Deep-water drilling in the Gulf of Mexico could resume within weeks

Path Clears for Deep-Water Drilling

By BEN CASSELMAN And DANIEL GILBERT
Deep-water drilling in the Gulf of Mexico could resume within weeks under a policy announced Monday by the Obama administration, which has come under increasing criticism from the oil industry and politicians in the region over the impact of the drilling halt.

Oil and gas exploration in the Gulf's deep waters has been stopped since May, when President Barack Obama announced a six-month drilling moratorium in the wake of the April explosion of the Deepwater Horizon drilling rig, which killed 11 workers and set off the worst offshore oil spill in U.S. history.

The administration lifted the ban in October—a month ahead of schedule—but hasn't issued any permits for new deep water oil wells.

On Monday, The Wall Street Journal reported that the delay has hurt both the oil industry, which has seen billions of dollars in projects put on hold, and the Gulf Coast's economy, which has been hit hard by the slowdown.

The administration said Monday that it would clear the path for 13 companies, including Chevron Corp. and Royal Dutch Shell PLC, to resume work on a handful of wells that were already approved and under way when the moratorium took effect. The 16 projects must still comply with strict new safety rules announced after the Deepwater Horizon disaster, but in most cases won't be subjected to new environmental reviews.

The announcement means that some drilling could resume in a matter of weeks, although the exact timing remains unclear. But the policy doesn't affect the more than a dozen permit requests that were pending when the moratorium took effect or have been filed since. Those must still undergo enhanced environmental reviews.

GE Bets on Deep Water Oil With $1.3 Billion Wellstream Bid Access thousands of business sources not available on the free web. Learn More Michael Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, the newly formed federal agency in charge of offshore drilling, said projects that were interrupted by the moratorium deserved special consideration.

"For those companies that were in the midst of operations at the time of the deep-water suspensions, today's notification is a significant step toward resuming their permitted activity," Mr. Bromwich said in a statement.

Oil companies in recent weeks had become increasingly pessimistic about a quick resumption of drilling in 2011, with some predicting that the wait would last into the second half of the year. On Monday, the industry praised the decision but said more details were needed.

"It appears to be a step in the right direction," Randall Luthi, president of the National Ocean Industries Association, a trade group, said in an interview. However, he said, "there are still major questions and some confusion among the companies about what is being required."

Elgie Holstein, a staff expert for the Environmental Defense Fund, an environmental group, said he didn't see any reason for projects halted by the moratorium to be treated as special cases. But he said the new policy was reasonable as long as regulators enforced the new safety and environmental rules. "I actually thought it was a balanced response," Mr. Holstein said. "It does relieve some of the pressure that the Gulf Coast has been feeling from an economic standpoint."

The administration has come under increasing pressure from Republicans and some Gulf Coast Democrats to allow drilling to resume. On Monday, lawmakers reacted cautiously to the announcement. Sen. Mary Landrieu, a Louisiana Democrat who has been a vocal critic of the administration's drilling policy, said some projects could still be thwarted.

"We need to know more about the conditions under which drilling will be allowed to resume and make sure those conditions don't actually undermine the intent," Ms. Landrieu said in a statement.

Doc Hastings, the Washington Republican who is incoming chairman of the House Natural Resources Committee, was also skeptical.

"Today's announcement by BOEMRE only ensures the possibility that previous drilling activity can resume at some point in the future if certain requirements are met," Rep. Hastings said in a statement. "The Obama administration can prove it's serious about resuming drilling in the Gulf by actually issuing permits and allowing people to return to work."

—Siobhan Hughes and Tennille Tracy contributed to this article.