Monday, May 31, 2010

Obama To Suspend Arctic Oil Drilling Until 2011 $BP

Obama To Suspend Arctic Oil Drilling Until 2011
The Obama administration, under pressure to act over the Gulf of Mexico oil disaster, is expected to announce later today that it will suspend consideration of any applications for exploratory drilling for oil in the arctic oil until 2011.
The decision is a major blow to Royal Dutch Shell PLC (RDSA, RDSA.LN), which had planned an ambitious oil drilling program in the Chukchi and Beaufort Seas off Alaska this summer. Shell has been arguing to regulators that its operations in Alaska would face a lower risk of the kind of problems faced by BP PLC (BP) in its ill-fated Gulf of Mexico operation.
The announcement is expected to be made after Interior Secretary Ken Salazar delivers a report to President Obama Thursday on what can be done to prevent future offshore oil spills.
The administration is also expected to announce that a moratorium on permits to drill new deepwater wells will continue for a period of six months. A planned lease sale off the coast of Virginia will also be canceled in response to environmental concerns and worries raised by the Defense Department, a person familiar with the matter said.

The White House has faced increasingly urgent calls to act against offshore drillers in the wake of last month's sinking of the Deepwater Horizon oil rig, which has left oil gushing into the Gulf of Mexico and threatening Gulf Coast states with environmental disaster.
The decision is sure to upset Alaska lawmakers, some of whom were briefed on it late Wednesday. Sen. Mark Begich (D., Alaska) said in a statement that it would cost Alaska jobs and cause the U.S. to "export more dollars and import more oil from some unfriendly places." He said the halt would "cause more delays and higher costs for domestic oil and gas production to meet the nation's energy needs."
Shell officials appeared resigned to the decision. They acknowledge that Obama can't halt oil production in the Gulf of Mexico, which is crucial to U.S. energy security. But he can stop oil companies drilling in virgin areas if they haven't started yet.
But the decision will be hugely frustrating for the Anglo-Dutch major, which won a slew of legal challenges from environmental groups. It has already started moving equipment up to staging areas in Alaska, ready to commence drilling in July.
In the wake of the Gulf disaster, Interior Department officials said they would subject Shell's drilling plans to a new safety review before deciding whether to issue final permits.
Subsequently, Shell sought to reassure nervous regulators that its Alaska plans would meet the "highest and operational and environmental standards."
In a letter sent earlier this month to the Minerals Management Service, which oversees offshore drilling, it stressed there was a much lower risk of the kind of blowout that destroyed the Deepwater Horizon April 20th, since the wells it planned to drill in Alaska were in much shallower waters and at much lower pressures.
It also said it would heighten safety measures, including testing a critical piece of safety equipment, the blowout preventer, every seven days instead of every fortnight, the industry standard. Shell also argued it would have much more back-up plans in place than BP PLC had when the Deepwater Horizon exploded.
But environmental critics of Shell's plans said the company had still not addressed how it could ensure a rapid oil-spill response in a place as remote as the Arctic. They say clean-up equipment and personnel would have to be transported thousands of miles by barge or helicopter to the spill site, a process that could take days.

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