OFFSHORE DRILLING:

Interior approves second deepwater permit for Gulf

The Obama administration has issued its second deepwater drilling permit for the Gulf of Mexico since BP PLC's oil spill last April.

The permit -- which was approved Friday evening -- allows BHP Billiton to resume drilling that was suspended as part of the deepwater moratoriums Interior Department issued last summer in the wake of the BP spill. Production on BHP's Shenzi facility began in March 2009 and is located about 120 miles south of Houma, La., the company said.

Interior last month issued its first deepwater drilling permit to Noble Energy Inc. since last year's spill. The company seeks to resume drilling in 6,500-foot depths in waters about 70 miles southeast of Venice, La. (E&ENews PM, Feb. 28).

As in the Noble permit, BHP will use a stacking cap designed by Helix Well Containment Group to contain oil in the case of a spill, an Interior official said.

"We are pleased to be resuming work," said BHP spokesman Ruban Yogarajah.

The agency's second permit comes amid increasing pressure from Republicans, oil-state Democrats and industry groups to accelerate permitting in the Gulf to create jobs, boost domestic production and potentially cushion the recent rise in gasoline prices.

House Republicans have called a series of hearings this week to examine permitting in the Gulf and to highlight a new report by the nonpartisan Congressional Research Service suggesting the United States contains the world's largest recoverable resources of oil, natural gas and coal (E&E Daily, March 14).

The permit also comes less than a week before Bureau of Ocean Energy Management, Regulation and Enforcement Director Michael Bromwich is set to testify before House appropriators on his agency's fiscal 2012 proposal to significantly boost funding to strengthen offshore drilling oversight.

The American Petroleum Institute issued cautious praise for the new deepwater permit but said the agency is taking "baby steps" by approving projects that were already operating prior to the BP spill.

"As we said last week, all new permits are welcome," said Erik Milito, API's upstream director.

"The oil and natural gas industry can and will provide even more jobs, higher economic growth and increased revenues to the federal treasury when policymakers pursue options that make resources currently off-limits available," Milito added, "and move forward on permitting and licenses at a pace necessary to support domestic production."

Interior Secretary Ken Salazar earlier this month said resuming a pre-Macondo pace of drilling while implementing new safety measures -- including well integrity standards, worst-case spill estimates and mandatory spill response and containment plans -- will depend on whether the agency receives a requested $133 million bump over current spending levels.

Salazar recently promised to issue a "handful" more permits in the near future now that operators have begun demonstrating the ability to prevent and contain possible oil spills.

President Obama on Friday rejected criticism that his administration is blocking access to oil and gas resources in the Gulf and said oil production from federal waters in the region was at an "all-time high." Critics, however, point out that such production is coming from leases and exploration plans approved under the George W. Bush administration.

"I don't think anybody's forgotten that we're only a few months removed from the worst oil spill in our history," Obama said. "We are encouraging offshore exploration and production. We're just doing it responsibly."

Obama also said he was continuing to pursue a strategy outlined in his budget proposal to encourage nonproducing lease holders in the Gulf and onshore to pursue development of their tracts. The majority of federal mineral leases on public lands and waters lay dormant, and the administration is asking Congress to authorize a $4-per-acre fee to encourage development.

Obama directed Interior to provide an updated report on nonproducing leases within the next two weeks.

"People deserve to know that the energy they depend on is being developed in a timely manner," Obama said.

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