BOEMRE Looking to Expand Oversight to Drilling Contractors

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April 25, 2011

WASHINGTON (Dow Jones)–The U.S. offshore drilling regulator is reviewing its authority to apply “any” or “all” of its regulations to drilling contractors like Transocean Ltd. (RIG) and Halliburton Co. (HAL), a spokesperson for the Bureau of Ocean Energy Management, Regulation, and Enforcement said Monday.

“We are looking at what our authority is to apply any/all of the regulations at our disposal” to the contractors, a bureau spokesperson told Dow Jones Newswires by email. The statement followed public comments from Michael Bromwich, the bureau’s director, in which he reiterated his interest in regulating the contractors directly.

“With respect to the Transoceans and Halliburtons of the world, I don’t believe there is a compelling reason why we don’t regulate them,” Bromwich said at an event hosted by advocacy group Public Citizen.

Currently, the bureau, which oversees oil and gas drilling in U.S. waters, holds one primary operator responsible for meeting safety and environmental regulations. But those operators typically hire other companies to perform tasks that are central to the drilling operation. In the case of last year’s Gulf of Mexico oil spill, primary operator BP PLC (BP, BP.LN) retained Transocean, which owned and staffed the doomed Deepwater Horizon rig, and Halliburton, which was responsible for the well’s failed cement seal.

Investigations of the Gulf spill have faulted those contractors for their role in the disaster. When a presidential commission earlier this year said the spill revealed “systemic” industry problems rather than mistakes made by BP alone, it pointed to the fact that Transocean and Halliburton provide services to many oil and gas companies.

Bromwich suggested that in the past U.S. regulators chose not to regulate contractors out of convenience. He likened the system to “one-stop shopping.”

“The agency historically has preferred to go through the operator to get to the contractors,” Bromwich said. “But until I started asking the question relatively recently, it wasn’t clear whether we weren’t exercising the authority because we didn’t have it or because it was simply not exercised.”

“We’re looking right now into, number one, whether we have the full legal authority to regulate them directly, and if not, what it would take to get that authority?” Bromwich said.

In the past he has said it may be necessary for Congress to expand the agency’s authority.

“There is no, to my mind, credible reason why we shouldn’t at least have the ability to proceed against contractors, without in any way having that detract from or deflect from our ability to hold the operator liable,” Bromwich said. “You can hold multiple parties liable. There are other legal and regulatory schemes that do that and I don’t see any reason in the world why ours couldn’t.”

-By Ryan Tracy, Dow Jones Newswires

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