Deepwater Drilling 'Open for Business'

At last, Gulf of Mexico area politicians and business groups have what they’ve been pressing for—an end to the Obama administration’s ban on deepwater drilling in the Gulf of Mexico.

The ban, put in place after the April blowout of the Deepwater Horizon oil rig leased by BP, was scheduled to run through the end of November. But the administration lifted it today, more than a month early, after intense pressure from politicians as diverse as Louisiana’s Republican Governor Bobby Jindal and Mary Landrieu, its Democratic Senator.

“We are open for business,” said Ken Salazar, Secretary of the Department of the Interior, which had declared the moratorium. “We will be taking applications for deepwater drilling.”

But, he said, drilling at the 36 deepwater rigs now in the Gulf of Mexico, and any future rigs, will be done under much tougher oversight than was in place prior to the BP disaster, which killed 11 workers. The new rules govern blowout preventers, safety certification, well design, emergency response, and worker training—all issues cited by BP in its own report on the disaster that has cost the company billions of dollars.

Companies that drill in deep water will have to provide plans showing they have effective blowout preventers—resources to beat back a blowout, should one occur—and safety provisions for workers aboard any rig. Oil company officials will have to provide written documentation that they have met the safety standards.

“Some will say that…the bar we have set is too high,” Salazar said. “They want us to ignore the new reality and go back to business as usual.”

Gulf Coast politicians and business leaders have been concerned that a continued moratorium could cost thousands of good jobs. They feared oil companies drilling in deep Gulf waters would depart for other areas of the world. And they worried that the small-business people who relied on ferrying personnel and material to the rigs in the Gulf would be put out of business if the moratorium dragged.

On word that the moratorium had been lifted, Landrieu offered cautious praise.

“I applaud the administration for taking a step in the right direction by lifting the deepwater drilling moratorium," Landrieu said in a statement. "Today’s decision is a good start, but it must be accompanied by an action plan to get the entire industry in the Gulf of Mexico back to work. This means that the administration must continue to accelerate the granting of permits in shallow and deep water and provide greater certainty about the rules and regulations industry must meet."

The Obama administration had expected the moratorium to cost some 23,247 jobs. The Louisiana Mid-Continent Oil and Gas Association expected the losses to be even worse, predicting that it would cost 46,000 jobs. A report in September said some 8,000 to 12,000 jobs had been lost, with most of those job losses occurring at smaller businesses.

Michael Bromwich, head of the Bureau of Ocean Energy Management, Regulation, and Enforcement, which is tasked with regulating offshore drilling, held town-hall meetings and meetings with politicians and industry leaders from around the Gulf before recommending the reopening of deepwater drilling. He held forums in several Gulf of Mexico locations, including New Orleans and Houston.

“The risks of deepwater drilling have been reduced sufficiently,” he said.

But there was likely another factor in the timing of the moratorium’s end, the coming election. The drilling ban had been deeply unpopular along the Gulf Coast. And analysts had predicted just such a move by the administration as the one made this afternoon.

“There’s a 100 percent chance it will happen around the midterm elections. The senators just need to get a sense of public feeling,” Brian Uhlmer, director of research for Pritchard Capital Partners LLC, said in August.

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Kent Bernhard Jr. is News Editor of Portfolio.com