June 25, 2010 / 9:43 PM / in 9 years

SCENARIOS-Tighter regulations to follow Gulf oil spill

WASHINGTON, June 25 (Reuters) - With oil still flowing into the Gulf of Mexico, the U.S. government is set to flood the offshore drilling industry with new laws and regulations.

Following dozens of hearings and heated political rhetoric, several key Congressional panels will begin considering and voting on legislation crafted in response the biggest oil spill in U.S. history next week.

The Obama administration has vowed to move forward with aggressive regulations for oil and natural gas companies operating in federal waters, despite a federal court’s ruling overturning its six-month moratorium on deepwater drilling.

Ultimately, the oil disaster is almost certain to reshape the role government plays in overseeing oil and natural gas exploration and production off the U.S. coastlines.

Following is a look at some of the possible actions and new laws and regulations that may result from the spill.


Lawmakers in both chambers have begun working on legislation to crack down on the offshore drilling sector in the wake of the Gulf spill.

The Senate Energy and Natural Resources Committee on Wednesday will vote on several bills relating to the spill, including measures that would increase financial requirements for drillers and raise civil and criminal penalties for rule violators.

The committee is also considering measures that would require that the Interior Department ensure any companies bidding on new leases have met all safety requirements for their existing operations and have complied with any obligations for damages in prior accidents.

This measure, in particular, could affect those companies involved in the Deepwater Horizon rig spill.

Also on Wednesday, the House Natural Resources Committee will hold a hearing on expansive energy legislation that would eliminate any environmental review exemptions for offshore projects and require drillers to have technology demonstrated to be able to handle oil spills.

Lawmakers are still debating how much to raise the amount of money BP (BP.L) would be required to dole out for economic losses caused by the spill from the current cap of $75 million. Some lawmakers have called for a $10 billion cap, while others have said there should be no cap on damages companies face.

While it is unclear exactly how much the cap will be lifted, it is almost certain that BP and other oil companies drilling offshore will be responsible for covering much more than $75 million in economic losses in the future.


Despite a federal court’s decision this week to block the the government’s drilling ban, Interior Secretary Ken Salazar has pledged to issue an order for a new moratorium.

Although the department has been scant on details, Salazar signalled this week that the new ban may be more targeted and would include criteria for ending the moratorium. [ID:nN23116856]

Any drilling ban will likely face additional legal challenges.

Politically the Obama administration will be under intense pressure from Gulf state lawmakers to shorten or weaken the ban, which they say could cost their region hundreds of thousands of jobs.

Even if the ban is lifted, any new drilling will be done under intense scrutiny and with extensive technological and environmental requirements.

The department has already issued new safety rules for projects operating in shallow waters, in addition to mandating more detailed blowout prevention and response plans.


Depending on the outcome of federal investigations, BP and other companies involved in the Gulf oil spill could face criminal prosecution.

The U.S. Justice Department announced early this month that it has launched a criminal and civil investigation into the environmental catastrophe.

In a worst-case scenario, criminal charges could lead the Interior Department to limit BP’s offshore drilling activities.

The department could strip BP of its ability to operate its offshore oil fields or suspend its leases, but those moves would have to be balanced against U.S. energy needs.

The government also has an interest in not completely crippling BP’s U.S. energy business, because it wants the company to pay billions of dollars in damages and clean up. (Reporting by Ayesha Rascoe; Editing by Lisa Shumaker)

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