By Lori LeBlanc, LMOGA Offshore Committee Director
for BIC magazine
From manufacturing to professional services, hospitality to health care, federal regulations are a routine part of doing business in the U.S. At times, however, overreaching regulations can threaten the very existence of a business itself and the economy along with it.
This is what we are now facing with proposed federal regulations on Gulf energy production. Regulations and policy decisions coming out of Washington during this presidential election year are challenging the productivity of the Gulf energy industry, the viability of the Gulf as a domestic energy producer and half a million well-paying American jobs.
The Gulf of Mexico is a critical energy source for our nation, delivering more than 16 percent of America’s oil and 5 percent of its natural gas supply. The Gulf energy industry also supports more than 430,000 direct and indirect jobs and more than $44 billion of economic activity. All this is now threatened, however, due to a slew of new rules or rule interpretations that have been announced in recent months, many of which are ineffective as written or were issued prematurely. In some cases, the rules greatly increase costs for compliance without demonstrating an increase in benefits to worker safety or the environment, and some are simply not technically feasible.
Following are some of the proposed regulations and other policy issues that are challenging the Gulf’s ability to fuel America:
- Proposed Well Control Rule — This significant proposal by the Bureau of Safety and Environmental Enforcement (BSEE) seeks to address offshore drilling technology and safety without consideration of many improvements made since Macondo. If implemented as written, the rule would reduce Gulf production by as much as 35 percent by 2030; reduce government tax revenues by up to $5 billion a year; and put as many as 190,000 jobs at risk by 2030, according to a study by Wood Mackenzie.
- Proposed Air Rule — The Bureau of Ocean Energy Management (BOEM) has proposed a major overhaul of its offshore air regulations that will change how producers evaluate their emissions and could require the implementation of emissions reductions measures before BOEM has completed studies to determine if these changes are even needed. This rule could seriously impact our ability to develop and produce offshore resources on the Gulf’s Outer Continental Shelf (OCS).
- Supplemental bonding and financial assurance — BOEM plans to change its current policy on supplemental bonding, which could severely limit oil and natural gas operators’ ability to sell assets to traditional purchasers. It will also result in increased costs to hold leases in the OCS and may drive some operators out of business.
- Offshore heavy-lift construction — Recently, Customs & Border Protection has misinterpreted current U.S. marine vessel transportation regulations to include complex heavy-lift construction and installation operations in the Gulf. Without resolution, this will impact offshore facility construction and put American fabrication yards and their employees at risk.
- Best Available and Safest Technology (BAST) — BSEE is changing how compliance with BAST is achieved, and there is uncertainty about how existing in-service technology will be considered. This could undermine the use of existing technology that has been proven safe and effective and dictate the use of new technology with no justification outside of the rulemaking process.
- Geological and geophysical (G&G) activities regulatory process — BOEM and the National Marine Fisheries Service are working on regulations for incidental impacts of G&G activities on marine mammals or endangered species. Proposals would significantly change monitoring and mitigation requirements in the Gulf, potentially putting at risk our ability to explore for and develop offshore resources.
The Louisiana Mid-Continent Oil and Gas Association (LMOGA) is following all of these federal rulemaking and policy initiatives closely. We will continue to advocate on behalf of our industry, state and nation to secure the competitiveness of the Gulf as America’s energy workhorse, promote energy safety and investment, and support American jobs and our economy.