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New Deep-Water Rules on the Horizon

29 September 2010

The Obama administration was set to release its latest set of requirements for offshore oil drillers by tomorrow as the government moves toward lifting its contested ban on deep-water drilling in the Gulf of Mexico.

The Interior Department has said it will release new drilling regulations by the end of September aimed at increasing safety in the industry, which was rocked by the BP oil spill disaster.

The new rules are one of the conditions the department said must be in place before it lifts its temporary ban on exploratory drilling in waters more than 500 feet (150 metres) deep.

The freeze is supposed to expire in 30 November, but the Interior Department has said it hopes to end the ban early.

These new rules will likely encompass many of the recommendations made in the safety report the department released in May, such as requirements for certifying that rigs have working blowout preventers and standards for cementing wells.

The rules may also include requirements for more vigorous testing of equipment and for blowout preventers to have at least two sets of blind shear rams, which are supposed to shut a well in the event of a blowout.

Imposed as BP's ruptured undersea well poured millions of barrels of oil into the Gulf of Mexico, the drilling moratorium already has forced oil companies to postpone projects and will cut into Gulf oil output next year.

Once the ban ends, drilling is still unlikely to resume quickly, Interior official Michael Bromwich said this week.

"Even when the moratorium is lifted, you're not going to see drilling going on the next day, or even the next week," Bromwich told a White House oil spill commission meeting. "It's going to take some time."

Erik Milito of the American Petroleum Institute, an industry group, said oil companies were ready to meet more stringent safety regulations, but the government must approve new permits expeditiously.

"It's going to take a commitment of resources from the government to allow the industry to get back to work," Milito said in a Reuters report.

Shallow drillers have faced significant delays in getting permits since the BP accident, even though the drilling ban does not apply to waters less than 500 feet deep.

Last year the department approved 15 shallow water permits for new wells between June and August. Over the same period this year, the department approved four.

The moratorium is officially forecast to cut an average of 82,000 barrels per day in oil output from the Gulf in next year, according to the Energy Information Administration.

Extended delays would likely push output down further, since that estimate is based on the assumption that drilling will immediately resume at a normal pace after the moratorium.