New Ban Hits Oil Drillers


WASHINGTON—The Obama administration on Monday issued a new order banning most new deepwater-drilling activities until Nov. 30, setting up a fresh round of conflict with the oil industry over when it will be safe to drill again offshore.

The latest round in the clash over the ban on new drilling got under way as BP installed a new cap on its blown-out undersea well that company and government officials hope will capture all the spewing oil. BP officials have said they are also aiming to finish drilling a relief well that will allow them to permanently stanch the flow. Even after the well is sealed, BP and the Gulf Coast face a lengthy process of cleaning up the huge slick that has fouled beaches and wetlands from Texas to Florida.

The drilling moratorium could last for weeks after oil has stopped gushing into the Gulf. The Obama administration’s ban on new deepwater wells is one of the most contentious elements of its response to the nearly three-month-old oil spill.

The new ban replaces a May 27 order that was struck down by a federal court, and it drew quick condemnation from oil-industry representatives and their allies.

In moving to reinstate the drilling ban, President Barack Obama again sided with environmental groups and many voters in big coastal states such as Florida and California who support a halt to new deepwater drilling until the causes of the catastrophic BP PLC well blowout are known.

“We know that that is not without some economic consequences to the region,” White House Press Secretary Robert Gibbs said Monday. “But it’s imperative that we have a sense of what happened before we continue to do this again.”

Lawmakers from Florida and California praised the new moratorium. “Until we know what happened with the Deepwater Horizon, and we’ll know very soon, it makes sense not to put Gulf Coast residents and the economies there at further risk,” said Sen. Bill Nelson (D, Fla.).

But public officials and many residents of Gulf states directly affected by the spill say the ban threatens thousands of jobs in the offshore oil industry.

Sen. Mary Landrieu (D., La.) said Monday the administration’s new order still leaves oil and gas companies without “the certainty they need to move forward with future plans” and predicted the moratorium will “force thousands of Louisianans into the unemployment line.”

Interior Secretary Ken Salazar tailored his new order to respond to the sharp criticism by two federal courts of the earlier moratorium. A federal district court judge in June issued an order prohibiting the administration from enforcing the moratorium, calling it arbitrary and questioning the logic the Obama administration used to defend it.

The Fifth Circuit Court of Appeals in New Orleans rejected the Obama Administration’s plea to reinstate the ban just 90 minutes after hearing arguments in the case earlier this month. The Justice Department said it would file to dismiss the case entirely because the original moratorium is “no longer operative.”

To address some of the problems with the earlier order, Mr. Salazar on Monday said his latest order reflects new evidence regarding safety concerns, shortcomings in industry equipment to control blowouts, and spill-response capabilities that are strained by the BP oil spill.

The new ban establishes a process through which the Interior Department will gather information that could “provide the basis for identifying conditions for resuming certain deepwater drilling activities.” It also takes a new approach. Instead of banning drilling in waters of 500 feet or more, drilling is now suspended at any wells using subsea blowout preventers or surface blowout preventers on a floating facility.

“If anything, we would suggest that the new moratorium could be more restrictive, because some floating rigs occasionally work in shallow depths,” said Kevin Book, a managing director at ClearView Energy Partners LLC, and his partners, in a report.

Oil industry representatives said the new ban would cost jobs, and reiterated arguments used to attack the original moratorium in court.

“The new moratorium threatens enormous harm to the nation and to the Gulf region,” said Jack Gerard, the president of the American Petroleum Institute, which represents oil and gas companies, in a statement. “It places the jobs of tens of thousands of workers in serious and immediate jeopardy and promises a substantial reduction in domestic energy production.”

About 33 deepwater rigs are directly affected by the moratorium. Mr. Salazar said in his statement that shallow-water oil and gas exploration “can continue to move forward” if operators comply with new safety and environmental requirements.

But a group representing shallow-water drillers said Monday uncertainty about Interior Department drilling policy has frozen activity in their industry, affecting hundreds of rigs.

“Despite assurances from the White House and the Interior Department, about one-third of the shallow water fleet has been idled by the application of what can only be called a de facto moratorium,” said Jim Noe, Senior Vice President and General Counsel of Hercules Offshore, a large shallow-water driller.

Mr. Salazar’s announcement came minutes after a presidential commission investigating the causes of the Gulf oil spill heard testimony in New Orleans from Larry Dickerson, president and CEO of Diamond Offshore Drilling Inc. He said the moratorium has already prompted his company to send two deepwater rigs to foreign waters, and warned that “there won’t be much of a U.S. industry left” if the moratorium lasts six months.

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Stuart H. Smith is an attorney based in New Orleans fighting major oil companies and other polluters.
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