New consortium seeks to simplify biofuel certification standards

Boeing and a Swiss group on Mar. 22 launched the Sustainable Biomass Consortium, a research initiative seeking to help develop and simplify biofuel certification standards. The Swiss group, Ecole Polytechnique Federale de Lausanne (EPFL) recently created the Roundtable on Sustainable Biofuels.

The consortium plans to use the roundtable’s sustainability standard to set regional benchmarks based on aviation biofuel projects. Various airlines already have tested biofuels. The consortium plans to work with groups implementing voluntary standards or regulatory requirements for biomass used in jet fuel.

Research projects will commence in April, and the anticipated work during the next 2 years will include projects in China, Africa, the European Union, Latin America, North America, and the Asia-Pacific region.

Billy Glover, vice-president of environmental and aviation policy for Boeing Commercial Airplanes, said the aviation industry needs sustainable biofuel development.

“This consortium will help ensure we have a transparent way to collaborate among certification processes that guide us towards a more sustainable future,” Glover said.

Sustainable biofuel development is a key element of the aviation industry’s strategy to lower its carbon emissions, he added. Meanwhile, unrest in the Middle East has driven up jet fuel prices, emphasizing the importance of alternate fuel sources.

Exxon’s Tillerson disputes comment by BP’s Dudley

Tension continues to surface regarding the Macondo well blowout and Gulf of Mexico oil spill nearly 1 year ago. ExxonMobil Corp. Chief Executive Rex Tillerson criticized comments made by BP PLC’s Chief Executive Bob Dudly at the IHS-CERA energy conference.

On Mar. 8 in Houston, Dudley said industry can learn from safety issues identified since the Apr. 20, 2010, Macondo well control incident in 5,000 ft of water off Louisiana. The blowout caused an explosion that killed 11 people aboard Transocean Ltd.’s Deepwater Horizon semisubmersible drilling rig.

During a separate Mar. 9 news conference, Tillerson said the accident and spill primarily stemmed from management oversights by BP. Tillerson met with reporters following Exxon’s analyst meeting in New York.

“I think those comments are a great disservice to this industry,” Tillerson said of Dudley’s remarks. “This conclusion that this is a bigger problem for the industry is just wrong.”

Top executives of major oil companies rarely express negative comments about one another, but Tillerson openly disputed Dudley’s comments.

“I think the industry manages this risk well. When you do things the proper way, these things don’t happen,” Tillerson said. He believes Exxon manages risk well, relying on a system it developed after the Exxon Valdez tanker spill in Alaska’s Prince William Sound.

Tillerson’s unhappiness with his BP counterpart's industry remarks is an unusual demonstration of tension between oil companies.

FBR Capital: “No cookie-cutter process” for offshore drilling permits

Analysts are cautious about the pace that the US government might take in issuing deepwater drilling permits.

The Bureau of Ocean Energy Management, Regulation, and Enforcement approved the first Application for Permit to Drill (APD) for the deepwater Gulf of Mexico since the Macondo well blowout in April 2010 and the resulting oil spill.

“BOEMRE’s case-by-case evaluation of spill containment resources will not produce a cookie-cutter process for APD approvals, which are site specific and may require additional resources from operators,” FBR Capital Markets analyst Benjamin Salisbury said in a recent research note.

He believes the resumption of deepwater permitting “marks the beginning of a long period of slow approvals.” This is because BOEMRE significantly increased the volume of work involved in its review, verification, and approval of each permit application.

BOEMRE Director Michael Bromwich wrote an opinion article for the Houston Chronicle in which he said: “We need to ensure that our new drilling safety rules are fully complied with; we need to review certifications by professional engineers of every stage of the drilling process; and in many cases, we need to conduct more detailed environmental reviews. All of these steps are necessary and appropriate, but they extend the time needed to approve permits.”

RFF suggests putting deepwater risks in context

Resources for the Future, an independent economic research group, suggests that neither government or the oil and gas industry yet has adjusted to the high-risk context of deepwater operations. RAF recommends setting liability caps for individual wells at a level reflecting damages from worst-case spill scenarios.

Lynn Scarlett, RFF visiting scholar and former deputy secretary of the interior, made this comment during a Feb. 15 luncheon symposium hosted by ConocoPhillips at its Houston headquarters.

“One might argue it is rocket science,” Scarlett said of regulating drilling and production activities in the deepwater Gulf of Mexico. “No project is business as usual.”

RFF recommends that third-party insurance should be researched as a possible way to strengthen external monitoring of deepwater oil and gas operations. If insurance pools are used to assist smaller firms, fees should be related to risk, Scarlett said.

She said both government and the private sector lacked capacity and practices for performing adequate risk assessments.

‘You just don’t know what you don’t know,” Scarlett said, adding that risk assessment capacity and practices will be a key issue for both industry and regulators going forward after the April 2010 Macondo well blowout and resulting massive oil spill in the gulf.