"Bipartisan pressure is building on the Obama administration to reconsider its ban on new offshore drilling," FOX News reported Friday.[1]  --  "Following conflicting signs from his administration, Obama said that the moratorium only applies to deepwater wells, as opposed to those in shallow water.  --  But with the ban on new deepwater drilling extended for a six-month period, lawmakers are adamant that a compromise be reached."  --  The issue was framed as jobs vs. safety, with David Vitter, (R-LA) proposing as a compromise "an 'immediate and very rigorous' safety inspection program, while only shutting down those rigs that have problems that can't be addressed immediately."  --  The Houston Conservative Examiner bemoaned "the latest in a series of blows dealt to Texas by the federal government."[2]  --  But David Williamson of the Motley Fool said "industry insiders and investors: believe that the moratorium will affect business "'not very much."[3]  ...

1.

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GULF LAWMAKERS PLEAD WITH OBAMA TO EASE DRILLING BAN, WARN OF ECONOMIC BLOW


FOX News
June 4, 2010

http://www.foxnews.com/politics/2010/06/04/gulf-lawmakers-plead-obama-ease-drilling-ban-warn-economic-blow/

Bipartisan pressure is building on the Obama administration to reconsider its ban on new offshore drilling, with Gulf lawmakers decrying the moratorium as an overreaction to the BP oil spill that will compound the economic damage the disaster is inflicting on their states.

Lawmakers and industry groups warn that the moratorium could cost thousands of jobs and drain hundreds of millions of dollars out of the local economy.  That's on top of the billions of dollars studies predict could be lost from hits to the tourism and fishing industries along the Gulf.

President Obama, in an interview Thursday, defended the decision as necessary to give officials time to figure out what went wrong before the Deepwater Horizon rig exploded April 20 -- killing 11 workers and triggering the historic leak -- and how to prevent such a disaster from happening again.

"Until that happens, it would be irresponsible of me to lift that moratorium," Obama said on CNN.

Following conflicting signs from his administration, Obama said that the moratorium only applies to deepwater wells, as opposed to those in shallow water.

But with the ban on new deepwater drilling extended for a six-month period, lawmakers are adamant that a compromise be reached.  They are also concerned new restrictions on shallow-water drilling could hinder the local industry.

"Obviously we need to learn the lessons from this incident . . . but to completely shut down deepwater (drilling) and even threaten shallow water is a huge economic blow," Sen. David Vitter, R-La., told Fox News on Friday.  "And on top of the recession and on top of the hit that the oil is directly making on our economy, that is another big, big economic blow that is going to knock us down."

Vitter suggested the administration instead start an "immediate and very rigorous" safety inspection program, while only shutting down those rigs that have problems that can't be addressed immediately.  Vitter said he planned to speak with Obama about the issue during his visit to the Gulf coast Friday -- the president's third since the oil leak began.

The senator wrote in a letter to Obama on Thursday that the deepwater drilling ban, which is estimated to affect 33 rigs in the Gulf, could eliminate up to 4,000 Louisiana jobs in the short-term and "possibly 20,000 jobs throughout the course of the year."

Sen. Mary Landrieu, D-La., warned about the danger of a permanent flight of the industry from the region.

"If these big rigs ever leave the Gulf . . . it's not like you can make those every day or every year.  Some of them take years to build.  If they leave the Gulf and go drill under long-term contracts off the coast of Africa, they're not coming home any time soon," she said.

The Louisiana Mid-Continent Oil and Gas Association, a trade group representing oil and gas interests in the Gulf region, estimates that lost wages from all 33 rigs could total $330 million per month.

The National Ocean Industries Association, citing the figures, said in a statement that the six-month moratorium will "make things much worse by putting more Gulf citizens out of work."

Obama was looking to expand offshore drilling before the BP disaster.  The explosion led him to rethink that element of his energy plan, as he delayed or canceled lease sales in the Gulf, off the coast of Virginia and off the coast of Alaska.

The White House on Thursday acknowledged there will be job losses from the moratorium.

"I don't think there's any doubt," Press Secretary Robert Gibbs said.

But he argued that the commission investigating the incident needs to be able to first determine what "failsafe" measures can be implemented to prevent future disasters.

"I think that's important.  The president thought that was important.  I think that the citizens of the Gulf think that's important," Gibbs said.

2.

DRILLING MORATORIUM COULD COST HOUSTON THOUSANDS OF JOBS

By Kay McGarrity Desmond

Houston Conservative Examiner

June 4, 2010

http://www.examiner.com/x-48361-Houston-Conservative-Examiner~y2010m6d4-Drilling-moratorium-could-cost-Houston-thousands-of-jobs

Governor Rick Perry recently contended, “I tell people this president has put a target on Texas’ back.”  The remark came in response to Obama’s decision to cancel NASA’s Constellation Program.

Governor Perry may have been on to something.

The BP oil spill in the Gulf of Mexico has been a public relations disaster for the President.  In an effort to look effective, Obama has been scrambling to take some sort of action ranging from having his Justice Department investigate possible lawsuits against British Petroleum to stopping all current and future plans for offshore drilling for the next 6 months.

This is the latest in a series of blows dealt to Texas by the federal government.  A moratorium on offshore drilling will have a swift and negative effect on Houston jobs, but it is the immediate termination of current project[s] that would have the most extensive effect.

Lee Hunt, the president of the Internationals Association of Drilling Contractors (IADC), estimated that over the next three months anywhere from 25,000 to 80,000 jobs could be lost if the federal government broadens the rules that impede offshore drilling in shallow and deep water.

For Obama it is sharp turnaround from his March announcement to expand offshore drilling.  Though drilling offshore would still have been prohibited on the West Coast and parts of Alaska and other lease sales would have been postponed, Obama’s drilling expansion would have opened up more areas in the Atlantic and the Gulf of Mexico.

The future of new permits is uncertain.  On Wednesday one was issued for a shallow water well only to be revoked on Thursday.  The IADC has sent a letter to Ken Salazar, Secretary of the Interior, what needs to be done to continue operations at sites that already have permits.

Currently, BP is having limited success containing the escaping oil after placing a containment cap over the leaking well.

3.

WILL THE GULF MORATORIUM CRIPPLE THE INDUSTRY?

By David Williamson

The Motley Fool
June 3, 2010

http://www.fool.com/investing/general/2010/06/03/will-the-gulf-moratorium-cripple-the-industry.aspx


Both industry insiders and investors are trying to figure out how much the announced drilling moratorium in the Gulf of Mexico will affect their businesses.  According to Anadarko Petroleum (NYSE: APC), the answer is not very much.

Anadarko is a 25% owner of the Macondo well that's flooding the gulf with oil after Transocean's (NYSE: RIG) Deepwater Horizon rig sank in a ball of flaming glory.  While lead operator BP (NYSE: BP) has received the most public flogging, Anadarko shares have also taken a massive hit, dropping 40% since the crises started on April 20.

Today, however, shares are up as the company reaffirmed its both its sales volume and capital spending estimates for the year.  As CEO Jim Hackett stated:  "We want to assure our stakeholders that we expect to meet our 2010 production targets and have already taken a number of actions to protect the value of our portfolio during the moratorium in the Gulf.  Although our Gulf of Mexico drilling activity has been suspended due to the moratorium, we are evaluating opportunities to reallocate some of the 2010 capital from the Gulf to other areas of our global portfolio, including our numerous onshore liquids-rich opportunities, and we remain committed to our worldwide exploration, appraisal, and development programs."

"Liquids-rich opportunities" likely means the Eagle Ford shale play, where Anadarko has 400,000 acres leased, including some with joint-venture partner St. Mary Land & Exploration (NYSE: SM).

The shift to onshore resources is hardly surprising.  Shell's (NYSE: RDS-A) $4.7 billion purchase of shale assets comes after fellow super-major ExxonMobil's (NYSE: XOM) $41 billion buyout of XTO Energy (NYSE: XTO).  The real question is whether the well-capitalized heavyweights of the industry are happy putting additional capital expenditures into the leasehold they currently have, or are looking to use their downtime in the Gulf to take out some mid-size shale players.

--David Williamson owns shares of BP and is currently losing his friendly wager that the beleaguered oil giant will outperform Exxon in 2010. The Motley Fool owns shares of XTO Energy and has a disclosure policy.