companies to submit certification by a professional engineer that the well's casing and all-important cementing plan is appropriate for the expected pressure in the deepwater well. Again, this provision directly seeks to head off problems discovered in the Deepwater Horizon investigation, where tests showed the cement was unstable and the slurry itself was poorly designed.

In the drilling safety rule, the government sought to codify some of the voluntary industry standards that already existed. A separate regulation, called the workplace safety rule, requires that all offshore oil and gas companies develop and maintain safety and environmental management systems—again, codifying standards that had been identified as best practices by the American Petroleum Institute.

Blowout Preventers

More examination is surely ahead on standards for blowout preventers, the heavy equipment stack that sits atop a well with pincers, called shear rams, designed to pinch closed in the case of an accident.

The blowout preventer (BOP) is meant to be the last line of defense in a well catastrophe, but it failed to cut the drill pipe and shut off the well in last year's Deepwater Horizon explosion.

In March, new evidence emerged on the reasons for the failure when a company hired by the U.S. government to assist in the investigation turned in its report on the BOP. The Norwegian risk management company Det Norske Veritas concluded that the sheer force of the gas and oil from the well caused the equipment to buckle so it was out of place and couldn't shut down the well. Because any deepwater well presumably would have high-pressure oil and gas, the findings raise questions on whether current BOP designs are adequate for the job.

"We need to be sure that blowout preventers are safe," said David Pettit, a senior attorney at NRDC. "It's like putting cars out on the market where the [antilock brake] system doesn't work. At the very least you need antilock brakes to work in an emergency and that's basically what you're saying with the BOP not working."

BP, for its part, is suing the designer of its blowout preventer, Cameron International, as well as Transocean, the rig operator it had contracted to drill the Macondo well.

Who Pays?

If an oil company in the Gulf of Mexico were to have a catastrophic accident, the financial responsibility for a spill currently would be limited by law at $75 million, a cap that Congress set after the Exxon Valdez spill. Such a cap would hardly guarantee coverage of damages in a repeat of the Deepwater Horizon disaster; BP already faces damages of tens of billions of dollars.

BP has voluntarily waived the cap, but some question whether smaller companies with fewer resources could be counted on to make the same move. The National Oil Spill commission called for Congress to "significantly" raise the liability cap and financial responsibility requirements, but the seven members of the panel could not reach agreement on what level of responsibility made sense. With no congressional action in the offing on the liability issue, some are worried.

"If we don't increase the existing $75 million cap we're very much putting our coastal communities at risk," said Nelson of NRDC. "When the next spill occurs, we might not have a company like BP with deep enough pockets to put up an independent fund. Sticking the victims of the spill and American taxpayers with the cleanup tab is not acceptable."

Oversight Resources

Last summer, with BP's oil still spilling into the Gulf, President Obama called for $100 million in additional funding for the agency charged with oversight of offshore drilling. In early April, when Congress reached an agreement on the long-awaited federal budget for this year, BOERME received somewhat less than half that amount. Bromwich said the amount will allow the agency to make "significant incremental progress," but it is not enough to improve operations to the extent that agency officials and outside investigators view as necessary.

"We desperately need more engineers, inspectors and other safety personnel," Bromwich said. "We desperately need more environmental scientists and more personnel to do environmental analysis."

Dennis Takahashi-Kelso, the executive vice president of the Ocean Conservancy who was the commissioner of environmental conservation in Alaska at the time of the Exxon Valdez oil spill, believes one of the most important things still needed is scientific research that would back the government's decisions on leasing and permits.

"Unless you have basic information about how things work on the ground, then you're just taking a guess," Takahashi-Kelso said.

Courtney Subramanian is a reporter with Medill News Service.

(Related: "Gulf Oil Spill Surprises: 6 Things Experts Got Wrong")

(Related: "BP Macondo Tragedy, One Year Later: What Have We Learned?")

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