Embargo may block U.S. response to Cuban oil spill

Washington Bureau

With oil exploration set to begin in Cuba’s Gulf of Mexico waters, pressure is mounting on the administration to relax a politically sensitive embargo that would prevent U.S. firms from responding swiftly to potential oil spills roughly 50 miles from Florida beaches.

The U.S. trade embargo against Cuba generally bars U.S. commerce with the nation and caps at 10 percent the portion of American-made components in offshore drilling equipment used in Cuba.

That means containment equipment developed after last year’s oil spill would be off-limits — at least initially – if the same thing happened in Cuba’s part of the Gulf. Oil spilled there could reach the U.S. in three days.

The embargo also would forbid use of chemical dispersants to break up oil, boom capable of corralling it and other spill response equipment manufactured in the United States. Nearby drilling rigs in the Gulf also would be barred from working on relief wells in Cuban waters.

But with companies planning to begin exploratory drilling off Cuba as early as September, industry and environmental interests alike are pressing the Obama administration to modify the embargo’s restrictions for firms that could respond to a disaster.

“Embargo or not, we cannot ignore Cuba drilling in the Florida Straits,” said Lee Hunt, the head of the Houston-based International Association of Drilling Contractors. Hunt said he is trying to persuade political leaders to prepare now by coordinating with companies that could help in an emergency.

Help a long way off

If there were an accident under the current system, Cuban officials and the oil companies “simply won’t be able to pick up the phone and call the nearest responders in the U.S.,” said Dan Whittle, a senior attorney and director of the Cuba program for the Environmental Defense Fund.

Instead of flying technicians and parts from New Orleans and Houston, oil companies drilling in Cuban waters would have to seek resources from North Sea or South American operations, said Jorge Piñon, an expert on Cuba’s energy sector who spent three decades working for Shell, Amoco and BP.

Repsol, a publicly traded oil company based in Spain, is preparing to drill an exploratory well near the Florida Straits this fall, after Saipem’s Scarabeo 9 rig arrives there. Partners on the project include Norway’s Statoil and India’s Oil and Natural Gas Corp.

Other firms – all foreign-owned national oil companies – are lined up to use the Scarabeo 9 to explore their offshore Cuba leases afterward, with drilling on as many as seven wells reportedly planned during the next four years.

Political challenge

Under the embargo – imposed administratively since the early 1960s and by law since 1992 – companies can ask the Treasury Department’s Office of Foreign Assets Control for licenses to travel to or do business with Cuba. At least two U.S. companies specializing in spill response already hold such permits.

Advocates of a looser policy want the administration to issue a general license for a broad class of oil service companies to share safety information now and do business with Cuba in case of an emergency.

Another option is a presidential executive order issued after a disaster, though that would not remove barriers on sharing information in advance.

Piñon notes that company-specific licenses have a political virtue: They can be issued quietly. By contrast, a general license for all oil response and service firms – even limited to emergencies – would be seen by some hard-line embargo supporters as “the first crack in the embargo wall,” Piñon said.

That presents a political challenge for the administration and for lawmakers on Capitol Hill, where the conventional wisdom is that any move to relax the trade policy could alienate a powerful voting bloc of pro-embargo Cuban-Americans in South Florida.

Rep. Ileana Ros-Lehtinen, R-Fla., who represents many such embargo supporters in Miami’s Little Havana and the Florida Keys, wants the U.S. to do more to thwart Cuban offshore drilling.

“The Cuban tyranny will say and do anything to persuade others to invest in its oil sector in order to stay afloat,” she said. “It is in our national security interests to deter others from participating in these reckless schemes. We cannot allow the Castro regime to become the oil tycoons of the Caribbean.”

Cuban promises

Interior Secretary Ken Salazar has said his agency and the State Department are working to ensure that Cuban drilling is as safe as possible.

The Interior Department, which oversees drilling in U.S. waters, has been working with Mexico to develop what Salazar calls a single “gold standard” governing oil and gas exploration in the Gulf.

Department officials have drawn leverage from Repsol’s leases in U.S. Gulf waters and pushed the Spanish company to follow American standards when drilling in Cuba. Salazar pressed the issue with Spanish authorities and Repsol representatives during a trip to Spain last week.

In a conference call Friday from Oviedo, Spain, Salazar said Repsol has volunteered to comply with U.S. environmental regulations for any of its Gulf drilling – even near Cuba.

During an International Association of Drilling Contractors conference last month in Trinidad, six Cuban officials said their country is following IADC, American Petroleum Institute and United Kingdom models for managing the risks of drilling operations.

Information sharing

IADC’s Hunt said Cuba is requiring Repsol and other operators “to demonstrate the extent of their compliance with U.S. regulations.”

He said Cuban officials also have studied the report by the U.S. presidential commission that investigated last year’s oil spill, and have expressed interest in talking with the U.S. government about oil spill preparation and coordination.

The Environmental Defense Fund’s Whittle argues that by working together now – before drilling begins – Cuba and the U.S. could share information on standards and science.

“The Cubans would have a lot to learn on how to build out an infrastructure to accommodate oil and gas,” Whittle said. “From an environmental perspective, I wish this issue would transcend politics and the relative government agencies could work together.”

The United States already has plans with Mexico and Canada for handling oil spills in shared waters.

The U.S. needs a similar accord with Cuba, said Thad Allen, the former Coast Guard admiral who headed the Deepwater Horizon response.

“We need to figure out what are the barriers that might prohibit us from being more effective in a response with Cuba and start attacking those now from a legislative and statutory standpoint,” Allen said in an interview. “Right now we’re pretty much prohibited from doing anything.”