SEPTEMBER 30, 2010, 3:33 P.M. ET.
UPDATE:

(Updates with BP spokesmen being unavailable for comment; adds background)
By Nathan Becker and Tennille Tracy
Of DOW JONES NEWSWIRES

WASHINGTON (Dow Jones)–BP PLC (BP, BP.LN) has agreed to pay $15 million to resolve environmental violations at its beleaguered Texas City refinery, marking the largest penalty ever recovered under the Clean Air Act at a single facility.

The settlement covers violations from two fires that occurred at the refinery in March 2004 and July 2005, as well as a leak in August 2005.

During those incidents, thousands of pounds of flammable and toxic air pollutants were released, forcing people who lived in the surrounding city to take refuge indoors. The settlement also resolves allegations that the oil giant failed to identify hazardous pollutants in documents it submitted to the U.S. Environmental Protection Agency.

The EPA identified these violations after launching an investigation of the refinery following a March 2005 fire that killed 15 people and injured dozens more.

“BP’s actions at the Texas City refinery have had terrible consequences for the people who work there and for those in nearby communities,” said Cynthia Giles, assistant administrator for the EPA’s office of enforcement and compliance assurance.

BP spokesmen were not available for immediate comment.

This most recent settlement between BP and the government occurs as the U.S. Justice Department is looking at possible fines for BP for the Deepwater Horizon oil spill.

Under the Clean Water Act, BP could be penalized up to $4,300 for every barrel of oil that leaked as a result of that spill, potentially resulting in billions of dollars of fines.

The settlement also coincides with the introduction of new offshore drilling rules, unveiled by the U.S. Interior Department Thursday in the wake of the Gulf of Mexico spill.

On Wednesday, incoming BP Chief Executive Bob Dudley unveiled changes designed to improve safety and announced the departure of the senior executive who oversaw drilling operations.

The overhaul creates a safety unit that will have sweeping powers to challenge management decisions if it considers them too risky. It will be headed by Mark Bly, currently BP’s top safety executive and author of the company’s inquiry into the Deepwater Horizon disaster.

Once the government collects the $15 million penalty from BP, it will have recovered $137 million in penalties and fines as a result of safety violations at the Texas City refinery.

BP has also spent about $1.4 billion in corrective actions and will spend about $500 million more to improve safety at that facility.
-By Nathan Becker and Tennille Tracy, Dow Jones Newswires; 212-416-2855; nathan.becker@dowjones.com

–Special thanks to Richard Charter

Boats fighting a fire on a drilling platform in the Gulf of Mexico on Sept. 2. The Interior Department announced new regulations on offshore drilling today.

http://www.nytimes.com/2010/10/01/us/01drill.html?_r=1

By JOHN M. BRODER
Published: September 30, 2010

WASHINGTON – The Interior Department issued new safety and spill-response regulations for offshore oil and gas drilling on Thursday, but gave no hint of when the moratorium on deepwater operations will be lifted.

The new rules – governing blowout preventers, safety certification, well design, emergency response and worker training – provide offshore drillers with clarity on the terms under which drilling will resume when the current freeze ends. The main conditions had already been telegraphed by the department in a safety report issued in May and in two notices to offshore operators handed down in June, in response to the blowout of a BP well in the Gulf of Mexico on April 20.

That accident, which resulted in the worst offshore oil spill in American history, killed 11 rig workers and spewed nearly five million barrels of oil into the Gulf of Mexico.
Interior Secretary Ken Salazar presented the new rules in a speech Thursday morning, calling them a fundamental change in offshore operations that will guide all future leasing and development decisions in the gulf, the Arctic and elsewhere.

The rules take effect immediately under emergency rule-making powers.

In an interview, Mr. Salazar said he expected oil companies to complain, but to quickly come into compliance.

“We’ll hear from industry that the regulations are too onerous, but the fact is, it’s a new day,” he said. “There is the pre-April 20th framework of regulation and the post-April 20th framework, and the oil and gas industry better get used to it, because that’s the way it’s going to be.”

The secretary pointedly refused to say when or under what conditions he would lift the drilling suspension, which has caused economic hardship along the Gulf Coast and political headaches for the Obama administration in Washington.

“We will lift it at our own time and when we’re ready, and not based on political pressure from anyone,” Mr. Salazar said.

The moratorium on deepwater drilling, imposed in late April, is scheduled to end on Nov. 30, but officials have signaled that it would probably be eased before then.

Senator Mary Landrieu, Democrat of Louisiana and a strong ally of the oil industry, is blocking the confirmation of Jack Lew as the new White House budget director until the moratorium is lifted or substantially eased.

Michael R. Bromwich, director of the Bureau of Ocean Energy Management, Regulation and Enforcement, the Interior Department office that now polices offshore drilling, is to deliver a report to Mr. Salazar on Thursday providing a blueprint for safely resuming drilling. Mr. Salazar said he would review the report before making any decision on when that might happen.

Mr. Bromwich indicated earlier this week that even after the formal moratorium is lifted, it may be weeks or even months before his agency grants permits allowing the 33 idled deepwater rigs in the gulf to start up again. Permits will be issued only after companies provide new spill response plans detailed certification of the performance of critical equipment such as blowout preventers.

The regulatory agency is also undertaking a new environmental assessment of the impact of oil drilling on the gulf ecosystem, potentially causing further delays.

Oil industry executives, impatient to get back to work in the gulf, expressed resignation about the new rules, saying they were largely expected and can be met, at some cost in time and money.

Their deeper concern, they said, is that the new permitting process will drag on for months, forcing them to furlough workers and seek alternate supplies of crude.

Marvin E. Odum, the president of Shell Oil Company, said in an interview that his company had weathered the moratorium so far by renegotiating contracts on its seven idle deepwater rigs in the gulf, allowing it to keep most of its skilled workers on the payroll.

“That helps with the immediate-term cost impact,” he said. “The big concern is the lost production, and that grows month to month.”

He said he believed Shell and other major oil companies would have little trouble meeting the new conditions, adding that the company already meets the terms of the new guidance on safety and well design in its deepwater operations around the world.

“The piece I’m more concerned about is that when the moratorium does get lifted you won’t be able to get back to work until the permit system starts to flow again,” Mr. Odum said. “Will it be weeks, months? That’s the big question.”

Special thanks to Richard Charter