The Obama administration plans to halt new deepwater drilling for six months, suspend exploratory drilling that had been scheduled off Alaska this summer and cancel a lease sale off Virginia.
President Obama also is expected to announce a suspension of upcoming lease sales in the western Gulf of Mexico, after receiving a 30-day review of the Deepwater Horizon drilling rig explosion that caused an ongoing massive leak.
The White House also will propose more rigorous oil development regulations and oversight as part of an effort to boost its response to the disaster as criticism has mounted of its handling of the worsening crisis.
Obama plans to extend the current moratorium on new deepwater drilling, put in place after the Gulf leak began, until the independent commission created to investigate the spill and to make recommendations for improvements can complete its work.
Any applications for exploratory drilling in the Arctic will be suspended until 2011, sources said. That includes suspending preliminary permits that had already been given to Shell to drill in the Chukchi and Beaufort seas off Alaska, which had been scheduled to start in less than 35 days.
A lease sale 50 miles off the coast of Virginia planned by 2012 also will be canceled.
Saying that the administration needs to ensure the lessons from the Gulf disaster are learned, Interior Secretary Ken Salazar today said, "We need to hit the pause button with respect to deep water."
"We simply will not allow any more deepwater drilling until we can ensure it is done safely," Salazar added.
But Salazar also said offshore drilling will continue to be a part of the nation's energy mix. "We also recognize that we see oil and gas development as part of the portfolio for the future," he said. "The place where you have reserves is in the outer continental shelf."
In March, Obama proposed allowing oil and gas exploration for the first time in large swaths of water off the East Coast, in the eastern Gulf of Mexico and potentially off Alaska (Greenwire, March 31).
"The bottom line is this: Given our energy needs, in order to sustain economic growth and produce jobs and keep our businesses competitive, we are going to need to harness traditional sources of fuel even as we ramp up production of new sources of renewable, homegrown energy," Obama said at the time.
But the push for expanded drilling has lost momentum as the millions of gallons of crude wash onshore, devastating wildlife and wetlands on the Louisiana coast. Obama will fly to the Gulf tomorrow to view the devastation.
Late last year, Interior had given preliminary approval to allow Royal Dutch Shell PLC to drill three exploratory wells in the Chukchi Sea and two in the Beaufort Sea with conditions, including "close monitoring" to ensure they meet safety and environmental standards (E&ENews PM, Oct. 19, 2009).
"The Minerals Management Service is committed to responsibly developing offshore energy resources," said MMS Director Liz Birnbaum, who resigned today (see related story), in a statement at the time. "Now that we have approved Shell's plan and reached this important milestone, we will continue to work with Shell to ensure that all activities are conducted in a safe and environmentally responsible manner."
A federal court earlier this month refused to stop oil and gas exploratory drilling in the Beaufort and Chukchi seas off Alaska that is scheduled to begin this summer.
But in March, the administration had canceled upcoming lease sales off Alaska, citing concerns about safety and response efforts.
"The reality is there are issues of significant concerns in the Arctic; those relate to the oil spill response capabilities," Salazar testified today. "We have concerns that what was previously considered to be safe is not as safe as we had been informed."
Environmental groups, which had been campaigning hard to stop the Alaska drilling, welcomed the news.
"Together with people on the Arctic Slope, we extend our gratitude and thanks to President Obama and Secretary Salazar for their decision today to suspend Shell Oil's plans for drilling in the Arctic Ocean this summer," said Cindy Shogan, executive director of the Alaska Wilderness League. "We look forward to working with them to make sure that any development in these pristine waters is only allowed to proceed when it can be done safely."
But Alaska Sens. Lisa Murkowski (R) and Mark Begich (D) condemned the decision.
"The Gulf of Mexico tragedy has highlighted the need for much stronger oversight and accountability of oil companies working offshore, but Shell has updated its plans at the administration's request and made significant investments to address the concerns raised by the Gulf spill," Begich said in a statement. "They make an effective case that we can safely explore for oil and gas this summer in the Arctic."
Shell earlier this month sent a letter trying to assure federal regulators that its exploratory drilling this summer in Alaska would not pose the same environmental or safety problems (Greenwire, May 18).
Murkowski, the ranking member of the Senate Energy and Natural Resources Committee, said she spoke to Shell President Marvin Odum last night and was reassured that the company wants to continue to responsibly develop Alaska's offshore resources but needs a firm commitment that the delay will not go beyond next spring.
"We need to be able to tell Shell that this one-year delay isn't in reality a life sentence," Murkowski said. "Otherwise, this decision puts Shell's entire Alaska program at risk."
Lamar McKay, chairman and president of BP America Inc., did not have a specific comment on the decision while testifying at a House hearing this morning. But he said, "I think it is important that we learn from this incident."
Steven Newman, president and CEO of Transocean Ltd., said "a pause would be prudent" in deep water but added that he thinks that deepwater drilling is crucial to domestic energy production.
Rep. Lois Capps (D-Calif.) applauded the move.
"It's as plain as the nose on your face that the current system for regulating offshore oil activities is broken," Capps said. "To prevent disasters like this from ever happening again, it is imperative that we take stock of where we are before moving forward with any new drilling activities."
House Natural Resources Committee ranking member Doc Hastings (R-Wash.) today said there "may be some real merit to taking a pause in some areas." But he said the administration should be concentrating on the ongoing spill and not future policy. "Rather than focus on things that won't happen for months or years, the president should focus on the task at hand," he said.
Interior Appropriations Subcommittee Chairman Jim Moran (D-Va.), who had opposed the sale off his state's coast, welcomed the news.
"I greatly appreciate the Obama Administration listening to our concerns and wisely pulling back on offshore drilling in light of what is shaping up to be the worst ecological disaster in our nation's history," Moran said in a statement. "This pragmatic decision will help ensure another catastrophe like the Gulf Coast disaster doesn't repeat itself."
Kieran Suckling, executive director of the Center for Biological Diversity, lauded the decision but said it should be only a first step.
"Much more needs to be done, and done right away, including an immediate ban on environmental waivers for oil drilling, removal of BP executives from oil oversight posts in the Department of Interior, and rescinding the Interior's plan to open up new areas on the Atlantic coast, eastern Gulf of Mexico, and Alaska to new offshore oil drilling," Suckling said in a statement.
Reporters Mike Soraghan and Josh Voorhees contributed.