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Rig Explosion Hurts Bid to Expand Offshore Drilling

Fire boats battle the fire at the off shore oil rig Deepwater Horizonin the Gulf of Mexico off the coast of Louisiana. Source: U.S. Coast Guard via Getty Images
Fire boats battle the fire at the off shore oil rig Deepwater Horizonin the Gulf of Mexico off the coast of Louisiana. Source: U.S. Coast Guard via Getty Images

April 27 (Bloomberg) -- President Barack Obama’s bid to expand offshore drilling may be set back after a rig leased by BP Plc exploded and sank last week, reminding the public of the danger of oil extraction, environmental and industry groups said.

The April 20 explosion, which led to 11 deaths and thousands of barrels of crude oil spilling into the Gulf of Mexico, will force the industry to “at least admit that drilling for oil is a very risky, very dirty business,” Michael Brune, executive director of San Francisco-based environmental advocacy group Sierra Club, said today.

Democratic Senators Bill Nelson of Florida and Frank Lautenberg and Robert Menendez of New Jersey called for hearings, saying the incident raises “serious concerns,” over the industry’s safety claims. The incident on the Deepwater Horizon rig, about 41 miles (66 kilometers) off the Louisiana coast, created an oil spill 600 miles in circumference, roughly twice the size of Maryland, the Coast Guard said today.

“There’s no question that this complicates things a little bit because this plays into the argument from those that oppose offshore drilling,” said Tom Moskitis, a spokesman for the American Gas Association, a Washington-based trade group whose directors include representatives of Xcel Energy Inc. and El Paso Corp. “It’s going to make it harder to open more areas to production I’m afraid.”

Obama proposed last month drilling for oil and gas off the U.S. East Coast and in the Gulf of Mexico 125 miles off the west coast of Florida. Obama said the plan is part of a transition to a new-energy economy that relies less on imported fossil fuel and more on domestic power from the sun and wind.

Climate Legislation

“Given our energy needs, in order to sustain economic growth and produce jobs, and keep our businesses competitive, we are going to need to harness traditional sources of fuel even as we ramp up production of new sources,” Obama said on March 31 at Andrews Air Force Base in Maryland.

The rig explosion should prompt “a reconsideration of the energy choices that will be made” in legislation being crafted in Congress that targets climate change, Brune said.

Obama’s comments on offshore drilling touch a topic that has divided lawmakers and may complicate efforts to reach a compromise on legislation to slow global warming. Expanding offshore drilling was seen as a way to win support for a compromise climate bill crafted by Senators Lindsey Graham, a South Carolina Republican, John Kerry, a Massachusetts Democrat, and Joseph Lieberman, a Connecticut independent, Moskitis said.

‘Fear and Panic’

Climate-change legislation that expands offshore drilling will be tougher to pass “because of the fear and panic that has been engendered as a result of this catastrophe,” Nelson told reporters in Washington today.

BP intensified efforts to stop an underwater well leak at the drilling site that was streaming oil across the Gulf of Mexico, threatening the shoreline and triggering the evacuation of a rig 10 miles away. BP increased the pressure on hydraulic valves on the seafloor to halt the oil leak, U.S. Coast Guard Petty Officer Erik Swanson said today in an interview. BP, which leased the rig from Geneva-based Transocean Ltd., has said the next quickest alternative to curbing the spill may take two weeks.

Winds that scattered the slick northward have reversed and eased and are now “in our favor,” reducing the risk that oil will hit shore, Swanson said.

White House Meeting

BP officials, including Chief Executive Officer Tony Hayward, met at the White House today with Obama senior adviser Valerie Jarrett, energy and climate change policy adviser Carol Browner, Interior Secretary Ken Salazar, Homeland Security Secretary Janet Napolitano and Admiral Thad Allen, the U.S. Coast Guard commandant, according to an administration official.

Talks focused on BP’s understanding of the situation at the rig site and actions the company is taking in response, including surface and subsurface activities, the official said.

“The tragedy off the coast of Louisiana shows we need to be asking a lot more tough questions of Big Oil,” Nelson said in an April 23 statement. “We need to look back over 10 years or so to see if the record denies the industry’s claims about safety and technology.”

Industry Safety

Nelson, Lautenberg and Menendez sent a letter to the chairmen and ranking members of the Commerce, Science and Transportation Committee and the Energy and Natural Resources Committee requesting a hearing on the incident. Since 2006, there have been 509 fires, at least two fatalities and 12 serious injuries on oil rigs in the Gulf of Mexico, according to the letter.

“This may be the worst disaster in recent years, but it’s certainly not an isolated incident,” the senators wrote. The explosion raises “serious concerns,” over the industry’s safety claims.

Moskitis said the industry’s track record is still good.

“‘There hasn’t been any major incident comparable to what just happened in the gulf where a spill has reached land in 40 years,” he said.

To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net.

To contact the editor responsible for this story: Larry Liebert at lliebert@bloomberg.net.

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