Obama to extend drilling moratorium by 6 months

By Jeff Mason

WASHINGTON (BestGrowthStock) – President Barack Obama will extend a moratorium on new offshore oil drilling by six months on Thursday, delivering a setback to offshore exploration and a potential blow to his own energy overhaul bill.

Obama, who has come under increased pressure to show leadership over the Gulf of Mexico oil spill, will cancel or delay some exploration off the coast of Alaska and other states while identifying ways to intensify oversight of the industry, a White House aide said.

Offshore oil drilling is a key part of Obama’s efforts to rejig the country’s energy policy. But the spill has forced him and fellow Democrats to rethink their support for such an expansion, which many environmentalists oppose.

Obama has established a presidential commission to investigate the causes of the spill, which by government estimates is the country’s largest ever. His announcement on Thursday was meant amplify his administration’s response before that panel draws its own conclusions on what went wrong.

“(Obama) will announce standards to strengthen oversight of the industry and enhance safety, a first step in a process that the independent Presidential Commission will continue,” the aide said on Thursday.

“While the commission performs its work to determine how to prevent this from ever happening again, the moratorium on permits to drill new deepwater wells will continue for a period of six months.”

The Obama administration ordered a halt in new drilling permits after the BP’s oil rig, owned by Transocean (RIG.N: ) (RIGN.S: ), exploded in the U.S. Gulf on April 20.

Obama has come under increasing pressure to stop the spill and halt its environmental and economic consequences for Gulf states. BP, which has been publicly scolded by the president, was working on Thursday to plug the leaking well in a procedure known as “top kill.”

Some U.S. lawmakers have called on the administration to lift the permit ban, at least for exploration in the shallow waters of the Gulf while keeping it in place in deeper waters where BP was operating.

Mike Breard, an analyst at Hodges Capital Management, said the decision would force companies to move rigs to places such as Brazil, increasing the possibility of tanker accidents instead of offshore ones.

“You’re trading a risk of one type of spill for another type of spill,” Breard said.

CANCELLATIONS, RESIGNATIONS

The energy bill, which ramps up domestic production of renewable fuel sources and sets limits on greenhouse gas emissions blamed for global warming, is currently languishing in the U.S. Senate.

Democrats hoped increased drilling would attract Republican support for the bill.

Political fallout has not been limited to legislation. Interior Secretary Ken Salazar said Liz Birnbaum, the head of the agency that oversees U.S. offshore oil drilling, had resigned.

Salazar briefed Obama and his advisers about the contents of a report about the spill and the deadly blast aboard the Deepwater Horizon rig, which was leased by BP (BP.L: ) late on Wednesday.

The president is expected to discuss details of the report and his administration’s response to the spill at a 12:45 p.m. EDT (1645 GMT) White House news conference.

Planned exploration off the coast of Alaska in the Chukchi and Beaufort seas will be put off pending the presidential commission’s review, the White House aide said, while an August lease sale in the western Gulf will be canceled.

A lease sale off the coast of Virginia will also be scrapped “due to environmental concerns and concerns raised by the Defense Department,” the aide said.

Obama’s bipartisan presidential commission is modeled after previous panels that looked into the 1986 explosion of the space shuttle Challenger and the Three Mile Island nuclear accident in 1979.

Stock Market News

(Additional reporting by Tom Doggett; Editing by Russell Blinch and Vicki Allen)

Obama to extend drilling moratorium by 6 months