U.S. Mulls "Astro Act" for Offshore Oil and Gas

By MarEx 2017-10-11 19:35:18

On Wednesday, the U.S. Subcommittee on Energy and Mineral Resources held a legislative hearing on a discussion draft of the “Accessing Strategic Resources Offshore Act” or the “Astro Act.” 

Under the previous administration, 94 percent of America’s Outer Continental Shelf (OCS) lands were off limits to development through both the 5 Year Plan process and the withdrawal of acreage. 

The “ASTRO Act” establishes revenue sharing for states in the Mid and Southern Atlantic planning areas, in an attempt to fairly compensate the qualifying producing states, and to ensure disbursement certainty into the future. It also adds flexibility to the national oil and gas leasing process by giving the Secretary of the Interior the authority to conduct lease sales in areas excluded from approved 5 Year Plans. It also limits the president’s authority to withdraw OCS areas from leasing and to combine the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE).  

Jobs and Revenue

Studies show that opening the OCS in the Atlantic, Pacific, and Eastern Gulf would create 840,000 new jobs and generate over $200 billion in revenues. API Upstream and Industry Operations Director Erik Milito testified, saying: “As both the U.S. and global economies grow, the U.S. – with its abundant oil and natural gas supplies – can effectively provide economic and energy stability to markets at home and abroad through continued and expanded oil and natural gas development. That’s why promoting opportunities for investment in U.S. offshore oil and natural gas projects is critically important,” he said.

“From a safety and environmental responsibility standpoint, America’s offshore oil and natural gas industry is characterized by the continued advancement of technology and systems integrity, the application of extensive industry technical standards and a robust regulatory regime. The industry continues to develop and improve upon technologies designed to ensure that an environmental incident never occurs, and this includes everything from the materials used in offshore operations, the development of software and control systems to manage operations, the development, production and deployment of modern drillships and production facilities to bring energy to market and the design and manufacture of blowout prevention equipment systems, subsea safety valves and other equipment.”

Combining Agencies

Michael R. Bromwich, managing principle of The Bromwich Group, also testified. Bromwich served in the federal government for 14 years, including as a federal prosecutor and, most recently he served in the Department of the Interior from June 2010 through the end of December 2011 as the country’s top offshore drilling regulator. 

Bromwich discussed the provision of the draft bill that addresses the possible recombination of BOEM and BSEE, the two principal agencies within Interior responsible for regulating offshore exploration and production. “I think such a recombination is not just a profoundly bad idea that would be unnecessarily disruptive for the agencies and the industry and for which no clear case has been made, but it is also a dangerous idea that would significantly raise the risk of a catastrophic offshore accident.”

He sights the Deepwater Horizon accident that occurred in April 2010 that killed 11 people. “It was a human tragedy of major proportions. It was also an environmental tragedy because the accident released more than three million barrels of oil into the Gulf over the course of nearly 90 days before the well was finally capped. More than six years later, the extent of the environmental damage is still being determined through a broad range of scientific studies.” 

Bronwich said he was asked by President Obama to re-enter the government to deal with the crisis caused by the oil spill and its aftermath, and to lead the agency responsible for the oversight of offshore drilling – at the time known as the Minerals Management Service, or MMS. The task was two-fold: to help the Administration deal with the crisis and its after-effects, and to undertake efforts to reduce the risk of future explosions and spills.

“Our work to reduce the risk of a major offshore incident in the future involved (1) raising the bar on safety and emergency response by modernizing standards for the offshore oil and gas industry, and (2) establishing stronger, more independent, and better-resourced federal regulators overseeing this extremely important, but inherently challenging, activity. 

“First, we promptly implemented, and then through extended and inclusive rulemaking processes, a set of tighter rules and requirements designed to reduce the risks of deepwater drilling. Second, in addition to modernizing the rules and regulations to better match the nature of the challenges of deepwater drilling, we also examined whether the government’s structure for managing and regulating offshore drilling was well-suited to the nature of its challenges and risks. We concluded that it was not. 

“Through no fault of its personnel, MMS was a victim of lost credibility because of massive mission confusion and questions about structural conflicts of interest, a shortage of resources and a misallocation of those resources.”

The same structures had been in place for almost 30 years, but the spill focused long overdue attention on the relationship between agency structure and agency mission. “Over time, the assessment and collection of money from lease sales and oil and gas production determined the priorities of the agency. The federal government’s appetite for revenues and royalties drove decisions that were consistently pro-exploration and production. Very little time and attention was devoted to developing appropriate regulations that kept pace with technological developments in offshore drilling. Even less attention was devoted to enforcing those regulations and holding companies and individuals accountable for violations,” said Bromwich.

In the six years since the reorganization was completed, the wisdom of the reorganization has been clearly demonstrated, he says. “The agencies function separately and independently, with their own distinct and separate missions. They are free of the conflicts and questions about independence and technical expertise that previously plagued MMS... Most importantly, offshore operations have taken place without another serious oil spill. There is no doubt in my mind that the combination of more stringent regulations, additional resources for BOEM and BSEE, and clarity of mission for those two agencies have reduced the risks of such a spill. Government action cannot eliminate the risks of a catastrophic oil spill, but it can certainly help reduce that risk.

Transparency Puzzle

“The truth is I am puzzled by the impetus to undo the reorganization that was so broadly supported a few short years ago. I am unaware of any pressure to do so from industry or from any other stakeholder. If there is any such pressure, and it is based on evidence of structural problems with the reorganization, let’s hear what it is and let’s fix the problems. The Administration has certainly not made the case for recombining BOEM and BSEE, and I don’t believe there is a convincing case to be made. Because the discussions on this issue have so far taken place behind closed doors, there has been no opportunity for informed debate on the issue. This is the opposite of transparency.”

He concluded: “When the next offshore accident takes place, people would inevitably look to the recombination of BOEM and BSEE and its related consequences as one of the factors that raised the risks of an oil spill and allowed it to happen. And chances are they would not be wrong.”