* Obama to get Interior Dept oil spill report Thursday
* Ultra deep Gulf waters provided 9 pct U.S. oil output (Adds official saying final decision not yet been made)
By Tom Doggett
WASHINGTON, May 26 (Reuters) - U.S. President Barack Obama is expected to announce on Thursday that he will continue to hold off issuing deep water drilling permits off the Gulf of Mexico, but allow permits to be issued for shallow water drilling, a government source told Reuters.
In response to the growing oil spill caused by last month’s explosion of the Deepwater Horizon drilling rig leased by BP (BP.L), Obama halted all new drilling permits until Interior Secretary Ken Salazar conducted a 30-day review of the accident.
After Salazar delivers his report to Obama at the White House on Thursday, the president will lift the temporary ban on new permits for oil companies that want to drill in shallow waters, but keep it in place for drilling in deep waters, said the government source, who declined to be identified.
An administration official said later that internal deliberations were continuing and a final decision on the drilling permits had not yet been made. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ FACTBOX - Major Gulf producers’ drilling plans [ID:nN26233961] TAKE A LOOK-Gulf of Mexico oil spill [ID:nSPILL] ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>
Representative Nick Rahall, chairman of the House Natural Resources Committee, said earlier on Wednesday that he hoped Salazar’s report would recommend allowing new drilling to resume in shallow waters, while the permit ban continued for new operations in the deep Gulf waters.
The Gulf of Mexico accounted for about 29 percent of U.S. crude oil production and 11 percent of its natural gas output last year, according to the U.S. Energy Department.
About 9 percent of America’s total oil production came from ultra deep Gulf wells, which are at water depths of more than 5,000 feet (1.5 km). About 3 percent of U.S. gas output came from the ultra deep region, the department said.
Salazar’s report will also include recommendations on how to improve offshore drilling safety regulations.
The report could also recommend whether the department should go ahead with its next lease sale in the western Gulf of Mexico scheduled for Aug. 18, or maybe remove any deepwater drilling tracts. Salazar said last week the department was considering if it should continue.
The original 18.8 million offshore acres that would be offered to oil companies could produce between 242 million and 423 million barrels of crude oil, according to the Interior Department. (Additional reporting by Steve Holland; Editing by Lisa Shumaker, Bernard Orr)