Home > Uncategorized > Obama Order To Cap Abandoned Gulf Oil Wells Means New Jobs

Obama Order To Cap Abandoned Gulf Oil Wells Means New Jobs

The Obama administration announced Wednesday all Gulf of Mexico oil wells and platforms not in use in the past five years must be inspected, re-capped and dismantled.

I think the Interior Department has the oil and gas industries in the cross-hairs on this one. The good news it means more jobs and is a precaution to prevent more oil leaks and blowouts.

The bad news the cost will likely be passed onto consumers even though not one drop of oil or ounce of gas has gone to market from these abandoned sources in some cases for several decades. Alas, the crime here is that the cost can be a tax write off for the companies. So, the cries of anguish fall on my deaf ears.

There are nearly 3,500 abandoned wells and 650 oil platforms at issue. Hundreds have not been inspected for decades and no one knows whether they leak.

Initial reaction from the American Petroleum Institute was that it had been expecting the announcement and had been working with regulators “on a reasonable timeframe for implementation,” spokesman Carlton Carroll told msnbc.com. “We believe that for most operators, compliance will not be an issue.”

Carroll did not have an estimate of potential cost to the industry, but did say that one concern is “the ability of companies to get the permits necessary to undertake decommissioning activities.”

Environmental groups welcomed the directive. “This is an important first step in cleaning up what’s become a dumping ground for the offshore oil and gas industry,” Peter Galvin, of the Center for Biological Diversity, said in a statement. “These old wells can and do leak oil that only adds to the environmental problems the Gulf has suffered in recent decades.”

“We have placed the industry on notice that they will be held to the highest standards of planning and operations in developing leases and today’s notice reiterates that mandate,” Interior Secretary Ken Salazar said in a statement.

Michael Bromwich, head of the newly named Bureau of Ocean Energy Management, Regulation and Enforcement, said as “infrastructure continues to age, the risk of damage increases. That risk increases substantially during storm season.” Federal rules already require plugging such wells within a year of a lease’s expiration.

But, Interior noted, energy producers have historically said such “idle iron” might one day be used again to support other active wells located in the same lease area and were therefore reluctant to plug wells and remove infrastructure until they had to meet the government’s final decommissioning requirements.

Interior said the new directive “clarifies the regulation and mandates that any well that has not been used during the past five years for exploration or production must be plugged, and associated production platforms and pipelines must be decommissioned if no longer involved with exploration or production activities.”

“Companies will have 120 days to submit a company-wide plan for decommissioning these facilities and wells,” Interior added.

“These structures are not producing resources or creating jobs by just sitting there, and the risk of leaking abandoned rigs is something we’ve overlooked long enough,” said Rep. Raul Grijalva, chairman of a House subcommittee on national parks and public lands. “This announcement should put thousands of Gulf laborers back to work in short order cleaning up the Gulf and opening up new opportunities.”

Petroleum engineers say that even in properly sealed wells, the cement plugs can fail over time and the metal casing that lines the wells can rust. Even depleted production wells can repressurize over time and spill oil if their sealings fail.

The Obama administration announcement is a forewarning to double inspection fees as part of an $80 million plan to beef up Interior’s regulation of the oil and gas industry.

That proposal is opposed by the industry. American Petroleum Institute president Jack Gerard said said oil and gas companies already pay billions of dollars in royalty, taxes and other fees. He failed to mention the up to 80% in tax write offs the industry enjoys for exploration and extraction investments.

“We’ve been faulted for not doing the job people expected us to do, and the central reason for that is we haven’t had adequate resources. If we don’t get the resources we need we won’t be able to do the job effectively,” Bromwich said.

He said the agency is in the process of hiring new inspectors to bolster the 60 now in the field.

Bromwich said Monday the administration’s moratorium on 21 exploratory wells most likely will be lifted before its scheduled expiration in December but that decision rests with Interior Secretary Salazar.

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