Sunday, July 25, 2010

Blowout Prevention Act of 2010

According to the Wall Street Journal (7/22/2010, Son of Cap and Tax) last week the House Energy Committee unanimously (Republicans and Democrats) approved the Blowout Prevention Act of 2010 (link to Discussion Draft):

As always, the devil is in the details. This Act will not only apply to deepwater and Federal fee, but will also apply to any onshore drilling operation - on any property, public or private - that the Federal officials determine could "in the event of a blowout, ... lead to substantial harm to public health or safety or to the environment."

While this may not sound unreasonable, the problem is that under this language the Federal bureaucracy is expanded and can potentially control any and perhaps all drilling operations. Accordingly, drilling could come to a standstill until the Feds promulgate "how to decide" and "who gets to decide", set up more agencies, etc. Once they determine what applies - and what the process for determination and approval is - the typical inertia of the Federal government could throw a wrench in permitting wells. There is a provision to allow delegation of the task to the states, where said states are capable of making the determination and managing the risk. This would be the best option for all, as opposed to setting up additional, overlapping Federal bureaucracy.

Additionally, wells for which the Act applies ("High-Risk Wells", subjectively defined in this Act) will require "two sets of shear rams and two sets of casing shear rams". It would not be hard to imagine that only a few, if any, current land-based drilling rigs have enough substructure space for such a BOP stack. So, if no such rigs exist, many deep wells (and even some relatively shallow ones) could be delayed indefinitely until/unless new, very expensive drilling rigs are built - depending on the interpretations of the Federal government.

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