March 3, 2011 / 12:32 AM / 9 years ago

Interior department says more deepwater permits coming

WASHINGTON (Reuters) - The door could now be open for a “significant” number of new offshore drilling permits, Interior Secretary Ken Salazar said on Wednesday, as the administration comes under increased pressure to tackle surging world oil prices.

The Interior department on Monday issued a permit for a deepwater well co-owned by Noble Energy Inc and BP, the first such permit since a rig explosion unleashed millions of barrels of oil from BP’s Macondo well into the Gulf of Mexico last year.

“There are other deepwater permits that are pending and the ones that will go out the door will hopefully be the templates that will allow us to move forward with an additional, significant number of deepwater permits,” Salazar told a Senate Energy and Natural Resources committee hearing.

After the BP oil spill, the department imposed a temporary ban on exploratory drilling at depths of more than 500 feet. While the moratorium was lifted last October, no new deepwater permits were issued until this week.

The department has faced intense criticism, as well as legal action, over the slow pace of permitting.

Still, Salazar warned that if his department does not receive the funding it has requested permitting may not speed up as much as industry would like.

“If we don’t get the horsepower to be able to process permits under what is now a greater degree of scrutiny, we may never return to the pre-Macondo rate of permitting,” Salazar said after the hearing.

Last month, a federal judge gave the department 30 days to decide whether to approve five other pending permits to drill in the deep waters of the Gulf of Mexico.

Although Salazar said he believes the ruling inappropriately impedes on his administrative authority, the department plans to comply with this order.

Republican lawmakers have sharply criticized the slow approvals, saying it will leave the country more vulnerable to oil price shocks down the road. Lawmakers from both parties have also been asking for a release of oil from the 727-million-barrel Strategic Petroleum Reserve.

Jeff Bingaman, the chairman of the Senate Energy and Natural Resources Committee, called on the Obama administration on Wednesday to be ready to release oil from the Strategic Petroleum Reserve if conditions in Libya deteriorate further.

U.S. oil prices on Wednesday settled at $102.23 a barrel, rising above $100 a barrel for the first time since September 2008 over concerns that the strife in Libya could cut off that country’s oil exports and unrest was spreading to other countries in the Middle East.

U.S. retail gasoline prices soared nearly 20 cents a gallon since last week, the second biggest weekly rise in pump prices ever recorded by the government.

“While I do not think that high oil prices alone are a sufficient justification for tapping the SPR, I do believe that the announcement of an SPR sale would help to moderate escalating prices,” Bingman said on the Senate floor.

Energy Secretary Steven Chu on Wednesday ruled out tapping America’s emergency stockpile to help bring down prices, saying ramped up oil production in other nations, most notably Saudi Arabia, should cool crude costs.

“That’s going to mitigate the price increase,” he told reporters on Capitol Hill. “We’re hoping market forces will take care of this.”

When asked how high prices would have to go before the Strategic Petroleum Reserve is tapped, Chu indicated the Obama administration does not have a predetermined price.

“I think in the history of the United States’ SPR there’s never been a predetermined amount,” he said.

Chu rejected the notion that expanding offshore exploration would help bring down prices in the near term, noting it would take five to 10 years to bring the oil to the market.

Secretary Salazar agreed. “We do not produce enough oil in this country to influence price of oil because it’s set in world markets,” he told the separate Senate hearing.

Additional reporting by Tom Doggett; Graphic by Emily Stephenson; Editing by Dale Hudson, Russell Blinch, Sofina Mirza-Reid and Jim Marshall

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