U.S. Says No Deal With BP As It Seeks To Drill Again
Author: Mica Rosenberg and Ayesha Rascoe
Interior Secretary Ken Salazar, addresses the media in Mexico City April 4, 2011.
Photo: Reuters/Jorge Dan Lopez
The U.S. government lashed out at companies at the heart of last year's Gulf oil spill on Monday, denying reports it had negotiated a deal with BP to resume drilling.
The tough talk by Interior Secretary Ken Salazar highlights the Obama administration's sensitivity toward letting BP -- the biggest holder of deepwater acreage in the Gulf of Mexico -- drill there again a year after an explosion on the Deepwater Horizon rig led to the worst offshore oil spill in U.S. history.
The blast killed 11 workers, ruptured the company's underwater Macondo well and unleashed millions of barrels of oil into the Gulf of Mexico.
Since the government lifted a ban on drilling in the region in October established after the spill, BP has submitted one permit application to drill one well, said a source who spoke on the condition of anonymity because the request was under review.
British media reported on the weekend that BP is in talks with Washington to restart drilling at existing fields.
"There is absolutely no such agreement nor would there be such an agreement" with BP to resume drilling, Salazar said at a briefing while visiting the Mexican capital.
Salazar said that BP would need to go through the same review process to resume drilling as other companies.
"If they follow all the rules and they actually submit a development plan that is deemed safe and best practice, they're going to get issued a permit," said Ken Medlock, an energy fellow at the Baker Institute at Rice University in Houston.
"It's obviously not going to be without scrutiny," he said.
Salazar also condemned rig operator Transocean Ltd for granting bonuses based on what it said last week was an "exemplary" safety record in 2010, notwithstanding the deaths from rig blast. One of the leading members of a presidential panel on deepwater drilling said the firm "just doesn't get it".
GULF KEY TO BP
U.S. legal probes into the accident are ongoing, but a presidential commission earlier this year released a report blaming the disaster on systemic safety lapses and a series of mistakes made by BP and its contractors.
Months after lifting a temporary ban on deepwater drilling, the bureau has begun approving permits for such activity, clearing less than a dozen wells in the past few weeks.
BP is a partner in a well operated by Noble Energy, which received the first permit since the end of the ban.
BP has several drilling permit applications pending, according to a presentation at a conference last week by BHP Billiton, one of its partners in the projects.
Last week, BP America CEO Lamar McKay said the company was "working constructively" with regulators to meet new rules.
"We are encouraged by both verbal and written messages we have gotten from regulators," McKay had said.
The region is key to the company's future growth. "The Gulf of Mexico is by value about 15 percent of the company at the moment so it's important that they drill there to replace reserves," Investec analyst Stuart Joyner said.
"If you look at the company's reputational issues, it's important that they're seen resuming business in the Gulf of Mexico alongside other participants. It's very much a psychological issue," Joyner said.
TRANSOCEAN "JUST DOESN'T GET IT"
Salazar was in Mexico with officials from the White House commission that investigated the BP oil spill to discuss offshore drilling in the Gulf.
They condemned safety bonuses provided by Transocean, which said in a filing last week that 2010 was its best year for safety on record.
"In my own view, 2010 was probably the greatest year of pain in terms of oil and gas development in the deep water all across the world," Salazar said, telling reporters Transocean was "at some fault" for the spill.
William Reilly, co-chairman of the oil spill commission, called Transocean's comments "embarrassing".
"It's been said with respect to the disaster that some companies just don't get it -- I think Transocean just doesn't get it," Reilly said.
A Transocean official said in a statement the wording in its proxy statement "may have been insensitive" but was not intended to minimize the deaths of its employees.
The U.S. offshore drilling regulator is holding a hearing this week on the spill, but it was unclear whether Transocean employees would participate.
Two top Democratic lawmakers on Monday urged the government to examine what role worker fatigue at Transocean may have played in the spill.
Representatives Henry Waxman and Diana DeGette, leading Democrats on the House Energy and Commerce Committee, asked for an investigation of whether moving from 14-day to 21-day shifts on the rig may have helped to cause the massive spill.
(Editing by Alden Bentley)