Gulf oil spill: Offshore drilling firms threaten to go abroad

Gulf Coast offshore drilling companies, hoping for a stronger partnership with the Obama administration to make drilling safer without hobbling major plans, came away disappointed from a meeting Monday with Interior Secretary Ken Salazar.

In fact, companies and rig servicers raised the stakes by saying they're now actively looking to step up bidding for projects outside US waters as losses pile up.

Secretary Salazar met with the Shallow Water Energy Security Coalition on Monday in the oil mecca of Houma, La. The event highlighted the building tensions between the White House and largely Southern-based drillers, even after drilling moratoriums were lifted.

In May, following the Gulf oil spill, the Obama administration stopped all new drilling. It then ended a ban on shallow-water exploratory drilling after two months and lifted a deepwater drilling ban last month. Yet since then, only a nominal number of permits have been approved, causing critics to charge that a de facto moratorium remains in place.

"The Obama administration is sort of caught in the middle here: Do you go for short-term economic benefits concentrated in one area or the longer-term risk of some other environmental disaster?" says Daniel Fiorino, an environmental policy expert at American University in Washington.

In the wake of the Deepwater Horizon accident, the White House explained its drilling policy involving moratoriums as a safety precaution. But it has come under growing criticism after the acting inspector general for the Interior Department said that the White House edited a key document to suggest that one of the moratoriums had scientific backing, when no scientists had actually reviewed the policy. The editing change was inadvertent and the result of hasty work, the White House said.

While shallow-water drillers have said they're looking for more transparency into the rule-writing process and better cooperation with the Interior Department, it appeared to take a political deal by Sen. Mary Landrieu (D) of Louisiana to get Salazar to come to Houma. Last week, Senator Landrieu agreed to abandon her hold on the nomination of Jacob Lew to head the Office of Management and Budget if Salazar would come. But her promise of a "major announcement" from Salazar fell short Monday.

Instead, the Interior secretary gave few new details, saying only, “We will continue to work with the industry and stakeholders to provide certainty and ensure that everyone understands the rules of the road.”

Environmentalists say the Obama administration, by moving slowly and deliberately on permitting both deep and shallow drill sites, is abiding by a greater national imperative. Now, a key permitting hurdle is new requirements for environmental impact statements, which were routinely waived before the Deepwater Horizon disaster.

"We think it's more important to get [regulations] right going forward, and we also think the industry has had too great a say in how it's been regulated in the past," says Derb Carter, a Chapel Hill, N.C.-based attorney with the Southern Environmental Law Center. "The fact that they did write their own rules, assessed their own risks, and proceeded with little oversight were major contributing factors to the BP spill."

But from the vantage point of drilling companies and rig servicers, the White House has made arbitrary permitting decisions based on political expediency, with little thought for the plight of tens of thousands of oil industry workers whose jobs are in danger.

It was after receiving "no commitments" from Salazar on Monday to enable plans to go forward that these companies and rig servicers said they'd try to step up bidding for projects outside the United States.

"You can't have a $2 million asset, for example, lay idle for six months and expect that strategic asset to be there in the future," said Jim Adams, the interim CEO of the Offshore Marine Service Association, after meeting with Salazar. "The irony is that the same assets that are going to make the Gulf safer are the ones that are looking for overseas markets now."

To critics, the administration's reluctance to involve the oil industry in its permitting deliberations hints at a deeper political ambivalence on the part of the president and his advisers. Specifically, the shallow-water permitting pullback, says Mr. Fiorino of American University, is "puzzling, since people in Louisiana are saying, 'Hey, wait a minute: [The BP oil spill] was not a shallow-well problem.' "

"I'd be interested in hearing how they can justify killing the local economy for no good reason," adds Rory Cooper, a former senior policy adviser to the Energy Department and currently the editor of the conservative Heritage Foundation's Foundry blog. "I think the Obama administration wrote off Louisiana, Mississippi, Alabama, and Florida a long time ago politically, because they don't think they can win those states in 2012."

President Obama's proposal to expand deepwater drilling just a month before the Deepwater Horizon explosion was in large part a political concession to gain Republican support for climate-change legislation. But those political dynamics have fallen apart since the spill, leaving the White House with little motivation to appease the oil industry, says Joshua Busby, a public policy professor at the University of Texas at Austin. "There's nothing to be gained ... politically by rushing to get back out there and drill again."