2nd UPDATE: Salazar: Could Issue New Drilling Moratorium

23rd Jun 2010 19:59

(Updates with more details from hearing, background information.) By Siobhan Hughes and Tennille Tracy Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--U.S. Interior Secretary Ken Salazar, who had imposed a six-month ban on deepwater drilling in the U.S. in response to a vast BP PLC (BP, BP.LN) oil spill only to have the moratorium struck down by a federal judge, told lawmakers Wednesday that he would take a look at issuing a new, scaled-back moratorium in the "weeks and months ahead." "We will in the weeks and months ahead take a look at how it is that the moratorium in place might be refined," Salazar told a Senate Appropriations subcommittee. "It might be that there are demarcations that can be made based on reservoirs where we actually do know the pressures and the risks associated with that versus those reservoirs that are exploratory in nature," Salazar said. "The moratorium order that we will issue will include the criteria under which it is appropriate to take a look at the lifting of the moratorium." His comments came one day after a federal judge in New Orleans struck down the six-month deepwater-drilling ban, saying the Obama administration's policy went too far and was damaging the economy. The ruling threw the Obama administration policy into disarray. White House spokesman Robert Gibbs said the administration would "immediately appeal." The White House on Wednesday referred questions to the U.S. Justice Department, which wasn't immediately available to comment on the status of the appeal. The deepwater-drilling moratorium has been in place since late May, when U.S. President Barack Obama announced that he wanted a ban on new exploratory wells while a presidential commission studied how to ensure that offshore drilling could be made safer. The ruling had the effect of suspending activity at all 33 rigs developing exploratory wells in deep water. It also posed new hardships for the hundreds of oil-services companies, already hurt by an economic recession, that supply the steel tubing, engineering services, drilling crews and marine-supply boats critical to offshore exploration. Sen. Lisa Murkowski (R., Alaska), told Salazar that the Obama administration should distinguish between the rigs that had already completed a significant amount of work and those that were only in the early stages of developing exploratory wells. She suggested that 28 rigs that are already deep into their operations should be permitted to proceed. "There is a distinction between the exploratory wells, the five that are out there, and the 28 others that are in that subsequent phase," Murkowski said. "If there could be a process that allows them to move forward, perhaps, just perhaps, some of what we're seeing in terms of the economic devastation won't be as pronounced." BP's Macondo well was the first exploratory well drilled in Mississippi Canyon 252, a BP spokesman said. He said that he didn't know the pressure in the reservoir, but that the company had evaluated the geology using seismic tests. He said that this "wasn't a completely unknown part of the gulf," and that a production facility was 20 miles away. Sen. Dianne Feinstein (D., Calif.), who chairs the Appropriations subcommittee that funds the Interior Department, said that drilling would resume at all 33 rigs unless the moratorium were reinstated. "This, to me, is deeply troubling," she said. She said that the rigs might not have adequate safety equipment. The debate came at Salazar's first appearance before the Senate Appropriations Committee since the April 20 explosion of the Deepwater Horizon, which BP was leasing to bore a well into the floor of the Gulf of Mexico a mile below the sea. As Salazar was testifying, BP suffered a major setback with the malfunction of a key part of its system to contain the gushing oil. A robot collided with a cap placed on the broken well. If the cap is not replaced quickly, BP will be unable to increase its capture rate to 53,000 barrels a day by next week as planned, the U.S. Coast Guard said. The American Petroleum Institute, which represents the oil industry, said it wouldn't be satisfied with a modification to a deepwater-drilling moratorium, as Salazar appeared to suggest might happen. Deepwater drilling is a growth area, and already accounts for about 25% of all oil produced in the U.S. Cathy Landry, a spokeswoman for the API, said Wednesday that a federal judge's decision to set aside the six-month ban still left the industry with uncertainty. She said, while Feinstein "may be right" that companies "legally have a right to restart" work on 33 rigs, "would they want to?" Salazar appeared on Capitol Hill in order to ask for funding for more inspectors to oversee offshore drilling as the Interior Department reorganizes the agency formerly known as the Minerals Management Service into three separate divisions. He said the Interior Department would need to hire an additional 228 people--adding to 380 existing workers--to staff a newly planned bureau of safety and environmental compliance. Feinstein urged Salazar to make a formal request quickly, since the committee was working on a funding bill and would have to cut other spending requests in order to come up with the money. -Siobhan Hughes, Dow Jones Newswires; 202-862-6654; [email protected] (Susan Daker, Jared Favole and Isabel Ordonez contributed to this article.) (END) Dow Jones Newswires June 23, 2010 14:59 ET (18:59 GMT)