Deep-water drilling moratorium lifted: why neither side is happy

To environmentalists, the lifting of the deep-water drilling moratorium Tuesday comes too soon. To the industry, it is seen as the beginning of a new era of uncertainty.

The Obama administration lifted its moratorium on deep-water drilling in the Gulf of Mexico Tuesday, replacing it with what Interior Secretary Ken Salazar is calling a “gold standard” of safety standards for operators looking to drill in water depths greater than 500 feet.

Following the announcement, environmental groups said that it was "premature" to lift the moratorium, while oil-industry operators worried that federal regulators are not finished creating new drilling standards.

Among the new safety measures:

• Operators must have their blowout preventer inspected and its design reviewed by an independent third party.

• They must present a report showing how they would prevent or reduce a blowout at the wellhead.

• They must get all their casing designs and cementing procedures certified by a professional engineer.

The Bureau of Ocean Energy Management, which issues new permits for deep-water drilling in the Gulf, is “working to develop additional rules and guidelines” past what is being established this week, said director Michael Bromwich.

In the meantime, he added, “We will not approve permits or make decisions before the appropriate safeguards are in place."

The first permits under the new regulations will likely be issued “by the end of the year,” Mr. Bromwich said, adding: “How [many permits] by the end of the year, I can’t say.”

That uncertainty is what worries industry experts, says Joseph Mason, an economist at Louisiana State University in Baton Rouge, La.

Increased safety regulations will not catch the oil and gas industry by surprise. Since the April 20 explosion of the Deepwater Horizon oil rig, most operators have prepared for new measures they expected would result from the review period, which was expected to last until Nov. 30.

Nor are the costs associated with getting equipment compliant or creating new emergency procedures expected to be prohibitive. Rather, industry operators worry that they will not be able to establish budgets for projects when they don’t know what regulation may come in future months.

“We’re not out of the woods yet,” says Mr. Mason. The sluggish economy and “uncertain policy decisions” are both factors that make it difficult for rig operators to plan for the future at a particular well site, he says.

“And when they can’t plan around it, they move,” he adds, suggesting that operators could look abroad.

For their part, many environmentalists echo the statement released by Peter Lehner, executive director of the Natural Resources Defense Council. He calls the new rules “strong” but adds that “they may not be enough” to ensure that “future drilling is done more responsibly.”

His organization is calling for the moratorium to remain in place until more investigations determine the causes of the explosion, which killed 11 workers and released 4.4 million barrels (185 million gallons) of oil into Gulf waters.

To critics who say the moratorium is being lifted too soon, Secretary Salazar says, “The truth is, there will always be risks associated with deep-water drilling” but that the renewed regulation means “we will have the drilling of oil and gas in the Gulf of Mexico safer than it ever has been.”