July 13 (Bloomberg) -- 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 told a presidential commission. “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 commission, formed to investigate the spill that began in April, will also review the moratorium following two days of testimony about the ban’s economic effect on the Gulf Coast. Commission co-Chairman William Reilly questioned why regulators couldn’t increase inspections and take other steps that would allow the six-month moratorium to be lifted sooner.
“I’m less comprehending of the problems in determining that the rigs are safe than I have been,” the former head of the U.S. Environmental Protection Agency told reporters. “We’ve had almost three months already to make some determinations.”
Reilly said he was moved during the two-day hearing by testimony about the effect of the spill and moratorium on the local economy, including from Senator Mary Landrieu, a Louisiana Democrat, who told the commission yesterday that the ban would drive Gulf residents to the unemployment line.
“Whether you call it a moratorium, a suspension, a pause, the result will still be substantial loss of jobs,” Landrieu said. She told the panel that idling drilling rigs in the Gulf could affect as many as 46,000 workers.
Charlotte Randolph, president of Lafourche Parish in Louisiana, told the commission that the area is suffering a “slow death” as the drilling moratorium squeezes local businesses that support the oil industry.
Bob Graham, co-chairman of the commission, said the panel wouldn’t likely have the resources to evaluate the safety of the rigs or the ability of the oil industry to respond to another spill as BP’s well continues to leak oil. The panel could use its “bully pulpit” to ensure that the Obama administration knew the region’s concerns about the drilling ban, he said.
Salazar has said the Interior Department will consider any recommendations made by the National Commission on the BP Deepwater Horizon Spill and Offshore Drilling.
The moratorium on deep-water drilling may be adjusted to allow some new wells to go forward before Nov. 30, Bromwich told the commission. Bromwich said he 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. The ban was in response to the April 20 explosion on the BP-leased Deepwater Horizon drilling rig that killed 11 workers and triggered the largest oil spill in U.S. history.
The damaged Macondo well has been gushing as much as 60,000 barrels of oil a day, according to government scientists. BP had spent about $3.1 billion on containment efforts, cleanup and legal claims as of July 6, company data show.
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,” Louisiana Governor Bobby 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.
Reilly asked Bromwich if inspectors could be placed on affected rigs as a way to ensure the safety needed to lift the moratorium.
“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 prior to the BP disaster.
“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.”
“We’re not going to politely ask industry anymore to fix things,” Bromwich said. “We’re going to demand that they fix things.”
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