The People of America's Oil and Natural Gas Indusry

The De Facto Moratorium

Jane Van Ryan

Jane Van Ryan
Posted July 20, 2010

It's been three months since the Deepwater Horizon accident, and finally one new offshore drilling project has been approved.

According to government data updated daily, a shallow-water project has been OK'd under both of the new Notices to Lessees and Operators (NTLs) which contain new requirements.

As many offshore companies have learned, the new strictures on offshore drilling are quite daunting. NTL No. 2010-N05 requires the Chief Executive Officers (CEOs) of offshore companies to sign a statement guaranteeing that the operator is in compliance with all regulations under the threat of criminal prosecution. NTL No. 2010-N06 requires each operator to predict the likelihood of a blowout and calculate the worst-case discharge of oil and gas into the water.

In the wake of the Deepwater Horizon accident, these new requirements appear to be reasonable. After all, the oil leak in the Gulf is the largest oil spill in the nation's history, and the government should take steps to ensure that a similar accident doesn't occur in the future.

But complying with these new regulations isn't an easy or quick task. Offshore operators need time to put internal management systems in place to satisfy the new requirements. They also say they need more guidance on the types of management systems that will be deemed acceptable for CEO certification.

Meanwhile, new drilling in shallow waters has come to a near standstill, resulting in a de facto moratorium on shallow water exploration at the same time that the government has imposed a moratorium on new deepwater drilling.

This offshore drilling freeze threatens to do great harm to the U.S. economy. A new American Energy Alliance (AEA) study indicates a complete ban on offshore oil and natural gas production could destroy 400,000 jobs and cost the U.S. economy an estimated $95 billion.

The United States gets 30 percent of its domestic oil and 13 percent of its domestically produced natural gas from the Gulf of Mexico. To continue providing these resources, the oil and natural gas industry must continually replace the energy that's being consumed by finding new oil and natural reservoirs to fuel transportation and power the economy.

Clearly, the government's new offshore drilling policies are threatening U.S. energy supplies, energy security, and the long-term economic health of the nation.