Tom Petrie: “Quite clearly some of the opposition to fracing is coming from those who have a different agenda—to curtail the development of shale gas in general.”

A rolling, 30-day moratorium in the Gulf of Mexico with as much urgency tasked to federal legislators as to industry would have been a more successful resolution to continued U.S. energy production from the prolific region while developing stronger environmental-remediation defenses.

This is according to Tom Petrie, vice chairman of Bank of America Merrill Lynch, at a recent Oil Council meeting in New York City.

“It should have been a rolling adjustment that would have cut the time down from five and a half months to three months,” he says.

John Maalouf, senior partner for law firm Maalouf Ashford & Talbot LLP, says regulation and pending regulation in the Gulf stunted new M&A activity in the region in 2010, after an active first quarter and start in the second quarter.

“The uncertainty has, at least temporarily, put the brakes on transactions. Regulators are prone to overreaction in the wake of a perceived crisis and, although an analysis of these new regulations reveal they will do little to help the environment, they will have a very negative impact on oil and gas companies of all sizes, particularly smaller companies.”

As a result, Gulf oil and gas and related assets have become undervalued, he says. “Hedge funds and private-equity investors are taking advantage of the situation and increasing their equity position in the energy sector.”

Bobby Tudor, chief executive officer of energy investment-banking firm Tudor, Pickering, Holt & Co. Securities Inc., says the natural possibility of a well blowout cannot be eliminated, as hydrocarbons are combustible. The issue, instead, is remediation.

“If we can’t eliminate the possibility of it happening, then we had better be able to remediate and quickly. What was exposed in the Gulf is that—in ultra-deepwater, in ultra-high-temperature and -pressure situations—the industry’s plans for remediation certainly were not up to the task.”

A moratorium was absolutely appropriate, he says. However, today, permitting of new Gulf shallow-water drilling remains sluggish, and permitting of new deepwater Gulf drilling remains unofficially suspended, as regulators are deeming remediation plans insufficient.

“I think the big gripe for the industry and for the people who live along the Gulf Coast is that the nature of what has happened politically is such that it has absolutely shut down activity across the board in such a way that it is hugely damaging to people who live in that part of the world.

“Whether the (Obama) administration understands that and doesn’t care or doesn’t understand it…, that’s where I personally have a gripe as do most of the people in the industry as well.”

On another environmental matter—more regulation of hydraulic fracturing—Petrie says, “This is a work in progress. Quite clearly some of the opposition to fracing is coming from those who have a different agenda—to curtail the development of shale gas in general.”

Regulators need to grasp what are the real risks of fracing and where there are risks. “Quite clearly, in the watershed of New York City there is an issue and I think many in the industry acknowledge that.

“To the best of my knowledge, there are very few other places where fracing is occurring today in shale-gas development where there is a comparable risk to the water table, but it needs to be fleshed out as soon as possible because it is a transforming, new (gas) supply option as long as it can be done without incurring unacceptable risks to other resources, like the water table.”

For more news from the Oil Council meeting, see

--‘Not A Bottomless Pit:’ JV Partners In U.S. Unconventional Resources

–U.S. Shale-Gas Plays Are ‘Criminally Destructive,’ Says Kayne Anderson’s Sinnott

–BP: Exporting U.S. Gas Depends Ultimately On If Foreign Buyers Can Compete With U.S.’ Own Market

–Transier: Divorces Among JV Partners Inevitable And Will Be Ugly

–Nissa Darbonne, Editor-at-Large, Oil and Gas Investor, OilandGasInvestor.com, OilandGasInvestor.com Today, Oil and Gas Investor This Week, A&D Watch, A-Dcenter.com, UGcenter.com. Contact Nissa at ndarbonne@hartenergy.com.