East Coast, eastern Gulf oil drilling denied

By Steve Hargreaves, senior writer


NEW YORK (CNNMoney.com) -- The Obama administration formally reversed course on its plan to allow more U.S. oil drilling Wednesday, saying areas in the eastern Gulf of Mexico and off the Atlantic Coast will remain closed for at least seven years due to the BP oil spill.

Prior to the BP disaster this summer, the administration was considering opening up vast new areas to oil and gas development in an attempt to create jobs, reduce energy prices, and help reduce the nations's reliance on foreign oil.

The BP spill changed all that, with the administration enacting a ban on all drilling in the Gulf of Mexico and putting on hold a decision to open up new areas.

On Wednesday, the administration said new oil and gas leases in the Gulf of Mexico that were previously open for drilling will be expanded, but plans for drilling near the Florida coast and off of Virginia are halted until at least 2017.

"As a result of the Deepwater Horizon oil spill we learned a number of lessons, most importantly that we need to proceed with caution and focus on creating a more stringent regulatory regime," Interior Secretary Ken Salazar said on a conference call. "We have revised our initial March leasing strategy to focus and expend our critical resources on areas with leases that are currently active."

Environmentalists applauded the decision.

"Today, anyone who loves our beaches, who fishes in the ocean or who depends on a healthy coastal economy can thank the Obama administration for protecting the Atlantic and Pacific coasts and the west coast of Florida from oil drilling," Margie Alt, executive director for Environment America, said in a statement.

The oil industry said it would cost jobs and lead to more foreign oil dependence.

"This decision shuts the door on new development off our nation's coasts and effectively ensures that new American jobs will not be realized," Jack Gerard, president of the American Petroleum Institute, said in a statement. "It will stifle investment, deny billions in revenue for critical government services and increase our dependence on foreign energy sources."

New drilling was also planned for Arctic waters off Alaska prior to the spill.

The administration said the one new permit it had approved for Arctic drilling will be placed under review, and that no new leases will be granted until more studies are done. It left the door open to more leases being granted after 2012.

It did say that permits for seismic testing will be granted for the Atlantic coast. Very little is currently known about how much oil or gas might lie under those waters.

A bargain gone bad

The eastern Gulf has never been opened for large amounts of drilling, mostly due to its close proximity to Florida's beaches and its use as a military training ground.

But it is thought to contain large amounts of oil and gas, and was one of the areas President Obama was considering opening as part of his pro-drilling stance before the BP spill.

It was long thought that the president was willing trade more offshore drilling in exchange for lawmakers passing a cap on greenhouse gas emissions and increased funding for renewable energy.

That deal has since fallen apart, with the BP spill diminishing appetites for more offshore drilling and the perceived costs of capping greenhouse house gases dooming that measure in the Senate.

Obama imposed a drilling moratorium on the entire Gulf of Mexico just after the BP spill.

That ban on shallow water drilling was lifted in June, and the ban of deepwater drilling, where the BP accident took place, was lifted in October.

Although the ban was lifted, very few new oil drilling permits have been issued. Salazar indicated that the government would focus its attention on approving permits in those areas were drilling is currently allowed.

The United States gets about a third of its 5.5 million-barrel-a-day crude production from the Gulf of Mexico.  To top of page

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