By Jim Noe
Since the last time Gulf of Mexico shallow-water drillers were in the news as they struggled to survive the de facto “permitorium” that followed the Macondo blowout, Gulf shelf production has become even more important to our economy and energy security.
While a few years ago the bulk of shallow-water production involved natural gas, today shallow water drillers are producing oil and natural gas liquids that turn into products ranging from gasoline to liquids derivatives that supply the chemical industry.
Yet as much as fundamental market demand for these products determines the health of the offshore energy industry, it’s become unmistakably clear in recent years that the government’s offshore regulatory regime determines outcomes in the Gulf.
In the lead-up to the election, President Barack Obama took credit for the uptick in U.S. crude oil production that occurred under his watch, ignoring the fact that output in federal waters of the Gulf fell well short of the government’s own projections.
“I want to build on that,” Obama said, touting oil production at 16-year highs. “And that means, yes, we still continue to open up new areas for drilling.”
Yet will the president’s apparent support for robust drilling activity translate to pro-Gulf energy policies over the next few years?
As we shift into a second term, a number of Cabinet agencies likely will get new secretaries.
Leadership at the Department of the Interior may affect how Gulf policies are shaped and implemented, as evidenced by the positive impact of James Watson’s leadership at the Bureau of Safety and Environmental Enforcement on restoring a steady flow of permit and plan reviews in the Gulf.
The industry hopes that the timing and outcome of approvals also become more systematic and predictable over the next few years, in keeping with the president’s stated desire to bolster domestic production.
Still, the administration is likely to continue to toughen its enforcement of existing and emerging regulations.
Careful thought must be given to how the Bureau of Safety and Environmental Enforcement’s new Investigations and Review Unit is deployed to ensure that safe and responsible offshore production can continue its course.
The Gulf of Mexico alone is responsible for 28 percent of U.S. domestic oil production, a contribution that has doubled over the past 20 years. Whether the importance of Gulf energy output is affirmed or discarded by policymakers during the next four years packs enormous implications for our country’s broader economy.
We’ve seen the president’s energy rhetoric come a long way during the past few years. Let’s hope his apparent commitment to America’s energy future drives sensible decision-making toward the Gulf.
Noe is executive vice president of Houston-based Hercules Offshore and executive director of the Shallow Water Energy Security Coalition, an advocacy group comprising exploration and development companies, drilling contractors and service companies.