Bureau of Ocean Energy Management, Regulation and Enforcement
A platform "jacket" from a decomissioned well is lifted out of the water. The structures are often mammoth in size — notice the workers at right.
msnbc.com staff and news service reports
updated 9/15/2010 5:45:52 PM ET 2010-09-15T21:45:52

Oil and gas companies operating in the Gulf of Mexico will have to permanently plug nearly 3,500 temporarily abandoned wells and dismantle about 650 production platforms that are no longer used, the Obama administration announced Wednesday.

The move comes as the energy industry voices complaints that it is being overburdened in the aftermath of the BP oil disaster in the Gulf.

Iinitial reaction from the American Petroleum Institute was that it had been expecting the announcement and had been working with regulators "on a reasonable timeframe for implementation," spokesman Carlton Carroll told msnbc.com. "We believe that for most operators, compliance will not be an issue."

Carroll did not have an estimate of potential cost to the industry, but did say that one concern is "the ability of companies to get the permits necessary to undertake decommissioning activities."

The Wall St. Journal cited one expert as saying the cost could total $1.4 billion to $3.5 billion. Mark Kaiser, R&D director at Louisiana State University's Center for Energy Studies, also estimated that companies, mostly smaller producers, would be giving up $6 billion to $18 billion in lost revenue from future production.

Environmental groups welcomed the directive. "This is an important first step in cleaning up what’s become a dumping ground for the offshore oil and gas industry," Peter Galvin, of the Center for Biological Diversity, said in a statement. "These old wells can and do leak oil that only adds to the environmental problems the Gulf has suffered in recent decades."

The Interior Department says the policy aims to make energy production safer and prevent potentially catastrophic leaks at wells that in some cases have been abandoned for decades.

The order requires operators to plug wells that been inactive for the past five years. Production platforms and pipelines must be decommissioned if they are not being used for exploration or production, even under an active lease.

"We have placed the industry on notice that they will be held to the highest standards of planning and operations in developing leases and today’s notice reiterates that mandate," Interior Secretary Ken Salazar said in a statement.

More than 27,000 abandoned oil and gas wells lurk beneath the Gulf of Mexico, and more than 1,000 oil rigs and platforms sit idle. An Associated Press investigation showed that many of the wells have been ignored for decades, with no one checking for leaks.

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The order requires wells that been inactive for the past five years to be plugged.

The 3,500 wells cited are currently capped with a "subsurface safety valve," Interior said.

"As infrastructure continues to age, the risk of damage increases. That risk increases substantially during storm season," Michael Bromwich, head of the Bureau of Ocean Energy Management, Regulation and Enforcement, said in the statement.

Federal rules already require plugging such wells within a year of a lease's expiration.

But, Interior noted, energy producers have historically said such "idle iron" might one day be used again to support other active wells located in the same lease area and were therefore reluctant to plug wells and remove infrastructure until they had to meet the government's final decommissioning requirements.

Interior said the new directive "clarifies the regulation and mandates that any well that has not been used during the past five years for exploration or production must be plugged, and associated production platforms and pipelines must be decommissioned if no longer involved with exploration or production activities.

"Companies will have 120 days to submit a company-wide plan for decommissioning these facilities and wells," Interior added.

Rep. Raul Grijalva, who had urged Salazar to do something about idle rigs, called the announcement excellent news for both the economy and the environment.

"These structures are not producing resources or creating jobs by just sitting there, and the risk of leaking abandoned rigs is something we've overlooked long enough," said Grijalva, chairman of a House subcommittee on national parks and public lands. "This announcement should put thousands of Gulf laborers back to work in short order cleaning up the Gulf and opening up new opportunities."

The Associated Press investigation in July found that about 50,000 wells have been drilled in the Gulf over the past six decades, with about 23,500 permanently abandoned.

Another 3,500 are classified by federal regulators as "temporarily abandoned," with sealing procedures that are not as stringent as those for permanent closures.

Some of the "temporarily abandoned" wells have been left that way since the 1950s, without the full safeguards of permanent abandonment.

Petroleum engineers say that even in properly sealed wells, the cement plugs can fail over time and the metal casing that lines the wells can rust. Even depleted production wells can repressurize over time and spill oil if their sealings fail.

Industry feels overburdened
On Tuesday, the U.S. oil and gas industry voiced complaints about an administration plan to double fees charged for inspections of offshore operations.

The industry recognizes the need for improved inspections and oversight following the BP oil spill, said American Petroleum Institute President Jack Gerard. But doubling the fees is not appropriate, especially during a recession, he said.

"This is not the time to go back and impose additional costs on industry," Gerard told reporters.

The oil and gas industry contributes billions of dollars to the U.S. government in royalty payments, taxes and other fees, Gerard said, adding that government policies should encourage development of domestic energy, while making sure it is safe.

Video: Abandoned oil wells found in the Gulf (on this page)

The White House asked Congress late Monday to approve the higher inspection fees as part of a request for $80 million in new spending for the agency that oversees offshore drilling.

The proposal would more than double the amount collected from oil and gas companies, to $45 million next year from about $20 million this year.

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President Barack Obama said in a letter to Congress that the fee increases and other changes are needed to strengthen oversight of offshore oil and gas operations; address deficiencies in mineral revenue collection; and complete the reorganization of the agency formerly known as the Minerals Management Service into the Bureau of Ocean Energy Management, Regulation and Enforcement.

"We need the additional resources to do the job that we've been asked to do," Bromwich said Tuesday.

Under its former name, the drilling agency was long plagued by staffing shortages and an overly cozy relationship with the industries it oversees.

Bromwich acknowledged those problems, but said the ocean energy bureau is turning a corner — and needs additional money to get even better.

"We've been faulted for not doing the job people expected us to do, and the central reason for that is we haven't had adequate resources. If we don't get the resources we need we won't be able to do the job effectively," Bromwich said.

Story: Gulf awash in 27,000 abandoned wells

Bromwich also said the Interior Department is "highly unlikely" to extend its six-month moratorium on deepwater drilling beyond Nov. 30.

He said he hopes to finish a report to Salazar by the end of September, a month ahead of a deadline to make recommendations on the drilling moratorium and other issues. It was unclear how soon Salazar will act after the report has been submitted.

Congress recently approved $29 million in emergency spending to hire hundreds of new offshore drilling inspectors and take others steps to improve the drilling agency. No new inspectors have been hired yet, but Bromwich said officials were conducting a "full-court press" to find and hire qualified inspectors to bolster the 60 or so inspectors now responsible for about 3,500 drilling rigs and platforms in the Gulf of Mexico.

The Associated Press and Reuters contributed to this report.

Video: Background on abandoned wells

  1. Transcript of: Background on abandoned wells

    OLBERMANN: Good evening from New York . This is day 79 since the Deepwater Horizon well blew up in the Gulf of Mexico . There was news today about how day 80 could make or break untold numbers of people on the Gulf Coast . But, first, the disturbing findings of an investigation by the " Associated Press ." Our fifth story: Thousands of abandoned oil wells on the floor of the Gulf , wells could be leaking now or might leak in the future but no one will ever know it because neither big oil nor big government ever bother looking. An " A.P. " analysis of government data showed that drillers have temporarily abandoned more than 3,500 wells in the Gulf . Meaning: when the wells proved problematic, or company has decided to wait until gas prices went up, they put temporary -- meaning less good -- caps on them. The exact same kind of cement caps that failed to cap the Deepwater Horizon well. Some temporarily are abandoned for more than 50 years now; 1,000 of them for more than a decade. Not only is Interior Secretary Salazar is not inspecting any of these wells , his department would not even tell " A.P. " why it`s not expecting them, even though the Bush Interior Department concluded in 2001 that some of them might have been leaking then. Nor has the government responded, so far, to a coalition of hydrocarbon scientists -- one of whom joins us shortly. That it`s asking for permission and funding, $8.5 million, to examine the well which we know is gushing, the gauge accurately the flow rate to assess where it`s going and how its toxic components are reacting under water. And though "McClatchy" newspapers reported back in May that BP had a financial incentive, namely lawsuits based on the spill rate, to not get accurate estimates, "McClatchy" now reports that BP wasted little time preparing for those lawsuits by retaining the very environmental experts and labs who might otherwise be able to work for plaintiffs. And last week, COUNTDOWN confirmed today, several insurance companies notified the Marsh Insurance Brokerage that they will, quote, "enforce time limits strictly on their policies." Meaning: Gulf Coast business that is are or will be hurt can only get their insurance claims for it filled if they file by the deadline. What deadline? For some policies, the deadline is 5:00 p.m . tomorrow. " The National Law Journal " reporting that in many cases, policyholders must file claims within 80 days of the event, the explosion, even if the oil does not reach your beach or fishing ground until day 81. This as the oil is still making new ground reaching Lake Pontchartrain and Texas , as we told you. And spill chief, Thad Allen , told NBC News today it will be another two to four days until BP can hook up a third collection vessel, the Helix , that will double its collection capacity at the spill site. We`re joined now by Mitch Wise , part of the " Associated Press " investigative team covering the spill and one of the correspondents who broke that story about the Gulf `s abandoned wells . Mr. Weiss , thanks for your time tonight.

    MITCH WEISS, ASSOCIATED PRESS: Thank you for inviting me, Keith .

    OLBERMANN: Can you quantify this problem? How many inactive wells in the Gulf ? How many only temporarily capped? How many do we really need to worry about?

    WEISS: Well, we were able to crunch MMS data and we found that there are 27,000 abandoned wells . Well, within that, there`s a subset of 3,500 temporary wells . And those are wells that basically don`t have the same kind of protection that the permanently abandoned wells have. So, of those 3, 500, they were temporarily abandoned for a number of reasons. They may not be economically feasible. Some of the oil companies may be waiting for the price of gas to go up, or those wells may have been temporarily abandoned while the oil and gas company is trying to gain control of these wells . Sometimes they can be out of control wells . And, so, really, there are 3,500, you know, the temporarily abandoned wells . And then, of those, more than 1,000 of those have been temporarily abandoned for more than a year. Some of those abandoned for 20, 30, 40 years. And those are the ones that I think that are most at risk.

    OLBERMANN: And just so we`re clear this, there`s no inspection of them and there`s no regulators on site to see if they have been capped or follow up by anybody at any point afterwards, to look for leaks on any of these?

    WEISS: Basically, Keith , it`s an honor system . As long as the oil and gas companies fill out the appropriate paperwork and they submit it to MMS , then MMS , you know, basically takes their word that it was done right. And MMS does have guidelines about what they have to do to permanently abandon a well or temporarily abandon a well. But basically, it`s an honor system . The only time MMS inspectors are out there is if they happen to be doing a field inspection of a rig at the same time one of the wells is being either permanently abandoned or temporarily abandoned .

    OLBERMANN: Is there a reason that the Interior Department might have to abandon the idea that the honor system works when it comes to deepwater drilling or drilling in the Gulf , particularly?

    WEISS: Well, I mean, that`s a good question for MMS . Of course, we pose that question to them and they refused to talk to us. We went two weeks, you know, trying to get somebody to talk to us for an interview. And all they did was, say submit your questions via e-mail. And then they got back with us once, and they didn`t get back to us for any follow-up questions. But I`m not sure exactly why. I mean, there was a GAO report back in 1994 that recommended they take a more active role in inspecting plugged and abandoned wells . And -- because it was a concern at the time by the GAO that some of these wells could leak. And if they did, it could present a real environmental disaster. But those recommendations were ignored and they never put an inspection policy in place.

    OLBERMANN: Based on the " Associated Press " investigation, do you know -- are the quantities in any way significant or is the real issue that just one of those leaks by itself could develop into a full-on blow out just because of negligence?

    WEISS: Well, there are a couple concern, Keith . One is, you know, the temporarily abandoned wells and even the permanent abandoned wells , the ones that were abandons 20, 30 years ago, were abandoned using a different technology than we have in place today. They didn`t use the same kind of cement or the same kind of plugs. A lot of those temporarily abandoned wells , for example, could be capped by metal and sea water eats away at the metal. And, of course, we know from the Deepwater Horizon blow out, that, you know, cement can be blamed for a lot of the problem that you see. So, I mean, is there a concern or is there a worry? Knowing what we know now, yes. But is anybody looking into the problem, has anybody addressing it? No. It`s kind of a policy I think MMS has that: it`s out of sight, out of mind. We trust the companies to do the right thing . and, you know, hopefully, nothing will happen. But there`s always the potential that one of these abandoned wells could blow or could be leaking seriously. But nobody is watching, nobody inspecting. So, we just don`t know the extent of the problem.

    OLBERMANN: The honor system , what could possibly go wrong? Mitch Weiss , correspondent for the " Associated Press " -- great reporting and great

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