William Reilly, co-chair of the president’s oil spill commission, believes that the deepwater moratorium should end before the anticipated Nov. 30 expiration deadline, say energy analysts.

Reilly’s remarks were based on the results of a favorable report from a Bipartisan Policy Center task force, which concluded that the moratorium had served its purpose and was no longer necessary because new equipment testing and environmental rules would reduce the risk of another uncontrolled spill, said analysts with FBR Capital Markets (see Daily GPI, Aug. 30).

However, “even if the moratorium is lifted [before Nov. 30], it will take time for industry to comply with new requirements, secure third-party certification and obtain authorization to redeploy rigs and equipment,” FBR Capital Markets said. “This will vary depending on the rig, with newer ones largely expected to comply. Only 12 of the 33 affected deepwater rigs were constructed in the last five years. Thus it will likely take several months or longer for all wells affected by the moratorium to meet new stringent standards.”

Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulations and Enforcement, successor to the Minerals Management Service, has ordered a temporary suspension of categorical exclusions to approve drilling permits while the agency reviews its procedures. The suspension would apply to new permits after the moratorium ends.

Under a categorical exclusion, the Interior Department can waive certain environmental reviews — thus expediting the overall review process — associated with obtaining permits for offshore drilling. These waivers have caused a lot of fireworks on Capitol Hill in the wake of the Deepwater Horizon exploding and sinking off the southern coast of Louisiana in April (see Daily GPI, Aug. 17).

“We view the Department of Interior’s temporary suspension of the expedited environmental review process under the National Environmental Policy Act as a significant potential source of bureaucratic delay after the moratorium is lifted,” FBR Capital Markets said.

Erik Milito, upstream director at the American Petroleum Institute, said limiting the use of categorical exclusions require more extensive environmental reviews for deepwater projects and could delay development and job creation.

©Copyright 2010Intelligence Press Inc. All rights reserved. The preceding news reportmay not be republished or redistributed, in whole or in part, in anyform, without prior written consent of Intelligence Press, Inc.