George Brooks: More Domestic Oil Production on the Way

George Brooks |

Deepwater drilling is beginning to make a comeback for the first time since the BP oil spill last April. Just last week, the Obama administration issued its second deepwater drilling permit for the Gulf of Mexico

The permit, approved Friday, permits the BHP Billiton to resume the drilling suspended as a stipulation of the deepwater moratoriums issued by the Interior Department in the aftermath of the BP spill. Production on BHP's Shenzi facility, located about 120 miles south of Houma, La., first commenced in March 2009.

During February, the Interior released its first deepwater drilling permit since the spill to Noble Energy. The company intends to resume drilling in 6,500-foot depths in waters about 70 miles southeast of Venice, La.

As drilling slowly returns to pre-spill levels, other boons to greater engagement in domestic production can also be expected.

"The oil and natural gas industry can and will provide even more jobs, higher economic growth and increased revenues to the federal treasury when policymakers pursue options that make resources currently off-limits available," said Erik Milito, the upstream director of the American Petroleum Institute. Milito also mentioned, “moving forward on permitting and licenses at a pace necessary to support domestic production."

The drilling, according to Interior Secretary Ken Salazar in early March, is armed with new safety measures that include well integrity standards, worst-case spill estimates and mandatory spill response and containment plans. All this provided the agency is the recipient of a requested $133 million increase in current spending levels.

With the Noble permit, BHP has had a stacking cap created by Helix Well Containment Group intended to contain oil in the event of a spill, according to Interior officials.

The pressure for greater domestic drilling comes both from Republicans and the rising price of oil at the pump, largely the result of Libyan conflicts eliciting supply limitations. Oil-state Democrats and industry groups have also been looking to local oil sources to create jobs, and boost domestic production in a move that would help balance the sharp rise in gasoline prices over the past two months.

Republicans have been at the forefront of the movement for greater domestic drilling, calling for a hearing that would examine the benefits of greater Gulf permissions. The same hearing would also begin discussion on a report recently released by the nonpartisan Congressional Research Service. The information contained in the report suggests that the United States is in possession of the largest recoverable resources of oil, natural gas and coal across the globe.

Given the speculation that rising gas prices have the potential to cause a double dip in the economy and the manner in which foreign conflicts have the ability to affect domestic economics, the desire for greater domestic drilling has been gaining steam as of late.

Greater domestic production would add more jobs, help bolster bourgeoning oil companies operating in the U.S.

 

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