Interior Approves Deepwater Drilling Permit, First Since Deepwater Horizon Disaster

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The Interior Department on Feb. 28 approved the first deepwater drilling permit in U.S. waters since the disastrous blowout of the Macondo well 10 months ago in the Gulf of Mexico.

The green light was given for oil and gas company Noble Energy Inc. to resume drilling a well beneath 6,500 feet of water where work was begun April 16 but halted June 12 as the Obama administration insisted on a moratorium for drilling in depths greater than 500 feet.

Noble has demonstrated to the satisfaction of regulators that it was prepared to deal with a blowout and a worst-case scenario and also could meet the stricter requirements mandated for well design, casing and cementing, said Michael R. Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement.

“We expect further permits to be approved in the coming weeks and months,” Bromwich said during a telephone news conference.

He added that he expected the oil and gas industry to take this permit as a signal that BOEMRE, a part of the Interior Department, was ready to allow a resumption of deepwater drilling so long as that work met the enhanced safety requirements.

No Blanket Endorsement.

Noble will use a combination of its own technology and a capping stack from Helix Energy Solutions Group Inc. in the event of a blowout. By itself, the Helix equipment would not be sure to operate adequately below 5,600 feet, according to the equipment service company.

Noble is a member of a consortium of 20 independent exploration companies called the Helix Well Containment Group. The consortium is contracting to have access to Helix equipment. Another consortium, Clean Gulf Associates, will manage the marshalling of the equipment in the event of a blowout. The arrangement relies on a retainer fee for the Helix system and day rates that will be charged for the system in the event of a spill.

The Helix system helped contain the Macondo well blowout at a BP Plc drilling site after the destruction of the Deepwater Horizon rig. Bromwich and Interior Secretary Ken Salazar met with Helix officials Feb. 25 while visiting Houston and assessing containment systems (39 DEN A-7, 2/28/11).

Bromwich stressed that the permit decision was based on a site-specific assessment of the plans, equipment, and geophysical characteristics of the project. Each permit request will be judged individually, he said.

“No one should take this as a blanket endorsement of Helix or anything else,” he said.

Working on Greater Capacities.

So far, Helix and Marine Well Containment Co. are the two service providers that have announced new containment systems to cope with the tightened requirements for deepwater drilling. Marine Well Containment--backed by ExxonMobil Corp. and three other industry giants--has said it can operate in water depths up to 8,000 feet.

It is fair to infer that such an admitted limitation on the equipment will serve as a limit on what can be permitted, Bromwich said.

He added that the service companies are working as quickly as they can to expand their capabilities, raising the prospect that deeper projects may be able to win drilling permits as the companies continue their rapid development of the technologies.

Seven other deepwater drilling permits are pending--two for new wells, three for revised plans for new wells, one for a sidetrack well, and one for a bypass well. A bypass well is designed to get around a problem that has made an existing well impractical for further development.

The Noble well is a bypass well. Bromwich said Noble's worst-case estimate for a blowout at that well would involve a release of 69,700 barrels a day of oil. The government estimated that the Macondo well poured out 62,000 barrels a day during its early stages.

'Get the Gulf Back to Work.'

The announcement of the deepwater drilling permit was welcomed by industry and Gulf Coast officials.

“I hope that this permit is the first of many to come and I will continue to use every lever at my disposal to ensure that it is,” Sen. Mary L. Landrieu (D-La.) said in a statement. “While one permit is good, it's long overdue.”

Louisiana Gov. Bobby Jindal (R) responded to the news with a statement that the permit was “a good first step, but we must quickly get to a level of issuing permits that represents a critical mass so thousands of oil and gas industry workers can get back to work fueling America again.”

Jindal emphasized, “The deepwater and shallow water drilling industries support tens of thousands of jobs in Louisiana alone and represent a critical part of our state's economy. We've already watched seven deepwater rigs leave the Gulf of Mexico for other countries because of the moratorium. It's time to reverse that trend and get the Gulf back to work.”

Randall Luthi, president of the National Ocean Industries Association, issued a statement saying, “Taking the Department of the Interior at its word that this is not a token permit and that many are lined up to be approved in the near future, today's action sends a calming signal to operators, producers and service companies that the long drought is just about over.”

The interior secretary was scheduled March 1 to face a budget hearing of the Senate Energy and Natural Resources Committee--a committee on which Landrieu sits. Among the issues that may come up is the speed of permitting, not only for deepwater work but in shallow water. Interior has requested enough money to hire as many as 40 additional personnel for permitting work, Bromwich said.

By Alan Kovski