Lifting U.S. Drilling Moratorium Is Too Risky, Bromwich Says

Lifting the moratorium on deep-water oil drilling is too risky as companies have yet to show they are capable of preventing and containing spills following the BP Plc disaster, the main regulator for U.S. offshore drilling said.

Drillers must do a better job, and investigators must gather more data on the causes of BP’s Macondo well leak in the Gulf of Mexico before drilling can resume, Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, said today at a hearing in New Orleans.

“So long as the spill is out there and has not been contained and the oil-spill response capabilities are all being consumed by the current spill,” Interior Secretary Kenneth Salazar finds it too risky, Bromwich said. “He hopes that prior to Nov. 30 he will have the comfort level to allow some deep- water exploratory drilling to continue, but he is not there yet.”

The moratorium on deep-water drilling may be adjusted to allow some new wells to go forward before Nov. 30, Bromwich told a commission formed by President Barack Obama to investigate the spill. Oil companies and officials of Gulf Coast states including Louisiana Governor Bobby Jindal say the ban may do more economic harm than the actual spill.

Bromwich plans public hearings over the next 60 days to determine what additional safety measures are needed. Salazar announced the new moratorium yesterday after a federal judge rejected an initial ban imposed in May as a response to the April 20 explosion on the BP-leased Deepwater Horizon drilling rig that triggered the largest oil spill in U.S. history.

Job Losses

The new moratorium identifies at-risk wells based on drilling configurations and technologies instead of water depth. The previous version barred drilling deeper than 500 feet (152 meters), a distinction U.S. District Judge Martin Feldman questioned in rejecting the ban.

“This second suspension of deepwater drilling is a clear sign that the administration is unwilling to follow the advice of their own scientists,” Jindal said today in a statement. “The ultimate effect of this second moratorium is the same as the first -- to shut down drilling operations in the Gulf and risk killing an estimated 20,000 jobs in Louisiana.”

The new ban has idled 21 rigs in the Gulf, 12 fewer than the number affected by the original moratorium, Bromwich said. Companies including Diamond Offshore Drilling Inc., the largest U.S. deep-water oil driller, have said they will move rigs to other countries as a result of the U.S. ban.

Reorganizing MMS

William Reilly, co-chair of the presidential commission and former U.S. Environmental Protection Agency administrator, said the ban is causing economic damage to the region. Reilly asked Bromwich if inspectors could be placed on affected rigs.

“Inspections leave a margin for error,” Bromwich said.

Bromwich is charged with reorganizing the renamed Minerals Management Service, the agency within the Interior Department that oversaw oil and gas development on federal properties.

“The industry has been too casual in the oil spill response plans they’ve submitted,” Bromwich said. “Frankly, I think my agency has been too casual in approving them.”

The National Commission on the BP Deepwater Horizon Spill and Offshore Drilling held its first hearing in New Orleans yesterday. It is co-chaired by Reilly and Robert Graham, a former Florida governor and U.S. senator.

“We’re not going to politely ask industry anymore to fix things,” Bromwich said. “We’re going to demand that they fix things.”

The damaged Macondo well has been gushing as much as 60,000 barrels of oil a day, according to government scientists, after the initial explosion killed 11 workers and sank a $365 million Transocean Ltd. rig being leased by BP. London-based BP had spent about $3.1 billion on containment efforts, cleanup and legal claims as of July 6, according to company data.

To contact the reporters on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net; Jim Snyder in New Orleans at jsnyder24@bloomberg.net.

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.