Sometimes new regulations come out of nowhere. And sometimes it is just a matter of time. Last week’s unveiling of the Bureau of Safety and Environmental Enforcement’s (“BSEE”) offshore blowout preventer and well control regulations falls into the latter camp.
Though hard to believe, it has already been five years since the 2010 Deepwater Horizon tragedy. BSEE, the agency responsible for ensuring the safety of offshore oil and gas operations, has been criticized in some corners for the pace of its regulatory changes. In reality, the agency has been hard at work with the oil and gas industry, other government agencies, the scientific community, and other stakeholders to develop and incorporate new standards and technology to further improve safety during offshore oil and gas operations and avoid a future similar incident.
The government recognized from the outset that blindly prescriptive and hastily promulgated requirements would not be effective and could compromise growing Outer Continental Shelf production accounting for one-fifth of the oil produced in the country. Rather, BSEE’s measured and deliberative effort is intended to incorporate the latest data and lessons learned post-Deepwater Horizon and to remain flexible enough to accommodate future advances in well control technology. As BSEE Director Brian Salerno indicated when announcing publication of the proposed rule, “Regs are not easy to develop, it takes a lot of thought to get it right…[w]e invested the time to make this rule as comprehensive and holistic as we could.”
Given this advance collaboration, much of this proposed rule should not come as a surprise. The proposal predictably focuses on blowout preventers, identified as a key factor resulting in the largely uncontrolled release of oil that took almost two months — and much of the world’s oil containment resources — to finally cap. The proposed rule incorporates new standards for the design, manufacture, repair and maintenance of blowout preventers that were developed by industry experts over the last half decade. It requires that blowout preventers have double shear-rams that can instantly shear drill pipes in case of emergency and prevent the loss of well control. It further requires that blowout preventer maintenance and repair records be reviewed by third-party auditors and that the shearing capabilities of the double shear rams be similarly verified by independent experts. The regulations would also require real-time monitoring of deepwater and other so-called “high-risk” drilling operations, the presence of agency inspectors during blowout preventer testing, new guidelines for cementing wells, and criteria for “safe” drilling margins.
Although the economic burden imposed by proposal is anticipated to be the better part of a billion dollars over the next decade, many of the new requirements are based on guidelines already adopted by industry. Accordingly, BSEE officials have indicated that they don’t expect compliance to be an unreasonably heavy financial burden on the offshore oil and gas industry.
The agency is also attempting to streamline in certain areas. For example, although more stringent testing and verification requirements will undoubtedly increase the cost of drilling operations, the agency is proposing to decrease the frequency of required blowout preventer pressure tests during drilling operations, which should reduce the “downtime” required for testing. Given that it could take weeks or months to drill a deepwater well at a daily cost of $1 million or more for the rig and other equipment, the agency’s proposal to reduce the test frequency for blowout preventers from 14 days to 21 days could help mitigate the overall economic impact of the proposed rule.
The public comment period on the proposed rule runs until June 16, 2015. Undoubtedly, there will be questions or disagreement regarding at least some of the proposed provisions. That said, this rulemaking represents an instance where the government did not treat the industry as the enemy and retreat into a back room to craft new onerous rules. Instead, BSEE recognized and made affirmative use of information and expertise beyond the walls of the agency. This upfront engagement with industry and other stakeholders will better ensure that the regulatory effort successfully and efficiently achieves its goals.
It remains to be seen how the proposed rule is ultimately received over the next two months and what shape the final regulations will take. And of course, this is merely one set of proposed regulations in a slew of new rulemaking and guidance efforts by BSEE and other agencies post-Deepwater Horizon, which should continue for the near future.