Oil and Water

A new regulator is caught between industry and safety.

The Bureau of Ocean Energy Management, Regulation and Enforcement has been sued by the oil industry and the governor of Alaska for failing to approve offshore oil drilling permits fast enough, and by environmental organizations for approving them too fast. Lawmakers have accused it of pushing up gasoline prices, and government watchdogs have assailed it for keeping secret the details of drilling company safety plans.

And the bureau is less than a year old. BOEMRE exists "in a fishbowl-no, in a blender," says Randall Luthi, president of the National Ocean Industries Association. "It's being attacked from all sides." That's not surprising, considering the bureau was born in the midst of a national emergency-the blowout of the Macondo oil well, the explosion and sinking of the Deepwater Horizon drilling rig, and the largest oil spill in U.S. history. For almost three months, oil gushed from the broken, mile-deep well in the Gulf of Mexico, 41 miles off the Louisiana coast. Before it was plugged, the well spewed 4.9 million barrels into the Gulf, coating Louisiana marshes, staining beaches in Alabama and Florida, poisoning vast fishing areas, killing birds, turtles, dolphins and other creatures, and crippling the Gulf Coast's tourist-driven economy.

BOEMRE's job is to make sure that never happens again, and at the same time, enable oil companies to get back to the business of finding and extracting oil from beneath the sea. The nascent bureau's efforts to manage these often-conflicting goals have earned the Obama administration enmity from many in the offshore oil industry, which is seething over a five-month moratorium on deepwater drilling, followed by another five-month period during which no new drilling permits were approved.

Samuel A. Giberga, chief lawyer for Hornbeck Offshore Services, a Louisiana firm that provides supplies and services to offshore drilling rigs, gave Congress an earful in March: "We have fought this administration in the federal courts. We have fought this administration in Congress. We have fought this administration in the media."

In June 2010, Hornbeck sued the Interior Department, BOEMRE's parent agency, to overturn the drilling moratorium. He won, only to have Interior Secretary Ken Salazar impose another moratorium.

While drilling was at a standstill, BOEMRE was busy making "broad and lasting changes to the way we regulate oil and gas drilling," says Michael R. Bromwich, BOEMRE's director.

The bureau has imposed more safeguards and standards for oil wells, and drilling projects now must meet new standards for well design, casing and cementing, and be independently certified by a professional engineer. It also imposed new requirements on well operators to develop safety and environmental management plans and risk-reduction strategies. Now drilling companies must demonstrate they will be able to respond effectively to worst-case accidents.

To Giberga, BOEMRE's accomplishments mean "significant regulatory, environmental compliance and other hurdles have been placed in the path of the resumption of offshore drilling activity."

Not so, says Bromwich. "We are working hard to ensure that this important industry continues to be able to operate fully and successfully," he recently told Harvard University's Center for the Environment. But for offshore drilling to be safe, "the oil and natural gas industry needs to be just as aggressive about reform as we have been," he says.

BOEMRE issued its first deepwater drilling permit Feb. 28, and seven more by early April.

"We continue to believe new deepwater drilling will be approved in the coming months," Bromwich says. "That said, one thing that the secretary and I believe firmly is that a retreat on drilling safety is not an option."

When oil was gushing into the Gulf, "a broad consensus quickly emerged-in government and industry-that there was an urgent need for upgrading the safety rules and practices within the oil and gas industry," Bromwich says.

The consensus didn't last. After the leak was stopped, industry cooperation began to dry up, too, "with speed," Bromwich says. Some offshore operators "have seemed all-too-ready to shrug off Deepwater Horizon as a complete aberration," he notes. Now they argue the new regulations are "an overreaction and were unnecessary."

Salazar also recognizes the industry's shift. "As the oil spill fades from the headlines and our collective memory, pressure is growing in some corners to roll back the safety and environmental protection standards we have put in place since April 2010," he said in an address to the National Council for Science and the Environment. "We will not succumb to pressure to roll back the clock on our reforms."

Nor is BOEMRE acceding to demands from opposing quarters to permit greater scrutiny of future drilling plans by making them public.

Days after the bureau issued its first deepwater drilling permit, the organization OMB Watch complained of "lack of transparency" at BOEMRE. "Without adequate disclosure of key permit information, environmental advocates worry that plans to prevent or manage emergencies on oil rigs may be insufficient or missing entirely," the watchdog says.

Between the two extremes stands Elgie Holstein. BOEMRE "is doing exactly what needs to be done-building a new framework for permitting offshore drilling," says Holstein, senior director of strategic planning at the Environmental Defense Fund. The new safety and environmental protections BOEMRE requires do, indeed, "represent higher hurdles for the industry to clear," he says. And despite the hostility from some, "on the whole, I think, the industry understands that it has to play by a new set of rules."

But the responsibility to reform isn't industry's alone, Holstein adds. "The government has to demonstrate that it's prepared to be a responsible steward of resources. The government clearly has a duty to protect natural resources and the lives of workers," he says.

For the government, BOEMRE is only part of the solution. The Interior Department has created the Bureau of Safety and Environmental Enforcement to enforce new regulations and the Office of Natural Resources Revenue to oversee oil royalties. All three functions-issuing permits, enforcing safety regulations and collecting royalties-were performed by the Minerals Management Service. Many believe MMS failed because it had conflicting missions. "It was expected to promote resource development, to enforce safety regulations and to maximize revenues from offshore operations," Bromwich says.

"Separating leasing from policing needed to be done," Holstein says. But that alone won't prevent future oil drilling disasters. "What will make a difference in the long run is whether future administrations put worker safety and environmental protection first, ahead of revenue goals."

William Matthews is a freelance journalist who has covered government and technology in Washington for two decades.