Legal drilling battle looms as Gulf spill spreads

Reuters

SAN FRANCISCO/CHANDELEUR ISLANDS, 23 June 2010: The White House stepped up its legal battle on Wednesday over a key part of its response to the Gulf of Mexico oil spill after a US judge blocked its six-month ban on offshore drilling.

Interior Secretary Ken Salazar said he would order a new moratorium on deepwater drilling "in the coming days" to reinstate a temporary ban aimed at ensuring offshore safety after the worst oil spill in US history.

 

 

"We see clear evidence every day, as oil spills from BP’s well, of the need for a pause on deepwater drilling," Salazar said in a statement late on Tuesday. Salazar will testify to a Senate subcommittee at 1100 EDT (1500 GMT) on Wednesday, along with Michael Bromwich, the new head of the Bureau of Ocean Energy.

The bureau is the new name of the Minerals and Management Service, the troubled regulator blamed for failing to police the energy industry adequately. Bromwich, a former Justice Department inspector general, is assigned to overhaul it.

But President Barack Obama, also dealing with his top general in Afghanistan over insulting comments in a magazine article, postponed a meeting with senators set for Wednesday to discuss the process for passing energy and climate laws this year.

The 65-day-old disaster -- which threatens fishing and tourist industries in the Gulf as well as fragile ecosystems -- has shattered investor confidence in BP Plc, the British-based energy giant blamed squarely for the spill.

The price of BP’s stock, a stalwart of investment portfolios in Britain and the United States, has been slashed in half since the start of the crisis. BP shares fell to 13-year lows in London on Tuesday amid uncertainty about the company’s value as it grapples with the containment, clean-up, lawsuits and mounting costs.

The entire sector is also under scrutiny "given the new politicization of the oil industry," said Michael Cuggino, chief executive of Pacific Heights Asset Management in San Francisco, which holds BP shares. "I think we’re all trying to find out what the company’s worth right now," he said.

"It could go lower certainly. It could also bounce back and the fog clears and you begin to have some clarity with respect to what the problem is."

TOP OF OBAMA’S AGENDA

Seeking to restore confidence and rehabilitate BP’s image, Managing Director Bob Dudley will take over the day-to-day response to the spill from Chief Executive Tony Hayward, who was criticized for a series of gaffes.

The crisis has thrust its way to the top of Obama’s crowded domestic agenda and he has evoked it to rally support for his efforts to craft a clean energy and climate change policy.

The high-stakes legal battle over deepwater drilling began after the BP well ruptured on April 20, spewing millions of gallons (litres) of crude into the Gulf of Mexico and killing 11 workers. Obama imposed the ban while officials checked that other wells were operating safely. But in granting a request by more than a dozen oil services companies for the moratorium to be overturned, the judge challenged its "immense scope."

A new Reuters/Ipsos poll found most Americans still support offshore drilling despite the spill. Other skirmishes are taking place, pitting local against federal officials. Forty miles (65 km) off the Louisiana coast, on the north end of the Chandeleur Islands, a sand dredge sat idled late on Tuesday after the US Fish and Wildlife Service ordered operators to stop pumping sand to create new barrier islands.

The agency wants local officials to put the dredge farther out but they complain that will waste time -- a common complaint about the federal response to the effort. "Adaptive management and common sense are critical to the success of this project if we are going to prevail in protecting our precious marsh," Billy Nungesser, president of Plaquemines Parish, said in a letter to Obama complaining about the delay.