UPDATE 2-New U.S. oil drilling pause to end Nov. 30

Mon Jul 12, 2010 7:41pm EDT

* Revised plan to allow shallow water drilling

* Plan to leave door open to earlier end of deepwater ban

(Updates throughout)

By Richard Cowan and Tom Doggett

WASHINGTON, July 12 (Reuters) - President Barack Obama's administration issued a new six-month moratorium on deepwater oil drilling in the Gulf of Mexico, replacing an earlier ban that had been struck down by U.S. courts as being too broad.

Interior Department Secretary Ken Salazar announced the new drilling ban that will suspend most deepwater activities, just as the initial plan intended.

The oil industry, caught in a legal tug-of-war, and will have to keep its rigs idled in the Gulf of Mexico because of the moratorium which followed the April 20 rig explosion that ruptured an undersea oil well owned by BP Plc (BP.L)(BP.N) and caused the worst oil spill in U.S. history.

The government's original drilling ban shut down 21 rigs and the same rigs will not be able to operate under the revised moratorium.

In an attempt to avoid additional legal challenges, the agency also said that the new drilling ban will be based on the type of equipment being used and not solely the depth of the water, as in the first moratorium.

"More than eighty days into the BP oil spill, a pause on deepwater drilling is essential and appropriate to protect communities, coasts, and wildlife from the risks that deepwater drilling currently pose," said Interior Secretary Ken Salazar.

Salazar said the industry could not deal with another spill because most of the clean-up equipment is being used in BP's massive spill.

Under the agency's revised plan, oil drilling in shallow waters can continue if companies are in compliance with new safety and environmental rules. Existing deepwater offshore platforms producing oil and gas are not affected by the new order.

The Obama administration may have another tough legal battle with the energy companies that have sued to get the original drilling suspension lifted.

"The arguments for a moratorium on deepwater drilling are compelling in the wake of the Gulf tragedy, but the government faces an uphill battle convincing a skeptical federal district court that the new suspension does not simply repackage the moratorium that the court already struck down," said David Uhlmann, a professor at the University of Michigan Law School.

PRAISE AND CRITICISM

Tim Evans, an analyst with Citi Futures, New York, said the new moratorium "may only tweak the terms of the original" and that the Nov. 30 end-date could be subject to revisions.

The American Petroleum Institute slammed the new plan as "unnecessary and shortsighted."

Democratic Representative Edward Markey, who chairs two U.S. congressional panels overseeing energy and the environment, said the new plan "will reduce oil spill risk while the Gulf will continue to produce oil." He said 97 percent of the rigs in the Gulf will still be allowed to work.

Republicans and some Democrats sharpened their attack on the White House.

"The administration has put the jobs of thousands of Americans at risk, causing severe economic hardship to Gulf residents, while doing nothing to improve the safety of offshore drilling," said Robert Dillon, spokesman for Senator Lisa Murkowski, the senior Republican on the Senate Energy and Natural Resources Committee.

Democratic Senator Mary Landrieu of Louisiana, a state most threatened by the disaster so far, urged an independent commission looking into the oil spill to immediately lift the moratorium, saying the administration has ignored "a long history of oil and gas operations in the Gulf."

On top of halting any new exploratory drilling, the government ban forced companies including Petrobras (PETR4.SA) and Eni EN.MI to halt development work on oilfields near completion. That delayed an estimated 70,000 barrels per day of new oil production, or about 25 million barrels total, due to have come onstream next year, according to the U.S. Energy Department.

For a factbox on firms holding leases for 33 rigs halted by the original moratorium, click on [ID:nN02184586]. For Gulf projects hit by the moratorium, click on [ID:nN16151944] For Gulf of Mexico rig contractors and operators, click on [ID:nN20182158] (Additional reporting by Jeremy Pelofsky)

Related Quotes and News

Company
Price
Related News
Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.