Deepwater drillers may be disappointed despite moratorium ruling

Things might be getting worse – not better – for deepwater drillers in the Gulf. Despite the decision Tuesday by a federal judge in Louisiana to grant an an injunction against the Obama administration’s six-month moratorium on new deepwater drilling in those waters, the issue is not over. The White House said the administration would appeal, noting that the the moratorium must stay in place in the meantime. It also indicated there might well be a further tightening. From the statement of Ken Salazar, secretary of the interior:

We see clear evidence every day, as oil spills from BP’s well, of the need for a pause on deepwater drilling. That evidence mounts as BP continues to be unable to stop its blowout, notwithstanding the huge efforts and help from the federal scientific team and most major oil companies operating in the Gulf of Mexico.  The evidence also continues to mount that industry needs to raise the bar on blowout prevention, containment, and response planning before deepwater drilling should continue. Based on this ever-growing evidence, I will issue a new order in the coming days that eliminates any doubt that a moratorium is needed, appropriate, and within our authorities.

What will be in the new order remains to be seen. But the industry had been hoping for a rolling back of some parts of the moratorium, to at least let them do new deepwater drilling down to the levels before  hydrocarbons are reached — or just carry out maintenance and completion work. Anything to get their rigs, which cost in the order of $500,000/day to lease, working and keep them in the Gulf. Indeed, this is something Louisiana officials are eager for. Governor Bobby Jindal, (who, as we wrote last week,  wants clean waters but not a moratorium to help ensure them) has been among the most vocal, issuing regular denunciations of the moratorium. The latest of these praised the judge’s decision:

We absolutely agree with the judge’s conclusion that the Administration’s six-month, or longer, shut down of deepwater drilling was ‘arbitrary and capricious.’ Not only does the moratorium threaten thousands of direct jobs in our state, it also jeopardises many other industries that supply our oil and gas industry and the entire communities that depend on them. … The Administration just doesn’t seem to understand that you can’t just turn a switch on and off with these rigs. When they leave our coast to produce oil in other parts of the country or the world, the jobs that support them go with them.

But isn’t he worried about guarding against another environmental disaster? He addressed that:

We absolutely do not want another spill or one more drop of oil on our coast or in our water, but thousands of Louisianians should not have to lose their jobs because the federal government can’t adequately do their job of ensuring drilling is done safely. The federal government has an entire agency dedicated to monitoring safe drilling. It shouldn’t take them six-months or longer to ensure safety measures are in place and their laws and regulations are being followed.

The environmentalists and many of those who analyse the industry are not so sure about that. Here is what  Tyson Slocum, director of Public Citizen’s Energy Program, a nonprofit consumer advocacy group, said in a statement:

A federal judge’s decision today to block a six-month moratorium on new deep-water drilling projects is extremely shortsighted. If anything, the temporary ban that President Barack Obama declared in May should be made permanent. At the very least, we need a moratorium to allow regulators time to study what went wrong in the Gulf of Mexico so that we know best how to prevent it from ever happening again. Now, Congress needs to step in and act immediately to ensure that the health and safety of oil rig workers and Gulf residents is not compromised by future deepwater drilling. Until a technology is perfected that can stop oil flowing a mile beneath the surface of the ocean, we cannot move forward on deepwater drilling.

Congress has a reputation for delivering a lot of bluster and a little action. But Representative Edward Markey, Chairman of the Select Committee on Energy Independence and Global Warming, has been aggressively taking on the industry in this case. His response was in keeping with that tone:

This is another bad decision in a disaster riddled with bad decisions by the oil industry. The only thing worse than one oil spill disaster in the Gulf of Mexico would be two oil spill disasters. This judge’s decision flies in the face of mounting evidence that there are serious safety risks that must be examined with these 33 deepwater rigs before they start drilling again. …No one is realistically talking about shutting down offshore drilling in the Gulf. We would be doing the oil rig workers and citizens of the Gulf a disservice if we did  not put safety first with these few rigs. The Obama administration is right to appeal, and I fully support that effort.

Between Congress and the Obama administration insisting on the moratorium, one does wonder how far and fast the courts will move to oppose them. But one thing already is clear – nothing is likely to be resolved before the six months of the moratorium are up in November. And by then it could well be a moot point. But the constant niggling at the administration has obviously struck a chord. Salazar has indicated more actions will be taken. It might well have been better for the industry had it simply let the moratorium run its course. But that is only if it does not run on well past the six months with no end in sight.

Related links:

Louisiana wants clean waters, but no moratorium to ensure them - FT Energy Source

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