U.S. loses appeal on drilling moratorium

VENICE, La., July 8 (UPI) -- The U.S. government lost a bid Thursday to reinstate a moratorium on offshore oil drilling, when an appeals court refused to stay a judge's order.

The Obama administration suspended offshore drilling after the April 20 explosion on BP's Deepwater Horizon platform. The appellate panel, issuing a brief decision a few hours after a hearing, said the government "failed to demonstrate a likelihood of irreparable injury if the stay is not granted," CNN reported.

The moratorium applied to deepwater drilling in the Gulf of Mexico. The government asked the appeals court to reinstate it pending a full appeal of U.S. District Judge Martin Feldman's ruling.

Politicians in Louisiana argue the moratorium inflicts further harm on a region still dealing with the aftermath of Hurricane Katrina and now with the oil spill.

Also Thursday, federal officials asked BP when it will connect the leaking Gulf of Mexico well to a giant oil-recovery ship that has been held back by rough seas. The Obama administration is pressuring BP to take advantage of a good-weather window by simultaneously replacing the cap on the gushing Gulf of Mexico oil well with a tighter-fitting model and connecting it to the Helix Producer, an advanced oil-recovery ship capable of capturing up to 25,000 barrels of oil a day, The New York Times reported.

To exchange the current well cap for the tighter one, BP would have to temporarily disconnect the recovery ship Discovery Enterprise, which could result in the unmitigated flow of oil into the gulf for two or three days, the Times said. The Obama administration sent a letter to BP Thursday asking how the company plans to put all the pieces in place as quickly as possible to limit the duration of the free flow of oil.

BP officials said they are pushing to fix the crippled well by late July to show investors it capped its mushrooming financial liabilities from the leased rig.

Company and Obama administration officials said BP also is preparing a series of backup plans -- including connecting the well to existing pipelines in two nearby gas and oil fields -- in case efforts to fix the well go wrong, The Wall Street Journal reported Thursday.

The U.S. government has been prodding BP to develop what one official called the "backup to the backup plan." BP and the federal government are focusing on the next steps as the hurricane season gets into full swing.

The rig sank two days after the explosion, which killed 11 rig workers.

BP and the U.S. Coast Guard still project having a fix in early- to mid-August, but BP officials said they want the fix in place by July 27, when its second-quarter earnings report is due, the Journal said. The London-based oil company also wants something concrete to offer British Prime Minister David Cameron when he visits President Obama in Washington July 20.

"In a perfect world with no interruptions, it's possible to be ready to stop the well between July 20 and July 27," said Bob Dudley, the head of BP's Gulf Coast restoration unit, in an interview with the Journal. However, Dudley said, the "perfect case" is threatened by the hurricane season and is "unlikely."