American Oil and Gas Reporter - June 2016 - 110

says. In addition, that data must be preserved
and stored at a designated location, and be
made available to BSEE on request.
Real-time monitoring is a concern,
according to the industry coalition, quoting
comments API filed in 2015 in response
to BSEE's initial well control proposal,
questioning the wisdom of the government's recommendation to shift operational
decision making from rig site workers to
off-site personnel.
In addition, BSEE says the regulations:
* Consolidate equipment and operational requirements found in various parts
of its regulations into one group;
* Incorporate the industry's latest
minimum base-line requirements for BOP
design, manufacture, repair and maintenance; and
* Require annual mechanical integrity
assessment reports on certain BOPs by a
BSEE- approved verification organization,
and include a performance requirement
that the equipment be maintained pursuant
to original equipment manufacturer requirements, good engineering practices,
and industry standards.
BSEE points out in response to comments that its final rule has several changes
from the proposal. Among the amendments
is the safe drilling margin portion of the
well drilling procedures required in an
application for a permit to drill. The Deepwater Horizon investigation committee
recommended the agency require the static
downhole mud weight be a minimum of

0.5 pounds per gallon below the lesser of
the casing show pressure integrity test or
the lowest estimated fracture gradient.
Many commenters expressed concerns
that strict enforcement of that margin in
all circumstances could have negative
economic impacts because it would require
setting additional casing strings and
smaller hole sizes, and could make it impossible to reach target depths. In response,
BSEE says it maintained a 0.5 ppg drilling
margin as a default requirement, but is
allowing use of an alternative if the operator submits adequate justification and
documentation.
Industry Concerns
In joint comments filed prior to BSEE's
final rule, the industry coalition expressed
its concern that the rule could decrease
safety, and asked the Office of Management
and Budget's Office of Information and
Regulatory Affairs to address those concerns, particularly about BSEE's decision
to not fully incorporate API standards.
"OMB Circular A-119 requires that
an agency explain in the notice of proposed
rule making why it chose not to use the
voluntary consensus standard to provide
stakeholders an opportunity to review
and comment. BSEE has not satisfied
these requirements," the group asserts.
BSEE also failed to evaluate potential
alternatives to its rule, as required by executive order, the coalition says. It says
Executive Order 12866 requires federal

agencies to analyze potentially effective
and reasonably feasible alternatives to
planned regulations, but BSEE's analysis
in the preamble to the well control rule
was inappropriately limited, the industry
representatives say.
The seven associations also point to
significant concerns about BSEE's evaluation of the rule's potential economic
effects. The agency estimates the rule's
10-year incremental costs at $833 million.
"This conclusion appears to be incorrect,
considering the potential for this rule to
severely restrict offshore development, one
of the nation's most important sources of
energy," they say, citing a 2015 API-funded
study that projects the regulations will cost
industry $31.8 billion over 10 years.
According to a Wood Mackenzie analysis, the well control regulations could increase drilling costs by 20 percent or
more, and lead to as much as a 55 percent
cut in exploration. The analysis says that
would translate to $70 billion in lost
federal and state tax revenues by 2030.
"Ultimately, a regulatory action of this
significance requires high scrutiny, and
to that end, we ask you to ensure that all
required procedural requirements are
met," the trade groups say. "We again
ask that you ensure that this rule improves
offshore safety while also promoting our
energy and economic security."
The rule is available at www.bs ee.gov/regulations-and-guidance/final-wellcontrol-rule/.
❒

USFWS Mitigation Policy Under Attack
WASHINGTON-The U.S. Fish &
Wildlife Service's proposal to revise federal mitigation policy covering impacts
of land and water developments on wildlife
and habitats is not authorized by federal
statutes and is likely to delay federal permitting, two oil and gas association assert.
The American Petroleum Institute and
Independent Petroleum Association of
America filed joint comments against
USFWS's proposed changes to its 1981
mitigation policy. They ask the agency
either to withdraw the entire draft policy
or revise it in concert with a comprehensive
package of its entire mitigation strategy
that shows how this wildlife impact policy
integrates with the entire package.
According to the White House, in
1991, President George H.W. Bush made
decreasing wetland losses and increasing
wetland restoration a national goal.
In his Nov. 3, 2015, memorandum on
mitigating impacts to natural resources,
President Barack Obama ordered five
agencies-the departments of Defense, In-

terior, Agriculture, and the Environmental
Protection Agency and National Oceanic
& Atmospheric Administration-to expand
those federal wetlands policies to include
all natural resources. The memorandum
also encourages federal agencies to replace
resources even before they are destroyed.
USFWS's new policy applies to all
authorities under which the agency is authorized to make mitigation recommendations, including the Endangered Species
Act, which was excluded under the 1981
policy, USFWS says.
Obama's November memorandum
also:
* Establishes a goal of achieving net
conservation gains when recommending
project mitigation, whenever the situation
merits and doing so is allowed by law;
* Calls on federal agencies to use a
landscape-level approach that integrates
mitigation planning into regional conservation strategies; and
* Supports "advance mitigation plans,"
which the agency describes as planning

110 THE AMERICAN OIL & GAS REPORTER

that identifies the most ecologically effective mitigation measures on a landscape
prior to proposing specific development
projects.
Lack Of Authority
The USFWS draft policy cites 11
sources of statutory authority that it contends give the agency a role in mitigation
planning, IPAA and API say. But requiring
compensatory mitigation that reaches a
"no net loss" or "net conservation gain"
is not authorized by any of those statutes,
they counter, and applying the latter may
result in compensable taking lawsuits.
The industry groups add that the additional processes needed to evaluate mitigation requirements will introduce uncertainty into project planning, yield too much
discretion to the service, will delay federal
permits and authorizations, and may prevent
agencies from issuing such permits.
"The fact that the service lacks authority
to require mitigation that produces a 'net
conservation gain' from incidental take



American Oil and Gas Reporter - June 2016

Table of Contents for the Digital Edition of American Oil and Gas Reporter - June 2016

Contents
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American Oil and Gas Reporter - June 2016 - Contents
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