Fact Check: Permitting some fudging on oil stats

Introduction

The government’s chief regulator of offshore drilling tried to suggest to the Senate this week that the Obama administration has been issuing permits almost as quickly as before the BP-Macondo well erupted in the Gulf of Mexico.

Problem with the assertion: Michael R. Bromwich rested his argument on the number of permits issued in 2009, when the recession-plagued oil industry asked for the fewest permits in five years.

But 2004 was the last year the off-shore industry requested shallow-water drilling permits at the 2009 rate of around eight a month. In between, the oil industry went through four years of boom before busting with the rest of the economy in late 2008.

A review of Interior Department data covering the years of the second Bush administration, from 2004 through 2008, shows that it granted permits at three times the rate of the Obama administration, lending some credence to the contention of Louisiana Democrat Sen. Mary Landrieu that Bromwich had offered “disingenuous” numbers during his testimony.

It all began Tuesday when Bromwich, a former federal prosecutor, implored members of the Senate Energy Committee to “do the math.” He said his agency is issuing permits at “not a significantly slower pace than has historically been the case.”

For wells in less than 500 feet of water, considered much less risky than the Macondo well, Bromwich said his department – the Bureau of Ocean Energy Management, Regulation and Enforcement – has issued 53 drilling permits since last June, and averaged six permits per month since October.

He compared that favorably with the average of eight permits a month in 2009 – before the Obama administration halted all permits in the wake of the Macondo disaster.

The industry responded, asserting that 2009 was hardly an “historical average.”

Jim Noe, executive director of the Shallow Water Energy Security Coalition, tallied Interior-issued permits from 2005 through 2009 at the average rate of 18 per month.

Interior Department data on permits, however, shows that Bromwich and Noe both were engaged in some creative computing – while telling the truth, neither told the whole story.

Offshore oil and gas drilling permit applications boomed between 2005 and 2008, along with oil and gas prices – and cratered nearly as fast in 2008-09.

Through the 1990s and to mid-2004, crude oil prices stayed below $40 a barrel, Energy Information Administration data shows. In 2004, the price began its four-year march to $145 a barrel in mid-2008, before dropping precipitously by nearly $100 a barrel in a few months.

In 2004, as the boom was beginning, Interior handed out an average of 7.5 shallow water drilling permits a month, according to Interior’s database of permits. Permits were generally approved within two to three weeks of a request.

As oil prices rose, so did permit applications and approvals. In 2005, the average rose to just over 22 permits approved a month; in 2006, to just under 24, and in 2007, to 25.

In 2008, the average dropped to 16.5. From January through August, permits were issued at a rate of 18 per month, but as oil price cratered, permits dropped to 12 a month for the last four months of 2008.

In 2009, with the recession, permits hit eight a month, as Bromwich said.

But the average for the five years, 2004 through 2009, was 18 a month – as Noe said.

The Interior database records 72 shallow-water permits issued in 2010, 61% of them before the end of April, when BP’s Macondo well blew out in the gulf. The pre-Macondo rate was 10 per month, and the post-accident rate, 3.5.

This year, the actual permits recorded have reached nine per month in February and April, but Interior says only four shallow-water permits are pending, while six are awaiting more information, so the issue rate can’t go up until more applications are filed.

The same pattern shows up for deepwater permits, wells that lie beneath 500 feet or more of seawater like BP’s ill-fated Macondo well. Those permits swelled from about two a month in 2004 to 4.5 a month in 2005, eight a month in 2006, and nine a month in the oil boom heyday of 2007.

The pace then slowed to six a month for the last of 2008 and continued at between 7 and 8 monthly until the Obama administration put a controversial moratorium on the deepwater permits after the Deepwater Horizon blow-out.

Bromwich told the Senate Energy and Natural Resources Committee that Interior has approved 14 deepwater permits since the oil companies demonstrated new blow-out containment capabilities in mid-February, or about one a week.

But he was forced by Landrieu to admit that 13 of the 14 permits were for wells already under way when the Deepwater Horizon exploded.