The Obama administration yesterday released the final version of a rule designed to prevent a repeat of the Deepwater Horizon disaster that claimed the lives of 11 men and spilled nearly 5 million barrels of oil into the Gulf of Mexico.

The drilling safety rule, which offers tweaks to an interim rule established in October 2010, drew early criticism from environmentalists who argued it is still too weak to prevent future catastrophes. The American Petroleum Institute, the industry's main trade group, said it is still reviewing the proposal.

The 137-page rule sets in stone interim steps companies have largely followed since the Macondo well blowout to enhance well integrity, well control systems and blowout preventers.

The Interior Department estimated it will cost industry $131 million annually to comply with the final rule, which is $52 million less than the interim rule was estimated to cost. For example, the agency reduced by more than $80 million the estimated cost of testing remotely operated vehicles, which provided the video feeds of oil spewing from the BP PLC well.

"The administration's priority is continuing to expand offshore oil and gas development, while ensuring that drilling operations in our oceans continue to be the safest in the world," said James Watson, director of the Bureau of Safety and Environmental Enforcement. "This rule makes final important standards that were put in place shortly after the Deepwater Horizon oil spill and is based on input from stakeholders and recommendations from the numerous investigations related to that tragedy."

The rule finalizes new standards for well casing and cementing, including integrity testing requirements and third-party verification of blowout preventers (BOPs), which are the last line of defense against a runaway well.

It also finalizes requirements and function testing for subsea secondary BOP intervention along with documented inspections and maintenance for BOPs, and requires a professional engineer to certify casing and cementing requirements, among other steps.

The final rule eliminates language in the interim rule that operators "must" comply with a broad set of industry standards that are incorporated by reference in that interim rule. Industry had expressed concerns that mandatory compliance with the safety steps could actually reduce safety and in some cases would be impossible to meet.

For example, industry warned there are 14,000 instances of the word "should" just in documents incorporated from API on which much of the final rule is based.

"These commenters provided a number of examples in which they asserted that the [rule] could cause conflicts; undermine safety, instead of improving safety on the Outer Continental Shelf; and, in certain circumstances, establish requirements with which compliance may be impossible," the final rule states.

Randall Luthi, president of the National Ocean Industries Association, said the change appears to have addressed one of the group's major concerns.

"There is no doubt that it is everyone's goal to maintain and enhance a safe environment -- not only for drilling but at every step of the exploration and development process for home-grown energy," he said, adding that the association is still reviewing the rule.

Other changes from the interim rule include the description and classification of well control barriers, the definition of testing requirements for cement, and clarification of requirements for the installation of dual mechanical barriers. It also extended the requirements for BOPs and well control fluids to well completions, workovers and decommissioning operations.

In addition, the final drilling safety rule will include guidance for agency inspectors and investigators on when and how incidents of noncompliance (INC) reports are issued, Watson said yesterday during a speech in New Orleans (EnergyWire, Aug. 16).

The INC reports are issued when offshore oil and gas companies ignore or violate regulations, contributing to a serious incident.

"We've never actually put into writing any sort of policy document that will guide our inspectors and our engineers and our district managers in any kind of application of the intent that was put into place well over a year ago now," he said.

Watson stressed that industry has been operating successfully under most of the rules for nearly two years and that, during that time, BSEE has approved more than 750 drilling permits for shallow-water and deepwater activities in the Gulf.

While the White House has deemed the rule "significant," the estimated savings from avoiding future oil spills are expected to far outweigh the cost of compliance, the administration said.

"The quantification of benefits is uncertain, but is estimated to be represented by the avoided costs of a catastrophic spill, which are estimated under the stipulated scenario as being $16.3 billion per spill avoided and annualized at $631 million per year," the rule states.

Still, stepped-up safety requirements in the years following the BP spill have been a political lightning rod on Capitol Hill, where some lawmakers have lambasted the administration's permitting speed. Tempers have cooled considerably over the past several months, though some groups argue that regulatory uncertainty continues to chill investments in the Gulf (Greenwire, May 30).

Reid Porter, a spokesman for API, said the group was still reviewing the final rule and is hopeful the agency took steps to ensure clarity for the industry.

"Our number one priority is safety," he said in an emailed statement. "Safe, responsible development of our offshore oil and natural gas is critical for U.S. energy security, and it provides U.S. families and businesses with affordable and reliable energy for our future."

But Jacqueline Savitz, senior campaign director at Oceana, said the new rule is window dressing that fails to address significant risks of offshore drilling, particularly in deeper Gulf waters.

"When you consider the limited inspection capacity, the lack of meaningful penalties and the oil industry's high-risk culture, it's not even clear that the rule will be followed by many in the industry," she said in an email. "Even if it is followed, it doesn't have meaningful requirements to prevent a major spill."

The final rule stemmed from recommendations in a safety measures report Interior submitted to the president in the month following the spill and a joint investigative report by Interior and the Coast Guard released last September.

The joint investigative team report blamed much of the disaster on poor management decisions by BP and said the immediate cause of the blowout that sparked the nation's worst oil spill was the failure of a cement seal set the day before the explosion (Greenwire, Sept. 14, 2011).

But the disaster as a whole was "the result of poor risk management, last-minute changes to plans, failure to observe and respond to critical indicators, inadequate well-control response and insufficient emergency bridge response training by companies and individuals responsible for drilling at the Macondo well and for the operation of the Deepwater Horizon," the report says.

The 212-page report also made 40 recommended regulatory changes to improve the safety of offshore drilling operations. The recommendations cover well design, well integrity testing, kick detection and response, rig configuration, blowout preventers, and remotely operated vehicles.

The final rule becomes effective two months after it is published in the Federal Register.