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Offshore U.S. Oil Rule Disappoints Environmentalists

The U.S. issued a final rule on offshore drilling safety that the Obama administration said will reduce the risk of blowouts such as the 2010 one in the Gulf of Mexico, while environmentalists said the regulations don’t go far enough.

The Interior Department said the rule, issued yesterday, will cost the industry $130.7 million a year for additional inspections, testing and equipment designed to prevent a spill similar to BP Plc (BP/)’s Gulf of Mexico disaster in 2010.

Companies including BP, the largest leaseholder in the deep waters of the gulf, and Royal Dutch Shell Plc (RDSA) have been operating under similar interim requirements imposed shortly after the BP accident, which killed 11 workers and spilled millions of barrels of oil. Environmentalists say tougher rules are needed to control companies that are drilling at ever deeper levels in the gulf and expanding exploration of the Arctic.

The new rule “is stronger than the interim rule but not strong enough,” David Pettit, senior attorney at the New York- based Natural Resources Defense Council, said in an e-mail. “It should require real-world testing of the response time for containment of a wild well.”

The rule requires a professional engineer to certify that a well’s casing and cementing, used to prevent uncontrolled leaks, are appropriate. An independent third party must also verify the adequacy of the rig’s blowout preventer -- equipment designed to plug a gusher, which failed at BP’s drill site.

The Interior Department said the rule will cost the industry $130.7 million a year for additional inspections, testing and equipment designed to prevent a spill similar to BP Plc’s Gulf of Mexico disaster in 2010. Photo: U.S. Coast Guard via Getty Images Close

The Interior Department said the rule will cost the industry $130.7 million a year for... Read More

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The Interior Department said the rule will cost the industry $130.7 million a year for additional inspections, testing and equipment designed to prevent a spill similar to BP Plc’s Gulf of Mexico disaster in 2010. Photo: U.S. Coast Guard via Getty Images

Expanding Operations

“The administration’s priority is continuing to expand offshore oil and gas development, while ensuring that drilling operations in our oceans continue to be the safest in the world,” Jim Watson, the director of the Interior Department’s Bureau of Safety and Environmental Enforcement, said in an e- mailed statement.

Drillers added safety equipment and created systems to collect oil spilled under the water’s surface after BP spent about three months trying to bring its Macondo well under control. Shell, which is planning to start drilling in the Beaufort and Chukchi seas off Alaska’s north coast this year, has been delayed by the U.S. inspections of the containment system it aims to use in Arctic conditions.

“We are reviewing the rule,” Reid Porter, a spokesman for the American Petroleum Institute, a Washington-based trade organization, said yesterday in an e-mail. “Our number one priority is safety.”

‘Lax Inspections’

Oceana, a Washington-based environmental group, criticized the rule for failing to improve on the interim one.

Coming on top of “lax inspections and laughably low fines,” the new standards create a “recipe for another spill,” Jacqueline Savitz, Oceana’s senior campaign director, said in an e-mail.

Compared to the interim rule, the final one clarifies what is required in well-control barriers; defines testing requirements for cement; clarifies requirements for the installation of dual mechanical barriers; and extends the requirement for blowout preventers to well-completions and decommissioning operations.

Annual costs under the interim rule were estimated at $183.4 million. The Interior Department said much of the savings in the final version come from a reduced estimate for the length of time required for underwater testing.

To contact the reporter on this story: Katarzyna Klimasinska in Washington at kklimasinska@bloomberg.net

To contact the editor responsible for this story: Jon Morgan at jmorgan97@bloomberg.net

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