Obama Defends Spill Response, Says Drilling Risks Will Rise

President Barack Obama defended his administration’s response to the BP Plc oil spill and said Americans one day must decide how much risk they will tolerate to keep drilling for fossil fuels.

While domestic oil production remains an important part of U.S. energy policy, the “unprecedented disaster” unfolding in the Gulf of Mexico should be “a wake-up call” that will spur the transition to alternative energy sources, Obama said.

“We as a society are going to have to make some very serious determinations in terms of what risks are we willing to accept” in extending exploration into ever more remote locations, Obama said at a White House news conference today.

In the aftermath of the BP spill, Obama is suspending exploration in two areas off Alaska, canceling pending lease sales in the Gulf of Mexico and proposed sales off Virginia’s coast, extending by six months a moratorium on deepwater drilling permits and suspending operations at all 33 exploratory wells being drilled in the Gulf. He also said more must be done to wipe out the “cozy and sometime corrupt relationship” between oil companies and federal officials who regulate them.

Obama’s decision to delay leases signals that two decades of “pro-drilling sentiment appears to have reached its turning point,” Kevin Book, a managing director at ClearView Energy Partners LLC, a Washington-based policy analysis firm, said today in a note to investors.

Taking Responsibility

Obama, who is scheduled to visit the Gulf coast tomorrow, said the federal government is fully in charge of stopping the oil leak and cleaning up the Gulf of Mexico, after weeks of criticism, including from some Democrats, for not acting more forcefully since the disaster began April 20.

“I take responsibility,” he said. “It is my job to make sure that everything is done to shut this down.”

He rejected criticism that he’s let BP run the process.

“Every key decision and action that they take must be approved by us in advance,” he said. “This notion that somehow the federal government is sitting on the sidelines” while BP is making decisions “is simply not true.”

In the wake of criticism of the government’s oversight of energy exploration, the head of the Minerals Management Service, Elizabeth Birnbaum, submitted her resignation from the post she’s held since last July.

“This oil spill has made clear that more reforms are needed,” Obama said. He said he bears responsibility for the lagging efforts to overhaul the agency’s culture.

Policy Review

Obama’s comments and the changes in drilling policy follow a 30-day safety review on offshore drilling the president ordered from Interior Secretary Ken Salazar following the explosion and fire aboard a drilling rig leased by BP, which caused the massive oil spill.

His remarks didn’t quell criticism. The National Republican Senatorial Committee issued a statement citing Obama’s “failed leadership” and saying he “continued to blame President George W. Bush” to avoid responsibility.

Republican Representative Steve Scalise of Louisiana said the administration was slow to come up with a plan to protect coastal marshes.

“If all hands were on deck the president would have rolled up his sleeves Day One,” he said at a hearing. “It didn’t happen for over two weeks.”

Falling Short

Obama said the government response has fallen short in some areas. The effort to protect shorelines, for example, “hasn’t been as nimble as it needs to be,” he said. Government agencies may have underestimated how bad a “worst-case” incident on a deepwater rig might be, he said.

“Inevitably, in things this big, there are going to be places where things fall short,” Obama said.

BP continues to be taking the lead in the work to cap the leak 5,000 feet below the surface because the company has the “best technology” to perform the operation, he said.

The government is working on the surface cleanup and “we will demand they pay every dime” for the damage done to the environment and the hardship on Gulf businesses, Obama said.

Obama said he believes BP’s interests are “aligned” with the public interest in seeing that the leak is stopped. “They want this thing capped as badly as anyone does,” he said.

Where the company’s interest may diverge is in assessing the impact of the spill and “we have to verify whatever they have to say about the damage,” he said.

Obama said he still views domestic oil production as an integral part of the U.S.’s energy mix while the country moves toward clean-energy alternatives.

“Where I was wrong was in my belief that the oil companies had their act together when it came to worst-case scenarios,” he said.

BP began pumping mud-like drilling fluid into the well yesterday in a procedure known as a “top kill.” U.S. Coast Guard Admiral Thad Allen said the work has temporarily stopped the flow of oil and natural gas, though it isn’t yet certain that the technique will be a permanent fix.