Sen Landrieu Yields to White House on Offshore Drilling

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Sen. Mary Landrieu (D., La.) has yielded in a high-stakes battle with the Obama administration over offshore drilling, allowing the White House’s budget director to win confirmation in exchange for what she called a commitment to provide certainty to the oil and gas industry.

Late Thursday, Landrieu released her hold on Jacob Lew, allowing him to be confirmed as the head of the Office of Management and Budget. She had held up the nominee, demanding that the Obama administration speed up the issuance of permits to drill in the Gulf of Mexico. The U.S. Interior Department had banned deepwater drilling in the aftermath of the BP oil spill and only recently resumed approving drilling permits under more stringent safety regulations.

Some oil and gas drilling executives came away with an impression that Landrieu had struck a deal with the White House and that speedier permit approvals were in store, but the Interior Department gave little indication that a deal had been reached. The conflicting versions of events suggest continued negotiations on drilling in the Gulf of Mexico, which currently accounts for 30% of domestic oil production. U.S. Interior Secretary Ken Salazar appears in Louisiana on Monday to address the industry.

“He will outline the path forward so that permits will be issued and the people of Louisiana can get back to work in this vital industry,” Landrieu said in a statement.

Jim Noe, the general counsel of Hercules Offshore Inc. (HERO) and the head of a coalition of shallow-water drillers, said he understood that the Interior Department had agreed to issue five shallow-water drilling permits this week and to approve a flurry of new permits next week.

But Kendra Barkoff, an Interior spokeswoman, said that Interior’s offshore drilling agency continues to review permits case-by-case on their merits. The Bureau of Ocean Energy Management, Regulation and Enforcement has approved 15 permits to drill new shallow-water wells in the Gulf of Mexico and had six shallow-water permits pending as of Nov. 18. No permits to drill exploratory and development wells in the deep waters have yet received regulatory approval.

Noe also said that he expected the Interior Department to indicate its commitment to offering new leases in 2011 to drill in the Gulf of Mexico. The Interior Department has been expected by the industry to cancel a March 2011 lease sale because it only recently started to conduct an environmental review of the sale and this kind of review can take about six months to complete. The Interior Department has remained silent on its plans.

On Friday, the American Petroleum Institute, which represents the oil and gas industry, urged the Obama administration to get moving.

“It is up to the administration to end the de facto moratorium by expeditiously approving pending plans and permits in the Gulf of Mexico and Alaska,” API President Jack Gerard said in a statement. “It is also incumbent upon the administration to demonstrate a commitment to promptly complete environmental analysis, commence offshore leasing, and complete the offshore oil and gas program for 2012-2017.”

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