Producers, oil service firms and end-users slammed the new moratorium on deepwater drilling in the Gulf of Mexico that the Interior Department issued on Monday, saying it was no different than the original moratorium despite hints from Interior Secretary Ken Salazar that he was considering narrowing the scope of the ban.
Covington, LA-based oil service firm Hornbeck Offshore Services Inc., which challenged the original ban in court, said it was still reviewing the latest moratorium and had "substantial concerns" about whether it was consistent with a June 22 ruling by U.S. District Judge Martin Feldman, which granted Hornbeck's motion for a preliminary injunction barring the government from enforcing its deepwater moratorium.
Feldman said Interior failed to justify its decision to impose the six-month ban on deepwater drilling in the wake of the explosion onboard the Deepwater Horizon rig, and essentially sought retribution against an entire industry for the actions of one company -- BP plc (see Daily GPI, June 23).
Interior's announcement Monday failed to mention that Feldman's decision is under appeal. The Fifth Circuit Court of Appeals last Thursday rejected the federal government's bid for a stay of Feldman's ruling. However, the court expects to hold a hearing on the merits of the government's appeal in late August or early September (see Daily GPI, July 12).
The new moratorium -- or suspension as Interior calls it -- will last until Nov. 30 or until such earlier time that Salazar determines that deepwater drilling operations can proceed safely, Interior said. Salazar also ordered the Bureau of Ocean Energy Management, Regulation and Enforcement to gather and analyze information from the public, experts, stakeholders and the industry on safety and response issues, which could potentially provide the basis for resuming certain deepwater drilling activities (see Daily GPI, July 13).
The new moratorium does not prohibit drilling specifically by water depth, as did its predecessor, but rather prohibits drilling operations that use subsea blowout prevents (BOP) or surface BOPs on floating facilities until Nov. 30, according to the National Ocean Industries Association (NOIA). The moratorium does not apply to anchored facilities using surface BOPs; these facilities are generally used in shallow water, which makes the new moratorium "glaringly similar," if not even more restrictive than the original moratorium, NOIA said.
The second moratorium also leaves the door slightly ajar to the possibility of early removal of restrictions if industry provides assurance acceptable to the Interior secretary that adequate containment and response capabilities are in place, according to NOIA. But the problem for industry is that it is unclear what exactly it will take to convince the administration that such capability exists, the group said.
"At least for the sake of some clarity, the administration should only have one moratorium in play at a time," said NOIA Chairman Burt Adams. "It's the classic shell game. The administration keeps moving the shells around, only to reveal a new moratorium under the shell that is picked. However, in this case there appears to be a moratorium under every shell."
"Judge Feldman's recent ruling correctly recognized the severe unintended economic consequences of this moratorium. Unfortunately the administration does not recognize the potential consequences because virtually no changes were made to this new drilling ban -- it's simply more of the same shortsighted policies being created," said Bruce Vincent, chairman of the Independent Petroleum Association of America, which represents independent producers.
"No certain and expeditious path forward has been established for a resumption of drilling" in the Gulf, said Jack Gerard, president of the American Petroleum Institute, which represents major producers. "The 33 now-idle deepwater drilling rigs in the Gulf have passed thorough government inspections and are ready to be put back to work. The industry has been working extremely hard on all fronts to enhance safety and will continue to do so."
"We strongly encourage the department to reconsider its decision and establish a process and time line for putting our deepwater companies and highly skilled employees in the Gulf region back to work."
The U.S. Chamber of Commerce 's Institute for 21st Century Energy also panned the moratorium. "Despite two federal court rulings halting the moratorium on deepwater exploration, the administration is now proceeding with yet another blanket moratorium that will continue to cost the Gulf region much-needed jobs and America much-needed domestic oil and natural gas," said Karen Harbert, president of the institute.
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