April 14, 2016

Cassidy Comments on Expected Well Control Rule

WASHINGTON— U.S. Senator Bill Cassidy, M.D. released the following statement ahead of the Bureau of Safety and Environmental Enforcement (“BSEE”)’s proposed Blowout Preventer Systems and Well Control final rule, expected to be released today at 2pm ET:

“It is our responsibility to make sure history does not repeat itself and that every action taken makes legitimate safety improvements for Americans working offshore. Over the last 5 years, industry has responded with millions of dollars in investment and deployment of new technologies that have made working offshore safer. This is an extremely complex and technical issue, and I am concerned that the intent of many portions of this proposed rule do not match the desired goal of improving safety. The way the rule is proposed appears to prioritize speed and deadlines over long-term safety. The administration needs to address the geological and engineering concerns raised and continue to work with stakeholders to get this right. If this rule is finalized without addressing the outstanding concerns made by technical experts, I fear this rule could have unintended consequences that could increase risk for offshore workers.”

On December 1, 2015, Dr. Cassidy questioned officials in the U.S. Senate Energy and Natural Resources Committee hearing on the Well Control Rule, cautioning against rushed-over prescriptive regulations that could lead to unintended safety risks. He also secured language in the FY2015 Omnibus bill directing BSEE to examine a number of factors and provide a report to Congress before the rulemaking proceeds.


Background on proposed rule:

On April 17, 2015, BSEE propose a rule entitled “Oil and Gas and Sulphur Operations in the Outer Continental Shelf- Blowout Preventer Systems and Well Control”. BSEE’s own Regulatory Impact Analysis (RIA) estimates that the initial cost of rule implementation would total near $165 million in 2015, and between $77 million and $99 million in the years 2016 through 2024. BSEE also projects that the proposed rule would have a “significant impact on a substantial number of small entities” and would impose a federal mandate “that may result in the expenditure by the private sector of $100 million or more”. This rule comes when the offshore energy industry has published over 100 new and revised exploration and production standards since 2010.

A recent study by Wood Mackenzie finds that the proposed rule would decrease exploration drilling by up to 55%. The report also finds that production in the Gulf of Mexico would be reduced by as much as 35% by 2030, if the proposed rule is finalized as drafted. Most importantly, the study predicts that 105,000 to 190,000 American jobs would be at risk by 2030, including jobs beyond the energy sector.  Furthermore, the findings of this report predict a reduction of government revenue of $5 billion annually through 2030.


The offshore oil and natural gas industry brings in approximately $8 billion a year in rentals, royalties and bonus bids that help fund the LWCF, BOEM’s budget, GOMESA states’ conservation efforts to protect their coasts and money for the general treasury. If the proposed Well Control rule is estimated to halt 55% of future exploration and 35% of future production, this will significantly lessen the amount of receipts received from the OCS for Louisiana.


The U.S. Department of Interior (DOI) received significant comments and feedback on a number of safety concerns with the proposed rule. The oil and natural gas industry opposes key portions of the rule due to unnecessary, costly provisions and the regulations could actually decrease safety in the offshore industry.