Feds lift drilling ban — but don’t expect new wells soon

The Obama administration today lifted its deep-water drilling ban more than a month ahead of its scheduled expiration date, ending a moratorium that has idled dozens of rigs in the Gulf of Mexico and launching a long process to restart offshore exploration in the region.

“We have made and continue to make significant progress in reducing the risk associated with deep-water drilling,” Interior Secretary Ken Salazar said in a conference call with reporters. “It is now appropriate to lift the suspension of deep-water drilling for those operators who are able to clear the higher bar that we have set.”

“We are open for business,” Salazar added. “We will be taking applications for drilling in the deep water, and we will be processing those applications under the road map . . . created over the last six months.”

Oil and gas industry officials welcomed the news, but described the lifting of the moratorium as mostly symbolic because it could be weeks or months before the government grants permits for new deep-water wells.

“There is a difference between lifting the moratorium and securing the drilling permits needed to return to work,” said Shell spokesman Kelly Op De Weegh. “It’s imperative to ensure agencies have the capacity to process the backlog of drilling permits in a timely manner and consistent with the new safety rules.”

Administration officials have widely acknowledged there will be delays as drilling contractors comply with new drilling rules, energy companies submit new well proposals and government inspectors vet their applications.

Michael Bromwich, the director of the Bureau of Ocean Energy Management, Regulation and Enforcement, said he shifted 20 employees to process new drilling applications, adding to a staff of about 40 that were on the job before the Deepwater Horizon disaster. But some delays are inevitable, he said.

Bromwich outlined the lengthy process to restart deep-water drilling at the Platts Energy Podium this morning:

“You’re going to need at least a couple of weeks, maybe more, for the companies to review the rules and satisfy themselves that they have met their rules. We’re going to need to do inspections on all the rigs before we are going to be able to give the go-ahead for deep-water drilling to resume. And it will take some time for us to review the applications.”

Administration officials declined to predict the exact timing that new drilling could be approved, with Bromwich saying that no one knows how prepared companies are to comply with new safety rules — much less satisfy regulators.

The issuance of new deep-water drilling permits “will clearly not be tomorrow, and it’s not going to be next week,” Bromwich said. “How far in the future it will go … I don’t know. I don’t think anybody knows. My sense is that we will have permits approved before the end of the year, but how much before the end of the year I can’t say and how many permits I can’t say.”

Since President Barack Obama first announced he would halt deep-water exploration on May 27, the administration has faced intense political pressure to end the ban, especially from lawmakers along the Gulf Coast who said it jeopardized thousands of jobs tied to the industry. Drilling contractors also challenged the moratorium in federal court.

Salazar acknowledged the moratorium’s economic costs today, but defended the ban as the right decision in the wake of the Deepwater Horizon disaster. The time out allowed investigations of what went wrong at BP’s Macondo well and the development of newly announced rules designed to step up the safety of offshore drilling.

With its announcement today, the Obama administration is walking a political tightrope — seeking to assuage Gulf Coast voters and officials that deep-water exploration can resume while trying not to alienate environmentalists and offshore drilling foes three weeks before the Nov. 2 elections.

“I know some people will not be completely satisfied with today’s decision,” Salazar said. “Some will say that the new rules for offshore drilling are too onerous, or the bar is too high. . . . Others will say we are lifting the deep-water drilling suspension too soon.”

“The truth is, there will always be risks associated with deep-water drilling, he added, “. . . but we now have, in my view, sufficiently reduced those risks.”

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