Back in business: US lifts deep water drilling ban

[October 13, 2010]  WASHINGTON (AP) -- The U.S. is back in the deep water oil-drilling business. The question now is when work will resume.

The Obama administration, under heavy pressure from the oil industry and Gulf states and with elections nearing, lifted the moratorium that it imposed last April in the wake of the disastrous BP oil spill.

The ban had been scheduled to expire Nov. 30, but Interior Secretary Ken Salazar said Tuesday he was moving up the date because new rules imposed after the spill had reduced the risk of another catastrophic blowout. Industry leaders warily waited for details of those rules, saying the moratorium wouldn't be truly lifted until then.

"The policy position that we are articulating today is that we are open for business," Salazar declared.

The reality is more complicated. While the temporary ban on exploratory oil and gas drilling is lifted immediately, drilling is unlikely to resume for several weeks at least as oil and gas companies struggle to meet a host of new safety regulations. For example, the CEO of a company responsible for a well would have to certify it had complied with all regulations. That could make the person at the top liable for any future accidents.

"Operators who play by the rules and clear the higher bar can be allowed to resume," Salazar said.

The April 20 BP spill, which was triggered by an explosion that killed 11 people, gushed an estimated 200 million gallons of oil, harming wildlife and severely cramping coastal businesses. BP sealed the well last month and expects to eventually pay at least $32 billion to handle the cleanup and damage claims.

News that the moratorium -- much-despised along the Gulf Coast -- was being lifted came as a federal judge weighed a drilling company's bid to overturn it.

The action also came just weeks before midterm elections in which Democrats face widespread criticism for overextending government actions on the economy, including the health care overhaul, the economic stimulus plan and the drilling moratorium. A federal report said the moratorium probably caused a temporary loss of 8,000 to 12,000 jobs in the Gulf region.

White House spokesman Robert Gibbs denied that pressure from the oil industry or anyone else played a role in the decision to lift the moratorium ahead of schedule. It was, he said, "part of a very deliberative policy process ... that got done more quickly than the original timeline."

Salazar said he knew that some drilling supporters would say the new rules are too onerous, while critics would say risks remain in deep water drilling. The truth is, there will always be such risks, Salazar said, but "as we transition to a clean energy economy, we will still need oil and gas from the Gulf of Mexico to power our homes, our cars, our industry."

Rep. Charlie Melancon, D-La., called the end of the drilling ban great news for Louisiana's economy and workers, while Sen. David Vitter, R-La., contended there would be a "continuing de facto moratorium" on drilling that could extend for months or years. Melancon is challenging Vitter for his Senate seat next month.

Louisiana Sen. Mary Landrieu, a Democrat, applauded the decision to lift the ban but said she would not release her hold on Jacob Lew, President Barack Obama's choice to head the Office of Management and Budget. Landrieu has blocked a Senate vote on Lew, in part, to protest the moratorium.

Clint Guidry, a shrimper in Lafitte, La., said getting the oil industry cranked up should be a top priority.

"This country runs on oil," he said. "People need to get back to work, the country needs oil. There are a lot of people who think we shouldn't be drilling. I agree if we had something to replace it, but we don't."

The White House expressed disappointment. Officials continue to believe her actions are "outrageous" and "unwarranted," Gibbs said.

Salazar emphasized that companies seeking to drill exploratory wells will have to prove they have the appropriate steps in place to contain a worst-case accident.

The new rules include many recommendations made in a report Salazar released in May, including requirements that rigs certify that they have working blowout preventers and standards for cementing wells. The cement process and blowout preventer both failed to work as expected in the BP accident.

Under the new rules, a professional engineer must independently inspect and certify each stage of the drilling process. Blowout preventers -- the emergency cutoff equipment designed to contain a major spill -- must be independently certified and capable of severing the drill pipe under severe pressure.

Todd Hornbeck, CEO of Covington, La.-based Hornbeck Offshore Services, said lifting the moratorium would leave the industry in a "de facto moratorium stage" until the government fully explains how new drilling permits will be issued.

"We're still in the dark," said Hornbeck, who heads up one of the companies that sued to block Interior's initial moratorium. His company provides vessels and other services for the offshore industry.

Louisiana Gov. Bobby Jindal, a Republican and fierce opponent of the drilling ban, called the announcement good news, but added: "The devil is always in the details."

He said he will watch closely to see if new drilling permits are issued promptly.

Industry groups expressed similar skepticism. Both the American Petroleum Institute and the National Ocean Industries Association said they were concerned that a "de facto moratorium" would replace the one the administration lifted Tuesday.

Dan Favre, campaign organizer for the Gulf Restoration Network, a Louisiana-based environmental group, said the decision to lift the moratorium put the region at risk.

"The Gulf and our communities have a long road to recovery from the BP disaster," he said. Local fishermen are still out of work, effects on wildlife have not been fully assessed and long-term work is needed to ensure ecological and economic recovery, he added. "We certainly can't afford another oil catastrophe."

Ensco Offshore, which owns and operates offshore drilling rigs, asked a federal judge last month to overturn the moratorium. U.S. District Judge Martin Feldman set a Tuesday deadline for legal briefs in the case, but has not said when he would rule.

[Associated Press; By MATTHEW DALY]

Associated Press writers Dina Cappiello, Julie Pace and Darlene Superville in Washington, and Michael Kunzelman, Kevin McGill and Mary Foster in New Orleans contributed to this report.

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