It didn't take long. As last week arrived, the Obama administration set off cautious optimism among offshore drilling contractors by approving its first deepwater drilling permit for the Gulf of Mexico since BP's (NYSE: BP) Macondo well tragically blew out last April. But by Friday, the same administration had jammed on its brakes, indicating to the contractors that the permitting process wouldn't be nearly as speedy as they'd hoped.
The issuance early in the week went to Noble Energy (NYSE: NBL), which will restart a well in 6,500 feet of water 70 miles into the Gulf that it had been working on at the time of the catastrophe. It followed an order last month by federal judge Martin Feldman requiring the Interior Department's Bureau of Ocean Energy Management, Regulation, and Enforcement to act on five pending deepwater permit applications within 30 days. Another two applications were later added to the mix.
The permit followed the October removal by the administration of a deepwater moratorium it had ordered in May. But despite the passage of four months, no prior permits had been issued. In writing his order responding to a lawsuit by Ensco (NYSE: ESV), a global drilling contractor, Judge Feldman noted that before the BP tragedy the permitting process had generally required only two weeks. He called the recent delays "increasingly unreasonable."
Nevertheless, whether they were intended to flex muscles at the judiciary, Interior Department court filings on Friday afternoon quarreled with the quality and completeness of the drilling applications. The department also said that the judge's order inappropriately truncated the normal negotiations between the companies and regulators, warning that the applications may therefore be rejected.
When last week's permit was issued, Michael R. Bromwich, director of the Ocean Energy Management bureau, maintained that it was not a response to political pressures. He also said that the Interior Department was preparing a legal response to Judge Feldman's ruling based on its disagreement with the order and noted that Noble had met new safety and environmental rules.
Among the safety measures related to the potential for deepwater blowouts, an industry consortium led by ExxonMobil (NYSE: XOM), and also including Chevron (NYSE: CVX) and ConocoPhillips (NYSE: COP), has developed a response system designed to cap a well in up to 8,000 feet of water and to scoop up 60,000 barrels of leaked oil each day. In resuming its drilling, however, Noble will employ a competing system developed by Helix Energy Well Solutions (NYSE: HLX).
Now, just a week after Noble received its permit, I'm inclined to quote Senator Mary Landrieu, (D-La.), who called it "long overdue." She then added, "I hope that this permit is the first of many to come, and I will continue to use every lever at my disposal to ensure that it is."
Better grab a lever, Senator.
