The Policy and Regulatory Response to Deepwater Horizon: Transforming Offshore Oil and Gas Leasing?

• Date: 01 November 2010

40 ELR 11084 ENVIRONMENTAL LAW REPORTER 11-2010

Since the mobile oshore drilling unit Deepwater Hori-

zon exploded and sank into the Gulf of Mexico in late

April 2010, the resulting oil spill and the events that

may have contributed to the disaster have captured the atten-

tion of the general public, as well as government ocials, on a

historic scale. Despite the length of time that has passed since

the incident, the environmental, operational, and regulatory

impact of the spill, and the full range of public and private-

sector responses, remains to an extent uncertain. However, it

is apparent from the key issues that have emerged from the

various investigations and reports, congressional hearings,

and public debate relating to the spill that the federal policy

and regulatory response to this incident will have signicant

implications, not only for those entities that engage in or

support oshore drilling, but perhaps also for the broader

energy industry and the manner in which the United States

produces, transports, and consumes energy.

While cleanup and restoration eorts continue, admin-

istrative and congressional action to reform the oshore oil

and gas lea sing program in the United States is already well

underway. In the wake of the Deepwater Horizon incident,

more than 40 U.S. House of Representatives and U.S. Senate

hearings have been held, a nd multiple congressional com-

mittees have developed and advanced proposals to address

a breadth of issues relating to oshore oil a nd gas develop-

ment activity. At the same time, the Administration, and

particularly the U.S. Department of the Interior (DOI), has

moved forward with its own eorts at reform. On May 19,

in a change later echoed by legislative proposals, the Admin-

istration restructured the Minerals Ma nagement Service

(MMS)—the division of the DOI that, in the past, has

managed federal oil a nd gas leasing, exploration, develop-

ment, and production on the U.S. Outer Continental Shelf

(OCS), as well as been re sponsible for the collection of rev-

enues from lea sing—in order to address perceived conicts

of interest that some believe have compromised the agency’s

eectiveness. Bot h the Administ ration and the U.S. Con-

gress have explored, and continue to evaluate, a broad range

of mea sures to address environmental a nd sa fety concerns

raised by the Deepwater Horizon incident and to change

liability requirements for those who engage in oil and ga s

exploration and dri lling. Most ne w deepwater oshore

exploration and drilling in the Gulf of Mexico remains

under a highly controversial moratorium until new stan-

dards ca n be fully implemented.

e attention directed toward the spill reects the impor-

tance of oshore oil and gas resources, and the Gulf of

Mexico, to U.S. energy supplies. Over the last decade, oil

and gas production from the OCS ha s contributed between

25-30% of total domestic oil production and about 15% of

total domestic natural ga s production.1 In 2009, more than

530 million barrels of oil and more than 2.2 trillion cubic

feet of natural gas were produced f rom the OCS.2 Of t hese

totals, the overwhelming majority is produced from the Gulf

of Mexico region, with some additional current production

coming from oshore Alaska and the Pacic Coast. Major

producers in the Gulf include Anada rko, BP, Chevron, Exx-

onMobil, and Royal Dutch Shell. In addition to represent-

ing a sizable portion of U.S. domestic production, the Gulf

of Mexico is believed to contain some of the largest undis-

covered, technically recoverable oil and gas resources in the

United States.3

Given the broad economic, environmental, safety, and

energy security implications of the Deepwater Horizon inci-

dent, policy and regulatory proposals to address the impacts

of the spill and reform the oshore oil a nd gas leasing pro-

gram vary widely. Generally, administrative and congressio-

nal responses to the oil spill fall into two broad categories.

e rst category consists of incident-specic responses,

addressing claims, injuries, liability, investigations, and other

matters specic to the Deepwater Horizon incident. e sec-

1. Minerals Management Service (MMS), U.S. Department of the Interior

(DOI), Federal OCS Oil and Gas Production as a Percentage of Total of U.S.

Production: 1954-2006 (2008), available at http://www.mms.gov/stats/PDFs/

June2008/AnnualProductionAsPercentage1954-2006AsOf6-2008.pdf.

2. MMS, U.S. DOI, Federal OCS Oil and Gas Production (2010) (spreadsheet),

available at http://www.mms.gov/stats/xlsExcel/OCSproduction2010.xls.

3. C L. H  J L. R, C. R S., P’

N. R41262, D H O S: S I  C-

 2 (2010), available at http://www.fas.org/sgp/crs/misc/R41262.pdf.

The Policy and Regulatory Response

to Deepwater Horizon: Transforming

Offshore Oil and Gas Leasing?

by Jonathan Simon and Jennifer Owen

Jonathan Simon is a partner at Van Ness Feldman, specializing in natural resources, public lands, and energy law.

Jennifer Owen is an associate at Van Ness Feldman, specializing in energy technologies and public policy.

Copyright © 2010 Environmental Law Institute®, Washington, DC. reprinted with permission from ELR®, http://www.eli.org, 1-800-433-5120.