U.S. Drops Drilling Off Atlantic Coast, Eastern Gulf

BP’s Oil-Spill Estimate May Be 50% Below U.S. Report
Transocean Ltd.'s Development Driller III rig works to drill the primary relief well at the BP Plc Macondo site in the Gulf of Mexico off the coast of Louisiana in August. Photographer: Derick E. Hingle/Bloomberg

The Obama administration has reversed a decision to allow oil and natural-gas drilling in the eastern Gulf of Mexico and off part of the Atlantic coast following the BP Plc spill, Interior Secretary Ken Salazar said.

The biggest U.S. offshore oil spill showed that “the most appropriate course of action is to focus on areas with existing leases and not expand to new areas,” Salazar said today on a conference call with reporters.

President Barack Obama said in March he would consider drilling off the Atlantic coast from south of Delaware and in the eastern Gulf of Mexico 125 miles (201 kilometers) off the west coast of Florida. Less than a month after the announcement, BP’s Macondo well blew out, killing 11 workers on a drilling rig and setting off the spill.

Today’s decision puts off drilling in the Atlantic and in the eastern Gulf at least through 2017.

“After Macondo, I don’t think anybody believed that there was a real chance to have rigs off the coast of Florida, let alone the Atlantic,” David Pursell, a managing director at Tudor Pickering Holt & Co. LLC in Houston, said today in a telephone interview.

Business and industry groups such as the American Petroleum Institute said the administration’s decision will cost jobs and block economic growth.

‘Shuts the Door’

“This decision shuts the door on new development off our nation’s coasts and effectively ensures that new American jobs will not be realized,” Jack Gerard, president of the Washington-based institute, said in a statement.

While abandoning plans for expanded drilling, the administration will move ahead with lease sales in the central and western Gulf of Mexico that had been scheduled for this year, Salazar said.

“We will do everything we can to proceed with the lease sale by the end of 2011 and into 2012,” Salazar said.

In October, Royal Dutch Shell Plc, Europe’s biggest oil company, said it applied to drill an exploratory well next year off Alaska’s coast in the Beaufort Sea. The Bureau of Ocean Energy Management, the Interior unit that oversees offshore drilling, is “processing their permit in the normal course,” said Michael Bromwich, bureau director.

The region remains a “frontier” area that requires further study to ensure drilling can proceed safely, Salazar said today. “We will proceed with utmost caution,” he said.

Shell’s Record

Shell has a “proven track record of responsible and environmentally sensitive operations” and its “ability to obtain offshore permits in a timely and efficient manner is an important component to this country’s energy future, jobs, and the economy,” Kelly op de Weegh, a spokeswoman for The Hague-based company, said in an e-mail.

Obama’s proposal before the BP spill had included drilling 50 miles off the Virginia coast, in what would be the first offshore Atlantic oil and gas sale in more than two decades. Former President George W. Bush removed a presidential moratorium on offshore drilling in 2008, and Congress let a ban expire.

The decision today protects fishing grounds and tourist destinations “where there is now no threat, and where there is now no dependency on the petroleum industry,” Jacqueline Savitz, senior campaign director for the Washington-based environmental group Oceana, said in a statement.

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