Drilling Ban Lifted; Uncertainties Still Face Gulf

Daily News Article   —   Posted on October 13, 2010

(by Matthew Daly, YahooNews.com) AP, Washington – [The Obama administration Tuesday lifted its controversial moratorium on deepwater oil drilling in the Gulf of Mexico, but said it could take weeks for companies to win regulatory approval to go back to work there.]

… Thirty-three deep water operations were halted by the moratorium imposed as the BP oil disaster unfolded. Meeting new federal safety requirements imposed since then will take time for oil companies.

“Those big rigs that left the Gulf, it’s going to take them a while to come back,” said Ronnie Kennier, an Empire, La., fisherman working in BP’s vessel of opportunity oil clean-up program.

With elections nearing, and under heavy pressure from the oil industry and Gulf states the Obama administration lifted the moratorium that it imposed in April. The ban had been scheduled to expire Nov. 30, but Interior Secretary Ken Salazar moved up the deadline, saying new rules have strengthened safety and reduced the risk of another catastrophic blowout that caused more than 200 million gallons of crude to spew from BP’s well a mile beneath the Gulf.

A federal report said the prohibition likely caused a temporary loss of 8,000 to 12,000 jobs in the Gulf region and drilling is unlikely to resume for at least a few weeks.

Todd Hornbeck, CEO of Covington, La.-based Hornbeck Offshore Services, said lifting the ban would still 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 one of the companies that sued to block Interior’s initial moratorium. His company provides vessels and other services for the offshore industry.

“Right now, I’m skeptical that it will be anytime soon that permits will be issued even if the moratorium is lifted,” he said.

On the Gulf, oil stands with fishing and tourism as economic linchpins. All three were hit hard by the spill that began when the oil rig Deepwater Horizon exploded on April 20, killing 11 workers about 50 miles off the Gulf Coast. It took three months to cap the well that was finally killed last month. Fishing was severely curtailed, tourists stayed away and the safety of the oil industry was assailed.

“When you took oil away, you pretty much took all the jobs away, you slow down the whole place,” said Acy Cooper, a shrimper in Venice, La.

He said fishermen, too, often depend on oil-field jobs to make ends meet. “In the winter time, fishermen go into the oil field.”

With BP facing massive fines, he said he felt comfortable that other drillers will be more careful. BP killed the well last month and expects to eventually pay at least $32 billion to handle cleanup and damage claims.

“The rest of them don’t want to go through that,” he said. “They learned their lesson.”

Republican Louisiana Gov. Bobby Jindal said he was “glad they are beginning to reverse this job-killing policy.”

Though the administration’s policy only addressed deep water operations, “severe bottlenecks in the federal permit review process have resulted in a de facto moratorium for shallow water drilling,” he said.

Jindal said since early June, only 12 new permits have been issued for shallow water wells, compared to the pre-deepwater-moratorium average of 10 to 14 a month.

The administration’s decision comes 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. …..

Drillers aren’t the only companies affected. Caterers feed workers on drilling rigs, helicopters ferry them often hundreds of miles into the Gulf and shipping companies haul equipment and provisions to the rigs.

Salazar said he knows that some people will say the new rules are onerous. “Others will say that we are lifting the deep water drilling suspension too soon. They will say there are still risks involved with deep water drilling,” he said.

Salazar emphasized the move would include new requirements for those seeking to drill exploratory wells. Those entities and the companies they represent will have to prove they have the appropriate steps in place to contain a worst-case scenario spill. …..

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

Associated Press writers Dina Cappiello and Julie Pace in Washington, Michael Kunzelman, Kevin McGill, Cain Burdeau and Mary Foster in New Orleans contributed to this story.

Copyright ©2010 The Associated Press. All rights reserved. Reprinted here for educational purposes only. The information contained in this AP News report may not be published, broadcast, rewritten, or redistributed without the prior written authority of The Associated Press. Visit news.yahoo.com/s/ap/us_gulf_oil_spill_drilling_moratorium for the original post.

Background

ON ENDING THE DRILLING MORATORIUM: (from wsj.com)

• In ending the moratorium Tuesday, Interior Secretary Ken Salazar said rig operators must demonstrate they can comply with a lengthy list of new safety regulations designed to prevent a repeat of BP's Deepwater Horizon disaster.
• Industry executives said they were concerned about how long federal officials will take to vet [evaluate] new permits, and how much complying with the new rules will cost. Some said smaller operators could get pushed out of the Gulf by steeper safety costs.
• "It doesn't matter if they lift the ban if the wells can't get [permits] - and right now the guidelines are still vague, and the Bureau of Ocean Energy Management is too understaffed to process permits in a timely manner," said Kerry Chauvin, chief executive of Gulf Island Fabrications Inc. of Houma, La., a builder of massive steel platforms used in developmental oil and gas wells.
• Gulf Island has laid off 500 workers this year, about one-third of its work force. But Mr. Chauvin said he's worried about the effect a moratorium and a slow permitting process will have on his business several years down the road.