The Interior Department said Wednesday that oil and gas companies operating in the Gulf of Mexico need to do more to permanently plug nearly 3,000 inactive wells and dismantle about 650 production platforms that are no longer in use.
The new initiative is aimed at cleaning up what the industry calls "idle iron" - inactive wells and platforms that litter the gulf, pose hazards to shipping and run some of the greatest risks of leaks and accidents during storms.
Although the Interior Department has regulations requiring that old wells be permanently plugged with subsea safety seals and old platforms dismantled, the regulations are rarely enforced, industry sources said.
Federal regulations require idle structures to be decommissioned - a process that involves scrapping iron and steel platforms and pipelines or turning them into artificial reefs - within one year of the lease's expiration date.
Yet in certain fields, if a single well is producing, regulators will allow scores of other wells in those fields to be closed with temporary seals, gulf coast oil industry executives say. Operators often argue that inactive wells could become economically viable again depending on oil prices.
Some platforms are as much as 40 to 50 years old, dating to the early days of offshore drilling, one senior industry executive said. In some cases, the owners of the wells have gone out of business. Most of the idle platforms and wells rarely undergo maintenance, but the under-manned agency formerly known as the Minerals Management Service has been unable to inspect the thousands of sites in the gulf.
The Interior Department has periodically talked about forcing companies to clean up more of the idle iron in the gulf, especially after hurricanes Rita and Katrina inflicted heavy damage to inactive infrastructure. That damage accounted for many of the 130 small leaks during the storms.
However, in the wake of the blowout on BP's Macondo well April 20 that led to the massive gulf oil spill, the Interior Department is taking a tougher look at oil and gas industry operations in the region.
"As infrastructure continues to age, the risk of damage increases. That risk increases substantially during storm season," said Michael Bromwich, the new head of Interior's Bureau of Ocean Energy Management, Regulation and Enforcement. He added that the new order was expected to reduce such hazards.
The order issued Wednesday reiterates that operators should plug wells that been inactive for the past five years. Production platforms and pipelines must be decommissioned if they are not being used for exploration or production, even under an active lease.
Cathy Landry, a spokesman for the American Petroleum Institute, said that the order was "something we have been expecting" and that the API has been talking to BOEMR about "a reasonable time frame for implementation." She said, "We believe that for most operators, compliance . . . will not be an issue."
But she said that companies were worried about the ability of the already stretched agency to handle new permit applications for dismantling platforms.
Companies involved in dismantling platforms could profit handsomely. On Wednesday, the shares of two of the firms most active in this business, Hercules Offshore and Seahawk Drilling, jumped 7.5 percent and 6.6 percent respectively.