WASHINGTON--The Obama administration on Monday proposed new
offshore oil and natural-gas drilling regulations aimed at
preventing the kind of explosion that erupted nearly five years ago
on BP's Deepwater Horizon rig, including many provisions the
industry has already adopted.
The Interior Department draft rule imposes tougher standards on
equipment designed to keep control of a well, including blowout
preventers, and requires real-time monitoring for certain kinds of
drilling that are in deep water or are done at high pressures.
A blowout preventer, which is designed to seal off wells in
emergencies, failed on April, 20, 2010, and helped lead to the
explosion on the BP rig in the Gulf of Mexico, which killed 11
people and caused the biggest offshore oil spill in U.S.
history.
Interior Department officials stressed the collaboration between
government and industry in strengthening drilling standards.
"Both industry and government have taken important strides to
better protect human lives and the environment from oil spills, and
these proposed measures are designed to further build on critical
lessons learned from the Deepwater Horizon tragedy and to ensure
that offshore operations are safe," Interior Secretary Sally Jewell
said on a conference call Monday.
The Interior Department is expected to issue a final rule later
this year with an effective date three months after that.
Acknowledging how long it takes for companies to install new
technologies, the government is allowing between three and seven
years for companies to comply with the rule, depending on the
particular provision.
The government estimates that the rule will cost the industry
$883 million over a 10-year period and have monetized benefits,
such as time savings and potential reduction in oil spills, of $656
million over the same period.
Industry officials reacted cautiously to Monday's proposal.
"We are reviewing the proposed rules and hope they will
complement industry's own efforts to enhance safety," Erik Milito,
upstream director for the American Petroleum Institute, the
nation's largest trade group representing all parts of the oil and
gas industry. "Improved standards for blowout preventers are one of
the many ways industry has led the charge to make offshore
operations even safer."
Some environmentalists suggested the new regulations could be
stronger and noted that the proposal simply mirrors a standard the
industry has already adopted.
"Are we really strengthening safety or are we just making these
[provisions] official?" said Jackie Savitz, vice president of U.S.
Oceans at environmental group Oceana.
Environmentalists have pushed for Congress to pass legislation
in response to the BP oil spill, hoping lawmakers would embed
tougher standards into law, making them more difficult to undo. In
the years since the oil spill, however, legislative efforts have
broken down over a number of issues, particularly the degree to
which oil companies should be held liable for damage from such
spills.
In the absence of congressional action, the Interior Department
has issued two major regulations on drilling safety since 2010,
including tougher requirements on well casings and cementing
practices of wells.
The new rules are designed to prevent some of the equipment
failures that occurred on the Deepwater Horizon, including the
blowout preventer, a giant stack of valves that sits on the ocean
floor and is the last line of defense against an out-of-control
well. Such devices are equipped with a set of shears--like a cigar
cutter--to slice through the pipe and seal it off in case of an
emergency.
Investigators determined that the drill pipe of BP PLC's well
was off-center when the blowout preventer tried to close around it.
The shears failed to fully cut through the pipe, leaving it gushing
oil and gas. Now regulators plan to require companies to employ a
technology to center the pipe as the shears close around it, and
for the blowout preventer to have two sets of shears to increase
the likelihood that it will slice the pipe.
The new rules also raise the bar for companies to maintain what
is known as a safe drilling margin. In 2010, BP decided to drill
through a fragile layer of rock even though the pressure risked
cracking open the whole formation. A federal judge last year called
the choice "dangerous, " and concluded that it set in motion a
chain of events that led to the Deepwater Horizon blowout.
The proposed rules provide specifics on what constitutes a safe
drilling margin, and requires that companies maintain throughout
drilling.
Investigations into Deepwater Horizon incident found many
systemic problems, from poorly designed blowout preventers to poor
choices by workers aboard the drilling rig and government oversight
that relied on the offshore drilling industry.
Write to Amy Harder at amy.harder@wsj.com and Daniel Gilbert at
daniel.gilbert@wsj.com
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