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Capital Report


May 2011 Issue

Subcommittee on Energy Examines Drilling Safety, Spill Response Technologies
In a hearing before the U.S. House of Representatives Subcommittee on Energy and Environment on April 6, witnesses stressed the importance of offshore drilling and discussed both federal and industry efforts to address safety and response technology challenges in the wake of last year's Deepwater Horizon accident.

"We all know it is impossible to completely eliminate risks associated with complex endeavors such as deepwater drilling, but we must continually work to reduce risks and to manage them in a way that allows our economy and American consumers to benefits American consumers, creates jobs and allows our economy to grow from our vast supply of domestic offshore oil and gas resources," subcommittee chairman Andy Harris (R-Md.) said.

Owen Kratz, president and chief executive officer of Helix Energy Solutions Group (Houston, Texas), testified at the hearing, saying it was time to return to work. "With the experience of Macondo behind us," he said, "we have learned how to fashion an even more appropriate and effective containment system. It is time to get back to work."

Discussing efforts to make deepwater drilling safer, David Miller, standards director of the American Petroleum Institute, said the institute was using investigation findings to inform new standards and to improve technology.

"Permitting delays and the moratorium have already led to a loss of 300,000 barrels a day in oil production since May 2010, according to the [Energy Information Administration]'s Short-Term Energy Outlook, and the jobs loss is no less disturbing," he said.

Subcommittee members Rep. Brad Miller (D-N.C.) and Rep. Eddie Bernice Johnson (D-Texas) called for innovation in deepwater drilling, but they also cautioned against its risks.

"Regardless of the contribution to our economy, no industry has a right to neglect public health and environmental safety," Johnson said. "Instead, the oil and gas industry should take responsibility and devote some of its intellectual and technological capacity to developing safer drilling practices and advancing the technologies to respond to spills when they happen."

Natural Reserves Committee Approves Legislation to Increase Offshore Drilling in Gulf of Mexico
The U.S. House of Representatives Natural Resource Committee approved H.R. 1229, the "Putting the Gulf of Mexico Back to Work Act," on April 13 with a 27-16 vote.

"(This legislation) would end the administration's de facto moratorium in the Gulf of Mexico in a safe, responsible, transparent manner by setting firm time lines for considering permits to drill," House Natural Resources Committee Chairman Doc Hastings (R-Wash.) had said at an earlier legislative hearing in April. "It reforms current law by requiring the secretary to issue a permit to drill and also requiring the secretary to conduct a safety review."

The Secretary of the Interior would have to decide whether to issue a permit within 30 days after receiving an application, according to the bill, with the opportunity for the secretary to extend this time frame up to two periods of 15 days each, as long as the applicant was notified. Under the proposed legislation, if the secretary hasn't issued a decision on an application at the end of the waiting period, the application is deemed approved. When denying applicants, the secretary would be required to give explanation and a chance for the applicant to remedy any deficiencies.

Rep. Jeff Denham (R-Calif.) voted in favor of the bill.
"We can no longer afford to rely on foreign resources. The time for inaction is over, we must use the resources we have to get people back to work and curb rising prices," he said.

The Shallow Water Energy Security Coalition (SWESC), an industry trade group, said it was pleased with the committee's approval of H.R. 1229 and that it hopes the Senate will be prompted to pass further legislation.

"We commend the adoption of the Flores amendment on H.R. 1229, which would provide a one-year extension to the hundreds of leases impacted by the drilling moratorium," Jim Noe, SWESC executive director, said. "While rigs are idled due to regulatory delay, Congress should prevent time from running out these leases. The Flores amendment allows leaseholders to make up for lost time."

National Ocean Industries Association President Randall Luthi also voiced support for the bill, saying it "provides a road map that industry, Congress and the administration can follow to increase jobs, decrease oil imports and increase energy reliability and sustainability."

Lawmakers Discuss Solutions to Curbing Piracy
The U.S. House of Representatives Subcommittee on Coast Guard and Maritime Transportation in March conducted a hearing on piracy, particularly off the Horn of Africa, and the effectiveness of U.S. efforts to address and respond to this international threat.

"Piracy is recognized internationally as a crime against all nations and to which all nations must respond. It is incumbent on us to examine ways to minimize, if not end, this threat and its impact on both world commerce and our own national economy," Subcommittee Chairman Rep. Frank LoBiondo (R-N.J.) said.

He outlined three main approaches the U.S. could take in responding to piracy: Tracking ransom payments to ensure they are not funding terrorism operations; improving ways to keep mariners informed about avoidance and response tactics; and finding methods for prosecuting pirates, who are usually returned to shore without punishment.

Several factors have contributed to the frequence of piracy attacks, ranking subcommittee member Rep. Rick Larsen (D-Wash.) said. He cited a large number of high-value targets passing through the Gulf of Aden, global proliferation of the small arms trade, and persistent civil violence, lawlessness and economic troubles in Somalia.

Larsen suggested U.S. policymakers combat piracy by encouraging the maritime industry to adopt best practices, continuing to advance defensive technologies, helping coastal states in pirate-prone areas boost monitoring and interdiction capabilities, and providing resources to the U.S. Coast Guard and the Maritime Administration so they can advise the industry on how to strengthen its own security.


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