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July 12, 2010

Salazar replaces drilling moratorium with new suspensions

After promising a new deepwater drilling moratorium to replace one rejected by the courts, Secretary of the Interior Ken Salazar today directed the Bureau of Ocean Energy Management, Regulation and Enforcement (BOEM) to issue what he terms "new suspensions of deepwater drilling on the Outer Continental Shelf (OCS)."

At first glance, the new restrictions appear somewhat less restrictive than the original moratorium. Thus they do not suspend activities based on water depth, but on the basis of the drilling configurations and technologies used.

Be that as it may API's President and CEO Jack Gerard offered this reaction to the new policy: "It is unnecessary and shortsighted to shut down a major part of the nation's energy lifeline while working to enhance offshore safety. The new moratorium threatens enormous harm to the nation and to the Gulf region. It places the jobs of tens of thousands of workers in serious and immediate jeopardy and promises a substantial reduction in domestic energy production. No certain and expeditious path forward has been established for a resumption of drilling.

The Secretary says a pause is needed to ensure that oil and gas companies first implement adequate safety measures to reduce the risks associated with deepwater drilling operations and are prepared for blowouts and oil spills.

A statement from the Department of the Interior says that shallow water drilling activities that use different technologies do not present the same type or level of risks as deepwater drilling operations and can continue to move forward if operators are in compliance with all safety and environmental requirements, including new safety and environmental requirements implemented through recent Notices to Lessees. Production activities in federal waters of the Gulf are not affected by the deepwater drilling suspensions.

"More than eighty days into the BP oil spill, a pause on deepwater drilling is essential and appropriate to protect communities, coasts, and wildlife from the risks that deepwater drilling currently pose," said Secretary Salazar. "I am basing my decision on evidence that grows every day of the industry's inability in the deepwater to contain a catastrophic blowout, respond to an oil spill, and to operate safely."

Secretary Salazar's decision to impose new deepwater drilling suspensions is based on his authorities and responsibilities under the Outer Continental Shelf Lands Act (OCSLA) to ensure safe operations on the OCS. The new decision is supported by an extensive record of existing and new information indicating that allowing new deepwater drilling to commence would pose a threat of serious, irreparable, or immediate harm or damage to the marine, coastal, and human environment.

In a decision memorandum to BOEM Director Michael R. Bromwich, Salazar said that a temporary pause on deepwater drilling will provide time to implement recent safety reforms and for:

1. The submission of evidence by operators demonstrating that they have the ability to respond effectively to a potential oil spill in the Gulf, given the unprecedented commitment of available oil spill response resources that are now being dedicated to the BP oil spill;

2. The assessment of wild well intervention and blowout containment resources to determine the strategies and methods by which they can be made more readily available should another blowout occur; and

3. The collection and analysis of key evidence regarding the potential causes of the April 20, 2010 explosion and sinking of the Deepwater Horizon offshore drilling rig, including information collected by the Presidential Commission and other investigations.

In this period, the Department and BOEM will also be issuing and implementing interim safety rules in accordance with recommendations in the 30-Day Safety Report that Secretary Salazar submitted to the President on May 27, 2010.

The suspensions ordered today will last until November 30, 2010, or until such earlier time that the Secretary determines that deepwater drilling operations can proceed safely.

To help inform decisions about deepwater drilling safety reforms Secretary Salazar today also asked Director Bromwich to engage in an active public outreach effort with industry, academic experts, the public and other interested parties, and to prepare a report with recommendations on deepwater drilling.

"I remain open to modifying the new deepwater drilling suspensions based on new information," said Secretary Salazar, "but industry must raise the bar on its practices and answer fundamental questions about deepwater safety, blowout prevention and containment, and oil spill response."

The new suspensions apply to drilling operations that use subsea blowout preventers (BOP) or surface BOPs on floating facilities.

Like the deepwater drilling moratorium lifted by the District Court on June 22, the deepwater drilling suspensions ordered today apply to most deepwater drilling activities and could last through November 30. The suspensions ordered today, however, are the product of a new decision by the Secretary and new evidence regarding safety concerns, blowout containment shortcomings within the industry, and spill response capabilities that are strained by the BP oil spill. Moreover, the new decision by the Secretary establishes a process through which BOEM will gather and analyze new information from the public, experts, stakeholders, and the industry on safety and response issues, which could potentially provide the basis for identifying conditions for resuming certain deepwater drilling activities. In addition, the May 28 moratorium proscribed drilling based on specific water depths; the new decision does not suspend activities based on water depth, but on the basis of the drilling configurations and technologies.

Secretary Salazar's decision memorandum on the new deepwater drilling suspensions is available HERE

To view a Q and A document regarding the suspension decision, click HERE.


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