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Tuesday, June 29, 2010

Force Majeure Begins in GOM Over Oil Spill

I'm not a lawyer and I don't play one as I write here, so I looked it up. Here is the definition of force majeure:

Force majeure is a term that generally refers to an irresistible force or overcoming power. It affects someone's ability to do something and may be used as a legal excuse for not having carried out the terms of a contract. It is a form of the impossibility defense. In some cases, the defense may not apply, such as when there are terms requiring a backup or contingency plan to be in effect.Why is this legal term coming into prominence in the professional reporting of the oil drilling industry? Because the future is here. The oil drilling in the Gulf of Mexico is coming to a halt, either under the current moratorium or in anticipation of new regulations to come from this very anti-drilling administration. As these two links show, it's beginning.

This from Chevron:
Chevron on June 23 declared force majeure on its contract for Hercules Offshore jackup Hercules 120, saying that it believes the new regulations issued for drilling in the U.S. Gulf of Mexico prevent Chevron from continuing operations involving the rig.

And this from Apache :Rowan Cos. received notice on June 22 that Apache had declared force majeure on Rowan jackup Cecil Provine, which had been working in the Gulf of Mexico, due to delays in obtaining new drilling permits following the Deepwater Horizon incident

These two articles are from a professional publication widely read in the oil drilling industry. The moratorium uncertainty and the anticipated upcoming additional regulations are being used as the excuse to get out of drilling contracts. Companies don't want the burden of paying out contracts if the rigs will be unable to drill or if the timeline is uncertain.

This is what happens when knee jerk reactions are allowed to substitute for common sense policy. The oil drilling rigs under deep water drilling contracts - 33 of
them - were inspected immediately after the Deepwater Horizon exploded. All are in compliance of existing regulations. None give any indication that problems will occur.

There is a backlog of permit requests as it is. With all the criticism of MMS, the pace of the request grants has slowed to a halt. Those already drilling and waiting on new permits to continue will not simply continue on and have to pay for down time of a working rig. Rigs are leased for tens of thousands of dollars per day. The rigs will leave the Gulf of Mexico.

The sheer lunacy of the political left in this country is on display. Carol Browner, EPA director and former Clinton administration EPA director thanks to her mentor Al Gore, is adamant that a moratorium is needed. She actually states it is necessary so that this doesn't happen again. This is the lunacy popping up. This horrible situation was man-produced. Human beings making poor choices and decisions. The Gulf of Mexico has produced millions of barrels of oil over the last few decades by drilling thousands of wells and this has not happened before in our water. While the uninformed like to compare this to the Exxon Valdez accident, that was an oil tanker accident. Two completely different scenarios.

Humans will make mistakes. Lessons will be learned from this disaster. Eleven men lost their lives and many more are injured. BP's safety record is well known in the industry. The MMS is now exposed as having known the problems with this particular well as far back as February. Enforcement of the regulations on the books is needed, not completely shutting down oil drilling or even more layers of regulations not to be enforced.

You will not feel the pinch at the gas pump tomorrow or next week. Maybe not even six months from now, but it is coming. This will make the skyrocketing gas prices of $4.00 a gallon and up of the past seem like a bargain.

Day 71.

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