US Interior Dept. Approves New Shallow-Water GOM Well

WASHINGTON (Dow Jones Newswires), July 19, 2010

The Obama administration has approved a permit to drill a new well in the shallow waters of the Gulf of Mexico, the first such clearance since new safety regulations were put in place following the BP disaster.

The permit, granted to Apache Corp., in Houston, comes amid high-level talks between the Interior Department and shallow-water drilling executives on developing a format that can be used to win approval for new permits. Since issuing new shallow-water drilling safety regulations in early June, the Interior Department hadn't approved any permits for new wells.

"I'm not sure it's a turning point, but I'm optimistic," said Randy Stilley, the chief executive of Seahawk Drilling, in an interview. He said that drilling executives were in Washington, D.C., meeting on Monday with a top Interior official on creating a "template" to use in future applications.

The developments could help ease political tension that had been building between the Obama administration and the industry. The Obama administration has been facing a backlash in the Gulf Coast over a loss of rig jobs that industry executives and political leaders blame on what they called a de facto moratorium on new oil and gas wells in waters shallower than 500 feet.

Apache began drilling operations on Sunday on a gas well in about 50 feet of water, a company spokesman said. Apache is using a rig from Ensco. The well is off the Texas Coast.

The approval was issued amid high-level talks between shallow-water drilling executives and Interior Department officials. On Monday, Michael Bromwich, head of the Interior's new Bureau of Ocean Energy Management, and permit reviewers from the Interior Department met with drilling executives following a similar meeting last week in which Sen. Mary Landrieu (D, La.) participated.

The sticking point has been confusion about how to meet newly mandated environmental reviews that require an analysis of risks and worst-case scenarios. Drillers have said that complying with the regulations is difficult because Interior hasn't been clear about what information it seeks.

The agency "will continue to work with the shallow-water drillers to provide them guidance," an Interior spokeswoman said in a statement. "BOEM met with them on Friday and again today and will continue to have a working dialogue."

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