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Oil Execs' Celebration Ends; Now Comes the Grilling

Four weeks ago, oil company executives were celebrating an Obama administration decision to expand drilling off the U.S. East Coast. Now, after a rig exploded and sank in the Gulf of Mexico, they face a grilling in Congress and tougher rules on how they do business.     Representative Edward Markey, a Massachusetts Democrat, on Thursday told chief executives from five companies that they will be called to appear before his committee on Energy Independence and Global Warming. The companies include BP Plc, which leased the rig to drill the well that is now leaking 5,000 barrels a day into the waters off the coast of Louisiana.

The spill has created an oil slick 600 miles in circumference that is slowly moving ashore. Eleven members of the 126-member rig crew were killed in the explosion.

“There’s just really no way to sugarcoat this situation,” said Randall Luthi, president of the Washington-based National Ocean Industries Association. “It’s a tragic accident and it does have the potential for long-term political and policy implications.”

President Barack Obama on Thursday signaled that the incident may force changes to an offshore drilling plan unveiled March 31

Obama last month proposed drilling for oil and natural gas off the U.S. East Coast in areas previously off limits, while scrapping development in Bristol Bay, Alaska. The initiative is part an effort he said will boost energy independence and protect the environment.

Photographer: Joshua Roberts/Bloomberg

Representative Ed Markey, a Democrat from Massachusetts, speaks during a House Energy and Commerce Committee markup session on the Greenhouse Gas Emission Reduction Act, in Washington on May 20, 2009. Close

Representative Ed Markey, a Democrat from Massachusetts, speaks during a House Energy... Read More

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Photographer: Joshua Roberts/Bloomberg

Representative Ed Markey, a Democrat from Massachusetts, speaks during a House Energy and Commerce Committee markup session on the Greenhouse Gas Emission Reduction Act, in Washington on May 20, 2009.

Proposal Welcomed

The president would permit exploration in the Atlantic Ocean from south of Delaware and, if a congressional moratorium is lifted, in the Gulf of Mexico 125 miles (201 kilometers) off the west coast of Florida. The proposal was welcomed by the industry.

On Thursday, Carol Browner, Obama’s advisor for energy and climate change said the incident “will be taken into consideration” as the administration advances its drilling plans.

The U.S. Interior Department announced immediate inspections of all deep-water drilling rigs in the Gulf of Mexico. The Minerals Management Service, or MMS, the agency within interior that manages energy production in federal waters, is moving forward on developing new rules opposed by BP and other drillers meant to reduce the risk of injuries and spills from offshore drilling, Eileen Angelico, an MMS spokeswoman, said in an e-mail.

“I expect a knee-jerk reaction to this terrible, horrible incident,” Allen Verret, executive director of the Metairie, Louisiana-based Offshore Operators Committee, a trade group for rig operators. “What we in the industry would like to see is a fair airing of the facts.”

Trust Fund

After the 1989 Exxon Valdez spill in Alaska’s Prince William Sound, Congress enacted the Oil Pollution Act in 1990, which expanded the government’s ability to respond to oil spills and created a trust fund to provide up to $1 billion per spill.

Representative Markey has asked CEO’s of BP, Exxon Mobil Corp, ConocoPhillips, Royal Dutch Shell Plc and Chevron Corp. to testify, he said in an e-mailed statement. Interior Secretary Ken Salazar will be questioned on the incident at a Senate Energy Committee hearing May 6, Senator Lisa Murkowski, a Republican from Alaska. She also expects company CEO’s will be called before the Senate Energy Committee.

BP Plc and Transocean Ltd., owner of the rig, were asked for inspection reports dating back to Jan. 1 by House Energy and Commerce Committee Chairman Henry Waxman, a California Democrat.

‘Absolute Tragedy’

“It is in the back of your mind that we could be dealing with something much larger,” Murkowski said in an interview, recalling the Exxon Valdez disaster. “We do know that we have lost 11 lives and that, in and of itself, is an absolute tragedy. We don’t know what the environmental consequences are, but we do have a very painful reminder of what the potential could be.”

At the current rate of leakage from the well, the spill will exceed the amount of oil dumped by the Valdez accident by the third week of June, making it the worst U.S. oil spill.

The National Oceanic and Atmospheric Administration expects winds to begin pushing oil ashore in Louisiana near the mouth of the Mississippi River as soon as today. Shrimp boats headed to fishing grounds east of the river yesterday after Louisiana opened an early season to bring in as much harvest as possible before oil from the Gulf of Mexico spill washes ashore.

To contact the reporters on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net and Jessica Resnick-Ault in New York at jresnickault@bloomberg.net.

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