Feds approve second deep-water drilling project stalled by spill *updated*

The federal government on Friday told BHP Billiton it could resume a deep-water drilling project that was halted by the Obama administration’s moratorium last year — the second work like it to be approved since that ban was lifted in October.

The permit will let BHP Billiton resume work on a well in its Shenzi discovery, approximately 120 miles from the Louisiana coastline.

BHP first began drilling the well in 4,234 feet of water last February – two months before the blowout of BP’s Macondo well that triggered the spill and spurred the administration’s ban.

It is the second permit of its kind issued since the ban was lifted. The first, approved by the ocean energy bureau on Feb. 28, allows Noble Energy to drill a bypass well in its Santiago prospect 70 miles southeast of Venice, La.

Bromwich and Interior Secretary Ken Salazar said that Noble Energy permit was likely the first of several to come soon. Salazar also told lawmakers he expected the initial permits would provide a “template” for future approvals and drilling applications.

Because it was under way before the administration’s ban, the BHP Billiton project faced fewer hurdles to resuming work than drilling that has been proposed since the spill.

The ocean energy bureau announced in January that the 16 projects under way when the moratorium was imposed would not have to undergo new environmental assessments before restarting.

Like all deep-water drilling, the BHP Billiton project has to comply with new safety and environmental mandates imposed since the spill. Companies also must prove they can swiftly contain a blowout in deep water, like the one at BP’s Macondo well.

Two companies — Houston-based Helix Energy Solutions Group and the Exxon Mobil-led Marine Well Containment Company — have vessels and equipment designed to capture oil from runaway deep-water wells. BHP Billiton contracted with Helix to respond to a disaster at its Santiago project.

“We are very pleased to be resuming work,” BHP Billiton spokesman Ruban Yogarajah said.

BHP Billiton has a working interest — and 44 percent equity — in the field, joint interest participants include Hess Corp. and Repsol.

Erik Milito, upstream director for the American Petroleum Institute, downplayed the permit approval. “All new permits are welcome,” Milito said, “but the administration has once again chosen to focus on baby steps — approving a permit for a project that was operational prior to the moratorium, instead of taking the steps necessary to produce the domestic resources this country needs.”

Milito added:

“The oil and natural gas industry can and will provide even more jobs, higher economic growth, and increased revenues to the federal treasury, when policymakers pursue options that make resources currently off-limits available, and move forward on permitting and licenses at a pace necessary to support domestic production.”