In offshore drilling freeze, rumblings of a new era for oil industry
The six-month moratorium on new deepwater offshore drilling announced by President Obama Thursday isn't likely to have a big impact on the oil industry – unless it's a sign of things to come.
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On Wall Street, the announcement brought into question whether the valuable deepwater oil and gas leases would remain valuable.Skip to next paragraph
"All these companies' share prices have taken a hit because many have very valuable leases in the Gulf, and the long-term fate of these leases – and whether they will ever drill in them – is now up in the air," says Amy Myers Jaffe, a research fellow at Rice University's Baker Institute. "What the president's announcement has accentuated for the industry in a very concrete way, is that the industry is only as safe as the practice standards of the weakest link."
It's not yet clear how the president's moves will impact energy legislation stalled in the US Senate. Sen. John Kerry (D) of Massachusetts portrayed the accident as yet another reason why Congress needs to endorse climate-energy legislation he supports.
But he also has said that the bill may be dead for this legislative season. That bill would have expanded offshore drilling – a key bargaining chip to win Republican votes.
Environmentalists were enthused by the president's announcements, but cautious about the long term, calling for more study before drilling in the Arctic Ocean.
“No new oil leasing, exploration, or production should take place until the president’s independent commission completes its process and reforms are implemented,” Marilyn Heiman, director of the Pew Environment Group’s US Arctic Program said in a statement.
To Ms. Jaffe of Rice University, the major issue is that the industry must develop new technology for dealing with deepwater blowouts – otherwise the future there could be limited.
"It's all well and good to say the focus is prevention, which is where the industry has been," she notes. "But there's human error, too – and the consequences simply cannot be that you damage an entire coastline of a state."
[Editor's note: President Obama's quotes have been updated to reflect the official transcript of his remarks Thursday.]
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