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Gov. Jindal, Oil Firms Challenge Obama Deepwater Drilling Ban

Mary Rickard and Ernest Scheyder

NEW ORLEANS/LAFITTE, La. - A U.S. judge promised to rule by
Wednesday on an oil industry challenge to the Obama administration's
six-month moratorium on deepwater drilling in the Gulf of Mexico after
the worst oil spill in U.S. history.

U.S. District Court
Judge Martin Feldman heard opening statements in New Orleans on Monday
in a case in which more than a dozen companies involved in offshore
drilling operations called the ban "arbitrary and capricious."

lawsuit is the first case seeking to reverse Obama's May 28 moratorium,
which the companies say will force job cuts in the labor force needed
to service offshore oil platforms. The ban has caused the shutdown of
33 deepwater drilling rigs.

Obama imposed the six-month
ban after an explosion aboard an oil rig in the Gulf of Mexico on April
20 killed 11 workers and ruptured a well owned by energy giant BP,
unleashing millions of gallons of crude into the ocean.

Obama administration argues that the moratorium is necessary to prevent
further accidents while a presidential commission investigates the
cause of the BP spill.

Louisiana Governor Bobby Jindal, a
Republican critic of the Obama administration's handling of the spill,
has sided with the companies in the case. Jindal argued that the ban
could cripple the offshore industry.

The lawsuit is
another example of Obama's strained relationship with big business.
These tensions also were in the spotlight last week when BP bowed to
pressure from Obama and agreed to set up a $20 billion fund to pay
damage claims arising from the spill.

The spill, now in
its 63rd day, has soiled the coastline of four U.S. states, threatening
tourism and fishing industries; seeped into ecologically sensitive
wetlands and marshes; battered BP's image; and tested President Barack
Obama, who has come under fire over his handling of the crisis.


BP said on Monday it has spent $2 billion so far on cleaning up the spill.

investor concern about BP's final bill for the spill, a Democratic U.S.
lawmaker on Sunday released an internal company document that said, in
a worst-case scenario, up to 100,000 barrels (15.9 million liters) of
oil could gush from its ruptured deep-sea well.

British energy company dismissed it, saying the figure was being taken
out of context. But investors, apparently worried it could mean higher
fines and clean-up costs for the company, drove down BP shares more 3
per cent in New York trading.

BP plans to raise cash from
banks to ensure it has enough money on hand to pay for the clean-up but
does not plan a bond offering, sources familiar with the company's
thinking told Reuters on Monday. Banking sources said last week that BP
was seeking some $7 billion from banks.

BP has considered
a number of different scenarios to raise more money, should the need
arise, such as selling assets. But for now, the company is confident
its cash resources can cover the bulk of the clean-up costs, one source

Seeking to keep the focus on the unfolding
ecological disaster, New Orleans Mayor Mitch Landrieu on Monday was
taking mayors from 17 U.S. cities to visit the slick-damaged
Mississippi Delta, where oil has coated fragile marshlands, tarred
wildlife and decimated fisheries.

"Educating the rest of
the country is what's going to help us win this fight," said Tim
Kerner, mayor of Lafitte, Louisiana, where the mayors gathered for a
presentation from BP and the U.S. Coast Guard.

"Every day
it's a new oil spill," said Coast Guard Captain Roger Laferriere. "In
previous spills, we always had a known quantity of oil."


Feinberg, the administrator of a $20 billion fund set up by BP to
compensate victims of the spill, said on Monday he would "err on the
side of the claimant" in paying emergency relief. "We've got to ease
the burden on these folks in the Gulf," he told CNN.

continued to siphon more oil from the blown-out deep-sea well. It said
it collected or burned off 23,290 barrels (3.7 million litres) of crude
on Sunday, still well below the 35,000-60,000 barrels a day that
government scientists estimate are gushing from the well.

BP and the U.S. government are placing their hopes on two relief wells
that are being drilled to permanently cap the leak. Those wells are
expected to be finished in August.

BP also rejected claims
by its partner in the oil well, Anadarko Petroleum, that it had been
negligent in the way it operated the installation.

Anadarko criticism, along with the release of the internal document,
hit BP's share price. It was down about 3.2 per cent in afternoon
trading in New York after closing down 2.22 per cent in London.

Managing Director Bob Dudley is in day-to-day charge of the company's
response to the spill after Chief Executive Tony Hayward returned to
Britain last week, the company said.

A company spokesman
was unable to say when Hayward would return or whether it remains BP's
plan for Dudley to take full-time control of the effort only after the
well is capped.

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