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Spill panel’s idea seen as too restrictive

By David Hammer

The Obama administration largely embraces the legislative priorities recommended by the Oil Spill Commission the president appointed in the wake of last year’s BP disaster, but appears ready to oppose key regulatory changes the group is seeking, according to a White House draft memo obtained this week by The Times-Picayune.

The memorandum, which is marked as a “pre-decisional draft” and is being circulated among various federal agencies, says the administration is “concerned” about the Oil Spill Commission’s request that Congress create an offshore safety agency within the Interior Department.

The concern appears to be that an independent agency would impose demands on the oil industry that run contrary to those recently devised by the new Bureau of Ocean Energy Management, Regulation and Enforcement.

In its report last month, the Oil Spill Commission praised Interior Secretary Ken Salazar’s reorganization of the old Minerals Management Service into bureaus to separately handle lease revenues, drilling safety and environmental issues, but said the new oversight structure didn’t go far enough to protect safety and environmental regulators from political and money-making pressures.

The commission suggested an independent safety agency should operate inside the Interior Department, like the FBI does within the Justice Department, with a director appointed by the president to serve a fixed term.

The White House memo says the agency proposed by the commission won’t work right now. The document suggests the administration is considering opposing any legislation that could take the mantle of safety reforms away from its leaders on this issue, which are Salazar and BOEMRE Director Michael Bromwich.

“Implementing the (commission’s recommended) change now could actually be disruptive to the safety reforms being undertaken by DOI,” the memo says.

Kendra Barkoff, an Interior Department spokeswoman, responded on behalf of the Obama administration, saying it is considering input from the “commission and other independent reviews” as it works to remove conflicts from the regulatory structure.

Last month, Bromwich told reporters that it would be up to Congress to implement a more independent agency than the Bureau of Safety and Environmental Enforcement recently established by the Interior Department.

“We are by no means foreclosing the possibility that down the road we may move to the model that the commission recommended,” Bromwich said.

The Oil Spill Commission declined to comment on the memo Thursday.

Oil and gas companies have been complaining for months that they can’t get permits to drill new wells, and Bromwich has said the government is waiting for proof that operators have the capacity to respond quickly in case of subsea blowout akin to BP’s in April. But the White House appears worried that Congress might go too far in stifling an oil and gas industry that has already been dazed by the regulatory upheaval and uncertainty since the spill.

“We are also concerned about legislative proposals that would mandate specific drilling safety or environmental performance regulatory requirements by statute due to the need to maintain flexible, performance-based and cost-effective regulatory approaches …,” the memo says.

The document also suggests that if new requirements don’t come from Salazar and Bromwich they could clash with the flexible regulatory philosophy President Barack Obama laid out last month in an executive order.

The Jan. 18 order adopts a key principle from former President Bill Clinton’s regulatory reforms of 1993: That regulation of industry should be strong but malleable, using warnings rather than harsh business-killing penalties whenever possible and “specify(ing) performance objectives, rather than specifying the behavior or manner of compliance” that regulated businesses must follow.

The idea that Obama wants to keep oil and gas regulation looser than others is sure to surprise Louisiana political and industry leaders. They complained loudly that the president overreacted to the Deepwater Horizon incident when he banned all deepwater drilling for five months last year, and the critics still allege that he has fabricated a slowdown in new well permits.

But the Obama administration does appear to support going beyond the commission’s recommendations to crack down further on the industry in two key areas.

First, the memo calls for Congress to change the Clean Water Act to remove a reference to individual states’ power to pursue their own legal actions to collect spill fines. The document says the reference could be interpreted to limit the federal government’s ability to collect bigger fines whenever states pursue parallel actions against polluters.

Second, the memo pushes for a change to the Outer Continental Shelf Lands Act so it will be easier for the government to prove that a criminal act caused a spill.

Currently, prosecutors have to prove “willful” misconduct led to a spill to establish criminality. The “willful” standard means a defendant knew he was breaking the law. By switching to a “knowing” standard, the government will only have to prove that the accused “had knowledge of the facts that constitute the offense and that the conduct at issue was not accidental or a mistake,” the memo says.

The rest of the administration’s legislative priorities basically echo the commission’s recommendations. The memo calls on Congress to direct a majority of fines imposed for the Deepwater Horizon spill to restoring the ecology of Gulf Coast states.

It also backs the establishment of an industry-run safety institute, the beefing up of whistleblower protections for rig workers who report unsafe practices, the repeal of caps on responsible parties’ liability and the end of royalty relief, a common practice by the old MMS of waiving fees while companies were running up their highest exploration costs.

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The U.S. has the ability to increase oil production more than 40 percent, to 10 million barrels a day, within a decade to reduce dependence on foreign sources, a former Shell Oil Co. president told Congress.

Developing resources in Alaska, the Gulf of Mexico, off the U.S. West Coast and in the Bakken formation of North Dakota and Montana may also add 3 million jobs, John D. Hofmeister, chief executive officer of Citizens for Affordable Energy Inc. and Shell president in 2005-2008, told the House Energy and Power Subcommittee in Washington today.

Royal Dutch Shell Plc, Europe’s largest oil company, delayed drilling in Alaska until 2012 because it was unable to obtain all the permits from the Obama administration, Chief Executive Officer Peter Voser said on Feb. 3. The Interior Department halted deep-water drilling in the Gulf of Mexico after BP Plc’s well ruptured in April, and asked energy companies to meet more stringent safety requirements before they resume drilling.

“The decline in the Gulf of Mexico, I believe, will be sharper and deeper than anyone is currently projecting,” Hofmeister said. “We have made a horrible error as a country. The rest of the world did not discontinue offshore drilling.”

The U.S. consumes 20 million barrels of oil a day, Hofmeister said. The nation produces about 7 million barrels a day, he said.

“We imposed strong new drilling safety and blowout prevention standards,” Tommy Beaudreau, a senior adviser to the director of Bureau of Ocean Energy Management, Regulation and Enforcement, the Interior agency responsible for offshore drilling oversight, said in an e-mailed statement yesterday. “Industry has yet to demonstrate that it has the equipment and systems in place to respond to a deep-water blowout.”

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By Andrew Restuccia

A federal proposal laying out new standards for a controversial natural-gas drilling practice called hydraulic fracturing likely won’t be issued until after the 2012 elections, an energy analyst said Thursday.

The practice is certain to be an election issue for lawmakers from states in which hydraulic fracturing is prevalent, but the timing of the standards would take that hot-button issue off the table.

In hydraulic fracturing, or “fracking,” large quantities of chemicals, water and sand are injected into the ground to get access to valuable natural-gas reserves. Environmental groups have railed against the practice, arguing that the chemicals used in the process can pollute drinking water.

To address these concerns, the Environmental Protection Agency (EPA) is conducting a study on the impact of fracking on drinking water. The agency released a draft study plan this week that will be reviewed by scientists.

Analysts at ClearView Energy Partners, which was founded by aides in former President George W. Bush’s administration, say that they don’t expect initial results of the study to be released until the second half of 2012 and that there will be more conclusions released in 2014.

“This implies that any standards proposal predicated on the ongoing study may not surface until after the November 2012 presidential elections,” the analysts say in a research note released Thursday.

The analysts said the timeline does not eliminate industry fears of the standards, but does allay near-term concerns.

“In our view, delay does not eliminate the regulatory overhang for operators, but it could diminish the near-term acuity of headline risks perceived by investors, because possible strictures may now appear years, rather than months, away,” the research note says.

The analysts are watching the EPA study closely for signs that the federal government will intervene in state fracking regulations.

“[R]egulatory risks can be ‘top-down’ (e.g., EPA intervenes out of concern that state regulators may have inadequate resources to manage environmental risks) or ‘bottom-up’ (e.g., states lead the charge by tightening their own standards, potentially to pre-empt or obviate federal intervention),” the research note says.

Oil and gas industry groups have said the federal government should allow states to regulate the practice. But Democrats in Congress have called on the EPA to regulate fracking and to require companies to identify the specific chemicals used to get access to the natural-gas reserves.

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By JOHN MARKOFF

At least five multinational oil and gas companies suffered computer network intrusions from a persistent group of computer hackers based in China, according to a report released Wednesday night by a Silicon Valley computer security firm.

Computer security researchers at McAfee Inc. said the attacks, which were similar to but less sophisticated than a series of computer break-ins discovered in late 2009 by Google, appeared to be aimed at corporate espionage. Operating from what was a base apparently in Beijing, the intruders established control servers in the United States and Netherlands to break into computers in Kazakhstan, Taiwan, Greece and the United States, according to a report, “Global Energy Cyberattacks: ‘Night Dragon.’ ”

The focus of the intrusions was on oil and gas field production systems as well as financial documents related to field exploration and bidding for new oil and gas leases, according to the report. The attackers also stole information related to industrial control systems, the researchers noted, but no efforts to tamper with these systems were observed.

McAfee executives declined to name the victim companies, citing nondisclosure agreements it signed before being hired to patch the vulnerabilities revealed by the intrusions. Last year, when Google announced that intellectual property had been stolen by Chinese intruders, it expressed frustration that while it had observed break-ins at a variety of other United States companies, virtually none of the other companies were willing to acknowledge that they had been compromised.

“We have confirmed that five companies have been attacked,” said Dmitri Alperovitch, McAfee’s vice president for threat research. He said he suspected that at least a dozen companies might have been affected by the team of computer hackers seemingly based in Beijing and who appeared to work during standard business hours there.

“These people seemed to be more like company worker bees rather than free-spirited computer hackers,” he said. “These attacks were bold, even brazen, and they left behind a trail of evidence.”

It was not possible to tell whether the attacks were the work of a government organization or a particular group of cybercriminals, Mr. Alperovitch said.

Jenny Shearer, a spokeswoman for the Federal Bureau of Investigation in Washington, said that the agency was aware of the McAfee report, but had no comment.

According to the report, the intruders used widely available attack methods known as SQL injection and spear phishing to compromise their targets. Once they gained access to computers on internal company networks, they would install remote administration software that gave them complete control of those systems. That made it possible for the intruders to search for documents as well as stage attacks on other computers connected to corporate networks.

In addition to their parallels to the Google attacks of last year, the intrusions resembled a Chinese-based electronic espionage network that was found in 2009 and named GhostNet. In that case, researchers at the Munk Center for International Studies at the University of Toronto uncovered an elaborate network aimed at government computers as well as those of nongovernmental organizations like the office of the Dalai Lama. The researchers concluded that the control servers of the attack system were based on the island of Hainan, which is part of China.

The McAfee report was released shortly before the annual RSA Conference on Web security in San Francisco. The annual computer security industry trade show and conference routinely leads to an outpouring of accounts of computer network vulnerabilities and new reports of intrusions and data thefts.

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Pair debate, focus on their backgrounds

By RICHARD BURGESS

LAFAYETTE — The two candidates in the Feb. 19 special election for Senate District 26 squared off in a debate Thursday, distinguishing themselves more by their backgrounds than by any difference of opinion on the issues.

State Rep. Jonathan Perry, R-Kaplan, and Vermilion Parish Police Juror Nathan Granger, of Erath, are running in a special election to replace Nick Gautreaux, who stepped down to take a job as commissioner of the state Office of Motor Vehicles.

Perry and Granger gave similar answers to nearly every question in the debate, but they often returned to distinctions that have been a general theme of the campaign.

Granger, a Democrat, who owns two oilfield service companies, touted his experience as a “job creator” who knows how to stick to a budget. “I think we need a breath of fresh air in Baton Rouge,” he said.

Perry, a lawyer who has served for three years as a state representative, said his experience will be invaluable as the Legislature works this year to redistrict and to contend with a $1.6 billion budget shortfall.

“I think I have been a huge part of the solution in moving Baton Rouge in the right direction,” Perry said.

In responding to questions during the debate, both men stressed the need for more federal money to pay for hurricane protection in coastal Louisiana, for better funding for higher education and for an economic development policy that focuses on small businesses.

There were nuances.

On the issue of economic development, Granger said the state should offer more low-interest loans and incentives for small businesses and more skills-based job training as an option for students who have no interest in college. Perry focused on the need to maintain all existing tax exemptions and to forgo any new taxes or fees.

Both candidates downplayed a question about whether religious differences should play any role in the race, and commended each other on their dedication to faith and family.

Granger is a Catholic, and Perry, a born-again Christian. Both said they are pro-life.

The two candidates shared views so often during the debate that the moderator, University of Louisiana at Lafayette journalism professor Robert Buckman, offered the candidates a chance at the end of the debate to elaborate on any disagreements.

Granger again talked about his background as a businessman, while Perry talked of the need for an experienced legislator in the senate seat.

The debate was sponsored by the ULL Society of Professional Journalists.

Senate District 26 is made up of all of Vermilion Parish and portions of Acadia, Lafayette and St. Landry parishes.

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By Scott Conroy

Former House Speaker Newt Gingrich on Thursday hammered the Obama administration on a host of issues and promoted his own energy proposals during a speech at the Conservative Political Action Conference (CPAC).

Gingrich’s address was characteristically heavy on policy, as he opined on issues ranging from the German stock market to the newest generation of nuclear power plants. However, he also sprinkled his address with sound bite-ready slogans befitting a possible future campaign.

“2010 was the appetizer,” the potential Republican presidential candidate said of GOP victories in the midterm elections. “2012 is the entrée.”

Gingrich made several of the kinds of references to the 40th president that are near requisite at conservative gatherings and declared flatly, “Barack Obama is no Ronald Reagan.”

The former speaker joked that he wanted to give Obama an opportunity to be the keynote speaker at next year’s CPAC if the president were to decide to move to the political center, but Gingrich offered a blunt take on his view of where Obama stands on the major issues of the day.

“The Obama administration is anti-jobs, anti-small business, anti-manufacturing, pro-trial lawyer, pro-bureaucrat, pro-deficit spending and pro-high taxes,” Gingrich said to the cheering crowd.

The second half of Gingrich’s speech focused mostly on his “all-American energy plan,” which the former speaker was promoting through his advocacy group, American Solutions.

Gingrich repeated his call for a new environmental solutions agency to replace the Environmental Protection Agency and said that the U.S. needed to more aggressively develop all sources of available energy for the sake of economic prosperity, environmental protection and national security.

“We need an American energy policy,” Gingrich said. “By contrast, what you have from the Obama administration is a war against American energy. They just can’t help themselves. Even in the State of the Union, at a time when we’re facing rising oil prices, what does the president want to do? He wants to raise taxes on oil and gas.”

Gingrich has long been outspoken in his support of ethanol subsidies, which are generally popular among Iowa caucus-goers but anathema to many fiscal conservatives.

The former speaker is heading back to the nation’s first voting state on Saturday for a tour of a hospital and a meeting with local small business leaders in Iowa City.

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It should come as no surprise to the people of the Gulf Coast that the ideologically unbalanced national oil spill commission, appointed by President Obama following the BP oil spill last year, faced hard questions from Congress. It’s about time.

The Congress is not only supposed to provide oversight on executive branch agencies and commissions, but a check and balance as well. William Reilly, co-chairman of the commission, told the committee there is an aura of complacency among oil producers in the Gulf.

But the House Natural Resource Committee, now under the control of Republicans, was skeptical. Louisiana Rep. Jeff Landry, pointed out that 42,000 wells, including 2,500 deepwater wells, have been safely drilled in the Gulf of Mexico without incident since 1947.

He said the commission was unjustified in its finding that there was a systemic failure of the oil producers in the Gulf.

The Obama commission was fatally flawed from the beginning. It didn’t have one oil drilling engineer, and was clearly biased toward anti-fossil fuel environmental interests.

On the other side, Rep. Ed Markey, D-Mass., long a foe of the oil industry, endorsed and defended the report. He has introduced legislation to put more obstacles in the way of offshore drilling, including increasing the power of the U.S. Coast Guard and the National   Atmospheric and Space Administration in monitoring the drilling industry.

The problem that led to the Deepwater Horizon oil rig explosion wasn’t a lack of regulation, it was a lack of enforcement of regulations that already existed. Piling more regulations on the industry will just make it harder for the oil industry to exist in the Gulf.

U.S. Sen. Mary Landrieu, who has been skeptical of the commission, lauded Reilly and the other commission co-chairman, former U.S. Sen. Robert Graham of Florida, long a foe of offshore drilling, for a “very balanced report.”

The commission’s recommendations, among others, call for more federal government bureaucracy, more agencies, more regulators, more red tape.

At a time when the U.S. is becoming more dependent on hostile leaders such as Hugo Chavez in Venezuela, and unstable Middle Eastern sources, the Obama administration policy has increased red tape to make new drilling extremely difficult in the Gulf of Mexico. This is putting upward pressure on the price of gasoline at the pump, slowing our fragile economic recovery and job creation, as well as threatening our National Security by making us more dependent on hostile and unstable overseas sources.

Louisiana doesn’t need more bureaucratic oversight from Washington. It needs to have more control over its own vital resources.

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The EPA has proposed examining every aspect of hydraulic fracturing, from water withdrawals to waste disposal, according to a draft plan the agency released Tuesday. If the study goes forward as planned, it would be the most comprehensive investigation of whether the drilling technique risks polluting drinking water near oil and gas wells across the nation.

The agency wants to look at the potential impacts on drinking water of each stage involved in hydraulic fracturing, where drillers mix water with chemicals and sand and inject the fluid into wells to release oil or natural gas. In addition to examining the actual injection, the study would look at withdrawals, the mixing of the chemicals, and wastewater management and disposal. The agency, under a mandate from Congress, will only look at the impact of these practices on drinking water.

The agency’s scientific advisory board [1] will review the draft plan on March 7-8 and will allow for public comments then. The EPA will consider any recommendations from the board and then begin the study promptly, it said in a news release [2]. A preliminary report should be ready by the end of next year, the release said, with a full report expected in 2014.

A statement from the oil and gas industry group Energy in Depth gave a lukewarm assessment of the draft.

“Our guys are and will continue to be supportive of a study approach that’s based on the science, true to its original intent and scope,” the statement read. “But at first blush, this document doesn’t appear to definitively say whether it’s an approach EPA will ultimately take.”

The study, announced in March [3], comes amid rising public concern about the safety of fracking, as ProPublica has been reporting [4] for years. While it remains unclear whether the actual fracturing process has contaminated drinking water, there have been more than 1,000 reports [5] around the country of contamination related to drilling, as we reported in 2008. In September 2010, the EPA warned residents of a Wyoming town [6] not to drink their well water and to use fans while showering to avoid the risk of explosion. Investigators found methane and other chemicals associated with drilling in the water, but they had not determined the cause of the contamination.

Drillers have been fracking wells for decades, but with the rise of horizontal drilling into unconventional formations like shale, they are injecting far more water and chemicals underground than ever before. The EPA proposal notes that 603 rigs were drilling horizontal wells in June 2010, more than twice as many as were operating a year earlier. Horizontal wells can require millions of gallons of water per well, a much greater volume than in conventional wells.

One point of contention is the breadth of the study. Chris Tucker, a spokesman for Energy in Depth, said he understands the need to address any stage of the fracking that might affect drinking water, but he’s skeptical that water withdrawals meet the criteria.

“The only way you can argue that issues related to water demand are relevant to that question is if you believe the fracturing process requires such a high volume of water that its very execution threatens the general availability of the potable sources,” he wrote in an e-mail.

The EPA proposal estimates that fracking uses 70 to 140 billion gallons of water annually, or about the same amount used by one or two cities of 2.5 million people. In the Barnett Shale, in Texas, the agency estimates fracking for gas drilling consumes nearly 2 percent of all the water used in the area.

The EPA proposes using two or three “prospective” case studies to follow the course of drilling and fracking wells from beginning to end. It would also look at three to five places where drilling has reportedly contaminated water, including two potential sites in Pennsylvania’s Marcellus Shale, and one site each in Texas, Colorado and North Dakota.

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