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Traveling by airboat through the Delta National Wildlife Refuge on Wednesday, Interior Secretary Ken Salazar repeated the Obama administration’s commitment to using large chunks of money paid by BP to rebuild Louisiana wetlands. Salazar asked Garret Graves, chairman of Louisiana’s Coastal Protection and Restoration Authority, whether it might make sense to use part of the BP money paid in the aftermath of the Deepwater Horizon oil spill for a half-dozen freshwater and sediment diversions that the state has included in its master plan for coastal protection and restoration.

Salazar said the administration is supporting the Restore Act, which would dedicate 80 percent of any fines levied against BP and other responsible parties to restoration projects in Gulf states. But he said the Justice Department also is attempting to ensure that any settlement of legal claims now pending in federal court in New Orleans would include similar requirements to spend money on restoration projects.

Salazar’s impromptu five-hour tour of Louisiana’s coastal erosion problems followed his kicking off the Bureau of Ocean Energy Management’s successful sale of leases in the central Gulf of Mexico.

During the flight, he mused on the complaints raised over the past two years by Republicans, including Gov. Bobby Jindal, about the speed at which oil and gas production has returned to the Gulf.

“I think that the attacks of the Republican Party on what was done in the Gulf are simply wrong,” Salazar said. “They don’t stand up to the truth of the light of day.

“The number of permits that have now been issued, and the rigs that are operating out here in the Gulf of Mexico, the bids we saw this morning in the lease sale in the central Gulf, all are measurements that should tell the world that the Gulf is back in business and doing well,” he said.

Salazar said the administration’s efforts to resume drilling in the Gulf in a responsible manner match its efforts to ramp up regulation of drilling for natural gas and oil in deep shale deposits, using a method called hydrofracturing or “fracking.”

He said federal officials are on track to require release of information about the chemicals used to fracture the hard shale deposits, while promoting the method to produce enough natural gas to meet the nation’s needs for the next 100 years. The cheaper prices for natural gas resulting from the new exploration method have been seen as an opportunity by the administration to push big business to switch their commercial fleets to natural gas, he said, which will result in the production of less greenhouse gases.

Salazar passed over the rapidly eroding Chandeleur Islands and Breton Island, which are part of the Breton National Wildlife Refuge.

Unusual high tides that prompted coastal flood warnings on Wednesday made the remaining barrier islands look even smaller from the air.

Breton Island was home this spring to between 35,000 and 40,000 royal and sandwich terns, and between 3,000 and 4,000 brown pelican nests, said Fish & Wildlife Service biologist James Harris. But he said erosion continues to challenge nesting birds.”We lost about 3,000 from early flooding, but we’re building that number back up from some re-nesting and some late nesters,” he said.

Salazar said he hopes to talk to Fish & Wildlife Service officials about a restoration project for the Chandeleurs among projects that BP and other parties may have to pay for as part of the Natural Resource Damage Assessment process required under the Oil Pollution Act.

Projects viewed during a boat tour included one where sediment dredged from the Mississippi River by the Army Corps of Engineers is being used to rebuild a platform for freshwater wetland grasses. Where the dredged material has been in place for a year or more, a lush array of marsh grasses has popped up.

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An energy explorer working in the Gulf of Mexico sued the U.S. government for what it said was the illegal suspension of drilling operations in 2010.

Offshore oil and natural gas production company ATP Oil and Gas Corp. sued the U.S. Interior Department in a federal court in Washington.

The lawsuit claims the U.S. Interior Department “improperly and illegally” placed a moratorium on offshore drilling activity in the Gulf of Mexico after the 2010 disaster at the Deepwater Horizon rig, the Platts news service reports.

The Deepwater Horizon rig caught fire and sank in April 2010, leading to one of the most catastrophic oil spills in the history of the industry. The U.S. government lifted the subsequent moratorium on offshore oil and natural gas drilling in October 2010, though drilling permits weren’t issued until March 2011.

ATP alleges it lost more than $60 million as a result of the moratorium after it canceled a rig contract and continued paying for two idled rigs.

ATP sued the Interior Department once before because of the delay in issuing drilling permits after the October moratorium was lifted.

More than 38 million offshore acres are up for bid in a Wednesday auction planned in New Orleans. The U.S. government estimates the sale could result in the production of more than 1 billion barrels of oil and 4 trillion cubic feet of natural gas.

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MWCC to Deploy Capping Stack for Exercise in the Gulf.
  
As part of the Obama administration’s ongoing efforts to strengthen the oil and gas industry’s ability to respond in the event of a deepwater blowout and ensure that offshore oil and gas production can continue to expand safely and responsibly, Secretary of the Interior Ken Salazar today charged the Marine Well Containment Company (MWCC) with conducting a live drill this summer to deploy critical pieces of state-of-the-art well control equipment in the Gulf of Mexico.

The exercise would demonstrate the ability of MWCC to mobilize a capping stack – a device similar to the one that stopped the flow of oil from the Deepwater Horizon’s well – in a timely fashion from its on-shore base to the deep water seabed of the Gulf.

This first-of-its-kind exercise will be overseen by Interior’s Bureau of Safety and Environmental Enforcement (BSEE), which tests capping stacks on the surface as part of its overall responsibility to enforce the tougher offshore safety requirements implemented in response to the Deepwater Horizon explosion and oil spill.

“In the wake of the Deepwater Horizon explosion and oil spill, we undertook the most aggressive and comprehensive reforms to offshore oil and gas oversight in U.S. history, including requiring the industry to have immediate access to equipment and technologies that could stop another blowout,” said Salazar. “Our safety reforms are designed to reduce the chances that a capping stack would ever be needed again, but one thing Deepwater Horizon taught us is that you must always be ready to respond to the worst case scenario. This exercise is an opportunity to deploy systems, test readiness, and train under real-time conditions.”

“BSEE has made great strides in developing an effective and strong regulatory framework to support the offshore oil and gas program,” BSEE Director James Watson said. “We have tested MWCC and capping stacks repeatedly, but putting them through their paces in the deep waters of the Gulf will give us added confidence that they will be ready to go if needed.”

MWCC is one of two consortia that provide contract access to well containment equipment to oil and gas operators in the Gulf of Mexico. This equipment is required by BSEE for drilling with subsea blowout preventers in deepwater, among other situations. The other consortium, the Helix Well Containment Group, will complete a similar deployment exercise in the future.

The demonstration will involve the field deployment and testing of a capping stack as part of a larger scenario that will also test an operator’s ability to obtain and schedule the deployment of the supporting systems necessary for successful containment – including debris removal equipment and oil collection devices, such as top hats. The capping stack will be lowered to the seabed by wire, a technique that offers the potential to be significantly faster than the deployment via pipe that occurred during the Deepwater Horizon response.

As part of the exercise, BSEE will also analyze the results from tests conducted on the sea floor. In October 2010, Secretary Salazar required that prior to receiving approval of a deepwater drilling permit, an operator must demonstrate that it has enforceable obligations that ensure that containment resources are available promptly in the event of a deepwater blowout.

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Last month, the Obama administration’s Environmental Protection Agency issued 588 pages of new regulations to control alleged “air pollution” from natural-gas wells. The anti-carbon crowd believes that adding another layer of regulatory “oversight,” with its attendant compliance costs, will somehow retard development of this abundant and versatile domestic energy resource.

EPA’s concern is that when fracking fluids are withdrawn from gas wells, some volatile organic compounds (VOCs) such as benzene rise to the surface. But a 2010 report from the Texas Commission on Environmental Quality found only two cases out of 94 monitoring sites where VOC and methane levels exceeded state guidelines.

Responsible drilling companies across the nation already use technologies developed in the North Texas Barnett Shale to capture the vast majority of these gases. EPA’s imposition of additional monitoring and reporting requirements will simply drive up the cost of gas production with no significant health or environmental benefits.

The EPA may have exceeded its mandate with these new directives. Under the Clean Air Act, the agency has authority to regulate emissions of volatile organic compounds. But the new rules are focused primarily on methane emissions, even though they’re not currently covered by the act. In any case, this new set of federal rules largely duplicates state regulations already in place.

Now the Interior Department is about to issue numerous new environmental and safety rules pursuant to hydraulic fracturing for natural gas on federal lands. Though only 25 to 30 percent of fracked wells are on federal lands, these rules also may become the template for fracking on private leases.

The underlying rationale for these new regulations is to ensure that fracking doesn’t contaminate groundwater or cause earthquakes. Specifically, Interior will require that drilling companies (a) disclose the names of all chemicals contained in fracking fluids, (b) set standards for well construction and wastewater treatment, and (c) request permission to frack with every permit application.

What we have here is another example of federal regulators arriving late to a party to which they weren’t invited. For more than 40 years, the individual states have had exclusive regulatory oversight of natural gas drilling, and hydraulic fracturing has been used in nearly 1 million wells across the U.S. Careful studies by the EPA and the Ground Water Protection Council haven’t revealed a single case of groundwater contamination from shale gas drilling. That’s because the fracturing occurs far below the location of drinking water, and the gas wells are encased in steel and concrete to ensure isolation from groundwater. All but 1 percent of the fracturing mixture is made up of water and sand, so the small amount of chemicals and additives is well diluted. And most states already require disclosure of chemicals used in drilling fluids.

As for earthquakes, the U.S. Geological Survey recently completed a study that concluded hydraulic fracturing does not cause them. The study did find an increase in “seismic activity” near some well sites but attributes these episodes to injections of well wastewater and not fracking. The study also notes there are more than 140,000 disposal wells in the U.S. with only a handful potentially linked to seismic activity. Importantly, the USGS found that the “earthquakes” were fairly small and rarely caused damage.

In practice, these new regulations may not be as draconian as they first appear, though they will impose unnecessary additional costs on drilling companies and likely slow the pace of permitting new wells. But the broader issue is whether public policies and regulations are encouraging or inhibiting greater use of America’s abundant domestic energy resources, especially natural gas.

Bernard L. Weinstein is associate director of the Maguire Energy Institute at Southern Methodist University’s Cox School of Business and a fellow with the George W. Bush Institute.

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Visitors to this oil town might be forgiven for wondering whether the BP oil spill and subsequent drilling moratorium ever happened. “Now hiring” signs are plastered on billboards around town, and hotels such as the Crowne Plaza are chock full of seminars training students to work on offshore rigs. Many offshore companies can’t find enough workers for the jobs they’re listing. This parish has the lowest unemployment rate in Louisiana, 4.8%.

Such is the opportunity on the offshore rigs that Sheila Clark, whose husband, Donald, died in the Deepwater Horizon explosion two years ago, said her 22-year-old son recently asked her how she’d feel if he went to work on a rig.

“I can’t stop him,” said Clark, who moved to Baton Rouge after her husband’s death. “He wants to make a good living for himself.”

The Obama administration takes credit for this sea change in an area that was all but closed during a six-month moratorium on offshore drilling in 2010.

“There are politicians who say that if we just drilled more, then gas prices would come down right away,” President Obama said last month in the Rose Garden. “What they don’t say is that we have been drilling more.”

But companies here complain about a sluggish permit process, and say the hiring signs are up because so many workers left town during the moratorium that there’s now a worker shortage. When Mitt Romney came to Louisiana this spring, he picked up on their complaints.

Obama “made it harder to get energy in America and so he shouldn’t be taking credit for that,” Romney said, standing on a natural gas rig.

As gas prices fluctuate and the economy remains stagnant, energy is becoming one of the more contentious issues in the 2012 campaign. House Democrats introduced a bill that would pay for lower-interest student loans by ending tax subsidies to oil companies. Republicans accuse Democrats of hampering energy production by blocking the Keystone pipeline.

Romney spoke to supporters in front of an oil derrick in the swing state of Colorado last week, criticizing Obama for “outdated” energy policies.

“I’m going to open up [the Arctic National Wildlife Refuge]; I’m going to get drilling in the gulf going again; I’m going to make sure we drill for oil in the outer continental shelf,” he said.

Nowhere is the energy issue more sensitive than in the Gulf of Mexico, where environmentalists butt heads with economic development officials after one of the biggest environmental disasters in U.S. history.

The strange thing is, experts say, that despite the politics, Romney and Obama have essentially the same position on offshore drilling.

“They’re not that far apart,” said Cindy Rugeley, an assistant professor of politics at Texas Tech University. “Both of them agree that there should be some degree of drilling offshore.”

Promoting drilling is a little tougher for Obama, who counts environmentalists among his supporters and must tread carefully in Florida, which saw its tourism industry decimated after the oil spill. But administration officials have been vocal in insisting that there’s more offshore drilling going on than there has been in years, part of an “all-of-the-above” energy policy that promotes getting energy from both below-the-ground resources and renewable fuels.

“Since the president took office, domestic oil and gas production has increased each year, with oil production higher than any time in eight years and natural gas production at its highest level ever,” said Clark Stevens, a White House spokesman. The administration has approved more than 500 permits for oil wells, and will hold a 38 million acre lease sale in June, he said.

By the end of April, there were 41 rigs operating offshore in Louisiana, compared to 47 in the week before the spill, according to a count by Baker Hughes, a large oil field company that keeps an official tally. Total federal oil production — offshore and on — has increased by 13% during the first three years of the Obama administration, according to administration data.

In October, the Interior Department completed reorganization of the Minerals Management Service, which had been responsible for regulating drilling, into three separate agencies. Permitting has picked up since then, with 32 drilling permits approved in the Gulf of Mexico in February, the most in one month since May 2007.

The administration points out that in one lease sale in December, it made available 21 million acres of land in the gulf, but the industry leased just 1 million acres.

Critics say the Obama administration has created regulatory uncertainty that’s driven out companies and workers.

“We are really not maximizing the opportunities in the Gulf of Mexico,” said Lori LeBlanc, executive director of the Gulf Economic Survival Team, a Louisiana nonprofit that advocates for more gulf energy production. “Without a predictable process, companies are going to look at other parts of the world.”

Operators submit plans to the government before they can apply for permits, she said, a process that used to take 50 days but now takes, on average, 212.

Obama’s opponents cite statistics that contradict administration figures. LeBlanc’s rig count shows 18 active rigs in the gulf now, down from 27 before the BP spill — any tallies that show otherwise are counting rigs that are not actively operating, she said. She is counting only deep-water rigs; the Baker Hughes number counts all offshore.

“There have been intentional efforts to slow down new production by slowing the permit approval process,” said Garret Graves, director of coastal activities for the state of Louisiana in the administration of Republican Gov. Bobby Jindal. Graves said production was down about 100 million to 200 million barrels a year.

Those in Lafayette are divided over Obama’s record.

“We find there’s a lot of rhetoric coming from the politicians – they say they’re going to lift the moratorium, and then they don’t issue permits,” said Keith Mosing, chief executive of Frank’s International, which provides tools and workers for offshore rigs. He says 80% of the equipment he makes in Lafayette is going overseas.

But Volker Rathmann, president of Collarini Energy Staffing, which finds workers for offshore rigs, said the demand for such workers had tripled in the last year and a half.

“If you take the rhetoric and politics out of it, I don’t think the Obama administration is very far away from what the Republicans are saying,” he said. “If you can spell drilling, you can get a job.”

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The Interior Department Thursday issued the final notice for an oil and gas lease sale to be held in New Orleans June 20 that will make available all unleased areas in the Central Gulf of Mexico for a total of more than 38 million acres offshore Louisiana, Mississippi and Alabama. The sale, which will take place at the Mercedes-Benz Superdome, could, according to estimates by Interior’s Bureau of Ocean Energy Management, lead to the production of more than one billion barrels of oil and more than 4 trillion cubic feet of natural gas.

“The Gulf of Mexico is the crown jewel of the U.S. Outer Continental Shelf, and home to a number of world-class producing basins — including many in deepwater areas that are becoming increasingly accessible with new technology,” said Bureau of Ocean Energy Management Director Tommy Beaudreau. “There have been a number of significant discoveries in the past two years alone, and this sale will continue making significant and promising areas available while encouraging diligent development and providing the taxpayer a fair return.”

“As part of the Obama administration’s all-of-the-above energy strategy, we continue to make millions of acres of federal waters and public lands available for safe and responsible domestic energy exploration and development,” said Secretary of the Interior Ken Salazar. “Holding this lease sale is one of the many administrative steps we are taking, at the president’s direction, to increase U.S. production, reduce dependence on foreign oil, and incentivize early production on leases that industry holds.”

According to Interior, the 7,276 blocks that will be part of the sale are located from three to about 230 miles offshore, in water depths ranging from nine to more than 11,115 feet in the Central Gulf of Mexico, a region that BOEM estimates contains close to 31 billion barrels of oil and 134 trillion cubic feet of natural gas that are currently undiscovered and technically recoverable.

The Final Notice of Sale package issued by Interior describes all terms and conditions for Central Gulf Lease Sale 216-222. According to Interior, “these include a range of incentives that encourage prompt development and ensure a fair return to taxpayers, as described in a recent report by the Department of the Interior on the status of Oil and Gas Lease Utilization. These measures include escalating rental rates and tiered durational terms with relatively short base periods followed by additional time under the same lease if the operator drills a well during the initial period.”

BOEM has also increased the minimum bid in deepwater to $100 per acre, up from only $37.50. That change was based on the finding by Interior that, over the course of the last 15 years, deepwater leases that went for lesser amounts “experienced virtually no exploration and development drilling.”

The terms of the sale also, according to Interior, reflect lessons learned from the Deepwater Horizon disaster.

According to Interior, “these include stipulations to protect biologically sensitive resources, mitigate potential adverse effects on protected species, and avoid potential conflicts associated with oil and gas development in the region.”

For this sale, BOEM has also adopted a stipulation to notify bidders that the terms stated in a February 20, 2012 agreement between Mexico and the United States regarding the exploration and development of oil and natural gas reservoirs along the United States’ and Mexico’s maritime boundary may apply to some of the blocks offered in this sale, should the agreement enter into force.

The Final Notice of Sale information package is available at: http://www.boem.gov/sale-216-222/. Copies can also be requested from the Gulf of Mexico Region’s Public Information Office at 1201 Elmwood Park Boulevard, New Orleans, LA 70123, or at 800-200-GULF (4853).

The Final Notice of Sale and the Notice of Availability of a Record of Decision on a Final Supplemental Environmental Impact Statement for Lease Sale 216/222 are available today in the Federal Register at: http://www.archives.gov/federal-register/public-inspection/index.html.

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After a drumbeat of complaints from energy companies that the Obama administration is blocking domestic oil and gas production, the Interior department released a report claiming that U.S. oil and gas producers are sitting on millions of acres of idle government land leases.

Secretary of the Interior Ken Salazar says that if producers were sincere about wanting to increase energy production, they would activate millions of acres of public land already leased to them. What should they be doing on that land? Drilling.

In a statement issued Tuesday, Salazar says the administration wants companies “to develop the tens of millions of acres they’ve already leased but have left sitting idle.”

A report released by the Department of the Interior claims that of 36 million government acres leased offshore for oil and gas production, 72 percent sit idle. Onshore, in the lower 48 states, says the report, more than half of federally leased acreage sits idle, “neither producing nor under active exploration or development by companies who hold those leases.”

The American Petroleum Institute calls the administration’s claim “absurd” and “willfully misleading.”

In a statement, API CEO Jack Gerard says that just because a lease doesn’t fit the government’s definition of active doesn’t mean it’s idle. Where a lease truly is idle, the reason often is that the producer must hold off drilling while they wait years to get the necessary government permissions.

Erik Milito, API director of upstream and industry operations, says there’s another reason some leases aren’t being used: There’s only a 30 to 40 percent success rate to finding oil. A producer has to narrow down its leases to find the few ones good enough for drilling.

The fallacy behind Salazar’s assertion–which Milito characterizes as being, ‘We don’t have to open up any more public land to you, because you’re not using the leases you’ve already got’–is the belief “that you just put a pipe in the ground, and you’re ready to go–that there’s always oil there.”

Kathleen Sgamma, vice president of government and public affairs for the Western Energy Alliance, whose members produce, she says, 27 percent of the natural gas and 14 percent of the oil in the U.S., cites a more basic reason a lease may be idle: Its oil and gas may be uneconomic to extract.

As energy prices fluctuate, and as technology improves, she says, idle leases are brought into production. The most dramatic and most recent example is the 200,000-square-mile Baaken oil field underlying North Dakota and Montana. As recently as five years ago, she says, many leases here sat idle. Then technology and economics made production possible, and production boomed.

The DOI report, she says, “Actually is useful, since it shows that we’re becoming more efficient at operating on public lands. To have 44 percent of public lands in production is very high, compared to the 30 percent it’s been historically. There will always be maybe 30 percent of leases that don’t pan out. But of the rest, we estimate half are somewhere in the [drilling] process. If government is truly serious about increasing production, they would remove some of the red tape.”

The Alliance says that when you add up the time required for prospecting, drilling, and waiting around for government approvals, 19 years can pass before a lessee actually sees oil. During part of that time, the government counts the lease inactive.

She says she knows the government can move energy projects ahead more aggressively when it wants to, because it has done exactly that with wind and solar projects. It’s only politics, she says, that accounts for the different treatment accorded oil and gas.

A spokesman for the Department of the Interior, asked to respond to the industry’s contention that DOI’s report is both misleading and absurd, says, “The report speaks for itself. The notion that we have somehow locked up federal lands clearly doesn’t square with the facts. Our goal is to continue expanding safe and responsible development, and we will continue to take steps to deliver on that priority.”

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On Tuesday in Salt Lake City, Interior Secretary Ken Salazar approved a natural-gas drilling project for Utah’s Uinta Basin that will result in more than 3,600 new wells.

For those concerned that fracking — a controversial extraction method that involves pumping a mixture of water and chemicals deep into the ground at high pressure — might contaminate groundwater or increase harmful emissions, Salazar’s announcement might seem like yet another setback for the environmentalist cause. Yet the project includes big concessions to conservation groups, which means that activists who often oppose such projects largely haven’t attacked it. Even if they had, a report out Monday from the Rhodium Group (h/t National Journal) demonstrates why America’s natural gas boom, fracking and all, will probably be a net plus for the environment.

Rhodium’s Trevor Houser notes that greenhouse gas emissions from America’s energy sector in January were down 13 percent compared to 2005, the baseline year the United States uses in its international climate commitments. Sure, Houser admits, the month-to-month data the Energy Information Administration provides are volatile, and other things also made the numbers look good. This winter was unusually warm, depressing electricity demand, for example. But lower demand only accounts for about half the decline. The other half appears to be electric utilities, whose emissions dropped 18 percent, switching away from coal to renewables, nuclear and, yes, natural gas. When burned, natural gas emits about half the CO2 coal does. And, unlike renewables, it is now extremely cheap.

Don’t get too exuberant. The country has not yet reached its 2020 carbon goals — more fuel-switching away from coal, among other things, will be necessary for that. And burning loads of natural gas is not a permanent solution to the climate problem, either. The fuel won’t reach its full potential to cut U.S. emissions until some new fracking rules from the Environmental Protection Agency (EPA) kick in, but, even then, it will still produce lots of greenhouse emissions. Rather, natural gas is an inexpensive bridge that seems already to be helping the United States meet its medium-term climate goals, giving us some time as renewables get cheaper.

Instead of writing off these benefits, environmentalists can play a constructive role in auditing natural gas fracking practices, looking out for unforseen consequences and pushing for sensible fracking regulation. In that vein, environmentalists should count new fracking rules from EPA and Interior as victories. Interior’s rules only apply to drilling on federal land, but environmentalists and state regulators can use them as a template for environmental standards on state and private land, too. EPA’s rules, meanwhile, will cut down on the release of methane, a potent greenhouse gas, during the fracking process.

Salazar’s Tuesday announcement in Utah shows that conservationists can encourage safer extraction without closing off access to resources. Anti-natural gas activists should apply the same logic more often.

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