Proposed BSEE well control rule may stifle GOM activity, study finds

A federal rule for offshore oil and gas operations could have bigger adverse impacts than the US Bureau of Safety and Environmental Enforcement projected when it proposed the regulation in April 2015, the Gulf Economic Survival Team announced.

It said that a Wood Mackenzie study it commissioned found that under an $80/bbl scenario—a price less than what BSEE used—exploration could drop by up 1 million boe/d to 55% or 10 wells/year; Gulf of Mexico production could fall by as much as 35% by 2030; and 105,000-190,000 jobs could be at risk, many beyond the energy sector and about 80% in Louisiana and Texas.

“The extreme costs associated with the proposed well control rule will simply force operators out of the Gulf of Mexico, leaving valuable energy resources untapped, causing massive unemployment, devastating communities already hurt by the energy industry downturn, and slashing our federal government’s revenue from offshore production,” GEST Executive Director Lori LeBlanc said as the organization issued the study’s findings on Feb. 1.

It also found that in an $80/bbl environment, the proposed rule would cut industry investment by as much as $11 billion/year; reduce government tax revenue by $70 billion or 20%, and gross domestic product by a cumulative $260-390 billion through 2030; lower lease sale bonuses by $3.5 billion or 40% through 2025; and drop the rig count by 25-30% through 2030.

“Our port, our tenants, and our local community will not be able to sustain the economic impacts of this new rule,” explained Chett Chiasson, executive director of the Greater Lafourche Port Commission. “Our region is already grappling with the local impacts of low crude oil prices.

“With the proposed rule in place, we would be looking at massive unemployment, more local businesses closing, and significant drops in tax revenue that would hurt our region for many years to come,” Chiasson said.

The study’s findings clearly show the consequences unnecessarily burdensome regulations can have on the US economy and its energy security, National Ocean Industries Association Pres. Randall B. Luthi said in Washington.

“A federal regulation of this magnitude must be carefully crafted to actually focus on ways to improve safety and allow companies to adopt its requirements in a safe and practical manner, instead of the current approach which seems to be designed around a political objective and deadline,” Luthi said.

“Getting this rule right is more important than rushing the rule out on an arbitrary deadline,” said Luthi, who was a director of the US Minerals Management Service, BSEE’s predecessor agency at DOI, during George W. Bush’s administration. “We urge the Obama administration to carefully consider the findings of this study before finalizing the rule.”

Contact Nick Snow at nicks@pennwell.com.

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