Companies ask to end drilling moratorium; head of spill victims fund pledges fast payments

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Head of spill victims fund pledges fast payments

NEW ORLEANS — As a federal judge mulls whether to lift a six-month moratorium on new deepwater drilling in the Gulf of Mexico, the administrator of a $20 billion fund to compensate oil spill victims pledged Monday to speed payment of claims.

Judge Martin Feldman said he will decide by Wednesday whether to overturn the ban imposed by President Barack Obama’s administration after the Deepwater Horizon rig explosion off the Louisiana coast.

During Monday’s two-hour hearing in New Orleans federal court, plaintiffs’ attorney Carl Rosenblum said the six-month suspension of drilling work could prove more economically devastating than the spill itself.

“This is an unprecedented industrywide shutdown. Never before has the government done this,” Rosenblum said.

Government lawyers said the Interior Department has demonstrated that industry regulators need more time to study the risks of deepwater drilling and identify ways to make it safer.

“The safeguards and regulations in place on April 20 did not create a sufficient margin of safety,” said Justice Department attorney Guillermo Montero.

Meanwhile, Kenneth Feinberg, who has been tapped by the White House to run the fund set up to help people harmed by the spill, said many people are in desperate financial straits and need immediate relief.

“We want to get these claims out quicker,” he said. “We want to get these claims out with more transparency.”

Feinberg, who ran the claim fund set up for victims of the Sept. 11, 2001, terrorist attacks, said BP has paid out over $100 million so far. Various estimates place total claims so far in excess of $600 million.

BP said it has spent $2 billion fighting the spill for the last two months and compensating victims, with no end in sight. It’s likely to be at least August before crews finish two relief wells that are the best chance of stopping the flow of oil.

The British oil giant released its latest tally of response costs, including $105 million paid out so far to 32,000 claimants. That figure does not include the $20 billion fund BP PLC last week agreed to set up for residents and businesses hurt by the spill.

Also Monday, the government sent BP a $51.4 million bill for the response effort. BP has already paid two other bills totaling $70.9 million.

Shares of BP, which have lost about half their value since the April 20 oil rig disaster that killed 11 workers, fell nearly 3 percent Monday in New York trading to $30.86. The rig was owned by Transocean Ltd. but run by BP.

BP chief executive Tony Hayward canceled a scheduled Tuesday appearance at a London oil conference, citing his commitment to the Gulf relief effort. The last-minute pullout followed stinging criticism of Hayward’s attendance at a yacht race on the Isle of Wight off the coast of southern England on Saturday.

President Barack Obama’s administration has also been struggling to show it is responding forcefully to the spill, which has gushed anywhere from 68 million to 126 millions gallons of oil into the Gulf.

As part of that effort, the Interior Department halted the approval of any new permits for deepwater drilling and suspended drilling at 33 existing exploratory wells in the Gulf.

But a lawsuit filed by Hornbeck Offshore Services of Covington, La., claims the government arbitrarily imposed the moratorium without any proof that the operations posed a threat. Hornbeck says the moratorium could cost Louisiana thousands of jobs and millions of dollars in lost wages.

During Monday’s hearing, Feldman asked a government lawyer why the Interior Department decided to suspend deepwater drilling after the rig explosion when it didn’t bar oil tankers from Alaskan waters after the Exxon Valdez spill in 1989 or take similar actions in the wake of other industrial accidents.

“The Deepwater Horizon blowout was a game-changer,” Montero said. “It really illustrates the risks that are inherent in deepwater drilling.”

Feldman asked Rosenblum if it’s true that a recent Securities and Exchange Commission filing by Hornbeck suggests “basically things are pretty good” for the company and it can survive the moratorium. Rosenblum said the full impact of the shutdown cannot be calculated.

“Thousands of businesses will be affected,” he said. “These dominoes are falling as we speak.”

Louisiana Gov. Bobby Jindal’s office filed a brief supporting the plaintiffs’ suit. A lawyer for the state told Feldman that the federal government did not consult Louisiana officials before imposing the moratorium, in violation of federal law.

Catherine Wannamaker, a lawyer for several environmental groups that support the moratorium, said six months is a reasonable time for drilling to be suspended while the government studies the risks and regulations governing the industry.

“The risks here are new,” she said.

Government lawyers said the plaintiffs haven’t seen much of the data that served as the basis for the Interior Department’s decision to suspend drilling operations.

Secretary of the Interior Ken Salazar “wants to be sure deepwater drilling is as safe as we all thought it was on the day before the incident on April 20,” said government lawyer Brian Collins.

U.S. District Judge Nancy Atlas in Houston listened to Monday’s hearing over the telephone. Atlas is presiding over a similar case against the Interior Department filed by Diamond Offshore Co., which operates a fleet of drilling rigs.

Along the coast Monday, some cleanup workers reported progress.

On Barataria Bay off the coast of Louisiana, thick globs of oil that washed onto marshy islands a week ago had disappeared, leaving a mass of stained bushes and partly yellowed grasses.

Blackened lengths of boom surrounded the islands, which were still teeming with brown pelicans, gulls and other seabirds, some with visible signs of oil on their plumage. Nearby, shrimp boats that have been transformed into skimmers hauled absorbent booms across the water’s surface, collecting some of the remaining oil.

Crews aboard Navy and Coast Guard boats teamed with local fishermen using booms to funnel oil into a vessel and haul it away.

This is the area’s new economy — dependent as ever on the sprawling bay, but now those who made their living harvesting its bounty are focused on its healing.

“It looks 10 times better than it did a week ago,” said Carey O’Neil, 42, a commercial fisherman idled by the spill who now provides tours of the damaged areas for media and government observers in his 23-foot boat anchored in Grand Isle. “But what impact will this have for the future — two, three, four, even 10 years? That’s what worries me.”

The number of oil-soaked birds in the area is down significantly, from 60 or 70 a day at the triage center on Grand Isle to more like seven or eight, said Steve Martarano, a spokesman for the U.S. Fish and Wildlife Service.

“We’ve been sending 55 boats a day out pretty much since day one, when the oil hit this area, and so we feel like we’ve really made inroads,” he said.

Associated Press writers John Flesher and Ramit Plushnick-Masti in Barataria, La., and Robert Barr in London contributed to this report.