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Issuing Only Three Permits for Offshore Drilling is Not Enough

This afternoon, the Department of Interior issued a deepwater permit to ATP Oil & Gas Corp. to resume drilling 90 miles south of Venice, Louisiana.  The project was put on hold by the drilling moratorium.  Although this is a good step forward by the Interior, the permitting process is still slow and more permits need to be issued.  During a time when the price of gas at the pump continues to rise, companies waiting for permits should be allowed to go back to drill in the Gulf of Mexico. 

Currently, a number of companies are keeping their rigs “warm” by continuing to pay for their leases and maintaining a skeletal group of workers so that they can immediately return to drilling when they receive their permits from Interior.  These companies can incur costs up to $1 million a day while their rigs sit idle. 

Offshore drilling is a significant part of the U.S. economy.  As Scott Angelle, Secretary of the Louisiana Department of Natural Resources, noted in his testimony this week, one third of our nation’s domestic production comes from the Gulf, and nearly 90% of that production is from deepwater drilling.  Furthermore, drilling in the Gulf directly impacts nearly 16,000 companies and 153,000 employees. 

Although the Interior is on the right track by issuing its third permit, this will not address those jobs that are put at risk and the slowdown of oil and gas production.  The Interior needs to streamline its permitting process and to issue permits more quickly.   The U.S. is still struggling with a recovering economy with high unemployment.  Furthermore, with the unrest in the Middle East that is causing even higher prices at the pumps, the Interior needs to be more efficient in issuing permits that will boost our domestic production of oil and gas and put people in the region back to work.

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NRC: Japan Plant Explosions Will Not Affect U.S. Operations

The earthquake-caused explosions at Japan’s Fukushima Daiichi plant caused terrible damage and posed real dangers, but it is worth noting that no one died from the events (11 workers were injured). Even as Japan continues to take control of the plant and the nation’s power grid, the United States Nuclear Regulatory Commission (NRC) used a White House briefing today to announce that events in Japan will not affect its day-to-day operations, including permitting of nuclear power plants in the United States.

 The NRC briefing also reaffirmed a statement the commission released Sunday via Eliot Brenner, its spokesman, who said: “NRC’s rigorous safety regulations ensure that U.S. nuclear facilities are designed to withstand tsunamis, earthquakes and other hazards. In addition to those plants in recognized earthquake zones, the NRC has been working with several agencies to assess recent seismic research for the central and eastern part of the country. That work continues to indicate U.S. plants will remain safe.”

Nevertheless, some lawmakers in Washington are calling for a halt in nuclear energy developments.  Such a reaction would have an overwhelming negative impact on the many people who have dedicated their lives, time and energy in working on these nuclear energy reactors.  The nuclear energy industry remains a clean and safe source of energy.  We ask that those lawmakers whose first instinct is to call for the halt of all aspects of nuclear energy to hold off on their speculations and demands.  Policymaking requires facts and deliberation, not immediate impulses.

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Interior Department Issues Deepwater Permit

The Department of Interior (DOI) announced this afternoon that it issued its first deepwater drilling permit for the Gulf to Noble Energy.  While this may be a good first step for DOI and the permitting process, there are still 14 deepwater permits pending review and approval.  Since the moratorium on offshore drilling was lifted in November 2010, companies, who can afford to, have kept their lease and rigs “warm.”  

Essentially, these companies pay approximately $550,000  per day in order to maintain their rigs – although for the most part the rigs are idle.  Offshore drilling is a significant part of the U.S. economy both in terms of generating jobs as well as creating a domestic supply of oil and gas.  A recent study noted that there are 125,000 jobs that can be lost by 2015 and we can stand to lose 680,000 barrels of oil by 2019 if the permitting delays continue to linger. 

Although the DOI is on the right track by issuing this one permit, today’s announcement it will not resolve the jobs put at risk and the lost production if the permitting process is not streamlined. In an economy with high unemployment and disruptions in the Middle East that have significantly increased the price of oil, the U.S. cannot afford more permitting delays.

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Judge to Secretary Salazar: Get Moving on Drilling Permits

U.S. District Court Judge Martin Feldman of the Eastern District of Louisiana has just handed the Obama Administration an order to re-open the Gulf to drilling, ruling that that “[t]he government is under a duty to act by either granting or denying a permit application within a reasonable time.” (The order is here.)

This added pressure on the Department of Interior to speed up the permit process is a result of a lawsuit that was filed by Ensco Offshore Co. against Secretary Ken Salazar.  At the center of the lawsuit are five permit applications by Ensco PLC pending before Interior. Although the ruling does not ensure the agency will approve the permits, it will speed up the review process.

Even though the moratorium on offshore drilling was lifted last fall, the new permit requirements have created a de facto moratorium. Prior to the onset of the moratorium, permits were processed in two weeks. With the new requirements, the permit process has been delayed by anywhere from four to nine months. In fact, no permits have been issued since the moratorium was lifted last November.

The continued delay in drilling has had a devastating impact on the U.S. economy both in terms of job loss as well as domestic supply of energy. According to a study from the American Petroleum Institute, if the de facto moratorium continues, an estimated 125,000 jobs could be lost by 2015 and the Gulf production of about 680,000 barrels of oil could be at risk by 2019.

Coverage, background…

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API Analysis: Offshore Permitting Delays Threaten U.S. Jobs

The American Petroleum Institute (API) released a study this morning on the negative impact the delays in offshore drilling in the Gulf will continue to have on the US economy and energy security. The analysis by Wood Mackanezie supports what the National Association of Manufacturers has pointed out in the past -– delays in permitting have had and will continue to have detrimental impact on the U.S. economy and domestic energy.

According to the study, an estimated 125,000 jobs can be lost by 2015 and approximately 680,000 barrels of oil a day could be at risk by 2019. The delay on permitting continues even though the moratorium on offshore drilling was lifted in November of last year. This stems from the fact that companies are now faced with new procedures and guidelines in order to secure permits to resume their activities in the Gulf. These requirements mean companies can no longer rely on the old applications which they submitted for a permit. They now have to go back to the drawing board, re-start their application process and go through the steps of applying for a permit all over again.

This continued delay is devastating to the U.S. economy as it has and will continue to cause a great deal of job loss which this country cannot afford, especially with an unemployment rate of 9.4 percent. More delays will only lead to companies leaving the U.S. shores to drill in foreign waters and reduce domestic oil supply. Drilling off the coast of Brazil or West Africa does a lot less to create U.S. jobs than drilling in the Gulf of Mexico.

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Be Careful in Raising Liability Cap on Deepwater Drilling

The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling today released its final report making numerous recommendations, including an increase in the current $75 million cap on liability for offshore drilling accidents. The oil spill dommission did not recommend a specific figure for the higher cap, leaving that decision up to Congress.

Manufacturers believe that a substantial or unlimited cap increase is not the solution. Before taking any action, Congress should take a close look at the impact of any cap increase on the industry. Any substantial increase to the liability limit will inevitably lead to higher insurance rates, making operations in the U.S. waters potentially so expensive as to drive producers out of the Gulf overseas. Smaller independent operators, in particular, would suffer competitively. (See this American Petroleum Institute paper, “Impacts of Increased Liability Limits on OCS Operations.”) The result would be to continue an unofficial moratorium on offshore drilling.

Last session, there were discussions of an unlimited liability, while several Senators introduced legislation to raise the cap 13-fold, to $10 billion. Despite intense pressure to act, Congress ultimately passed very little legislation last year in response to the Deepwater Horizon spill, largely out of concern about further damaging the Gulf region’s economy. Those concerns remain valid.

As the Manufacturers have stated before, any delay in off-shore drilling will have a significant economic impact on manufacturers and other industries throughout the Gulf Coast and the nation.  The nation cannot afford increased job loss, especially during a time when the unemployment rate is as high as 9.4 percent.  Additionally, any further delay will have considerable impact on the domestic oil supply where it will drive up the cost of energy and create uncertainty in oil supply because companies will have to go abroad for drilling.

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Stalled Drilling is Harmful to the Economy

Today’s Wall Street Journal article “Drilling Is Stalled Even After Ban Is Lifted” simply points out what manufacturers have been facing all along – the lift on the moratorium on drilling in the Gulf of Mexico seems to be in name only and not in practice.  Although the Obama administration lifted the moratorium two months ago, manufacturers are still waiting for the green light to resume drilling. Companies are now faced with new procedures that will make receiving a permit a long and drawn out process.

This delay has a significant economic impact on manufacturers and other industries throughout the Gulf Coast and the nation.  According to the White House’s own assessment, approximately 8,000-12,000 people could lose their jobs as the delay in permitting continues.  The nation cannot afford this type of job loss, especially during a time when the unemployment rate is as high as 9.8%.  Additionally, any further delay will have considerable impact on the domestic oil supply where it is estimated that there may be a loss of 220,000 barrels of oil per day.

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