IHS Cambridge Energy Research Associates
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Internet: www.ihscera.com
DANIEL YERGIN
CHAIRMAN
August 11, 2011
Michael R. Bromwich
Director
Bureau of Ocean Energy Management,
Regulation and Enforcement
US Department of the Interior
1849 C Street, NW
Washington, DC 20240
Dear Director Bromwich,
Thank you for your extensive letter responding to our study Restarting the Engine – Securing
American Jobs, Investment and Energy Security: The Importance to the US Economy of
Restarting the Offshore Oil and Gas Exploration and Development Industry.
We understand the challenges of creating a new regime for the offshore and respect your
efforts to reshape the regulatory system to meet the challenges that it now faces. Clearly this is
still a time of transition, and our objective in the study is to provide quantification of how the
system is functioning and the potential benefits of success in this endeavor. We recognize the
many pressures that BOEMRE faces and its paramount focus on safety. Our aim is to provide
a common basis for dialogue that would be useful both to the Bureau and the industry in
developing the path forward. You yourself have spoken about the importance of the off-shore
to the nation. We sought to provide quantification that extended to the impact on the country
beyond the four Gulf states, including on employment.
We recognize the constraints and responsibilities of creating a new regime for the offshore.
You know better than anyone else the importance of these issues and that this is an evolving
situation. Our hope is that the metrics presented in the report will contribute to the constructive
dialogue that an issue of this significance requires.
In our communication with Ms. Melissa Schwartz after the release of our study, we
volunteered to brief you when your schedule permitted and I understand that we now have a
date. I am also sending you the methodology for our analysis to facilitate the discussion at that
meeting.
The detailed methodology is contained in a 211-page appendix comprised of four parts. We
think you and your colleagues would find Appendix A – “BOEMRE Data – Detailed Analysis”
of particular interest. The other appendices are “IHS CERA Gulf Activity Model”, “Economic
Impact Model”, and “Economic Impact Assessment Tables”.
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Page Two
Let me mention a few brief points in reply to your letter and in anticipation of the briefing:
1. We did not assign in our report any specific responsibility for delays in bringing permit
activity to appropriate levels. We would be most interested in learning the perspectives
of BOEMRE on that backlog. During the research process we encountered many points
of view as to what factors are contributing and would value the chance to gather similar
understanding from BOEMRE staff.
2. The study was not just done by IHS CERA, as your letter seemed to suggest. It
combined an analysis of industry activity by IHS CERA with an analysis of the
economic impacts of the “activity gap” – the difference between two scenarios for
recovery of industry activity – by IHS Global Insight. We note that you did not
comment on the economic impacts, and we would welcome any thoughts you have on
this dimension of the work.
3. We thought that by recognizing the need for new regulations in light of the tragic
Deepwater Horizon incident we laid out the context within which the Bureau is
operating, but we look forward to discussing your concerns.
4. With respect to the six month time frame analyzed, our objective was to examine the
pace of recovery and the resulting impacts rather than to form judgments as to the cause
of delays in returning the Gulf of Mexico to healthy levels of activity.
5. It seems that there are differences between the set of plans and permits we used in our
analysis versus those included in the figures you mentioned in your letter to me. We set
out to examine drilling activities and included any that pertained to actual wells. In
some cases, these referred to sidetracks and well modifications and, in others, to new
wells. We eliminated duplicate records and matched the data against wells that were
actually drilled (as recorded in IHS databases) in order to ensure the most complete
possible analysis of plan and permit activity. During the upcoming briefing we will be
pleased to explain the steps we undertook and help clarify any differences between our
respective analyses of your publicly available database.
6. I am not sure of the vintage of any pre-release drafts you may have reviewed regarding
plans for future licensing rounds and so cannot comment on specific content. But please
do know that we have made consistent use of BOEMRE’s website and data resources
throughout the study program. As you mention in your letter, the final report correctly
noted the licensing rounds you have planned.
We look forward to the briefing and helping to contribute to the constructive dialogue that we
hoped would result following release of our study.
With kind regards and best wishes.
Yours sincerely,
Dr. Daniel Yergin