Interior Department limits use of environmental waivers

WASHINGTON (Reuters) - The U.S. Interior Department said on Monday it would limit the controversial practice of allowing environmental waivers for deepwater drilling projects and instead subject all such drilling to detailed analysis as it evaluates its review process.

Allowing companies to skip the environmental review process for specific drilling projects has come under intense scrutiny because BP was granted waivers for its exploratory well that blew out of control in April.

BP's doomed project that sent millions of gallons of oil spewing into the Gulf was granted a waiver, or categorical exclusion, from a full environmental analysis normally required under the National Environmental Policy Act.

The department also said it intends to complete a new review of the Gulf of Mexico region to help guide future leasing and development decisions.

The American Petroleum Institute, the main U.S. oil lobby, warned the restrictions would add unnecessary delays to developing new energy projects.

"We're concerned the change could add significantly to the department's workload, stretching the timeline for approval of important energy development projects with no clear return in environmental protection," API Upstream Director Erik Milito said in a statement.

Interior's decision comes as the White House's Council on Environmental Quality released a report criticizing the Interior department for a lack on transparency. It said the department's review process "has led to confusion and concern about whether environmental impacts were sufficiently evaluated and disclosed."

It also called on Interior to reassess the use of waivers "in light of the increasing levels of complexity and risk" associated with deepwater drilling.

The categorical exclusion process was created to lessen the paperwork and speed up developments deemed not to have a significant impact on the environment.

Kieran Suckling, director of the Center for Biological Diversity, said the department's restriction of environmental waivers does not go far enough.

"Categorical exclusion is meant for very minor projects like building fences," Suckling said. "It's completely inappropriate to use categorical exclusions for any kind of major drilling operation, whether deepwater or shallow water."

(Reporting by Ayesha Rascoe; Editing by Lisa Shumaker)