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Proposed federal rule costly for Gulf oil operations

By:  Ben Karkela, Energy Media Group

 

Exploratory drilling in the Gulf of Mexico could decline by 55 percent under a proposed federal rule, according to a new study.

The proposed Well Control Rule addresses recommendations made after the Deepwater Horizon oil spill. It tightens standards on blowout preventers and puts more controls on how companies drill and monitor wells on the ocean floor.

A study by Wood Mackenzie says the proposed governing rule comes at a high cost for oil and gas operations in the Gulf of Mexico. The rule would significantly reduce domestic energy production while also curtailing economic activity, energy supplies and offshore revenues.

Under an $80 oil assumption, the Interior Department’s draft rule would:

  • Decrease exploration drilling by 35-55 percent, or up to 10 wells per annum
  • Reduce Gulf of Mexico production by as much as 35 percent by 2030
  • Put 105,000 – 190,000 jobs at risk, mainly in Louisiana and Texas
  • Reduce the country’s GDP by $260 – 390 billion through 2030
  • Reduce the number of rigs by 25 – 50 percent by 2030

 

The guidelines may make exploration and development projects too expensive to operate.

“It is important that we conduct further study of the finer points and practical effects of this new rule before forcing it on companies engaged in operations in the Gulf,” said Lori LeBlanc, Executive Director of the Gulf Economic Survival Team. “Our nation as a whole would feel the impact of reduced domestic energy production stemming from this rule, with a particularly harsh blow to Gulf energy-producing states.”

The proposed rule will head for final analysis by the Office of Budget and Management. After that, it would be published in the federal register and go into effect within 90 days, according to the Bureau of Safety and Environmental Enforcement.