Obama Lifts Deepwater Drilling Moratorium

world-oil-615After weeks of speculation and months of debate, the United States' deepwater drilling moratorium has been lifted. Earlier this week, the Secretary of the Interior Kenneth Salazar, along with the Bureau of Ocean Energy Management director Michael Bromwich, announced that the ban on leases for new drilling operations was over. This announcement signals the resumption of deep water oil exploration and extraction in the Gulf of Mexico (as well as other American locales).  While many within the business community were gushing following the announcement, reactions by consumers remain mixed. The fallout from the Gulf of Mexico disaster continues to resonate in many people's minds, and few have forgotten the economic and environmental devastation that BP's oil disaster wrought. Moreover, while the announcement was meant to provide comfort to an industry under stress, the announcement has also re-ignited fears that another environmental and economic disaster may be lurking quitely beneath the ocean surface. In an effort to minimize risk, the President's office coupled the announcement with the release of new rules which will apply to all future oil and gas drilling permit holders. Specifically, before operators in the gulf receive new drilling permits, an independent third party will be requied to verify the safety of blowout preventors -- the piece of equipment that failed to shut off the gushing oil in BP's Gulf of Mexico spill. Additionally, each operator must prove that they are prepared to deal with a blowout, and present an adequate response plan that minimizes environmental and economic risk. Drilling projects will be required to uphold new well designs (as well as casing standards), and well construction and design must be certified by a professional engineer before operations are approved. 

oil20spillWhile the new rules provide comfort, it is important to recognize that legislation alone cannot guarantee the removal of operational risk. Like most industries, the oil and gas industry has operated for decades using strict guidelines meant to govern its actions. Unfortunately, despite the presence of rules, a small minority of individual companies operating within this sector have consistently found ways to circumvent industry guidelines (consciously or not), particularly when profits are on the line. Will these new regulations be enough? While citizens and environmental groups remain critical, Mr. Salazar and the President's office remain confident. Interestingly, this confidence has remained buoyant despite the acknolwedgement that the new, strict restrictions may anger some players within the industry. Overall, the President's office believes that, while some companies many protest, few will act to circumvent the rules, particularly with the prevalence of inforcement and high costs associated with error or guilt. According to the Secretary, their office will make every effort to ensure that regulatory processes do not interfere with operations and industry growth, while maximizing risk mitigation and safety. Inspections will be designed to take only one or two days to complete. To ensure this happens, the Secretary's office has committed to pulling resources from elsewhere to ensure that review standards do not decrease as workload requirements increase. The Department of the Interior has also asked for more money in 2011 to cover the cost of better inspection. While I applaud the intent, I continue to have mixed feelings regarding the future of deepwater drilling within the Gulf. The move certainly is a boon for the local oil and gas industry, and will help reignite the stuttering American economy. Unfortunately, despite the economic benefits, it is hard to ignore the fact that deepwater drilling, regardless of the regulation, will always carry risks. Yes, new regulations have been put in place to minimize these risks. Unfortunately, the scope of the industry will mean that the the burden to protect both the environment and its citizens will remain with the operators; companies, who face coercive, normative, and mimetic forces to adapt and remain profitable. While Mr. Salazar closed his conference call touting the presence of adequate disaster resources, I sincerely hope - for both the sake of the economy and the environment - that another Gulf of Mexico oil spill never happens again.