Overregulation Just Ahead

Jim Brown
 
Printer Friendly Version

With deepwater well complexity rivaling that of a NASA mission do we really need the government giving oil companies a check off list of certifications every time they drill a well? Obviously it would have helped in the BP case only if BP had actually heeded the list.

There are several new bills in preparation that will regulate oil companies and oil wells almost to the point they will need to certify the thickness of the toilet paper used on the rig. I am sure some new rules and oversight are needed but give lawmakers a crisis and odds are good they will over regulate.

John Martinez, an expert with 42 years in the drilling industry, told the House Energy and Commerce Committee's Energy and Environment subcommittee on Thursday that the industry must insure safety and quality and not take short cuts in an attempt to save millions of dollars. We have seen in the BP disaster that attempting to save $20 million will easily cost BP $50 billion.

Martinez said "We need to have a quality design in the wellbore that will result in improved safety as well as lessen casing corrosion and remedial maintenance."

More importantly Martinez supports requiring more thorough function testing of blow out preventers of BOPs. We should require redundant shear rams to shut off BOPs when loss of well control is imminent. There should be separate control systems to independently activate those rams. He also favors independent certification of BOP functions as well as pressure testing and over certifications proposed in HR 5626.

The bill in its present form would require a producer seeking a permit for a high-risk offshore well to demonstrate the ability to prevent and contain leaks. It would require the use of BOPs with at least two sets of blind shear rams appropriately spaced, two sets of appropriately spaced casing shear rams, independent and redundant hydraulic and activation systems for each blind shear and casing ram, one or more emergency backup control systems, and remotely operated vehicle intervention capabilities for secondary control.

Each BOP would have to be certified by an independent third party before the well could be drilled. The certification would be based on a detailed physical inspection, design review, system integration test, and function testing, according to a summary of HR 5626. Recertification would be required every 180 days or after any material modification to the BOP or the well?s design.

A BOP?s functions and pressures would have to be tested promptly after a significant well control event, it said. Reports also would have to be submitted covering BOP maintenance and repair, electronic logs, design specifications and changes to them, and failure during a well control event.

High risk wells would have to have at least three "independently tested" barriers to a blowout. Third party certification of new well design would have to be approved before any drilling could begin or changes in a prior design.

The bill also would establish regulations for operators and contractors to stop work whenever there is the possibility of a blowout. BP operators continued working for nearly a day after the well began to exhibit signs of trouble.

The bill goes on and on with definitions of who would be capable to certify and how often and on what kinds of wells, etc. I am sure some of these regulations are necessary but it is tough to legislate around idiots. When idiots are running the well they will find away around the regulations and procedures as they did at the BP well.

The new rules will have to be strict enough and with severe penalties in order to make the operators fear the regulators more than their bosses. But if they are too strict oil companies will simply move the rigs overseas and we will end up paying far higher prices for our oil since none of it will be produced in the gulf. This is a critical effort by lawmakers but let's hope they don't kill the golden goose instead of just put a fence around it.

Jim Brown

This newsletter is only one of the newsletters produced by OilSlick each day. The investment newsletter is also produced daily and contains the current play recommendations in the energy sector. Stocks, options and futures are featured. If you are not receiving the "Play Newsletter" please visit the subscribe link below to register.

Subscribe to Energy Picks Newsletter

Archives:200920102011201220132014201520162017