Salazar: Won't Bow to Political Pressure to Restart Gulf Deepwater Drilling

HOUSTON (Dow Jones Newswires), Feb. 25, 2011

Interior Secretary Ken Salazar said that U.S. regulators would not bow to political pressure to restart deepwater drilling in the Gulf of Mexico before they are certain the oil-and-gas industry is capable of containing an oil spill like the one that followed last BP's Deepwater Horizon disaster.

Salazar and Michael Bromwich--the head of the U.S. Bureau of Ocean Energy Management, Regulation and Enforcement, which oversees offshore drilling--were in Houston Friday to meet with oil industry executives to assess the spill-containment systems they have developed in the wake of nation's worst-ever marine oil spill.

Bromwich said he was "quite confident that we are getting very close to the point where we can begin issuing deepwater permits." But he and Salazar said the industry still has work to do before exploration of the Gulf's deepest waters can resume.

The U.S. government shut down deepwater drilling shortly after the Deepwater Horizon exploded on April 20, killing 11 and unleashing a catastrophic oil spill.

The government's official ban was lifted in October, but regulators have yet to allow drilling to resume in water deeper than 500 feet despite mounting political pressure from congressional Republicans and Gulf Coast Democrats to reopen one of the nation's primary energy fields.

"We don't respond to political pressure," Salazar said. "We are frankly doing what's right for America's energy program."

Both Helix Energy Solutions Group, whose system helped stem the flow of BP's runaway well last summer, and the nonprofit Marine Well Containment Co., formed by a consortium of major oil companies, say their systems are ready to respond to spills on par with Deepwater Horizon. But the nation's top energy regulators said that they felt differently.

"These containment systems are work in progress," Salazar told reporters after the meetings. "Both systems currently have limitations on water depth and barrel-per-day containment capability."

The Marine Well Containment Co. was formed by Exxon Mobil, Chevron, ConocoPhillips and Shell last July. The consortium said last week that its containment system was ready for deployment and could respond within 24 hours of an offshore spill and capture up to 60,000 barrels of oil per day at depths up to 8,000 feet.

The Helix system is capable of capturing oil at depths up to 5,600 feet, and the company said it hopes to extend that reach to 8,000 feet by late March. The Houston company said last month that it has signed an agreement with nonprofit spill-response consortium Clean Gulf Associates to make its containment system available for two years to the group's members in exchange for a retainer fee. Helix also said it has day-rate agreements with 19 of the group's member companies.

While the containment systems are aimed at stopping gushing wells up to 8,000 feet below the surface, drillers have gone on a buying binge in recent months, ordering rigs that can drill at depths of 10,000 feet and 12,000 feet--twice the depth at which the Deepwater Horizon was drilling when it exploded.

Since the end of September, seven companies have ordered 11 so-called ultra-deepwater rigs. Along with those firm orders, eight companies have disclosed options for 14 more such vessels.

So far five applications for deepwater drilling permits have been filed. Bromwich offered no prediction of when any permits might be issued, but he indicated that wells planned for depths within reach of the containment systems may soon be allowed.

A federal judge in New Orleans last week ordered Salazar's department to decide within 30 days whether to grant permits for those projects. In his ruling, part of a suit brought by London-based driller Ensco PLC ADS (ESV), U.S. District Judge Martin Feldman said that the administration's inaction is "increasingly inexcusable."

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