united states: September 14, 2010
At a recent meeting with oil and gas professionals in Houston, Federal regulators could provide no assurances that the current deep water drilling moratorium in the United States would be lifted prior to its expiration set for November. The best the Bureau of Ocean Energy Management, Regulation and Enforcement could muster was some lukewarm encouragement that good progress was being made on the regulatory front towards ending the ban that had been in effect since this past May.
As much publicized in the media, the ban resulted from the BP deepwater oil platform explosion causing the nation’s single largest environmental disaster. While BP has accepted responsibility for the accident setting a clean-up/claim fund of $20 billion, the images of spewing oil and polluted areas continue to resonate in the public mind have some maintaining the deepwater ban should remain in effect indefinitely, if not permanently.
It is necessary to point out that off-shore oil and gas drilling in the US has long been controversial. Back in the day when oil was trading below $40 per bbl and natural gas prices hovered around $1.50 to $2.00 per dth, environmentalists were largely successful in having off-shore drilling banned in many coastal areas with the notable exception being the Gulf of Mexico. However, once oil broke the $100 per bbl level and natural gas topped $15 per dth in 2007/08 “drill baby drill” became the rallying cry for deepwater proponents. The BP accident has done little to change the makeup of the debate and in our view, once oil tops $100 per bbl again, deepwater drilling in the Gulf along with other otherwise prohibited coastal areas will once again become more accessible to the oil companies.
The Obama administration is right to call for more regulation concerning not only deepwater drilling, but drilling of all kinds in US coastal areas. However, whether these regulations have any effect in preventing another BP accident will no doubt have little consequence in settling the debate whether we should be doing this type of drilling at all.