Delays anticipated for BLM under US budget sequester; BOEM, BSEE also expect slower pace

By Katie Mazerov, contributing editor

The US budget sequester, resulting in millions of dollars in cuts this year for key oil and gas regulatory agencies under the Department of the Interior (DOI), is expected to impact the issuance of land oil and gas leases on federal lands and could also affect the speed at which offshore E&P plan reviews and permitting applications are processed. As of 1 April, DOI was unable to provide any estimated timing or duration of potential delays.

“The DOI has determined that for the remainder of 2013, sequestration will cause delays at the Bureau of Land Management (BLM), meaning that 300 fewer Applications for Permits to Drill on federal lands will be processed this year,” a DOI official who did not wish to be named told Drilling Contractor. Cuts also will result in a $200 million revenue loss in royalty payments to the US Treasury and the states this year. “The $200 million revenue loss does not include foregone future royalties or potentially lost royalties resulting from 1,700 fewer inspections this year,” the official said in a written statement.

BLM reviews and approves permits and licenses from companies to explore, develop and produce both renewable and non-renewable energy on federal lands. The agency ensures that proposed projects meet all applicable environmental laws and regulations and, once projects are approved, ensures that developers and operators comply with use authorization requirements and regulations.

Offshore, sequestration has so far resulted in reductions in overtime and travel. The Bureau of Ocean Energy Management (BOEM), which reviews offshore oil and gas exploration and development plans, had its budget reduced by $8 million from a total of $161 million. The agency also conducts environmental reviews, including National Environmental Policy Act (NEPA) analyses and compliance documents for every stage of energy development plans.

“BOEM is concerned about the effects sequestration may have on the pace of offshore oil and gas exploration and development plan reviews in the Gulf of Mexico (GOM),” Caren Madsen, chief, Office of Public Affairs for BOEM, said in a written response. “The bureau has worked diligently to reduce the processing time for plans while also ensuring operator compliance with the heightened safety and environmental protection standards. Budgetary constraints related to sequester, such as limitations on the use of overtime and compensatory time for plan reviews, may mean losing some amount of the gains BOEM has made in the pace of plan reviews.”

BOEM’s GOM plan status is updated at the end of each business day and can be accessed here.

The Bureau of Safety and Environmental Enforcement (BSEE), which develops standards and guidelines for offshore operations and reviews drilling permit applications through three regional offices, had its $183 million budget reduced by $9 million. “Due to the sequester, BSEE is cutting the amount of overtime worked by our employees. While we do not yet know of any immediate impacts to the review process for permits, the cuts could potentially cause delays,” BSEE spokesman Nicholas Pardi said in a statement. “At this time, 23 shallow-water and 24 deepwater drilling permits are pending. That is currently within normal ranges for pending permits.”

As for the scope of any potential delays, Mr Pardi stated, “There is no way to accurately know how continued operations under a sequester would impact the rate at which BSEE reviews drilling permits. This is due in large part to other factors, such as the rate at which industry submits applications for drilling permits, the complexity of those permit applications and current BSEE operations.” In 2012, BSEE accumulated 13,006 hours of overtime to review drilling permits, he noted.

For 2013, as of 1 April, BSEE has approved 116 shallow-water GOM drilling permits, of which 44 were issued in March, after the sequester took effect. The agency has issued 126 deepwater permits so far in 2013, including 10 new well permits; 83 revised new well permits; nine bypass permits; eight revised bypass permits; nine sidetracks and seven revised sidetracks. Forty-four deepwater permits were issued in March. In 2012, BSEE issued 446 permits for shallow-water and 520 for water depths over 500 ft. In 2011, those numbers were 418 and 274, respectively. The status of GOM permits is updated at the start of each month and can be accessed here.

For GOM operations in waters greater than 500 ft, BOEM has approved 309 plans and documents, including 55 initial exploration plans, 114 revised exploration plans, 39 supplemental exploration plans, 19 initial Development Operations Coordination Documents (DOCDs), 55 revised DOCDs and 27 supplemental DOCDs since 12 October 2010. This includes plans and documents submitted before and after that date. A DOCD is a plan that describes development and production activities, including timing, location, analysis of potential offshore and onshore impacts and information regarding drilling vessels proposed, by an operator for a lease or group of leases.

Since 8 June 2010, the bureau has approved 384 plans and documents for GOM waters less than 500 ft, including 47 initial exploration plans, 19 revised exploration plans, 22 supplemental exploration plans, 32 initial DOCDs, 190 revised DOCDs and 74 supplemental DOCDs. 

Officials at OSHA did not respond to questions about the potential impact of sequestration. OSHA’s budget has been reduced by $28 million from a total of $568 million. The budget for the US Coast Guard’s non-defense operating expenses, which include event response and oversight of mobile offshore vessels, have been reduced by $152 million from a total of more than $3 billion. The Coast Guard’s Public Information office did not respond to requests for information about sequestration effects.