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Does the Government Influence Deepwater Drilling



June 24, 2010 – Comments (5)

An interesting analsys here.  I haven't seen this reported in the MSM (then again, I don't watch or read the MSM, so you tell me).  Back in 1995, the United States government started giving financial incentives for deep water drilling, while since 1990 there has been a complete ban on drilling on the east side of the Gulf.  So you have a couple things going on.  All drilling, shallow or not, in the Gulf takes place on one half of the Gulf Coast.  Two, the number of deepwater rigs in the Gulf has exploded since 1990.  Go figure.  Say it with me, "Government intervention fails again!"

David in Qatar

Bashing BP (for Doing Exactly What Government Led Them to Do) by Matthew J. Novak

Government Intervention: A Major Contributor to the Mess

After first hearing about the problem BP as a company currently faces, I became curious about the positions of oil platforms in the Gulf of Mexico. I am no expert, but drilling in over five thousand feet of water sounds hard. So, I searched for something to show me where the platforms are located and found the following map, which I find useful for discussion.

oil wells

Incentivizing Risk

In 1995, President Bill Clinton signed into law the Deepwater Royalty Relief Act (DWRRA), which was "intended to encourage natural-gas and oil development in the Gulf of Mexico in waters at least 200 meters (656 feet) deep by offering royalty relief on qualifying natural gas and oil lease sales." This act has since expired, but there remain continued incentives for drilling in deep water.

For example, a report from the DOE written in 2005 states that after the conditions of the DWRRA expired in 2000:

"the MMS adopted a program which determines royalty relief on a lease-specific basis. Under the revised method, leases located in the same water depth may have different volumes exempt from royalty charges if the economic conditions vary. For example, if one natural gas field is more expensive to access, then it may potentially receive more royalty relief than a field in the same water depth with lower costs to access."

In other words, the government specifically passed laws that gave the oil companies incentives to drill far offshore — that is, in deeper water where risk is presumably higher. In addition to the higher risk of accidents, the cost of solving any problems are necessarily greater in five thousand feet of water than in, say, 250 feet of water.

How much of an incentive was there to drill in deeper water? The same DOE report contains the following table.


Full Article


5 Comments – Post Your Own

#1) On June 24, 2010 at 1:33 PM, nzsvz9 (< 20) wrote:


I find it hard to believe that our grand and glorious all-knowing and all-gracious government would EVER advocate risky business behavior or personal behavior for that matter.

"I want to roll the dice a little bit more in this situation towards subsidized housing. . . ." - Rep. Barney Frank (D., Mass.) House Financial Services Committee hearing, Sept. 25, 2003

Very hard to believe.

Known as hear no evil, see no evil, but still somehow swimming in evil nzsvz9

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#2) On June 26, 2010 at 6:35 AM, devoish (70.13) wrote:

Stop a $54billion bailout of the nuclear industry. 

In 2007, Congress approved $18.5 Billion in taxpayer "loan guarantees" for new reactor construction. In February 2010, President Obama approved the first "guarantee" under this program: for $8.3 Billion to build two new reactors in Georgia.

But these aren't just "loan guarantees." The money is coming directly from taxpayers, through a little-known government agency called the Federal Financing Bank. Under this new kind of nuclear socialism, taxpayers would pay to build nuclear reactors. If the project succeeds, the nuclear companies will receive all the profits. If the project fails, taxpayers will pay the costs. And the Congressional Budget Office has predicted that 50% or more of these projects will fail.

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#3) On June 28, 2010 at 12:13 PM, nzsvz9 (< 20) wrote:


Nuclear energy should stand on it's own - without subsidy, as should oil, natural gas and so on. There should be no subsidy for energy at all. I'm for nuclear power, but only if it's by a private company.

So where is the outrage from environmentalists over Obama supporting nuclear energy AND corporate welfare?

Known as free-marketeer nzsvz9

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#4) On June 28, 2010 at 9:55 PM, devoish (70.13) wrote:


I found it you silly. The outrage has been there for as long as nuclear power has. Do you think we should wait for a big accident and then you blame Government for not doing enough while all along untill the accident you tell Government to get out of the way and let buisiness's make the best decisions?


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#5) On June 28, 2010 at 11:05 PM, whereaminow (< 20) wrote:

That has to be the most illogical statement I've ever seen. 

You admit that

1. The government is in the way
2. The government is helping nuclear power through subsidies

We demand that

1. Government get out of the way
2. The government sotp helping nuclear power through subsidies

And then you criticize us for it.  Even though you want the govenrmnet out of the way.

So which one is it devoish?  Do you want the government to be involved or not to be involved?  PICK ONE ALREADY!  You are about a freaking retard.

David in Qatar

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