OFFSHORE DRILLING:

Salazar denies reports of BP permit talks

Greenwire:

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Updated at 1:09 p.m. EDT.

Interior Secretary Ken Salazar this morning denied reports that his agency has entered talks with BP PLC for the company to resume deepwater drilling this summer in the Gulf of Mexico.

But a government source familiar with the issue who spoke on the condition of anonymity because the comment comes before the decision said BP since last October has submitted one permit to drill a well and that the permit is under review.

Salazar rejected reports, however, that any "agreement" had been reached.

"There is absolutely no such agreement, nor would there be such an agreement," Salazar said during a conference call from Mexico City, where he is discussing best drilling practices with industry and Mexican and Brazilian officials. "We treat every company with its applications to move forward in the deep water under the same set of standards as we'll treat everybody else."

Salazar was joined by Interior Deputy Secretary David Hayes and by former Sen. Bob Graham and William Reilly, co-chairmen of the presidential Oil Spill Commission to investigate the BP spill last year in the Gulf.

Salazar said BP will have to meet the same new safety standards as other companies if it decides to resume drilling. New regulations include higher corporate accountability and well integrity standards, worst-case discharge calculations and a contingency plan to cap and divert spilled oil in the case of a runaway well.

"There's absolutely no truth to the rumor out there that there's some agreement with BP," Salazar said.

His statements follow reports from major media outlets over the weekend that BP is seeking permission to continue drilling at 10 existing deepwater production and development wells in the region in July in exchange for stepped-up oversight.

BP did not respond to requests for comment by press time.

Melissa Schwartz, spokeswoman for Interior's Bureau of Ocean Energy Management, Regulation and Enforcement, this morning said the news reports were incorrect and that there are no pending agreements with BP.

"There are no ongoing talks. There are no ongoing negotiations," Schwartz said. "We issue permits based on the merits of the application. We have issued no permits to BP to date."

By law and for proprietary reasons, the agency would not be able to disclose which companies have submitted drilling proposals, or for which companies it is close to issuing permits, the agency said.

BP is the largest leaseholder in the deepwater Gulf, with more than 650 lease blocks in waters deeper than 1,250 feet, according to the company. The London-based firm has eight deepwater projects in the Gulf and produces roughly 400,000 barrels of oil equivalent every day.

In February, the company announced it had joined Chevron Corp., ConocoPhillips, Exxon Mobil Corp. and Royal Dutch Shell PLC as a member of Marine Well Containment Co. LLC, one of two companies authorized to provide oil containment services to companies drilling new deepwater wells in the Gulf.

"Last autumn we made an ongoing commitment to share what we've learned and the experience we gained during the Deepwater Horizon incident response with the world," James Dupree, regional president for BP's Gulf business, said at the time. "We have shared our insights with regulators, participated in public forums, worked directly with industry bodies and published our lessons learned."

More than 50 drilling operations were halted in the wake of the BP spill while Interior sought answers to why BP's blowout preventer failed to stop the Macondo well from spewing nearly 5 million barrels of oil into the Gulf. Hearings this week in New Orleans by the Interior-Coast Guard Joint Investigation Team will seek further data as to why the "fail-safe" device malfunctioned.

Since late February, Interior has issued eight permits for deepwater drilling activities that were banned under a post-spill moratorium lifted last October. It also has approved one new deepwater exploration plan by Shell Offshore Inc. and initiated 30-day reviews of three additional plans that could clear the way for 12 new deepwater wells (E&ENews PM, April 1).

Salazar today announced that Interior next week will be hosting ministers and senior government officials from oil- and gas-rich countries to discuss state-of-the-art safety technologies for containing potential deepwater well blowouts on the outer continental shelves.

The Ministerial Forum on Offshore Drilling Containment will be held in Washington, D.C., on April 14 at Interior headquarters.

Click here for a draft agenda.