'Risk/reward equation' used in building gulf well, BP worker testifies

A BP drilling engineer involved in the planning of the Macondo well declined to testify before a federal investigative panel Friday, invoking through his lawyer his Fifth Amendment right against self-incrimination.

Mark Hafle, who was involved in some of the most heavily scrutinized decisions about the well, became the third BP employee to invoke his constitutional right not to answer questions from the panel. Hafle had testified in an earlier round of hearings.

As Friday's hearing proceeded, another BP employee who wrote one of the most widely derided e-mails to surface in investigations of the Deepwater Horizon disaster testified under oath and gave a more benign explanation of the document.

In an e-mail four days before the April 20 blowout in the Gulf of Mexico, drilling engineer Brett Cocales addressed one of the most controversial decisions in the construction of the Macondo well, saying in part, "who cares, it's done, end of story, will probably be fine."

In the e-mail, he went on to defend the decision based on "the risk/reward equation."

Congressional investigators have cited the decision as evidence that BP might have cut corners to save time and money. Testifying before a separate federal investigative panel in Houston on Friday, Cocales said, "Those are my words."

But he said they had nothing to do with financial considerations.

Cocales said he was weighing engineering risks associated with alternative approaches, and he thought less risk was associated with the course BP took.

At the time, he said, he thought the "worst-case scenario" was that BP would have to do remediation work on the well, not that safety would be jeopardized, he testified Friday.

But he acknowledged that there "was still a risk of channeling" - a term that refers to gaps in the cement lining between the steel well pipe and the rock formation that could give gas a path to escape.

At issue was the number of devices called centralizers installed to center the pipe in the well. Halliburton, a contractor to BP, recommended 21 but BP used six. In a report to BP two days before the explosion, Halliburton warned that with as many as seven centralizers the well could have a "SEVERE" gas flow problem.

Cocales on Friday became the fourth BP employee to testify that, before the blowout, he did not read that warning.

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Great Plains oil pipeline plan sparks grass-roots activism, high-stakes lobbying

A massive feat of engineering by any measure, the Keystone pipeline expansion project would transport crude oil close to 1,700 miles from "oil sands" in the icy reaches of Hardisty, Alberta, down through the Great Plains to the refineries of Port Arthur, Tex. In doing so, the giant pipe also promises to allay some fears about U.S. energy security: The oil will come from a trusted ally, and its cross-continental path avoids visions of another deep-sea drilling disaster.

But the decision on whether to issue a permit to the project, opposed by environmental groups, rests with the State Department, which has little expertise in engineering or environmental matters. And reflecting the chaos of U.S. energy and environmental policy, the proposed pipeline is pitting Montana landowners against pipe fitters in Nebraska and creating unlikely allies of Nebraska ranchers and chieftains from Alberta's indigenous communities.

On one hand the move to extend TransCanada's existing pipeline - which runs from Hardisty to the Illinois towns of Wood River and Patoka and has a daily capacity of 435,000 barrels - offers obvious benefits. The extension will generate 13,000 construction and 7,000 manufacturing jobs in the United States over roughly two years, according to the company, and could transport as much as 500,000 additional barrels of oil a day. It also could help stabilize electricity prices for several rural co-ops along the route.

"Everyone's saying we've got to get less dependent on Middle East oil, and this is a perfect opportunity to bring this oil in," said William Hite, general president of the United Association, the union for plumbers and pipe fitters.

But the crude comes from an area known as "tar sands" or "oil sands," where operators extract a viscous oil called "bitumen" from formations of sand, clay and water. The process consumes more energy and water than most conventional drilling methods, can require clear-cuts of forests and creates tailings that can pollute nearby waterways. Canada has the world's third-largest reserve of heavy crude after Saudi Arabia and Venezuela and accounts for 20 percent of U.S. crude imports.

At least 65 lawmakers - nearly all Democrats - have written the State Department raising questions about the pipeline, while 40 Republicans have written letters backing it.

"When I think of the State Department I think of many things they do well," said Sen. Mike Johanns (R-Neb.). "But I would tell you, siting pipelines is not anything I would think of when I think of State Department expertise."

Environmental issues

The National Wildlife Federation's senior vice president, Jeremy Symons, said the Obama administration cannot claim to be fighting global warming while signing off on oil imports from such an energy-intensive operation. "What does it mean when the U.S. bellies up to the trough and says, 'Give me your dirty energy?' " Symons said.

Symons also noted that TransCanada submitted a 2009 market assessment in its Canadian permit application suggesting the extension will raise heavy crude prices in the United States by removing the "oversupply" in the Midwest, where the price has been discounted. The analysis said that by extending the pipeline to the Gulf Coast, with many more refineries and buyers, the Canadian heavy crude price could be expected to increase by around $3 a barrel, giving the Canadian oil industry at least $2 billion in additional revenue each year.

But the pipeline will traverse environmentally sensitive areas such as Nebraska's Sand Hills and the Ogalalla Aquifer, which provides drinking water for 2 million people. Local ranchers and farmers have questioned why the pipeline needs to pass through an area where the aquifer runs just a few feet below the ground and the sandy soil makes it harder for vegetation to regrow once it's been disturbed.

"We know what it takes to try to maintain the land in a productive state," said Teri Taylor, who runs a cow-calf operation with her husband and son that would have miles of pipeline laid across it. "We are unable to even fathom what it would take to reclaim the land."

Oil pipelines are not uncommon in the United States. There are nearly 147,000 miles of them already, according to the Transportation Department's 2008 statistics, with 50,000 miles devoted to transporting crude.

An Energy Department-commissioned analysis, which has not been released but has been obtained by The Washington Post, provides some fodder to both sides' arguments. The report says the United States can obtain the Canadian crude it needs for the next decade without the Keystone extension, but it suggests that increasing oil-sands imports and reducing overall U.S. oil demand would "have the potential to very substantially reduce U.S. dependency on non-Canadian foreign oil, including from the Middle East." It also concludes that a decision to block the pipeline would not affect Canadian oil sands production, since the heavy crude would go to Asia instead.

TransCanada chief executive Russ Girling said his company "has done a rigorous review of the rerouting to make sure that it has the least environmental impact," adding that "we will leave the environment in exactly the same condition where we found it."

The Nebraska Farmers Union has passed a resolution demanding the pipeline project be relocated or blocked. Relocation would entail the running the pipeline through more populated areas as well as wetlands, and it could delay the process by another six months.

TransCanada said it will employ extra precautions that are usually reserved for a high-pressure operation. But Nebraska state Sen. Tony Fulton (R), a former engineer who chairs the legislative sportsmen's forum, said he would be more comfortable with the pipeline if another Canadian company, Enbridge, could explain why its pipeline in Michigan ruptured and released more than 800,000 gallons of oil last summer into the and a nearby creek.

"Why are we so hellbent on moving this so quickly?" Fulton said.

At the State Department

The State Department is under pressure to reach a conclusion this year on the permit application, which was filed in September 2008. The draft Environmental Impact Statement it issued in April sparked an unusually high number of comments. The Environmental Protection Agency sharply criticized it, saying it did not fully explore the potential environmental impact or the prospect of a more rapid transition to alternative energy that would make the imports unnecessary.

Daniel Clune, the principal deputy assistant secretary in the Bureau of Oceans and International Environmental and Scientific Affairs, said State Department officials have "been engaged in very serious discussions with" the EPA and other relevant agencies.

Lobbying on both sides has been intense. TransCanada has run television and radio ads in Nebraska and Washington, D.C., and Laborers' Local 1140 in Nebraska has made more than 600,000 robo-calls to Nebraskans. More than 100 activists demonstrated outside Nebraska's capitol early this month, and the Texas-based Stop Tarsands Oil Pipelines has gotten local politicians to demand a more-detailed environmental analysis.

Opponents such as Bold Nebraska director Jane Kleeb are using e-mail, Facebook and monthly conference calls to strategize with others along the pipeline's route - in states including Montana, South Dakota, Kansas and Texas. They have also forged connections with Canadian First Nations activists through the Indigenous Environmental Network, which has sent speakers to Nebraska to help mobilize opposition there.

While Secretary of State Hillary Rodham Clinton prompted an uproar in mid-October when she declared that the department was "inclined" to grant the permit, officials now say they will not release a final environmental analysis before next month. Once that process is complete, the state has another 90 days to make a "national interest determination" that focuses on economic and security considerations.

"All other things being equal, there would be an advantage in getting our oil from a close ally like Canada," Clune said. "What we're trying to do is make the best decision for the country."

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Federal investigators again try to question BP spill witnesses

A federal investigative panel will begin its next round of hearings Monday into the Deepwater Horizon disaster and call witnesses who can address alleged shortcuts in the drilling of the BP oil well, problems with the failed blowout preventer and the confused scene after an explosion on the rig.

Whether all of those witnesses testify remains to be seen.

After challenges to the investigative board's authority and competence, the hearings are shaping up as a test of the panel as well as the parties under investigation.

At the previous round of hearings last month, some witnesses canceled at the last minute. One invoked his Fifth Amendment right to remain silent. Lawyers for other witnesses accused the board -- a joint panel of the U.S. Coast Guard and the Bureau of Ocean Energy Management, Regulation and Enforcement -- of ignoring their clients' legal rights and the rules governing the proceedings.

Toward the end of the last day of testimony, July 23, the Coast Guard officer presiding over the hearings, Capt. Hung Nguyen, implied that the board could put aside federal rules of evidence. The comment appeared to provide ammunition to the board's critics.

Referring to the federal rules of evidence, Nguyen said: "It's possible we can use it. It's possible we don't have to use it."

"It doesn't say you don't have to. It says they should be followed . . . . ," said Transocean lawyer Edward F. Kohnke IV.

"Should, not shall," Nguyen replied, according to recordings and a privately commissioned transcription.

But in the official transcript released by the panel, Nguyen's response is: "Sure. Sure."

A Coast Guard spokeswoman said that nothing in the transcript had been changed and that it is possible the person transcribing the hearing misheard the statement.

On Thursday, the Coast Guard and the Bureau of Ocean Energy Management added two legal professionals to what had been a six-member board, a move that followed complaints that the panel lacked legal expertise.

The new members are Wayne R. Andersen, a retired federal judge, and Capt. Mark R. Higgins, a Coast Guard staff judge advocate.

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As gulf cleanup continues, BP will also struggle to clean up its brand

HOUSTON -- The protesters have stopped coming here to wave angry signs in front of BP's large office campus. The boycotts of BP gas stations are tapering off, too -- both signs that the energy company's plug of the spewing Gulf of Mexico oil well is quieting its loudest critics.

The shouting may be over, but rebuilding the company's badly tarnished brand will prove a much harder task -- one that advertising and oil industry experts say could be nearly as daunting as stopping the oil that gushed into the gulf for more than three months.

"It's probably the most notorious branding crisis in memory," said Tom Zara, director of corporate branding at Interbrand.

After the Deepwater Horizon rig exploded in April, BP went on the air with television ads and bought a series of full-page ads in The Washington Post, Wall Street Journal and other papers to position itself as an imperfect but responsible corporation committed to the cleanup of the gulf. The company has spent $55.8 million on television and print advertising so far this year, according to the Nielsen Co., which tracks ad spending. (The total for all of last year was $80 million.)

But as one of Washington's top corporate lobbying forces, BP took flak for paying lobbyists, so the company cut back that spending to only $3.3 million so far this year, compared with $8.2 million in the first six months of 2009.

BP has been bouncing back already in the place where its brand meets consumers -- at its gas stations. After the spill, sales dropped off 40 to 50 percent at some stations on the Gulf Coast, but in most cases business declines have leveled off to about 10 percent on the gulf and less than 5 percent in other parts of the country, said John Kleine, executive director of the BP Amoco Marketers Association, which represents the station owners.

Kleine, who calls the station owners "investors" in BP's brand (their only link with the company is contracts to buy gasoline), said they began facing angry protests after the spill and turned to BP for help. The company gave them signs and took out print and radio advertisements emphasizing that the stations were locally owned and operated. At some stations BP helped the owners do customer appreciation campaigns with free car washes and cups of coffee. Corporate staffers flew in to stand in driveways and listen to customers' concerns, Kleine said.

"Where the owner is known in the community, there is a less significant impact," Kleine said. "I think BP has to recognize that the local face is really a value to their brand even more so than anybody thought."

Company's evolution

BP, which began selling gasoline in Britain in the 1920s, has long been a company that cared a lot about its name -- and changed it several times. After it bought Amoco in 1998, the company British Petroleum to become BP Amoco, then two years later shortened it to BP, to signify that it was more than a petroleum company and emphasize its investments in alternative energy.

The company dropped the shield and torch that had represented British Petroleum and Amoco and adopted a logo called the Helios, which looks like a sunflower bursting with petals. BP says the design is named after the Greek sun god and represents "dynamic energy in all its forms."

The company's Web site declares that its brand can be summed up in two words: "beyond petroleum." Its executives have preached the importance of "social responsibility on a global scale" at major business conferences.

As British Petroleum, it won the support of some environmental groups in 1997 when it announced that it agreed with scientists that global warming stems from an excess of carbon dioxide and other greenhouse gases released through the burning of fossil fuels. It pledged to greatly increase its investment in solar power. Still, other environmentalists, including Greenpeace, called such investments a relatively insignificant part of the company's portfolio. In 2000, more than 10,000 students from seven Ivy League schools signed a pledge refusing to accept jobs at BP Amoco because the company had pursued permission to drill in the Arctic National Wildlife Refuge.

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E.U. rules let Iran import, export oil, creating possible split from U.S. policy

TEHRAN - The United States and Europe have worked cooperatively on Iran policy since President Obama took office, but a small crack might have begun to open over sanctions that are beginning to pinch ordinary Iranians.

The European Union issued regulations this week that went well beyond a U.N. Security Council resolution passed in June, outlining tough restrictions on the sale of equipment and technology to the Iranian oil and gas industry, as well as on investment in those sectors. But the regulations - unlike legislation passed by the U.S. Congress - allow for the import and export of oil and gas to the Islamic republic.

"If you want to send a tanker filled with refined petrol to Iran, and you have proved that you are not carrying any other goods that we deem illegal, Europe has no problem," said a European official who specializes in sanction policies and spoke on the condition of anonymity because of the sensitivity of the subject. "We don't want any negative effect on the Iranian population or to deprive them of energy, so we do not follow U.S. measures that go beyond United Nations sanctions."

The E.U. will also permit financial transactions needed to import of oil and gas to Iran. The United States, by contrast, penalizes companies if they sell gasoline to Iran, and has increased pressure on international oil companies and refineries to cancel their contracts with the country.

The practical effect of the European action might be minimal because European oil giants might still refuse to supply Iran with fuel for fear of appearing to thwart U.S. sanctions.

U.S. officials said Wednesday that they were broadly pleased with the European regulations, which they said could devastate Iran's oil and gas industry. "We are going at the supply, while they are going at the back end," said a senior administration official who handles the Iran portfolio. "We have had the kind of cooperation and coordination with the Europeans that has been unprecedented."

The U.S. official said he had never heard any concerns raised by his European interlocutors about the effect of the sanctions on ordinary Iranians. "The regulations turned out to be pretty solid," he said. "At each stage, when they have faced a choice between going soft or going heavy, they have gone heavy."

U.S. officials have in the past said that if the increased pressure is hurting ordinary Iranians, they should blame their leaders for the Islamic republic's increasing isolation.

But E.U. officials said Wednesday that they specifically allowed fuel sales to ease the burden on average Iranians.

According to June statistics, Iran needs to import 4.7 million gallons of refined petroleum each day because of the country's low refining capacity. After U.S. sanctions were implemented in July, Iranian leaders announced that they had started an emergency plan to increase local production by mixing oil with high-octane products.

At several European airports, planes belonging to Iran's national carrier, Iran Air, are being refused refueling services by representatives of major oil companies. According to the European Union, there is no legal basis for denying the airline services.

Iran Air has been able to refuel at only three European airports since a Sept. 30 agreement among the State Department and European oil firms Total of France, Statoil of Norway, Eni of Italy and Royal Dutch Shell of Britain and the Netherlands.

They pledged to end their investments in Iran and avoid new activity in the country's energy sector. In turn, U.S. officials said, the companies would be protected from possible U.S. penalties for doing business with Iran.

"We have complained to the U.S. about the extraterritorial effects of their measures on European companies," the European official said. "If those companies submit to U.S. wishes, it is their decision, but we are against these policies. This is a major issue for us."

There have been complaints in the European parliament over U.S. pressure on E.U. companies regarding Iran.

"If Europe accepts U.S. interference through pressure on its businesses, it is giving up independence," said Marietje Schaake, an influential parliament member who represents a liberal party. "The influence of U.S. interference beyond our own sanctions harms the E.U.'s credibility as a global player.

Kessler reported from Washington.

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In its report on the gulf oil spill, BP spreads the blame

BP rolled out the results Wednesday of a four-month internal investigation into the causes of the April 20 blowout of its Macondo oil well in the Gulf of Mexico, spreading blame among its contractors and giving a glimpse of the defenses it might deploy in public and in court.

The much-anticipated report asserted that a "complex and interlinked series" of failures - of equipment, engineering and judgment - led to the surge of oil and gas that exploded on the deck of the Deepwater Horizon drilling rig, killing 11 people, sinking the rig and triggering the worst oil spill in U.S. history.

The report was written by a team of 50 internal and external experts led by the company's head of safety and operations, Mark Bly, and the rollout Wednesday morning at a hotel in downtown Washington was labeled a "technical briefing."

But the document inevitably carries a heavy public relations element as well as legal and financial implications for BP. It arrives as the Justice Department is weighing whether to bring charges of criminal negligence against BP that could sharply increase the cost of the spill for the London-based oil giant and provide fodder for private lawsuits.

In addition, there is legislation in Congress that would effectively strip BP of the right to drill in the Gulf of Mexico. The company is haggling with the Obama administration over what pieces of collateral to offer while it is financing the $20 billion escrow fund that will be used to pay claims. And BP's main partner in the well, Anadarko Petroleum, has declared that it won't pay its share of the cleanup costs and claims because it views BP's well design and actions as reckless.

The BP report makes the case for "shared responsibility," saying that "no single factor" caused the blowout. It points to multiple failures by its contractors in maintenance, equipment and planning.

The investigation found fault with the recipe Halliburton used in its cement, with the flaps on a Weatherford International barrier device known as a float collar, and with the condition of hydraulic lines and batteries that might have sapped power from the blowout preventer made by Cameron International and operated by Transocean, making it impossible to clamp and cut through steel piping.

"Transocean was solely responsible for operation of the drilling rig and for operations safety," the report says in an appendix. "It was required to maintain well control equipment and use all reasonable means to control and prevent fire and blowouts."

The report also said Transocean and BP rig leaders jointly "reached the incorrect view" on well tests in the crucial hours before the explosion. And Bly said BP needs to reexamine the way it oversees work by its contractors.

BP's design not faulted

Yet the report absolves BP's widely criticized well design. It says the path that oil and gas followed as they escaped from the well meant that the well's casing and design - matters that could otherwise implicate BP - were not factors in the disaster. Instead, it says that if any one of eight failures of equipment or decision-making had not taken place, the blowout would not have happened.

The report not only offers new details and analysis of what went wrong, it also represents a bold declaration that BP is not going to assume more than what it considers its share of the blame for the accident. The report did not say how far up the BP corporate ladder the well problems went, and no employee was named or punished.

In a news release, BP chief executive Tony Hayward, who has barely spoken publicly since his disastrous congressional testimony in June, did not offer anything resembling a mea culpa.

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BP, Transocean, Halliburton blamed by presidential Gulf oil spill commission

The presidential oil spill commission on Wednesday blamed the Gulf of Mexico oil spill last year on "missteps and oversights" by oil giant BP, rig owner Transocean and contractor Halliburton, saying those errors were "rooted in systemic failures" and could happen again.

The commission said that the April 20 blowout at BP's Macondo well was not inevitable, but rather a failure of management in which officials from all three firms ignored critical warning signs and failed to take precautions that might have delayed the completion of the well but also might have averted the environmental disaster.

In a chapter released from the final report due out next week, the commission said: "The blowout was not the product of a series of aberrational decisions made by rogue industry or government officials that could not have been anticipated or expected to occur again. Rather, the root causes are systemic and, absent significant reform in both industry practices and government policies, might well recur."

The document provided a detailed account of the missteps that led to the spill, but most of the details have been revealed in other reports or investigations so far. It recounts fateful decisions by all three major corporate actors, including the failure to use enough centralizers to keep the pipe in the middle of the well, choices about the type of steel pipe used, and failure to heed or share test results suggesting that the cement used to seal the well could fail.

In the case of the failure to use enough centralizers, the report said that "the evidence to date does not unequivocally establish whether" that was a "direct cause" of the blowout, but the commission said that it "illuminates the flaws in BP's management and design procedures, as well as poor communication between BP and Halliburton."

The commission report also cited a Dec. 23, 2009, North Sea incident on one of Transocean's rigs, which the commission said was an "eerily similar near-miss" to what happened at the Macondo well. Though Transocean told the commission the incident was irrelevant, the commission said, "The basic facts of both incidents are the same. Had the rig crew been adequately informed of the prior event and trained on its lessons, events at Macondo may have unfolded very differently."

William K. Reilly, co-chairman of the commission appointed by President Obama, said that the commission had concluded that the blowout reflected "a more pervasive problem" within the oil industry.

"Given the documented failings of both Transocean and Halliburton, both of which serve the offshore industry in virtually every ocean, I reluctantly conclude we have a system-wide problem," Reilly said.

Former senator and commission co-chair Bob Graham stressed the failure of regulators. He said, "The Macondo blowout was the product of several individual missteps and oversights by BP, Halliburton and Transocean, which government regulators lacked the authority, the necessary resources and the technical expertise to prevent."

The Interior Department issued a statement saying that it has "already identified, acknowledged, and spent months working aggressively to reform" offshore drilling. It said it would "continue to make the changes necessary to restore the American people's confidence in the safety and environmental soundness of oil and gas drilling and production on the Outer Continental Shelf."

Last May, President Obama appointed Reilly and Graham to oversee the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling and gave them a January 2011 deadline to submit a report. Unlike Congress, the Justice Department or other probes, the oil spill commission lacked subpoena power but still sought to uncover the reasons for the disaster. It also criticized federal regulators and some Obama administration members for their response to the spill.

But the most detailed descriptions in the chapter released Wednesday were of communications and decisions by BP, Transocean and Halliburton.

"The immediate cause of the Macondo blowout was a failure to contain hydrocarbon pressures in the well," the report said. "Three things could have contained those pressures: the cement at the bottom of the well, the mud in the well and in the riser, and the blowout preventer. But mistakes and failures to appreciate risk compromised each of those potential barriers, steadily depriving the rig crew of safeguards until the blowout was inevitable and, at the very end, uncontrollable."

The report highlighted a series of decisions that led to time-saving and cost-saving measures when alternatives were available. Rep. Edward J. Markey (D-Mass.) said the report showed "that the underlying profits-over-safety pathology may be in temporary remission, but not fully cured."

The report said, "Most of the mistakes and oversights at Macondo can be traced back to a single overarching failure - a failure of management."

BP said it supports the commission's efforts and "is working with regulators and the industry to ensure that the lessons learned from Macondo lead to improvements in operations and contractor services in deepwater drilling." It said that it has already "instituted significant changes designed to further strengthen safety and risk management."

Transocean, meanwhile, sought to place blame with BP and regulators. "Consistent with industry standards, the procedures being conducted in the final hours were crafted and directed by BP engineers and approved in advance by federal regulators," the company said in a statement. "Based on the limited information made available to them, the Transocean crew took appropriate actions to gain control of the well. They were well trained and considered to be among the best in the business."

Halliburton issued a statement sharply criticizing the presidential commission and BP. It blamed BP for failing to run a cement bond log test, which it called "the only means to test the integrity of the cement bond." It said "had BP properly interpreted the negative tests, the tests would have revealed any problems with the cement job." The company also reiterated disputes about the commission's description of February and April lab tests of cement mixtures as failures, and asserted that Halliburton's engineer on the Deepwater Horizon rig had received notice of satisfactory test results. Halliburton also accused the commission of having "selectively omitted information we provided to them."

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As offshore drilling moratorium nears an end, questions about what's next

Interior Secretary Ken Salazar is getting ready to take his finger off what he has called the "pause" button on deepwater oil drilling, with environmentalists and oil industry executives alike worried about what comes next.

Salazar received recommendations Thursday from Michael Bromwich, head of the Bureau of Ocean Energy Management, Regulation and Enforcement, based on information gathered at public forums and private meetings in the wake of the BP oil spill. Salazar could act on the BOEMRE report well before the drilling ban's expiration date, Nov. 30.

While many Gulf Coast lawmakers and residents have been badgering the Obama administration to lift the deepwater moratorium, key industry and administration officials are struggling with the larger questions: not when drilling will resume, but how and where.

"We're stuck between 'drill, baby, drill' and the 'BP drilling disaster,' and no one knows which argument will win," said Athan Manuel, director of the Sierra Club's lands protection program.

Separate from Bromwich's report, Salazar on Thursday announced the federal government was adopting two new regulations for offshore drilling, including a drilling safety rule and a workplace safety rule. Both would impose new requirements on operators in the gulf and elsewhere.

The drilling rule dictates specific procedures aimed at preventing a blowout, including cementing and casing practices and the appropriate use of drilling fluids. It also increases oversight of mechanisms--such as the blowout preventer--that would shut off the flow of oil and gas in an accident, and requires operators to secure independent and expert reviews of their well design, construction and flow intervention mechanisms.

The workplace safety rule forces offshore operators to have what an Interior Department statement describes as "clear programs in place to identify potential hazards when they drill, clear protocol for addressing those hazards, and strong procedures and risk-reduction strategies for all phases of activity, from well design and construction to operation, maintenance, and decommissioning."

Energy industry officials said they would review the regulations and offer comments as part of the rule-making process. The drilling safety rule will take effect immediately on publication. Erik Milito, upstream director for the American Petroleum Institute, said, "Getting a good offshore safety rule in place is critical to the nation's energy future. The gulf and other parts of the nation's offshore areas are vitally important to helping meet the nation's future energy needs. The rule will affect every offshore energy project for years to come. It has to be right."

In the report Bromwich submitted to Salazar Thursday, he proposed new rules for drilling, as well as contingency measures to bolster the industry's response to any future spills.

Oil and gas executives are steeling for a slower and more costly permitting process that could hinder drilling even after the moratorium is lifted. And they worry that they won't be able to develop new areas - from Alaska to the East Coast - that President Obama outlined when he unveiled his five-year leasing plan on March 31, a few weeks before the BP blowout.

Environmentalists, in contrast, are hoping that the congressional limits on offshore drilling that expired two years ago are reimposed, or at least that the pace of development is slowed.

And the administration faces difficult questions about whether - and under what circumstances - it will allow leasing in areas from Alaska to off the coast of Virginia before Obama's first term ends.

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Record-Setting Wells Stays Upbeat Despite Home Loan Income Drop

Wells Fargo’s mortgage volume fell in consecutive three-month periods during the fourth quarter, but its mortgage banking income increased.

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