Feds give first green light for deep-water project since drill ban

The federal government just gave the green light for Noble Energy to resume a deep-water drilling project that was halted by the Obama administration’s moratorium last year — the first of its kind to be approved since the ban was lifted in October.

Until today, federal regulators had yet to allow offshore drilling that was off limits under a five-month ban on some deep-water exploration.

Michael Bromwich, the head of the Bureau of Ocean Energy Management, Regulation and Enforcement, which issued the approval, said the permit “represents a significant milestone for us and for the offshore oil and gas industry, and is an important step towards safely developing deep-water energy supplies offshore.”

But Noble’s project isn’t a new one — signaling there still may be high hurdles ahead for other proposed offshore oil and gas projects.

Project launched days before Macondo

Noble will now be able to drill a bypass well about 70 miles southeast of Venice, La., near work that was launched on April 16 last year — just four days before the Deepwater Horizon explosion. The new bypass drilling is meant to get around plugs the company was forced to set in the original well under the moratorium. The project at issue was one of 16 under way when the administration imposed the ban.

In January, the Bureau of Ocean Energy Management, Regulation and Enforcement said it would not subject those projects (which are operated by 13 separate companies) to new environmental assessments before allowing work to resume.

However, the projects did have to comply with a requirement that companies be able to swiftly contain a blowout in deep water, like the one at BP’s Macondo well.

Two companies — Houston-based Helix Energy Solutions Group and the Exxon Mobil-led Marine Well Containment Company — have vessels and equipment that could capture oil from underwater wells. On Friday, Interior Secretary Ken Salazar and Michael Bromwich, the head of the ocean energy bureau, met with the two companies in Houston for briefings on their systems.

According to the government, Noble Energy contracted with Helix to respond in case of a disaster at its just-approved project.

“This permit was issued for one simple reason: the operator successfully demonstrated that it can drill its deep-water well safely and that it is capable of containing a sub-sea blowout if it were to occur,” Bromwich said. “We expect further deep-water permits to be approved in coming weeks and months based on the same process that led to the approval of this permit.”

Many critics

The ocean energy bureau has approved other offshore drilling that was never blocked by last year’s moratorium, including 37 new shallow-water wells, four wells in more than 500 feet of water and more than 220 other deep-water exploration projects.

But today’s move comes amid heavy criticism from industry leaders and Gulf Coast lawmakers in Congress who say the Obama administration has dragged its feet on allowing energy producers to get back to work since last year’s oil spill.

Sen. David Vitter, R-La., has vowed to block quick confirmation of an Interior Department nominee until the government issues at least 15 deep-water drilling permits. He refused to back down today. “While one deep-water permit is a start, it is by no means reason to celebrate,” Vitter said.

House committees are expected to grill Interior Secretary Ken Salazar about the pace of offshore permitting this week, when he testifies about the Obama administration’s budget proposal. The House Natural Resources Committee is holding two hearings later this month focusing on what panel chairman Doc Hastings, R-Wash., calls the “de facto moratorium” on offshore drilling.

Lawmakers also have seized on unrest in Libya to ramp up pressure on the administration to quickly approve offshore drilling projects.

Bromwich denied that “upcoming testimony” by Salazar or politics played a role in the permit approval.

“There is no politics associated with the approval of this application,” Bromwich told reporters on a conference call. “This application . . . became ripe to be acted on literally within the last few days. It has nothing to do with anything other than that it was ready to be approved.”

Fail-safe measures

Noble is expected to begin the bypass drilling in April using a rig leased from Ensco. Before the work begins, BOEMRE will witness function testing of the blowout preventer that will be used at the site, and which could be called into action in case of an unexpected surge of natural gas or oil.

The government accepted Noble’s estimate that under a worst-case disaster as much as 69,700 barrels of oil could flow from the site per day. That calculation was key to federal regulators’ determination that Helix’s containment system would be up to the task if the well blew out.

“We determined that the capping stack that Helix has would be sufficient to cap the well, and there would be no blowback to the surface of the water and therefore no need for surface capture,” Bromwich said. “It’s based on a well-by-well determination.”

Approval of this project may have been streamlined because drilling at the site had been under way for two months before the well was plugged under the moratorium. That meant regulators and Noble knew more about the geology of the project.

But Bromwich said he was hopeful that this would be the first approval of many to come — and said it should help ease industry fears that deep-water drilling would be on hold indefinitely.

“Once you do something as we’ve done here, that is a full detailed analysis . . . I think it does get easier” to do it again, he said. “I’m certainly hopeful it will be quicker for us to do the analysis going forward than it was with this first well. Some of the uncertainty that industry said was still out there will be dispelled … and may encourage operators who have been holding back to file additional permits.”

But oil and gas industry leaders had a muted reaction. The American Petroleum Institute issued a news release stressing that the government had approved just “one permit for one company.”

“While every permit is welcome news, tightening the screws on domestic oil and natural gas production during a time of increased demand and global uncertainty is a formula for disaster,” said API President Jack Gerard. “This slow-moving process continues to stifle domestic production and puts thousands of jobs at risk in the Gulf and around the country.”

Read more about the reactions from lawmakers and industry leaders here.