WRAPUP 10-U.S. court refuses stay in deepwater drilling case

* Court rejects government request on moratorium

* Interior Department reiterates new ban to be issued

* BP shares up almost 2 percent, extend recent rally

(Adds Interior Department statement on ban in para 2-3)

By Jeremy Pelofsky and Tom Doggett

NEW ORLEANS/WASHINGTON, July 8 (BestGrowthStock) – The Obama
administration is preparing to unveil a revised deepwater oil
drilling moratorium after a federal court refused on Thursday
to reinstate an earlier ban imposed after BP Plc’s (BP.L: )(BP.N: )
massive oil spill.

The Interior Department reiterated late on Thursday that it
would issue the new order on deepwater drilling below 500 feet
(152.5 metres) to address the concerns raised by federal
courts. It did not say when the new ban would be issued.

“Based on what we have learned since the BP oil spill, it
has become increasingly clear that companies may not have
adequate containment and response capabilities to respond to a
spill and therefore, as the secretary has said previously, he
will be issuing a new moratorium,” Interior Department
spokeswoman Kendra Barkoff said.

Earlier, the U.S. Court of Appeals for the Fifth Circuit
ruled 2-1 against the administration’s request to stay a lower
court decision lifting the six-month drilling ban, saying the
government failed to show how it would be irreparably harmed if
it were not granted.

The court, based in New Orleans, added that the
administration also “made no showing that there is any
likelihood that drilling activities will be resumed pending
appeal.”

The political stakes in the drilling battle are high for
U.S. President Barack Obama as he tries in the face of public
criticism to show he is responding forcefully to the BP crisis
— it is the biggest offshore oil spill in U.S. history.

The oil industry fears the disaster could put costly
projects on hold.

The White House said on Thursday it had sent BP a list of
questions about the company’s efforts to cap the ruptured well
that has been leaking crude oil into the Gulf of Mexico since
late April and ordered it to respond within 24 hours.
[ID:nWEN6763]

The British energy giant, which had seen its share price
plummet by about half at one point during the 80-day crisis,
extended its market rally in London and New York trading on
Thursday.

Its stock has soared 24 percent in the previous eight
trading days, largely on reports that company executives were
seeking new investors and optimism the worst of the spill might
be over.

The Obama administration imposed the moratorium amid public
criticism over its response to the unfolding disaster and had
argued that its reinstatement was needed to investigate the
cause of the BP well blowout and ensure other rigs were
operating safely.
<^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ For full spill coverage http://link.reuters.com/hed87k BREAKINGVIEWS-BP should focus on governance [ID:nLDE6640I8] Special Report: Should BP nuke well? [ID:nLDE6610K6] Insider TV http://link.reuters.com/ned73m Graphics http://r.reuters.com/qam39k Graphic on deepwater rigs:

http://graphics.thomsonreuters.com/RNGS/2010/JULY/EUOIL.jpg
Graphic on spill’s coastal impact:

http://graphics.thomsonreuters.com/RNGS/2010/JULY/OIL2.jpg
^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^>

Drilling companies, like Hornbeck Offshore Services Inc.
(HOS.N: ) and Diamond Offshore Drilling Inc. (DO.N: ), had pressed
to have the moratorium lifted, saying it was too broad and was
causing significant economic harm.

The administration said it imposed the moratorium to allow
for an investigation of the April 20 drilling rig explosion
that killed 11 men and triggered the spill.

A federal judge stopped the administration’s drilling ban
last month, ruling in favor of the drilling companies.

Analysts said the ongoing battle over the ban had produced
gridlock for the oil drilling companies.

“Effectively the government’s getting what they want by
default. It’s too risky for companies to start up the deepwater
drilling process when you know the rug could be pulled out from
underneath you,” said Dan Pickering, head of research at Tudor,
Pickering, Holt & Co.

GULF ECOLOGICAL, ECONOMIC DISASTER

The head of Royal Dutch Shell’s (RDSa.L: ) U.S. arm said the
company could be interested in some BP assets.

“If BP decided to sell assets clearly there are some things
that would make sense for our portfolio. But that’s a later
decision because of what’s happening now,” Shell Oil Co.
President Marvin Odum told CNBC.

The Philadelphia oil services sector index (.OSX: ) rose more
than 3 percent ahead of the hearing.

Exxon Mobil Corp (XOM.N: ), the largest U.S. oil company,
expects heightened government scrutiny for the industry
following the BP spill, CEO Rex Tillerson told analysts on
Thursday. [ID:nN08211297]

The flow of oil from BP’s leaking well is killing birds,
sea turtles and dolphins, imperiling multibillion-dollar
fishing and tourist industries at a time of high unemployment,
and soiling the shores of all five U.S. Gulf Coast states.

U.S. Attorney General Eric Holder said that suspected
targets in the criminal investigation into the spill may cover
more than BP.

“There are a variety of entities and a variety of people
who are the subjects of that investigation,” Holder said a
taping of CBS’s “Face the Nation” scheduled for broadcast on
Sunday, Politico.com reported. [ID:nN08200956]

“For people to conclude that BP is the focus of this
investigation might not be correct.”

BP also sought to lower expectations after a report it
could stop the well by July 27 — the same day the company is
due to report second-quarter earnings. The target for
completing a relief well to stop the flow had been mid-August.

The head of BP’s Gulf Coast restoration unit, Bob Dudley,
told The Wall Street Journal that stopping the well between
July 20 and July 27 could be possible “in a perfect world with
no interruptions.” [ID:nSGE66706F]

“He (Dudley) gave that as the very, very best scenario if
everything went absolutely superbly according to plan and there
are no interruptions, but the expectation is that it will be
August,” a spokeswoman said.

Those perfect conditions would include good weather — in
the middle of the six-month hurricane season that began on June
1 — and a tropical disturbance prompted BP to evacuate some
workers from four Gulf of Mexico platforms this week.
[ID:nN08223707]

Retired Coast Guard Admiral Thad Allen, who oversees the
U.S. government’s spill response, said that by Thursday the
relief well was just 220 feet (67 metres) from the bottom of
BP’s blown-out well. [ID:nN08210427]

However, a serious storm in the Gulf could disrupt efforts
to contain the spill.

Meanwhile, BP Chief Executive Tony Hayward was on an
international marketing drive to boost the company.

Hayward met an Abu Dhabi state investment fund on
Wednesday, which followed visits to Azerbaijan and Russia.
[ID:nLDE6660B7] Singapore state investor Temasek Holdings
dismissed as “speculation” reports it had talked to BP about a
strategic stake. [ID:nSGE66708P]

BP has committed to a $20 billion fund for clean-up and
other spill costs. Its costs to date have topped $3 billion.

But hard-hit coastal residents say what has been done so
far is nowhere near enough.

“We have been asking for more protection since the oil
began spewing into the Gulf and we are so frustrated because it
seems that BP wants the oil to come on shore,” said Tommy
Longo, mayor of Waveland, Mississippi, where high tides were
washing sheets of the black crude onto the beaches.

(Additional reporting by Mary Rickard in New Orleans,
Matthew Bigg in Mississippi, Rodrigo Campos in New York and
Caren Bohan and Joanne Allen in Washington; Writing by Ed
Stoddard and Patricia Zengerle; Editing by Paul Simao)

WRAPUP 10-U.S. court refuses stay in deepwater drilling case