Delays in Drilling Even After Deep Water Drilling Ban is Lifted

**Jones Act** · January 3rd, 2011, 03:22 PM

Oil Companies Hurt by Delays After Gulf Drilling Ban is Lifted

The Gulf oil spill ban, which was lifted several months ago by the Obama administration, continues to hurt big oil companies such as Chevron Corp. and Royal Dutch Shell PLC. These companies have billions of dollars tied up in Gulf projects that are on hold and are paying hundreds of thousands of dollars a day for rigs that aren’t allowed to drill. Smaller operators such as ATP Oil & Gas Corp., which have less flexibility to focus on projects in other regions, have been even harder hit.

The Obama administration says it is simply trying to enforce new safety rules adopted in the wake of the April 20 explosion of the Deepwater Horizon drilling rig, which killed 11 workers on April 20, 2010 and set off the worst offshore oil spill in U.S. history. Environmental groups say the administration is right to take its time because the Gulf disaster exposed the risks of offshore drilling.

The Wall Street Journal reports:

The impact of the delays goes beyond the oil industry. The Gulf coast economy has been hit hard by the slowdown in drilling activity, especially because the oil spill also hurt the region’s fishing and tourism industries. The Obama administration in September estimated that 8,000 to 12,000 workers could lose their jobs temporarily as a result of the moratorium; some independent estimates have been much higher.

The lengthy delays in reviewing new permits have caught the industry off guard. When the Obama administration lifted its ban on deep-water drilling on Oct. 12, many experts had expected a few permits to be issued before the end of 2010, followed by a gradual ramp-up of activity this year.

Among the new rules: Companies must hire outside engineers to certify key well-safety equipment and subject the gear to more rigorous tests. They require more worker training, more documentation and detailed plans of how they would respond to a worst-case well blowout.

But with no deep-water permits yet issued and companies still struggling to comply with new, tougher safety rules, experts say it could be 2012 before drilling approaches pre-disaster levels. Even when it does, projects that were once approved in weeks will likely take months to get past increased regulatory scrutiny.

“There was a sense that we would start to see deep-water permits approved by year end,” said Arun Jayaram, an energy analyst with Credit Suisse in New York. Mr. Jayaram said he now doesn’t expect much deep-water drilling at all this year.

Source:
WSJ – Read Full Story

Published by maritime lawyer Gordon, Elias & Seely, LLP

**skycowboy** · January 3rd, 2011, 03:30 PM

WASHINGTON -(Dow Jones)- U.S. offshore-drilling regulators are trying to clear a path for 13 oil and gas companies to resume drilling in the Gulf of Mexico after the Obama administration suspended their projects following the Deepwater Horizon oil spill.

Amid mounting criticism over the pace of drilling activity in the Gulf, the U.S. Interior Department said Monday these 13 companies could resume their deepwater drilling projects without undergoing additional environmental reviews.

In December, the Interior Department said it would conduct additional reviews for companies submitting new plans or seeking new permits on previously approved plans.
Monday's announcement doesn't represent a shift in policy, but provides a clarification on existing procedures for companies that were already drilling new wells when the moratorium was put in place, a department spokesman said.

"For those companies that were in the midst of operations at the time of the deepwater suspensions, today's notification is a significant step toward resuming their permitted activity," Bromwich said in a statement.
The companies, which include ATP Oil & Gas Corp. (ATPG: 16.91, +0.17, +1.02%), Chevron USA Inc., Noble Energy Inc. (NBL: 84.79, -1.30, -1.51%) and Shell Offshore Inc., will still have to comply with new safety regulations before they revive their deepwater drilling projects.

The Obama administration imposed a moratorium on deepwater drilling in the weeks after the Deepwater Horizon oil spill. Government officials said they wanted to ensure the safety of other drilling projects in the area. The administration lifted the moratorium in October, but lawmakers and energy companies are now criticizing the speed at which the Interior Department is approving projects in both shallow and deep waters of the Gulf.

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