Judge blocks deepwater drilling ban; Obama to appeal

McClatchy NewspapersJune 22, 2010 

WASHINGTON — A federal judge Tuesday struck down President Barack Obama's six-month ban on new deepwater drilling, siding with oil companies that argued that it would harm their businesses, eliminate jobs and weaken the economies of Gulf Coast states.

While the White House said it would immediately appeal the decision, environmental groups launched a quicker salvo, publicizing financial disclosure forms that showed that the judge in the case, Martin Feldman of the U.S. District Court in New Orleans, owns or has owned shares in several oil and gas firms. According to Feldman's 2008 disclosures, he held up to $15,000 in Transocean, the owner of the ill-fated rig at a BP well that's pouring oil into the Gulf of Mexico.

Legal experts said the revelation of a potential conflict of interest would bolster the Obama administration's case, but appealing the decision puts the president at odds with many Gulf Coast residents, who rely on the deepwater oil industry for tens of thousands of jobs.

"The president strongly believes . . . that continuing to drill at these depths without knowing what happened does not make any sense," White House spokesman Robert Gibbs said. The administration will appeal the ruling to the Fifth Circuit Court of Appeals in New Orleans, he said.

With a legal battle looming, oil companies affected by the ban didn't seem ready to start drilling again just yet.

"We understand that the government has elected to appeal and so we would not be making any decisions on future drilling in the Gulf of Mexico until after the appeals are exhausted," said Bill Tanner, a spokesman for Shell in Houston.

On May 30, Interior Secretary Ken Salazar ordered oil companies not to drill any new wells in water deeper than 500 feet in the Gulf for six months as a safety precaution in the wake of the mammoth BP spill. The moratorium affected 33 deepwater exploration rigs but didn't halt activity on some 7,000 active leases in the Gulf, which contribute 31 percent of total domestic U.S. oil production, according to government lawyers.

Dismissing those claims, Feldman said an immediate injunction was needed because the plaintiffs, including more than three dozen companies that operate or provide services to deepwater oil rigs, "will incur immediate and irreparable harm to business" if the ban remains in place.

In ordering the injunction requested by Hornbeck Offshore Services, an oil-services firm based in Covington, La., and other oil companies, Feldman wrote that the Obama administration "makes no effort to explicitly justify the moratorium" and "does not explain how long it would take to implement the recommended safety measures."

Gulf Coast politicians cheered the injunction, saying it would spare the jobs of some 38,000 people directly employed by deepwater exploration rigs. Sen. Mary Landrieu, a Louisiana Democrat, had argued that federal regulators could implement stronger safety measures — such as recertifying blowout preventers and reviewing rig and well designs — without forcing the rigs to shut down at a cost of about $500,000 a day.

"I'm going to strongly urge the administration not to appeal this ruling but to try to find a way forward that would achieve the president's goals for safety and responsibility but at the same time would not jeopardize and threaten this very vibrant and necessary industry," Landrieu said Tuesday.

Environmental groups said the freeze is necessary to institute new safety regulations and to allow for the reorganization of the Interior Department's Minerals Management Service, the regulatory agency that's been criticized for being too cozy with the oil industry. McClatchy has reported that the agency approved dozens of drilling plans that were virtual carbon copies of BP's plan, and which downplayed the risks of blowouts and environmental damage.

"We need to have a break so that we can bring the standards of this industry back to where they're supposed to be," said Kate Gordon, vice president of energy policy at the Center for American Progress, a liberal policy organization with close ties to the Obama administration.

"This is an industry that's been unregulated since 2005. We're seeing the result of that with the reorganization of MMS."

Legal experts said the Obama administration likely would ask a Fifth Circuit appellate judge to stay the lower court's decision, and would argue that Interior Secretary Ken Salazar acted within his authority under the Outer Continental Shelf Lands Act to suspend drilling permits where there was a substantial risk of environmental damage.

Environmental law professor Pat Parenteau said that while courts typically defer to agencies when it comes to making these judgment calls, Feldman appeared to be second-guessing Salazar.

"This is a judge who's very close to the community that's most affected" by the moratorium," said Parenteau, a professor at Vermont Law School in South Royalton, Vt. "I wouldn't call it bias, but I think this judge was leaning against the government."

(Margaret Talev contributed to this article.)

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