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Home > Institutes and Centers > Mineral Law Institute > MLI Proceedings > Vol. 59 (2012)

 

Annual Institute on Mineral Law

Abstract

Change is perhaps the most consistent feature of doing business offshore over the past two years. The "who" has changed with the Department of Interior‘s former Minerals Management Service ("MMS") just completing a major reorganization designed to separate a long-standing single entity into multiple independent, yet, coordinated ones. The "what, where, when, and how" have also changed with new Notices to Lessees ("NTLs"), Interim Final Rules, informal guidance, and workshops adding regulatory requirements for drilling safety, subsea containment, decommissioning of aging and unused facilities, workplace safety programs, suspensions of production, and on and on. Increased costs are a certainty. Recent NTLs provide for increased civil penalties and assessment of mandatory inspection fees. Delays in obtaining permits and ongoing litigation over the validity of some deepwater leases are certain to increase the time required to achieve first oil on Gulf of Mexico projects, which will result in substantial additional costs. The Energy Information Administration‘s ("EIA") February 2012 "Short-Term Energy Outlook" estimates federal Gulf of Mexico production to be down 21 percent this year from 2010. Based on identified, mostly deepwater prospects, the offshore oil and gas industry was expected to grow significantly over the past two years. However, accordingto a recent report prepared for the American Petroleum Institute "API"), the moratorium and ensuing overall permitting slowdown led to an estimated $18.3 billion of previously planned capital and operational expenditures not occurring in 2010 and 2011. With all this in mind, it is as important now as ever for companies, their employees, and their attorneys to work with regulators to successfully and efficiently navigate this new world.

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