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Public Statements

Letter to Secretary Salazar and Director Bromwich

Letter

By:
Date:
Location: Washington, DC

U.S. Sen. David Vitter today sent a letter to the Obama administration demanding answers for the extremely slow pace of issuing drilling permits in the Gulf of Mexico which has led to job losses, increased deficits and decreased domestic energy production. Vitter's letter to Department of Interior Secretary Ken Salazar and Bureau of Ocean Energy Management Regulation and Enforcement Director Michael Bromwich highlights that, during the same week as the president's "jobs speech," it was reported that up to 20 more offshore drilling rigs could be leaving the Gulf.

"I share the frustration of Louisianians and Gulf Coast residents with the disparity between the president's rhetoric and the Interior Department's actions," Vitter said. "The administration's policies have led to massive deficits and job losses, especially in Louisiana, and it's time for the president to stop lecturing about job creation and allow our energy industry workers to get back to work."

Earlier this year, Vitter introduced 3-D: The Domestic Jobs, Domestic Energy, and Deficit Reduction Act of 2011, which would create more than two million jobs, $10 trillion in economic activity and $2 trillion in federal tax receipts (according to conservative 30-year estimates) by unleashing America's vast domestic energy potential.

A copy of Vitter's letter is below.

September 12, 2011

The Honorable Ken Salazar
Department of the Interior
1849 C Street, NW
Washington DC 20240

Director Michael Bromwich
Bureau of Ocean Energy Management Regulation and Enforcement
1849 C St., NW
Washington, DC 20240

Dear Secretary Salazar and Director Bromwich:

I write to stress my ongoing concerns with the pace of permitting for offshore production in the Gulf of Mexico. In light of the President's "jobs speech," perhaps you could help me better understand how the Interior Department is facilitating the President's objectives. A cursory glance of Interior Department activity shows an agency dedicated to a contrary agenda in relation to job creation. Accordingly, I would appreciate complete responses to my concerns.

The following questions focus on deepwater production in the Gulf of Mexico (GOM):

1. As of last week, there were 19 floating units working in the GOM, up from a low of 4 in the third quarter of 2010, and down from an average of 28 from 2007-2009. Unfortunately, without a higher volume of additional permits, the number of active rigs will decline. In the three-year period from 2007-2009, an average of 84 deepwater permits for new wells were granted annually. That shows 2011 permitting at well below historical rates (when you exclude permissions to modify which are essentially meaningless, yet you decide to calculate as a functional equivalent). Further, the annual number of deepwater permits should be going up over time, not down, because of the general movement by industry into deeper waters. Given the impossibility of deciphering the BOEMRE permit webpage, can you please attest to the accuracy of these numbers, delineating between new permits to drill and permissions to modify?

2. Given that Interior's press office has repeatedly attempted to indicate publicly that permitting is at nearly pre-Macondo levels, why is there not a pre-Macondo level of rigs working in the Gulf?

3. In 2007-2009, the permitting regime accommodated an average working fleet of 28 rigs. A rough estimate would suggest that each rig consumes 3 permits per year in order to stay actively working in the Gulf (28 rigs divided by 84 permits equals 3 permits/rig). Given that a typical deepwater well takes approximately 120 days to drill, one can also assume that the roughly estimated numbers are fairly accurate. Accordingly, at Interior's 2011 pace of permitting what is the anticipated attrition rate of rigs from the GOM? Over the next two years, what are the anticipated production and employment impacts from the current pace of permitting? Please do not hesitate to source your information from outside the Interior Department, including the Energy Information Administration and the FBR analysis I have provided.

4. Is it accurate that at the current run rate, assuming 2011 numbers, BOEMRE will approve 35 deepwater permits per year, supporting 11 or so rigs on an annual basis, representing a decline in drilling activity of approximately 60 percent?

5. I am told that operators have filed and re-filed permit requests at an average of 3.6 times, with multiple permits exceeding 8 times. How does this compare to historical numbers? What is your current estimate of the backlog of exploration plans and how do you achieve this number?

6. It has been noted that a backlog of non-drilling work has kept some rigs working in the Gulf that would otherwise not be there given Interior's permitting pace. How long do you see that non-drilling work lasting?

7. For each rig not operating in the Gulf of Mexico, what is the multiplier effect on the Gulf economy? How are small businesses, including but not limited to helicopter firms, restaurants, welders, carpenters, marinas, and hotels impacted by the loss of each rig? How is our economy impacted if in 2012 there are 1/3 the drilling rigs working in the Gulf than there were in 2009?

8. Do you believe that the current pace of permitting provides certainty in the market and will not affect the potential revenue generated from the upcoming lease sale in the Western Gulf scheduled for late this year or early next year?

9. How many staff at Interior were dedicated to permitting prior to the Macondo incident? How many staff are currently dedicated to permitting? Please provide the data for Interior's budget in fiscal years 2007 through 2011, including MMS/BOEMRE.

10. On June 9, 2011 the Natural Resources Defense Council, Defenders of Wildlife, Center for Biological Diversity, Sierra Club, Inc., Gulf Restoration Network, Inc, and Florida Wildlife Federation filed suit challenging BOEMRE's approval of Shell's drilling plan. Can you please provide the total amount in attorneys' fees that Interior Department has awarded these environmental groups under the Equal Access to Justice Act and Judgment Fund for fiscal years 2008 through 2011?

11. I was pleased to read EIA's latest Short Term Outlook (September 7, 2011) which points out that "domestic crude oil production, which increased by 110 thousand bbl/d in 2010 to 5.5 million bbl/d, increases by a further 140 thousand bbl/d in 2011 and by 60 thousand bbl/d in 2012." Please explain the GOM's contribution to the increase in domestic oil production in actual and percentage terms.
Again, I reiterate the frustration of my Gulf constituents with the disparity between the President's rhetoric and the Interior Department's actions. Perhaps your thorough response to these questions will shed some light on where consistencies do exist.

Sincerely,

David Vitter
United States Senate


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