US tightens offshore rules to reduce blowout risk

OREANDA-NEWS. April 15, 2016.  President Barack Obama's administration has adopted new safety rules for companies drilling offshore oil and gas wells in hopes of preventing the type of blowout behind the deadly 2010 Deepwater Horizon oil spill.

The US Bureau of Safety and Environmental Enforcement (BSEE) finalized the suite of offshore drilling rules today over the objections of oil and gas groups that warn the new regulations could limit production in the US Gulf of Mexico. The rule sets standards for how companies drill and design offshore wells, along with the type of equipment they use to prevent blowouts.

Finalizing the rule will help the US administration close the chapter on the largest offshore oil spill in US history. Investigators have said problems with the Deepwater Horizon's blowout preventer and flaws with the design of BP's Macondo well contributed to the disaster that killed 11 crew members and spilled an estimated 3.18mn bl of crude into the US Gulf.

The US administration soon after the disaster overhauled how it oversees offshore drilling, but it was not until 2015 that the agency proposed formal regulations for blowout preventers and offshore drilling safety. US interior secretary Sally Jewell said the agency needed to understand the root cause of the accident before developing the regulation.

"It takes a long time to do this right," she said.

Offshore producers lobbied aggressively to convince the agency to soften provisions in a rule they said would be costly, reduce safety and make it difficult to drill wells in certain types of geologic formations. Environmentalists pushed BSEE to make parts of the rule more stringent to reduce the risk of blowouts.

BSEE director Brian Salerno said regulators "worked tirelessly" to address concerns with the rule, but argued the agency preserved the proposal's safety and environmental protections.

When the rule was first proposed, offshore producers pointed to a "drilling margin" provision they said would be especially problematic. The provision would require them to use a specific weight of drilling mud, which they said could be too heavy for some geologic formations and cause other problems. BSEE maintained the language in the final rule but has expressly allowed companies to use different drilling mud if they submit adequate justification.

BSEE softened a provision requiring blowout preventers to be pressure tested every seven days, requiring testing every 14 days instead. BSEE also changed a requirement to break down and inspect each component on a blowout preventer at the same time every five years, so companies can stagger inspections for each component.

The final rule will take effect 90 days after it is published in the Federal Register, but BSEE provided three to seven years for industry to meet some of the more complicated provisions in the rule, such as installing more effective shear rams on blowout preventers.

BSEE estimates the rule will cost \\$890mn over the next 10 years but will provide benefits of \\$1.5bn. Oil producers estimated the proposed version of the rule would be far more costly. ExxonMobil in a meeting with the White House last month estimated the rule could cost as much as \\$25bn over the next decade.

Industry groups had a mixed reaction to the rule. The American Petroleum Institute said it was reviewing the rule but reiterated its concerns with the proposal.

The National Ocean Industries Association said it was gratified some industry concerns were addressed in the rule but said it still had concerns with the drilling margin requirement and the way the rule was developed.

Environmentalists said they were pleased the administration had finalized the well control rule but said there were still major risks associated with offshore drilling. The environmentalist group Oceana said there have been 22 losses of well control and 11 spills in the six years since the Deepwater Horizon accident.

"The only way to truly ensure there will never be another disaster of the magnitude of Deepwater Horizon is to stop drilling offshore," Oceana US vice president Jacqueline Savitz said.