Shallow-Water Drilling Delay May Be Near End, Hercules Offshore's Noe Says

Shallow-water drilling companies hope a meeting with the U.S. Interior Department will help end delays in approval of new permits, Hercules Offshore Inc. executive Jim Noe said.

“We are hopeful that today was a solid first step in resolving this issue and getting shallow-water drilling rigs back to drilling new wells,” Noe, senior vice president and general counsel of Hercules, said in a statement after meeting yesterday with Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement.

Drilling company executives have said Interior Department rules issued in response to the BP Plc oil spill have brought exploration in shallow waters to a halt. Obama administration officials have said a ban imposed after the spill in the Gulf of Mexico applies solely to deep-water operations.

Interior Secretary Ken Salazar announced a revised deep- water drilling moratorium July 12, saying the oil industry needed to “raise the bar” in stopping new leaks and demonstrate that blowouts can be prevented.

Senator Mary Landrieu, a Louisiana Democrat, Louisiana Lieutenant Governor Scott Angelle and Kurt Hoffman, senior vice president and chief operating officer of Seahawk Drilling Inc. also attended the meeting with Bromwich, Noe said in an interview at Bloomberg’s Washington offices.

Permits Pending

In a statement yesterday, the Interior Department said nine shallow-water drilling requests are pending while regulators evaluate their compliance with rules on how companies would respond to a worst-case blowout scenario.

Seventeen of 36 applications for permits not subject to the worst-case requirement, such as sidetrack and bypass wells, have been approved, the department said.

The meeting with industry was part of an effort to make sure regulators “have the best information as we work to ensure that drilling is done right, done safely, and that communities and the environment are protected,” Bromwich, who took over a regulatory agency that was revamped and renamed after the spill, said in the statement.

He said he discussed steps drillers can take to implement new safety standards effectively and quickly. Interior Department officials also met with environmental groups, according to the statement.

Before the BP spill that begin with an explosion on a rig on April 20, the Interior Department was approving 10 to 15 shallow-water drilling permits a week for new wells, Noe said. Hercules and Seahawk are the two biggest operators of drilling rigs in the Gulf’s shallow waters, he said.

Original Moratorium

The administration’s original moratorium on deep-water drilling barred operations more than 500 feet below the sea, a distinction that was called arbitrary by U.S. District Judge Martin Feldman when he overturned the ban on June 22.

The new version applies to wells using subsea or surface blowout preventers on a floating facility. Some shallow-water drilling rigs float, leaving open the possibility that they will be affected too, Noe said.

Of the 50 shallow-water rigs in the Gulf of Mexico, 19 are idle because of the difficulty of getting permits, Noe said. That number is expected to increase to 27 by the end of August, he said. Each drilling rig directly employs about 100 workers, 30 workers from associated contractors and spends $500,000 per month on equipment, he said.

To contact the reporter on this story: Jeff Plungis in Washington at jplungis@bloomberg.net

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