The Obama administration said on Thursday it will immediately issue a revised ban on deepwater drilling if an appeals court does not allow it to reinstate the six-month moratorium it imposed in the wake of the BP oil spill.
However, it will not impose a new drilling ban if the federal court in New Orleans supports its initial moratorium, an Interior Department official told Reuters.
A hearing before a three-judge appeals panel is scheduled for 3 p.m. CDT/4 p.m. EDT (2000 GMT) on Thursday on the ban imposed during the investigation of what caused the April 20 drilling rig explosion that killed 11 men and triggered the worst oil spill in U.S. history.
A federal judge stopped the ban last month, ruling in favor of drillers like Hornbeck Offshore Services Inc, who argued the moratorium was too broad, would cost jobs and unfairly punished their industry.
Department of Justice lawyers will argue the ban is sufficiently narrow and necessary to avoid another disastrous spill such as the one that has leaked oil into the Gulf of Mexico for 80 days.
Depending on how the three-judge panel rules, legal experts said the losing side could appeal to the full appeals court and the case ultimately could be appealed to the U.S. Supreme Court.
Ahead of the hearing, BP's New York share price on Thursday was up fractionally after rising about 24 percent in the past eight trading days on talk company executives were seeking new investors and optimism the worst might be behind the company.
BP sought to stanch some of that optimism on Thursday after a report it could stop the well by July 27, when it is due to report its second quarter income. The target for completing a relief well to stop the flow had been mid-August.
The company said it could stop the well by July 27 only under perfect conditions.
(Additional reporting by Matthew Bigg in Mississippi, Martinne Geller in New York, Rodrigo Campos in New York and Kristen Hays in Houston; Writing by Patricia Zengerle; Editing by Kristin Roberts and Jerry Norton)