U.S. Asks Appeals Court to Reinstate Moratorium on Deep-Water Oil Drilling

U.S. regulators, seeking to overturna judge’s ruling throwing out a moratorium on deep-water oildrilling in the Gulf of Mexico, said opponents of the ban shouldbe required to file a new lawsuit to pursue their claims.

The shorter, less restrictive moratorium was imposed thismonth after U.S. District Judge Martin Feldman in New Orleansthrew out a six-month ban on oil and gas drilling in watersdeeper than 500 feet. In the lawsuit brought by offshoreservices companies, Feldman blocked the government fromenforcing the ban, calling it overly broad and punitive to theregional economy.

The government yesterday asked the U.S. Court of Appeals inNew Orleans to reject Feldman’s June 22 order, arguing that therisk of a second spill outweighs the economic effects of thedrilling ban. On July 8, a three-judge panel of the sameappellate court refused regulators’ request to put Feldman’sorder on hold while the government appeals.

The government’s drilling moratorium “is fully supportedin the record and consistent with Interior’s authority tosuspend lease operations,” the U.S. said yesterday in itsfiling. “The district court’s order misperceives thesecretary’s authority, the rationale for the suspensions, andthe relative harms present in the Gulf, and was an abuse of itsdiscretion.”

The appeals court is scheduled to hear oral arguments inthe case on Sept. 1. The U.S., which previously filed motions todismiss the lawsuit over the six-month ban, said in yesterday’sfiling that the plaintiffs should be required to file a newlawsuit if they want to challenge the revised moratorium, whichexpires Nov. 30.

Deep-Water Moratorium

President Barack Obama imposed the suspension on deep-waterdrilling in May in reaction to the BP Plc oil spill, the worstin U.S. history, caused by the sinking of the Deepwater Horizondrilling rig off the Louisiana coast in April.

Government lawyers stressed in hearings and court papersthat the public interest requires improvement in drilling safetybefore a resumption of deep-water operations to prevent anotherdisaster.

“Our resources are taxed to the max,” Justice Departmentenvironmental lawyer Michael Gray told the appeals panel on July8. “It makes perfect sense.”

Hornbeck Offshore Services Inc. and other offshore serviceand supply companies on June 7 sued U.S. regulators, includingInterior Secretary Kenneth Salazar, seeking to lift themoratorium.

“It’s not over,” Hornbeck General Counsel Samuel Gibergasaid yesterday in a phone interview. “We believe JudgeFeldman’s original ruling was correct and is still the rulingthat governs this dispute overall, and will be upheld by theappellate court.”

Irreparable Harm

The offshore companies, which were joined by LouisianaGovernor Bobby Jindal, argued the firms and regional economywould suffer irreparable economic harm from the suspension indrilling.

Government lawyers said in court papers that the ban wasbased on findings in an Interior Department safety report madefollowing the sinking of the Deepwater Horizon, owned byTransocean Ltd.

Feldman said the six-month ban was too far-reaching aresponse to that investigation.

“The court is unable to divine or fathom a relationshipbetween the findings and the immense scope of the moratorium,”Feldman said in his 22-page decision. “The blanket moratorium,with no parameters, seems to assume that because one rig failedand although no one yet fully knows why, all companies and rigsdrilling new wells over 500 feet also universally present animminent danger.”

The U.S. filed a notice of appeal on June 24 and sought adelay in enforcement of Feldman’s decision. Two members of theappellate panel voted July 8 to reject the government’s requestto keep the ban in place during its appeal. The third sided withSalazar.

Lawsuit Irrelevant

On July 12, Salazar issued new restrictions on deep-wateroil drilling that may allow new wells if the industry shows ithas raised safety standards. The U.S. that day filed motions inthe appeals court and before Feldman to dismiss the Hornbecksuit, calling the original claim irrelevant in light of the neworder.

Hornbeck and the other offshore companies asked Feldman onJuly 20 to reject the government’s request for a dismissal.Feldman has scheduled arguments on the government’s motion inthe lower-court case for Aug. 11.

While pursuing the appeal, the U.S. believes the originallawsuit should be dismissed, government lawyers said inyesterday’s filing.

‘Abused’ Discretion

“If the preliminary injunction is not moot,” theappellate panel should rule that Feldman “abused his discretionby entering a preliminary injunction,” they said.

The plaintiffs “have not demonstrated that they willsuffer irreparable harm absent the injunction,” the U.S. said.“And the public interest in developing the resources of theouter continental shelf in an orderly and safe manner weighsagainst injunctive relief given the serious harm a second spillwould entail.”

The case is Hornbeck Offshore Services LLC v. Salazar,2:10-cv-01663, U.S. District Court, Eastern District ofLouisiana (New Orleans). The appeal case is 10-30585, U.S. Courtof Appeals for the Fifth Circuit (New Orleans).