Oil companies with ready-to-go wells fed up with permitting process

Amanda Carey Contributor
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In early February, Shell Alaska announced it was dropping any plans to drill in the Arctic’s Beaufort Sea in 2011. According to Vice President Pete Slaiby, the decision was based on the recent remand of air permits by the Environmental Protection Agency (EPA). Shell has been waiting five years to be given the go-ahead to drill.

Since 2005, the company has paid about $3 billion for leases to drill off the coast of Alaska. But after the BP oil spill last April, more than 4,000 miles away in the Gulf of Mexico, all drilling plans were put on hold per orders from the Department of Interior.

Shell isn’t the only company with ready-to-drill wells that is being prevented from drilling by the regulatory process that emerged from the BP oil spill. Hercules Offshore, a Houston-based oil company, has a developmental well in the Gulf of Mexico that has been ready since last April.

“We prepared the developmental applications,” Jim Noe, senior vice president of Hercules, told The Daily Caller. “Normally, we would have been developing and producing oil by June of 2010. But all the new rules and requirements and permit delays caused confusion and reluctance to submit the application.”

Hercules ultimately submitted the application in December 2010, but according to Noe, it took the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEMRE) 60 days to just “deem it submitted.”

According to the BOEMRE website, there are currently 13 pending permits for shallow and deep-water permits for new wells. The number sounds relatively low, a point noted by BOEMRE Director Michael Bromwich in a recent op-ed for the Houston Chronicle.

But Noe told a different story to TheDC, saying the reason the number of pending permits looks so low is because many are essentially in limbo, just waiting to be “deemed submitted” by the agency.

“There are applications made on a daily basis that aren’t being shown up on BOEMRE’s statistics for being submitted,” said Noe. “It’s disingenuous for Bromwich to point out relatively low number of pending permits for proof that there is low demand to drill.”

Another oil company, Texas-based Ensco, is fed up with the permitting process. Ensco’s permit applications were submitted in the weeks following the BP oil spill, and have all been pending for various lengths of time ranging from four to nine months. The company is leading the suit against the Department of Interior that resulted in a federal judge ordering the agency last month to act on five pending permits within 30 days. Last week, however, Salazar and Bromwich filed an appeal to the court’s decision.

The Hercules example is symbol of the dicey relationship between the Interior Department and the oil industry. After the BP oil spill last spring, the agency took the opportunity to, as Bromwich wrote, launch “the most sweeping reforms of offshore regulation in U.S. history.”

But the result has been a slow and uncertain regulatory process that has left ready-to-go wells sitting dry. And the deep-water permit issued last week to Noble Energy was received more as a taunt than a promise of better days ahead.

“The facts are there is demand to drill oil and gas wells in the Gulf,” said Noe, “and operators are ready and willing.”

“We need them to go back to their offices and do what they’re mandated by law to do and what is in the interest of the country: to review and process permits,” Noe added. “We’re not looking for a shortcut.”

When asked about the criteria used to deem an application submitted, a spokesperson for the Department of Interior simply told TheDC that submitted applications may be returned to the operator for further clarification.