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Gulf Drilling Ban Should Be Restored, U.S. Lawyers Tell Court of Appeals

By Margaret Cronin Fisk and Laurel Brubaker Calkins - 2010-07-08T15:06:44Z

A three-judge appeals panel will hear arguments from the U.S. government today on whether a six-month moratorium on deep-water drilling in the Gulf of Mexico should be reinstated after a lower court judge threw out the ban.

The government is seeking to delay an order by U.S. District Judge Martin Feldman that scrapped the six-month drilling moratorium, imposed May 27 after the explosion and sinking of the Deepwater Horizon oil rig in April.

Feldman’s June 22 ruling came in a lawsuit against U.S. regulators by oil service companies claiming the suspension would cause them irreparable economic harm. If the appeals court refuses to stay Feldman’s order, it may mean a quick return to drilling in the Gulf, said Anthony Sabino, a law professor who specializes in complex litigation and oil-and-gas law.

“Drilling will begin, not necessarily immediately and not necessarily 110 percent,” Sabino, a professor at St. John’s University in New York, said. “You’d see some of the braver souls go out there. They’d think, ‘We’ve got a green light now.’”

The U.S. is developing a new drilling-suspension plan, Interior Secretary Kenneth Salazar said last month after Feldman rejected the six-month moratorium. If the 5th Circuit stay’s Feldman’s order, the current ban still applies.

Spill Risk

The six-month ban’s potential economic effect is outweighed by the risk of another spill, lawyers for the Interior Department argued in court papers filed before a hearing set for this afternoon in New Orleans.

“If in Interior’s judgment, drilling poses a threat of serious or irreparable environmental harm, the public interest in avoiding that threat would trump economic considerations in the short term,” the government said in a July 6 filing.

The Interior Department asked the appeals court to stay Feldman’s order and keep the moratorium in place long enough for regulators to appeal.

Hornbeck Offshore Services Inc. and more than a dozen other offshore service and supply companies sued U.S. regulators, including Interior Secretary Kenneth Salazar, last month, seeking to block the moratorium.

They were joined by Louisiana’s Governor Bobby Jindal and Attorney General Buddy Caldwell, who said the drilling suspension is turning an “environmental disaster into an economic catastrophe.”

Obama’s Position

President Barack Obama said the moratorium, covering waters deeper than 500 feet, is needed to give a presidential commission time to study offshore operations safety as the BP Plc oil spill became the largest in U.S. history.

The companies claim the blanket suspension fails to distinguish between firms that adhere to modern safety practices and BP, which has been accused of utilizing risky drilling procedures with the well that blew out.

“The industry leader is being treated the same way as the industry laggard,” John Cooney, Hornbeck’s lawyer, said at the lower-court hearing.

Regulators have already imposed stricter requirements for oil-spill response, blowout prevention equipment, and design and casing standards, the Independent Petroleum Association of America said in court papers filed in support of Hornbeck.

Safety Standards

The tougher drilling standards have “already largely, and perhaps completely, rectified the safety concerns” that led regulators to suspend deep-water drilling, Anne Rodgers, the IPAA’s lawyer, said in court papers.

U.S. Senator Mary Landrieu of Louisiana, the U.S. Chamber of Commerce and regional business organizations joined the suit opposing the moratorium.

They claim a ban would have a “devastating ripple effect” costing the region “billions of dollars and tens of thousands of jobs.”

“Every day the moratorium remains in effect, a way of life comes closer to disappearing,” lawyer Ted Cruz said in court papers on behalf of Landrieu and the business interests. “The moratorium essentially cuts the legs from under Gulf Coast communities which are struggling to survive.”

Five environmental groups joined the case in support of the government’s moratorium. They said protecting the Gulf Coast’s tourism, recreation and seafood industries is equally important to safeguarding jobs imperiled by the ban.

“Interior had to take immediate action to minimize the risk of another spill,” Salazar said in court papers filed July 6. “The stakes are even higher now that it is hurricane season.”

“Tourism and recreation comprised approximately 71 percent of the direct employment in the Gulf region’s 2003 ocean economy, while oil and gas accounted for 3 percent,” the environmental groups said in court papers, citing the latest available economic statistics.

The case is Hornbeck Offshore Services LLC v. Salazar, 2:10-cv-01663, U.S. District Court, Eastern District of Louisiana (New Orleans). The appeal case is 10-30585, 5th U.S. Circuit Court of Appeals (New Orleans).

To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net; Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.