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BP Oil-Rig Explosion Hurts U.S. Bid to Expand Offshore Drilling

By Jim Efstathiou Jr., Bloomberg, April 27, 2010

President Barack Obama's bid to expand offshore drilling may be set back after a BP Plc rig exploded and sank last week, reminding the public of the danger of oil extraction, environmental and industry groups said.

The April 21 accident, which left 11 workers missing and spilled thousands of barrels of crude oil in waters off the coast of Louisiana, will force the industry to "at least admit that drilling for oil is a very risky, very dirty business," Michael Brune, executive director of San Francisco-based environmental advocacy group Sierra Club, said today.

Democratic Senators Bill Nelson of Florida and Frank Lautenberg and Robert Menendez of New Jersey called for hearings, saying the incident raises "serious concerns," over the industry's safety claims. The accident on BP's Deepwater Horizon rig, about 41 miles (66 kilometers) off the Louisiana coast, created an oil spill 600 miles in circumference, roughly twice the size of Maryland, the Coast Guard said today.

"There's no question that this complicates things a little bit because this plays into the argument from those that oppose offshore drilling," said Tom Moskitis, a spokesman for the American Gas Association, a Washington-based trade group whose directors include representatives of Xcel Energy Inc. and El Paso Corp. "It's going to make it harder to open more areas to production I'm afraid."

Obama proposed last month drilling for oil and gas off the U.S. East Coast and in the Gulf of Mexico 125 miles (201 kilometers) off the west coast of Florida. Obama said the plan, dependent on congressional action, is part of a transition to a new-energy economy that relies less on imported fossil fuel and more on domestic power from the sun and wind.

Climate Legislation

"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," Obama said on March 31 at Andrews Air Force Base in Maryland.

Obama's comments on offshore drilling touch a topic that has divided lawmakers and may complicate efforts to reach a compromise on legislation to slow global warming. Expanding offshore drilling was seen as a way to win support for a compromise climate bill crafted by Senators Lindsey Graham, a South Carolina Republican, John Kerry, a Massachusetts Democrat, and Joseph Lieberman, a Connecticut Independent, Moskitis said.

The rig accident should prompt "a reconsideration of the energy choices that will be made in the climate bill," Brune said.

Coast Guard Efforts

BP intensified efforts to stop an underwater well leak at the accident site that was streaming oil across the Gulf of Mexico, threatening the shoreline and triggering the evacuation of a drilling rig 10 miles away. BP increased the pressure on hydraulic valves on the seafloor to halt the oil leak, U.S. Coast Guard Petty Officer Erik Swanson said today in an interview. BP, which leased the rig from Geneva-based Transocean Ltd., has said the next quickest alternative to curbing the spill may take two weeks.

Winds that scattered the slick northward have reversed and eased and are now "in our favor," reducing the risk that oil will hit shore, Swanson said.

'Tough Questions'

"The tragedy off the coast of Louisiana shows we need to be asking a lot more tough questions of Big Oil," Senator Nelson said in an April 23 statement. "We need to look back over 10 years or so to see if the record denies the industry's claims about safety and technology."

Nelson, Lautenberg and Menendez sent a letter to the chairmen and ranking members of the Commerce, Science and Transportation Committee and the Energy and Natural Resources Committee requesting a hearing on the accident. Since 2006, there have been 509 fires, at least two fatalities and 12 serious injuries on oil rigs in the Gulf of Mexico since 2006, according to the letter.

"This may be the worst disaster in recent years, but it's certainly not an isolated incident," the senators wrote. The accident raises "serious concerns," over the industry's safety claims.

Adding more rigs to drill for oil and gas takes resources away from the development of offshore wind turbines, said Jacqueline Savitz, a spokeswoman for the Washington-based environmental group Oceana. Interior Secretary Ken Salazar plans to issue a decision on the first wind farm in U.S. waters this week.

"When we expand into these areas that used to be protected, we're competing with the development of a clean fuel," Savitz said in an interview. "It makes them both more expensive to develop."

To contact the reporter on this story: Jim Efstathiou Jr. in New York at jefstathiou@bloomberg.net.

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