Newest drilling permit is a milestone

Newest drilling permit is a milestone

WASHINGTON — The government on Wednesday granted the first permit for a new deep-water well that hadn’t been approved before last year’s Gulf spill shut down such drilling — a major milestone for both the oil industry and federal regulators.

The permit will allow Shell Oil Co. to drill an exploratory well in its Cardamom Deep discovery about 255 miles southeast of Houston.

The government previously had only issued permits for six deep-water projects that already had been approved — and in some cases, were under way — before the administration imposed a ban on that kind of offshore exploration.

By contrast, Shell’s drilling permit is for a well that was newly proposed in an offshore exploration plan that won broad approval last week from the government.

Although the plan provided the framework for Shell to drill three new exploratory wells at its Cardamom Deep site, the company still has to secure separate drilling permits for each of them.

Shell president Marvin Odum said the company was “proud to lead industry in returning people to work in the deep-water Gulf of Mexico.”

Environmentalists are poised to challenge the government’s approval of the drilling permit, setting up a legal battle that could determine not just whether Shell’s project can go forward, but also whether federal regulators can move swiftly to give the green light to others like it.

Conservationists argue that the government is acting prematurely and was bound by federal law to finish a post-spill environmental study of the Gulf of Mexico before approving the company’s broad exploration plan.

“The Shell drilling plan and permit are the test case for how the government will be going forward with deep-water drilling approvals,” said Miyoko Sakashita, oceans director for the Center for Biological Diversity.

Sakashita added that the Tucson-based environmental group is “certainly analyzing its options for litigation.”

Environmentalists could challenge both the new well permit and the offshore exploration plan in federal court and seek an injunction to stop drilling even before it begins.

If successful, that would cast a long shadow over the ability of the Interior Department’s Bureau of Ocean Energy Management, Regulation and Enforcement to swiftly permit other deep-water drilling projects, said Michael Bromwich, the agency’s director.

“Depending on what the grounds for the injunction were, it could have ramifications for a wide variety of other exploration plans and permits that we’re currently in the course of reviewing and that will be submitted in the future,” Bromwich said. “I haven’t fully considered all of the impacts and ramifications of an injunction, but it would not be a pretty sight.”

Shell plans to use the Noble Jim Thompson semi-submersible rig to drill its exploratory well, beginning in April.

Located in 2,721 feet of water, the new well is expected to be drilled to a depth of 24,380 feet below the sea surface, with results likely by the end of August.

Odum has told shareholders that the Cardamom Deep discovery near Shell’s already-producing Auger field could hold more than 100 million barrels of oil equivalent.

The move by the ocean energy bureau came as Bromwich was imploring Congress for more money to hire new inspectors and permitting staff to boost the safety of offshore drilling. The Obama administration is asking for $358 million — $119 million over the fiscal 2010 level — so it can hire 41 new permit review personnel and triple the roughly 55-member inspection team.

Offshore drilling advocates in industry and Congress complained that the ocean energy bureau is moving too slow in reviewing proposed drilling applications, despite the recent jump in deep-water permit approvals.

“After months and months of no permits, they now come at a slow, lagging pace,” said Rep. Doc Hastings, R-Wash., the head of the House Natural Resources Committee. “Given what’s at stake, it’s vital that this agency operates efficiently and aggressively to both encourage American energy production and ensure it’s done in the safest way possible.”

At a natural resources panel hearing with Bromwich today, House Democrats said they thought the administration was moving too hastily.

Rep. Ed Markey, D-Mass., said he was “worried that these new permits have been issued not too late, but, perhaps, too soon,” especially given renewed questions about the adequacy of emergency drilling equipment known as blowout preventers.

“The speed with which we are allowing industry to return to business as usual is risky,” Markey added.

Bromwich stressed that the ocean energy bureau will study how to improve blowout preventers, following a report that revealed a possible design flaw in the device that failed to stop the oil gushing from BP’s failed Macondo well last year.

“A substantial amount of work going forward by industry and by government needs to be done,” Bromwich said.

Although blowout preventers have been regarded as a “fail-safe” device of last resort, Bromwich said his agency has not been giving the equipment that much credit.

“We had been proceeding . . . on the premise that blowout preventers are not fail safes, and we need to do everything we possibly can to make offshore drilling safer in other ways,” Bromwich said.

Bromwich said the devices should be considered “a very important backup system that, if all else fails, would be able a large percentage of the time to stop a catastrophic blowout.”

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