Full environmental assessments will be required for all new deepwater drilling, the Interior Department announced today.

The move comes as a new federal report outlines flaws in the government's process in approving the well that caused the Gulf of Mexico oil spill.

The department will curtail the use of a provision it had been employing to streamline offshore drilling applications, including the BP PLC well. For deepwater drilling, the department will no longer use "categorical exclusions," which allowed it to approve projects without preparing new environmental analyses that would normally be required by the National Environmental Policy Act.

A new White House Council on Environmental Quality report says the categorical exclusions used to approve the BP plans were established in 1981 and 1986, long before deepwater drilling became widespread.

The decision also will affect new drilling closer to shore. All shallow-water plans will require a categorical-exclusion review to examine whether any factors would trigger an environmental assessment -- such as the use of unusual technology or a location near biologically sensitive areas -- and whether the plan's worst-case spill volume is greater than accounted for in oil spill response plans.

The policies will remain in effect while the department carries out a comprehensive review of its NEPA process and the use of categorical exclusions. It will affect deepwater drilling once the Obama administration's temporary moratorium is lifted, said Michael Bromwich, director of the new Bureau of Ocean Energy Management, Regulation and Enforcement.

Interior also will conduct a new environmental analysis in the Gulf of Mexico to guide future leasing decisions, officials announced.

"In light of the increasing levels of complexity and risk -- and the consequent potential environmental impacts -- associated with deepwater drilling, we are taking a fresh look at the NEPA process and the types of environmental reviews that should be required for offshore activity," Interior Secretary Ken Salazar said in a statement.

"Our decision-making must be fully informed by an understanding of the potential environmental consequences of federal actions permitting offshore oil and gas development," Salazar added.

The new agency, formerly known as the Minerals Management Service, in the coming days will publish a notice in the Federal Register of its intent to prepare the supplemental environmental impact statement for the Gulf.

The industry trade group American Petroleum Institute criticized the decision to restrict the use of categorical exclusions.

"We're concerned the change could add significantly to the department's workload, stretching the timeline for approval of important energy development projects with no clear return in environmental protection," API Upstream Director Erik Milito said in a statement. "Environmental review of offshore operations under existing rules is extensive, and decisions on categorical exclusions, which are intended to avoid repetitive analysis, require review."

House Natural Resources Chairman Nick Rahall (D-W.Va.) welcomed the move but called on Congress to approve the offshore drilling reform legislation he authored. The House-passed oil spill response bill prohibits the use of categorical exclusions for offshore drilling plans at all depths.

"Today's CEQ report highlights many of the problems plaguing the Interior Department's offshore oil and gas program," Rahall said. "I applaud Secretary Salazar for the steps he is taking, but permanent reform requires passage of my CLEAR Act, which would put the last nail in the coffin to the practice of allowing Big Oil to jam through offshore drilling projects with minimal review."

In May, the Obama administration announced it would re-evaluate environmental reviews for offshore drilling required under NEPA in the wake of the massive Gulf of Mexico oil spill (E&ENews PM, May 14).

Flaws in the approval of BP's well

The CEQ report, released today, shows that MMS failed to include needed analysis of worst-case oil spills and response plans when analyzing the environmental impacts of the BP well.

The 2007-2012 offshore drilling plan and its broad environmental impact statement "did not contain context or project magnitude for the effects on resources of a reasonably foreseeable spill," the report notes.

While the information was included in an EIS for the lease sales in the western and central Gulf area, which was approved at the regional level, all the documents concluded that oil from a spill would "weather" and degrade by the time it reached shore, and thus would have a "minimal" impact on the environment and wildlife.

The multi-sale EIS said there was a 69 to 86 percent chance of at least one or more offshore spills of greater than 1,000 barrels occurring for the leases in the central planning area over the 40-year life of the offshore program.

"In light of this probability, MMS described significant environmental impacts that were reasonably foreseeable, but generally determined that these impacts would not be catastrophic to the region, animal populations, and ecosystem," the report says.

The agency then relied on that EIS without providing additional details or analysis in the environmental assessment for the specific lease sale or for the categorical exclusions, the report says.

"MMS relied on mitigation measures to address environmental impacts at the programmatic level, while later not consistently referencing those mitigation obligations in its lease- and site-specific analyses," the report says. "This applies to the agency's analysis of a range of impacts, including those on tourism, recreation, fisheries, and endangered species."

The multi-sale EIS also did not include an analysis of a previous disaster, the Ixtoc I offshore well blowout in 1979 off the coast of Mexico that leaked 10,000 to 30,000 barrels of oil per day for nine months, as part of the spill probability analysis simply because it occurred outside U.S. waters.

CEQ made a series of recommendations for changes for environmental analyses of offshore projects. They include ensuring NEPA documents include an analysis of low-probability catastrophic spills, including site-specific information, deciding whether to revise categorical exclusions and eliminating the 30-day deadline for approving exploration plans.

Because of pending and future lawsuits on the Gulf spill, the CEQ report did not evaluate the "substantive adequacy" of any of the specific NEPA analyses or documents, it says.

Click here to read the CEQ report.

Click here to read Bromwich's memo.