Obama loses drilling moratorium appeal

Obama admin loses bid to keep a six-month freeze on offshore drilling.

Updated: Jul 09, 2010, 16:02 PM IST

New Orleans, Louisiana: The Obama administration lost its bid to keep a six-month freeze on offshore drilling, and BP was to outline Friday its next steps to cap the well gushing oil into the Gulf of Mexico.
A federal judge blocked the deepwater drilling moratorium last month after 32 oil companies and local officials argued it was causing irreparable economic harm.

The Fifth Circuit Court of Appeals on Thursday denied the administration`s emergency request to stay that judge`s order pending appeal.

The government failed to show "a likelihood of irreparable injury if the stay is not granted," the appeals panel judges wrote in a 2-1 ruling. The government also "made no showing that there is any likelihood that drilling activities will be resumed pending appeal."

Interior Secretary Ken Salazar has said he will soon issue a new order to block deepwater drilling regardless of how the court ruled, and oil companies have not resumed operations due to the legal uncertainties.

The court noted that Salazar "has the right to apply for emergency relief if he can show that drilling activity by deepwater rigs has commenced or is about to commence." Louisiana Governor Bobby Jindal hailed the court`s decision but expressed concern that the uncertainty has created a "de facto moratorium" which could cost the state 20,000 jobs.

"The federal government has an entire agency dedicated to monitoring safe drilling," Jindal said in a statement. "It shouldn`t take them six months or longer for a new national commission to ensure safety measures are in place and their laws and regulations are being followed."

Meanwhile, US officials ordered BP to outline by Friday afternoon its next steps in the fight to stop the spill, saying efforts to cap a blown out well were entering a "critical stage." After days of high winds hampered clean-up and containment efforts, forecasters are predicting seven to eight days of good weather, and the US administration is keen to press ahead before the Atlantic hurricane season truly gets underway.

BP is preparing to replace the containment cap on the ruptured wellhead with a more secure seal and hook up a third containment ship to the system in a bid to capture nearly all the gushing oil. "The sea is calming, which gives us the window in what... we now understand as an extremely active tropical storm and hurricane season," a senior US official told journalists.

A new well cap would give engineers greater flexibility if they have to move the containment ships quickly because of an approaching storm. But before the administration gives BP permission to go ahead, it wants detailed timetables for the steps ahead and contingency plans in case things go wrong.

BP managing director Bob Dudley said earlier Thursday that the firm was hoping to permanently cap the gushing well ahead of schedule, as early as July 27, when the troubled energy giant reports second-quarter earnings. It is the first time BP has set a fixed target date for ending the disaster, and is ahead of a mid-August time frame outlined by the government for completing two relief wells to seal the leak.

But US officials remained cautious about the date, stung by a string of botched efforts to contain the massive spill now in its 11th week. If the relief wells can be completed ahead of schedule "we can all jump for joy," said Admiral Thad Allen, Washington`s pointman on the disaster, adding the government`s mid-August target was more of a "realistic expectation."

Dudley conceded in an interview with The Wall Street Journal that the company`s "perfect case" deadkine, threatened by the rough weathers of hurricane season, was "unlikely." An estimated two to four million barrels of oil have gushed into the Gulf of Mexico since the catastrophic April 20 explosion destroyed the BP-leased Deepwater Horizon drilling rig and killed 11 workers.

Oil has now washed up on 519 miles (835 kilometers) of shoreline across all five Gulf states -- Texas, Louisiana, Mississippi, Alabama and Florida, forced the closure of vast areas of fishing grounds and threatened scores of coastal communities with financial ruin.

BP said Thursday more than 100,000 spill-related compensation claims have now been filed against the company. Ken Feinberg, the US lawyer overseeing BP`s 20-billion-dollar disaster fund, said there was "no cap" on the fund, and that the firm would still be on the hook for claims payments should they exceed the 20 billion.

Bureau Report