UpdateLifting of US Gulf drilling ban hailed, but changes unlikely

22 June 2010 23:04  [Source: ICIS news]

Deepwater Horizon drillship(adds updates throughout)

WASHINGTON (ICIS news)--US energy industry officials on Tuesday welcomed the federal court ruling that blocked a White House moratorium on deepwater drilling in US waters of the Gulf of Mexico, but environmental groups said they would join the Obama administration in appealing the ruling.

In addition, energy industry analysts noted that even with the White House moratorium technically on hold, deepwater drilling in US waters of the Gulf was not likely to resume within six months, and uncertainty about long-term US policy toward offshore energy development could chill deepwater drilling indefinitely.

Earlier on Tuesday, Judge Martin Feldman ruled in the US District Court for Eastern Louisiana that the Interior Department’s 28 May declaration of a six-month moratorium for offshore drilling in Gulf waters deeper than 500 feet was “invalid, heavy-handed and overbearing”.

The suit challenging the department’s moratorium was brought by offshore energy service companies that faced business losses and perhaps closure due to the drilling ban.

The American Petroleum Institute (API) welcomed Judge Feldman’s ruling, saying that “an extended moratorium would have had a tremendous impact on the nation’s energy security”.

API said the moratorium also would have caused significant harm to the region of the country already suffering from the Gulf oil spill “without raising safety or improving industry procedures”.

The Independent Petroleum Association of America (IPAA) also hailed the Feldman ruling, saying the decision was “important for America’s independent oil and natural gas producers, for our nation’s energy security and for the Gulf Coast’s struggling economy”.

IPAA chairman Bruce Vincent said the moratorium was “a misguided, hastily implemented decision [that] fundamentally failed to recognize how critical America’s oil and natural gas industry is to the livelihoods of so many Gulf families”.

But the White House said it would appeal Judge Feldman’s ruling immediately, raising the possibility that Feldman’s ruling could be subject to a court-ordered stay or suspension pending a trial on the issues - which would mean the moratorium would be resumed while the two sides fight it out in what could be a lengthy trial.

The Center for Biological Diversity said that it and several other environmental groups also planned to challenge Judge Feldman’s ruling in court. “The ongoing BP catastrophe in the Gulf should be enough to justify putting an end to all new offshore drilling,” the centre said.

However, energy sector analysts noted on Tuesday that Judge Feldman’s ruling against the moratorium did not mean that drilling in Gulf deep waters could or would resume.

The Institute for Energy Research (IER) said that invalidation of the department’s moratorium “will amount to little more than a morale boost to the hardworking men and women along the Gulf who have received pink slips”.

The Feldman ruling would not mean a resumption of deepwater drilling because other Interior Department policy decisions issued in the wake of the Deepwater Horizon explosion and sinking remained valid and likely would forestall any deepwater operations for six months or longer.

Kevin Book, an analyst with ClearView Energy Partners, noted that there were 11 Interior Department safety requirements still pending that in all likelihood could not be met by the offshore industry before the end of this year.

Under a policy statement issued the day before the moratorium was announced, the department said it was developing new requirements for deepwater drilling firms.

Those requirements, when made final by the department, would oblige deepwater drillers to submit new safety and effectiveness certifications for their blow-out preventers (BOPs), reviews and re-certification of secondary rig control systems, details on operating capabilities of drillers’ deepwater remotely operated vehicles (ROVs), training certifications for deepwater casing and cementing personnel, and other re-certifications or first-time evaluations of well control procedures, floating rig safety procedures, environmental systems and more.

Book said it was not likely that the department would complete final versions of those 11 deepwater certification requirements before the end of this year, and it could take many additional months for drilling companies to comply with them.

Consequently, and despite the ruling by Judge Feldman, deepwater drilling in US waters of the Gulf was not likely to resume before sometime next year at the earliest, according to analysts.

A long-term shutdown of deepwater drilling in the Gulf could impact US petrochemical producers because they rely to a significant degree on natural gas as a feedstock and energy fuel, and the Gulf had previously provided up to 10% of US domestic gas supplies.

The moratorium came in the wake of the 20 April explosion of the BP-operated Deepwater Horizon offshore rig. US officials estimated the resulting oil leak as high as 60,000 bbl/day.

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