Petroleum industry players expend considerable energy, money and time adhering to federal government dictates.
Additionally, they are constantly on the alert for newer policies and restrictions that might affect them – particularly in the U.S. offshore environment.
“We have a number of decisions coming up in the next few months and years that will shape offshore energy policy for the next 10 to 20 years probably, considering what’s at stake,” said Andy Radford, senior policy adviser offshore at the American Petroleum Institute.
“For the Atlantic, there will be decisions made over the next few years involving the five-year plan, like whether to offer leasing in the Atlantic or not,” Radford said. “Those decisions are now in a comment period.
“A proposed plan has been out that contains lease sales off the coast of Virginia, North and South Carolina and Georgia,” he noted. “The government will take a look at the comments received and the environmental analyses.”
And all of that takes time, of course.
“This is for a lease sale that is not until 2021,” Radford said. “It won’t even be the next president to decide if there will be a lease sale but the one after that.”
Long-Term Planning
The decision to keep the Atlantic in the proposed plan, which is now merely a draft proposal, is expected to be made sometime in the 2015-16 time span. Following this, there will be another round of comments and public hearings before a final plan is sent to Congress for review.
The focus of the initial proposed offshore plans is typically narrowed as they move down the line of the various reviewers.
“This is a long-term process with a lot of hurdles left before we get to potentially leasing in the Atlantic,” he emphasized. “Coupled with this is the ongoing saga of whether to allow seismic surveys in the Atlantic.
“We need seismic data, and the data we have is old and incomplete,” he noted.
Already, nine seismic permit applications have been made to the government. It’s another multi-step process and one that includes the individual states on the coast from Delaware down to Georgia, according to Radford.
They all have input based on the Coastal Zone Management Act.
“The BOEM (Bureau of Ocean Energy Management) is doing an environmental analysis that is site-specific to each survey, so they will make a decision soon whether to permit seismic surveys,” Radford said. “But they can’t do this until the states have their say, and also the National Marine Fisheries Service, which grants incidental harassment authorization for potential harassment or behavioral disturbances to marine mammals.”
The Future of Alaska, GOM
The Atlantic action is only one of many uncertainties hovering over the offshore industry.
For instance, decisions must be made about Alaska, which will be critical to the future of Arctic exploration.
To date, Shell has spent about $6 billion and a few years trying to right their drilling program in Alaska. A few accidents in this challenging region failed to curtail the company’s commitment here, which has triggered much industry interest in the Chukchi and Beaufort seas.
“It must be decided whether to let Shell drill their wells there this year,” Radford said. “A decision probably will be this spring so they can mobilize their equipment to get up there and finish the wells they started a few years ago.
“Lease sales are scheduled in the Chukchi in 2016, and (the government) must decide to hold that or not,” he commented. “If Shell drills the wells this year, their performance may determine if the lease sale occurs.
“The recent five-year plan took a lot of areas out of the Chukchi, which we didn’t expect.”
The federal government recently issued new Arctic-specific regulations, which likely won’t be finalized for a while yet.
“The conditions are particularly onerous, but maybe there’s some flexibility,” Radford noted. “We’re looking through them closely as they will certainly impact the government’s decisions on legislation.”
Far to the south in the longtime offshore industry workhorse, the Gulf of Mexico, the operators are awaiting issuance of new regulations on blowout prevention. It remains to be seen if the new regulations increase safety or introduce more risk.
It’s a given that they will increase costs to the companies operating there.
“In the offshore you need a long-term focus,” Radford said. “Anything that decreases certainty and predictability impacts the companies’ willingness to invest in the U.S. offshore.”