SCENARIOS-Tighter regulations may follow Gulf oil spill

By Ayesha Rascoe

WASHINGTON, June 1 (BestGrowthStock) – With oil still flowing
uncontrollably into the Gulf of Mexico, the Obama administration
is cracking the whip on the offshore drilling industry.

BP Plc’s (BP.L: ) latest attempt to plug its ruptured underwater
well failed last week, raising concerns that the Gulf oil spill
will continue unabated until August.

The disaster will likely reshape the role government plays in
overseeing oil and natural gas exploration and production off the
U.S. coastlines.

Already, the Interior Department has instituted a six-month
moratorium on deepwater exploratory drilling and called for
potentially costly new safety measures.

This is likely just the start of increased federal scrutiny,
with Attorney General Eric Holder visiting the Gulf Tuesday and
lawmakers exploring their options to prevent similar catastrophes.
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Following is a look at some of the possible actions and new
laws and regulations that may result from the spill.

PUNISHING BP

Depending on the outcome of federal investigations, BP and
other companies involved in the Gulf oil spill could face criminal
prosecution.

The U.S. Justice Department will neither confirm nor deny that
it is looking into pressing criminal charges against BP. But some
lawmakers have called for the department to open an investigation
into whether BP made false and misleading statements to the
federal government regarding its ability to respond to oil spills
in the Gulf of Mexico.

In a worst-case scenario, criminal charges could lead the
Interior Department to strip BP of its ability to operate its U.S.
offshore oil fields. The company would then be forced to have
other companies operate its leases.

The Environmental Protection Agency could also potentially
block BP from doing business with the U.S. government including
securing lucrative contracts to supply fuel to the U.S. military.

DRILLING BAN

Some 33 exploratory rigs will have to cease operations at the
first safe opportunity and stay out of action for the duration of
the ban.

During the ban, a presidential commission will be
investigating the causes of the Gulf accident and issuing
recommendations to avert another tragedy.

It is unclear how soon deepwater exploration will be able to
start again after the ban, if ever. It is all but certain that any
new drilling will be done under intense scrutiny and with
extensive technological and environmental requirements, however.
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Some lawmakers from coastal states have also called for a
complete halt to offshore drilling in any new areas, saying the
risk is just too great for coastal economies.

The Obama administration has called off upcoming lease sales
in the Gulf of Mexico and off the Virginia coast. Also, planned
exploratory drilling in the Arctic this summer has been put on
hold.

MAKING OIL PAY

Congress is not in session this week, but lawmakers were busy
last Friday attempting to raise fees on oil companies. The U.S.
House of Representatives passed legislation that would increase
the fee the industry pays to support the federal Oil Spill
Liability Trust Fund to 34 cents a barrel from 8 cents a barrel.

Lawmakers are still debating how much to raise the amount of
money BP would be required to dole out for economic losses caused
by the spill from the current cap of $75 million. Some lawmakers
have called for a $10 billion cap, while others have said there
should be no cap on damages companies face.

Republican Senators David Vitter and Jeff Session have
introduced a bill that would raise the cap to $150 million or
damages equal to the last four quarters of the responsible
company’s profits, whichever is greater.

While it is unclear exactly how much the cap will be lifted,
it is almost certain that BP and other oil companies drilling
offshore will be responsible for covering much more than $75
million in economic losses in the future.

Democratic Senator Frank Lautenberg of New Jersey has
introduced legislation that would impose an annual fee of $10 for
every acre leased for offshore drilling to raise money for clean
energy transportation technology. Lautenberg said the fee could
raise $1.8 billion a year.

The additional fees and liability risks could hurt smaller oil
and natural gas operators offshore that may not be able to handle
the costs.

Stock Market Analysis

(Editing by Jim Marshall)

SCENARIOS-Tighter regulations may follow Gulf oil spill