BOEM Director Addresses Oil and Gas Association with Outlook for Securing America’s Offshore Energy Portfolio
2012-01-25 New Orleans
Bureau of Ocean Energy Management Director Tommy P. Beaudreau delivered remarks
today at the Louisiana Mid-Continental Oil and Gas Association annual
meeting.
Director
Beaudreau provided an update on BOEM since its reorganization last fall, the
future of oil and gas development as it relates to the nation’s energy security,
and the status of the Proposed
Outer Continental Shelf Oil and Gas Leasing Program for 2012 – 2017. President
Obama discussed the Proposed Program last night in his State of the Union
address, which would make available for development 75 percent of
recoverable oil and gas resources on the Outer Continental
Shelf.
Director Beaudreau’s remarks, as
prepared for delivery, are below:
Good
afternoon. My name is Tommy Beaudreau, the Director of the Bureau of Ocean
Energy Management, or BOEM. I want to extend my sincere thanks to Chairman
Hutchinson, President John and Secretary Angelle for their invitation to speak
with you today at the annual meeting of the Louisiana Mid-Continental Oil and
Gas Association.
The subject
of this year’s annual meeting — “Securing Our Energy Future” — could not be more
timely or more urgent, for the state of Louisiana and for the entire United
States. I have listened with great interest to
the speakers today, and have been looking forward to sharing my thoughts and
outlook with you. The bottom line is that offshore oil and gas development in
the Gulf of Mexico is, and will remain, one of the cornerstones of America’s energy portfolio and is
central to our country’s energy security and future. I will talk today about why
I believe so strongly that this is true.
First,
though, I would like to take a few minutes to introduce myself and my agency,
which is one of the three federal agencies established to replace the former
Minerals Management Service in the wake of the Deepwater Horizon oil spill. I also want
to take a moment to reflect on how far we — in the government and in industry —
have come following the spill to implement meaningful reforms that have improved
the safety and environmental responsibility of offshore drilling, as well as
strengthened oversight.
I grew up in
Alaska. My
father worked in the Prudhoe Bay oil field on the North Slope, and he moved our
family to Alaska during the boom times in the 1970s.
Like a lot of those workers, he was laid off after the boom times went bust in
the mid-1980s. So, I know firsthand what this industry means to the men and
women who work in it, and to the families who depend on it for their
livelihoods.
I arrived,
along with Director Michael Bromwich, at the Interior Department on June 21,
2010. The Macondo well had been flowing uncontrolled into the Gulf for two
months, and a moratorium on deepwater drilling was in effect. Our direction from
the President and Secretary Salazar was both simple and daunting — reform
offshore drilling and oversight so that the American people can be confident
that oil and gas development on our oceans, which is vital to our economy, will
be safer, for workers and for the environment, and overseen by strong,
independent and effective regulators.
We all
remember what a difficult time that was, especially for the people of the
Gulf Coast, and Louisiana in particular, who were faced with
mounting environmental and economic uncertainty. Fundamental questions were
being asked about the safety of offshore drilling, especially in deepwater, and
a great deal of ire and criticism was directed at the federal government,
including at the agency I had just joined, the Bureau of Ocean Energy
Management, Regulation and Enforcement (BOEMRE) at the time.
I first met
Secretary Angelle a couple weeks into my work at BOEMRE. Soon after our first
in-person meeting, he called my office line to make sure I had been fully
sensitized to the effects that the spill and suspension of deepwater drilling
were having on industry and the economy of Louisiana. I recall Secretary Angelle’s words
very clearly — he said to me, “How could someone named Beaudreau hate Louisiana so
much?”
Well, we
have come a long way since those difficult days. And, for the reasons I’ll talk
about today, far from having any negative feelings, I am quite optimistic about
offshore oil and gas in the Gulf of Mexico and its role in securing America’s
energy future.
Role
of Regulation and Environmental Protection
The National
Petroleum Council (NPC), a federal advisory committee, recently completed a
study, requested by Secretary Chu and presented to federal agencies, entitled,
“Prudent Development: Realizing the Potential of North America’s Abundant
Natural Gas and Oil Resources.” This impressive and valuable study was prepared
by a team of experts from industry, state and federal government agencies,
conservation groups, financial institutions, and academia, and overseen by a
committee chaired by Jim Hackett from Anadarko and a number of vice chairs,
including Marvin Odum of Shell, from whom you heard this
morning.
If you
haven’t yet reviewed the study, I recommend it to you. It is comprehensive and
thought-provoking. For the purposes of my discussion today, I would like to
focus on one of the study’s four fundamental conclusions — that “realizing the
benefits of natural gas and oil depends on environmentally responsible
development.” The study emphasizes that, “the critical path to sustained and
expanded resource development in North America
includes effective regulation and a commitment of industry and regulators to
continuous improvement in practices to eliminate or minimize environmental
risk.”
That
conclusion is premised on a sophisticated and compelling insight into the
relationships between industry, government oversight and the public’s trust, and
I could not agree with it more. Frankly, following the Deepwater Horizon oil spill, the public’s
confidence in all of us — industry and government — was shaken. Fundamental,
challenging questions were being asked of all of us — Can offshore drilling for
oil and gas, especially in waters more than a mile deep, be conducted safely?
Have we thoroughly analyzed, and do we really understand, the risks this
activity poses to the environment? Are we adequately prepared to respond if
there is an accident? Does government have the expertise, resources and ability
to evaluate the risks and ensure that this activity is conducted properly and
that the rules are obeyed?
We — and
again, I mean industry and government — owe the American people good answers to
all of those questions. I believe we have made tremendous progress since the
spill, as we have implemented the most aggressive and comprehensive reform and
enhancement of offshore safety, environmental responsibility and regulatory
oversight in U.S. history.
My agency,
BOEM, now conducts site-specific environmental assessments under the National Environmental Policy Act (NEPA)
of every deepwater exploration and development plan. These reviews, which were
not done in the past, evaluate the potential environmental effects of individual
exploration and development projects, and result in mitigation measures tailored
to those risks.
We have
implemented enhanced drilling safety and blowout preventer standards and
introduced for the first time mandatory performance-based standards in the form
of Safety and Environmental Management System (SEMS) programs. We have revised
the way in which the worst case discharge potential for wells is calculated so
that we better understand and evaluate risk potential of individual reservoirs,
and this information is used to help define the spill response capacity and
resources necessary in the unlikely event of a
blowout.
Moreover,
industry has devoted hundreds of millions of dollars to the development and
staging of subsea containment systems — including capping stacks, riser systems
and support and capture vessels — that are now readily available in the event of
another blowout in deepwater. These systems did not exist at the time of the
Macondo blowout, but they have now been built and tested, and are part of the
permitting process for deepwater drilling operations in U.S.
waters. Industry deserves tremendous credit for investing in and building these
systems.
A federal
safety advisory committee, led by Dr. Tom Hunter and comprised of experts from
government, industry, academia and environmental NGOs, has been active
(including a series of meetings last week in Houston) in analyzing and developing
recommendations for further enhancements to offshore safety and emergency
preparedness. This committee is designed to help government and industry keep
pace, from a safety perspective, with rapid developments in technology and the
challenges of drilling in new frontiers.
Finally, one
of the most fundamental and sweeping changes that has been implemented is the
Interior Department’s overhaul of the offshore resource development oversight
and regulatory regime.
We have
established the Bureau of Safety and Environmental Enforcement (BSEE), led by
retired Coast Guard Admiral Jim Watson, as a strong, independent safety
authority responsible for promulgating high standards for safety and spill
response, ensuring that permitted operations comply with those standards, and
enforcing safety and environmental protection measures through rigorous
inspections and, where appropriate, administrative enforcement
actions.
My agency,
BOEM, is responsible for overseeing the environmentally and economically
responsible development of our country’s abundant offshore
conventional and renewable energy resources. This includes promoting responsible
offshore oil and gas development. BOEM’s decision-making must closely consider
the resource potential of geographic regions on the Outer Continental Shelf
(OCS), the critical role offshore energy development plays in the mix of
resources necessary to meet the nation’s energy demands, the significance of
offshore oil and gas to the economy and employment, and the vital need for
environmental protection and responsible stewardship. These are concerns and
values shared by everyone in this room.
I am often
asked — how will BOEM work to strike the right balances and make sound resource
management decisions? The answer is, and has to be, that BOEM’s decision-making
is based on the rigorous collection and analysis of scientific information and
data. It is important that this be true, and that the public have confidence
that it is true.
Let me be
clear about what science-based decision-making encompasses. We have geologists,
geophysicists, petroleum engineers and other resource evaluation experts who
developed sophisticated assessments of where the resource is and its
significance. Our environmental scientists and biologist possess broad expertise
in evaluating the potential effects of offshore energy activity on habitats,
species and ecosystems. BOEM’s impressive group of economists ensures, among
other things, that the American people receive fair value for the development of
our public resources. We also employ social scientists who consider impacts on
cultural and historical resources.
For a
relatively small agency, we have a tremendous breadth and diversity of subject
matter expertise. I will tell you that they are some of the best in the
business, and I am tremendously proud to work with them.
Outlook for the
Gulf of Mexico
So, what is my outlook
for the Gulf of Mexico and its role in securing America’s energy future? The bottom
line is that I am enthusiastic about the Gulf and what offshore oil and gas
development in this region offers Louisiana,
the Gulf Coast and America. My optimism for the
Gulf of Mexico and the role of offshore oil and
gas development in securing our energy future is grounded in part on the
strength and credibility of BOEM and BSEE as regulators. As the NPC concluded,
one of the pillars of maintaining public trust is confidence in properly
resourced, effective oversight.
Moreover, we
cannot lose sight of the fact that the Gulf of
Mexico still has the greatest, by a large margin, untapped resource
potential in the entire United States OCS. I have heard some people say —
including some people who know better — that exploration in the Gulf of Mexico means simply drilling in the same old
places. The truth is that the Gulf of Mexico is
the crown jewel of the U.S. OCS, and will remain so for the foreseeable future.
The Gulf of Mexico, in particular the deepwater, already has several world class
producing basins, and just in the past year there have been a number of
significant new discoveries.
According to
my agency’s recent Assessment of
Undiscovered Technically Recoverable Oil and Gas Resources of the Nation’s Outer
Continental Shelf, issued late last year, we estimate that the
Central Gulf of Mexico holds more than 30
billion barrels of oil and 133.9 trillion cubic feet of natural gas yet to be
discovered. This is nearly double the resource potential of even the Chukchi Sea. The Western Gulf
of Mexico is just behind the Chukchi with more than 12 billion
barrels of oil and nearly 80 trillion cubic feet of natural
gas.
Right of off
the coast of Louisiana is a new oil and gas frontier that
will fuel the state’s economy and help meet our nation’s energy needs for
decades to come.
I meet
regularly with operators who speak with enthusiasm and passion about plans for
the Gulf. High resolution, depth-migrated 3-D seismic data are revealing whole
new realms for exploration, including untapped subsalt plays. New and rapidly
advancing drilling technology and techniques, including innovations in
directional drilling, enable drilling crews to reach around salt structures to
make new reservoirs accessible. We also are seeing major developments and
ingenious solutions that are improving the recoverability of
hydrocarbons.
The
Gulf of Mexico remains an enormously attractive
place to work. The Gulf offers unparalleled infrastructure and support to
develop finds and bring resources to market efficiently. Indeed, there currently
are more drilling rigs working in the deepwater of the Gulf than there were at
the time of the spill.
Even with
the regulatory enhancements that have been introduced over the past year and a
half, the Gulf is a stable and reliable environment in which to work. We
continue to work with individual operators, as well as with working groups such
as the coalition that Secretary Angelle assembled, to promote compliance with
our standards and regulations and to make the regulatory process more efficient
and transparent. While more work remains on these fronts, there has been marked
improvements in compliance as well as in processing times for exploration and
development plans. While it takes time to conduct the rigorous operational and
environmental reviews involved in evaluating plans and BOEM will not cut
corners, industry deserves and should be able to expect a process that is
efficient, well-understood and consistent.
And we have
seen that investment in the Gulf remains strong. Last December, BOEM held Lease
Sale 218 for the Western Gulf of Mexico, the
first lease sale after the spill. We held this sale after completing a thorough
Supplemental Environmental Impact Statement (SEIS) analyzing, among other
things, available information about the effects of the Deepwater Horizon oil spill. Although
there were questions from some quarters about the level of interest that would
be shown in the sale, it was a tremendous success by virtually any measure. The
sale garnered nearly $338 million in high bids — the second highest amount for
any Western
Gulf sale conducted over
the past 10 years.
Earlier this
month, we completed our SEIS for the Central Gulf, which obviously suffered most
directly the effects of the Deepwater
Horizon spill. We will announce additional details about a sale in
the Central
Gulf
soon.
As you are
probably aware, the draft five-year oil and gas leasing program for 2012 – 2017
that we issued last November includes 12 lease sales in the Gulf of Mexico,
including annual area-wide lease sales in both the Western and Central Gulf, as
well as two sales in the Gulf of Mexico
Energy Security Act (GOMESA) area of the Eastern Gulf. We expect the
first of these Gulf sales under the new five-year plan to be held late this
year.
While I am
optimistic for the Gulf of Mexico, we are also
pursuing the strategic resource potential, as well as the potential
environmental effects of oil and gas exploration, in other areas of the U.S.
OCS. The proposed five-year program schedules potential lease sales in the
Chukchi and Beaufort seas off Alaska, as well
as a special interest sale in Cook Inlet. While
we are proceeding cautiously in the Arctic and
we must be extremely thoughtful about environmental, subsistence use and
infrastructure concerns, the resource potential in those areas is significant
and warrants analysis.
Together,
the planning areas included in our proposed five-year program encompass 75
percent of the undiscovered, but technically recoverable oil and gas resources
offshore of the United
States.
While the
proposed leasing program makes available the areas with the richest resources,
we are also evaluating the oil and gas potential of areas where drilling has not
occurred in the past. We are moving forward with a strategy to evaluate the
potential for oil and gas exploration off of the mid- and south- Atlantic. Although it is premature to schedule lease sales
in those areas, we will be issuing a draft EIS relating to seismic activity in
the mid- and south-Atlantic so that current, accurate data can be collected
about the oil and gas potential in the region. We are also actively engaging
with the Department of Defense about the military’s needs in these areas, as
well as developing information about other potentially conflicting uses. These
are all threshold issues that must be better understood to inform decisions
about whether — and if so where — any oil and gas activity in the Atlantic should occur in the future. And we are serious
about pursuing our strategy to develop that
understanding.
Conclusion
Public trust and
confidence — in industry and in government oversight — are essential to ensuring
that offshore oil and gas exploration and development, the potential of which is
and will remain enormous, fulfills its potential to contribute to the over
energy future of the United States. Both industry and government must remain
vigilant, promote operational safety and a culture of working safely, and
protect the environment, the ocean and coastal habitats. The resources, as well
as the benefits of their development, are available. Industry must go about
developing offshore resources the right way, and the public must have confidence
industry is committed to working safely and responsibly and that the regulators
are doing their jobs. If we do this, oil and gas in the Gulf of Mexico has a bright future indeed.
Thank you for your time,
and I am happy to take a few questions