Shell Oil President Marvin Odum welcomed Monday's news that the Obama administration approved a permit for his company’s exploration plan in the Gulf of Mexico—the first in the country since the BP oil spill almost a year ago.
Odum, also the director of Shell's upstream programs in North and South America, echoed concerns by the Interior Department that a permit backlog will build if the government doesn’t get more money soon and cautiously backed the idea of new fees to alleviate that backlog. The permit process will be arduous no matter what, though, he said.
“It is really good news,” Odum told National Journal Daily in an interview in Shell’s Washington, D.C., office on Monday afternoon right as the announcement was made. “It’s been a challenging process. I won’t lie to you. The way I would describe it, it’s been a process of discovery. We started talking about these permits a number of months ago, and there’s been a process of us submitting something, the regulator deciding: ‘That’s not exactly what I was looking for; it was really more like this.’ We’ve had to learn from each other as we went through this. I’m hoping this gets better.”
Odum said Shell has seven permits pending at Interior for deep-water projects in the Gulf of Mexico, which accounts for about a fifth of all the deep-water permits in the hopper.
Monday’s permit approval marks the first time the administration has approved plans to drill new oil-and-gas resources rather than approve wells that had been drilling at the time of the administration’s moratorium. It’s a plan to explore a lease, which will allow Shell to seek permits to drill new wells on the lease.
“It is a step toward exploring new resources," Interior Secretary Ken Salazar said on a conference call with reporters on Monday. “We are moving ahead with safer and more responsible offshore development.”
Odum and Michael Bromwich, who directs Interior’s Bureau of Ocean Energy Management, Regulation, and Enforcement, agree that Shell’s permit will pave the way for other companies to issue exploration plans—which in turn allow companies to apply for drilling permits.
“Now the regulator has something to go by that will help speed up this process in the future,” Odum said.
Bromwich said on Monday's conference call that approvals like this are “essentially creating templates that will guide oil and gas development.”
More money and inspectors are imperative to the government approving more permits in a timely manner, Odum and Bromwich agree.
“Because the regulations have become more detailed because now there is a requirement for an environmental analysis with each well and exploratory plan that’s more work, it’s going to take more money," Odum said. "It’s going to take more people inside the regulatory body.”
Echoing other oil executives and congressional Republicans, Odum pointed to the billions of dollars that the oil industry already pays in royalties and other fees to the federal government. “It’s a reasonable assumption to have the federal government pay for this regulatory capacity,” he said.
That said, the administration is not open to that idea and has instead proposed paying for the additional inspectors at least in part by increasing fees on the oil and gas industry. President Obama’s budget for fiscal 2012 requested a $4 per-acre, per-year fee on new non-producing oil-and-gas leases.
Odum cracked open the door for compromise on additional fees to the industry, differing with most executives in the industry and virtually all Republicans who remain adamantly opposed to that idea.
“The answer is yes within reason,” Odum said. “You have to stay reasonable about it. I think in all cases fees ought to be tied to the activity. So if it’s around drilling, it’s probably tied to drilling and so forth.”
He noted that his company, one of the largest producers in the Gulf, was able to keep five floating drilling rigs “that sometimes cost hundreds of thousands to millions of dollars a day on standby for a better part of the year waiting for this to start working again.”
In other words, at least for the major oil companies like Shell, additional fees would not break their banks, especially if it meant new permits would be issued in a timely manner.
Coral Davenport and Olga Belogolova contributed.