Oil drilling in the Gulf of Mexico is under threat from government gridlock

A battle is brewing in Washington over Gulf of Mexico oil production as US regulators race to roll back guidance on protecting endangered species ahead of a deadline that could eventually threaten about 15% of the nation’s crude oil production.

The disagreement stems from a scientific assessment that underlies oil and gas operations in the Gulf. According to a court order, the US government has until December 20 to revise this analysis, when the current one will be removed. If regulators don’t finish by the deadline — and the courts or Congress don’t step in to grant more time — existing oil and gas operations that depend on the assessment could grind to a halt.

The effects could be major: if the Gulf of Mexico were a country, it would rank among the top 12 oil producers in the world.

“The ramifications could be enormous for operations in what we and many others recognize is such a vital and productive region,” said Dustin Meyer, senior vice president of the American Petroleum Institute. “The level of concern is very high.”

Even with some uncertainty about the impact, the potential for danger has sparked a lobbying frenzy from oil companies and industry groups looking at legal strategies and possible legislation to prevent major disruption. One lobbyist compared the situation to an “all hands on deck” moment. The impact could be felt well before the December 20 deadline, clashing with a presidential election that puts economic stability and energy security at the center of attention.

Legal foundation

At issue is the government’s main analysis of oil and gas activity in the Gulf, the so-called biological opinion published in 2020, which documents how drilling, pipeline construction and other operations could endanger protected species in the region.

The broad assessment provides a legal basis for oil and gas activity under existing leases in the Gulf. U.S. offshore drilling and leasing regulators generally rely on it instead of making case-by-case assessments.

Environmental groups challenged the biological opinion four years ago, arguing that it did not properly analyze how oil operations affect endangered and threatened species. Last month, a federal district judge in Maryland sided with them, throwing out the biological advisory — effective Dec. 20 — and sending it back to the National Marine Fisheries Service for a rebuild.

The agency has already started work on a new version as a precaution, but told the court it might not be done “until late winter or early spring 2025.”

Without a valid biological opinion, energy regulators would likely be forced to consult on hundreds — if not thousands — of decisions annually, according to data they provided to the court.

“Cascading Effects”

The individual assessments would “overwhelm” the agencies and have “cascading effects” not just for oil operations in the Gulf but also for renewable permits in federal waters, Walter Cruickshank, deputy director of the Office of Ocean Energy Management, said in April. .

The National Oceanic and Atmospheric Administration, which hosts the fisheries service, and the Interior Department, which handles offshore oil and gas leases, said they were reviewing the court’s decision last month, but declined to comment further.

The issue is already causing anxiety for some operators in the Gulf, worried not only about delayed government approvals but also about the viability of existing work authorized under the court-invalidated biological advisory. At stake are operations as varied as traffic from vessels supplying offshore platforms to continued production at long-permitted wells, according to industry lawyers who asked not to be named about private legal discussions.

Oil companies and suppliers operating offshore could face additional legal dangers if they continue to operate without new permits.

The government previously authorized “incidental takings” — where oil and gas activities cause harassment, injury or other harm to certain species, as long as companies comply with the 2020 biological advisory. Without this authorization in place, companies “will have to decide if they continue to operate at their own risk” or instead “shut down their activities” pending further biological advice, Holland & Knight warned in an alert last week.

With about 2 million barrels of oil produced daily from the Gulf, potential disruptions “could cause considerable economic and national harm to our country,” said Erik Milito, head of the National Oceanic Industries Association, which along with other industry trade groups. , including API, and Chevron USA Inc., stepped in to defend the government in the suit. Discussions with the government are ongoing.

Industry stakeholders are considering legal options, including seeking a stay, if another solution does not materialize soon. They have also been talking to congressional offices about the issue and are weighing legislation that could address the issue by giving the fishing service more time.

“Given the vital importance of the Gulf of Mexico,” Milito said, “we remain optimistic that cooler heads will prevail and we will see a much-needed solution to this problem.”

Photo: An oil rig in the Gulf of Mexico off the coast of Louisiana/Bloomberg

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