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Friday, April 30, 2010

Obama Halts New Off Shore Drilling, Talks Gulf Oil Leak

Obama Shelves New Offshore Drilling

President Barack Obama on Friday directed that no new offshore oil drilling leases be issued unless rigs have new safeguards to prevent a repeat of the explosion that unleashed the massive spill threatening the Gulf Coast with major environmental damage.

Florida Gov. Charlie Crist, meanwhile, declared a state of emergency in the state's Panhandle coastal counties because of the threat.

"The oil slick is generally moving in a northerly direction and threatens Florida's coast," Crist said in the order declaring the emergency in Escambia, Santa Rosa, Okaloosa, Walton, Bay, and Gulf counties.

Obama ordered Interior Secretary Ken Salazar to report within 30 days on what new technologies are needed to tighten safeguards against oil spills from deepwater drilling rigs.

"We are making sure any leases going forward have those safeguards," said Obama at a White House Rose Garden event.

Obama's declaration is not expected to have any immediate impact. Under the expanded leasing plan Obama announced a month ago, the first offshore leases would be issued off the Virginia coast in 2012 at the earliest.

It is still unclear what caused the explosion on the BP rig more than 40 miles off the Louisiana coast. About 5,000 barrels of oil a day, 0r 210,000 gallons, are estimated to be spewing from three well leaks on the ocean floor.

Obama said supports domestic drilling for oil and natural gas but that it "must be done responsibly for the safety of our workers and our environment."

Senior adviser David Axelrod earlier defended the administration's response to the April 20 accident, saying "we had the Coast Guard in almost immediately."

He deflected comparisons with the government's slow response to Hurricane Katrina in 2005, telling ABC's "Good Morning America" that such speculation "is always the case in Washington whenever something like this happens."

Axelrod said "no additional drilling has been authorized and none will until we find out what has happened here."

Coast Guard Rear Adm. Sally Brice-O'Hara also faced questions on all three network television morning shows Friday about whether the government has done enough to push oil company BP PLC to plug the underwater leak and protect the coast.

Brice-O'Hara said the federal response led by the Coast Guard has been rapid, sustained and has adapted as the threat grew since a drill rig exploded and sank last week, causing the spill.

She said crews would be unable to skim oil from the surface or burn it off for the next couple of days because of the weather.

Billions in Damages possible

BP, for its part, said Friday it would compensate all those affected by the leak.

"We are taking full responsibility for the spill and we will clean it up and where people can present legitimate claims for damages we will honor them. We are going to be very, very aggressive in all of that," BP CEO Tony Hayward told Reuters.

The cost to the fishing industry in Louisiana could be $2.5 billion while the impact on tourism along Florida's Paradise coast could be $3 billion, Neil McMahon, analyst at investment firm Bernstein, said in a research note on Friday.

The spill could also hit Obama's plans to open some offshore areas of the U.S. where oil exploration is currently barred, to drilling, Hayward acknowledged.

"There may be an industry issue around what may or may not be opened," he said.

However the CEO hopes an effective response to the spill, including a flotilla of around 80 vessels and several aircraft, would reassure people about the risks from drilling.

"It would be bizarre to say it shouldn't influence the debate. How the debate will come out, I think ultimately will be judged by the success we have in dealing with this incident."

Regulations on drilling safety will also come under scrutiny, Hayward predicted.

"Rightly, there will be a reaction. Whenever you have something of this significance, it's right that regulators should look very hard at what they can do to further ensure that something like this never happens again," he said.

He said possible changes could relate to testing of equipment like the blow-out preventer on the ocean floor which failed to operate correctly and shut off the flow of oil, although he added it would be impossible to say how testing could be improved until the cause of the accident was known.

Failures of blow-out preventers are extremely rare and the equipment is regularly tested.

The scale of the disaster could also lead to changes in the rules on who is allowed to operate licenses in the deeper waters of the Gulf of Mexico, analysts said.

The government could limit operating licenses to larger companies, like BP, which have the deep pockets and operational capability to mount large cleanup operations.

The oil slick could become the nation's worst environmental disaster in decades, threatening to eclipse even the Exxon Valdez in scope. It imperils hundreds of species of fish, birds and other wildlife along the Gulf Coast, one of the world's richest seafood grounds, teeming with shrimp, oysters and other marine life.

The leak from the ocean floor proved to be far bigger than initially reported, contributing to a growing sense among some in Louisiana that the government failed them again, just as it did during Hurricane Katrina in 2005. Obama dispatched Cabinet officials Thursday to deal with the crisis.

Members of Congress on Thursday had also issued new calls for Obama to reconsider his plan to open vast stretches of U.S. coastline to oil and gas drilling.

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Sources: Huffington Post, MSNBC, Google Maps

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