Drilling Moratorium Challenge Is Kept Alive by Judge

A federal judge refused to throw out an industry lawsuit challenging the Obama administration’s temporary moratorium on deep-water oil and gas drilling in the Gulf of Mexico.

Offshore oil services companies claim the six-month moratorium on drilling in waters deeper than 500 feet, announced in May, is causing irreparable economic harm to the industry and the region. U.S. District Judge Martin Feldman in New Orleans today denied a government request to dismiss the case.

The same judge disallowed the ban in June, ruling that it was overly broad. The government claimed the suit and Feldman’s June order in favor of the industry were rendered irrelevant by later drilling suspension rules announced in July.

“A defendant’s voluntary action cannot serve to moot a case unless it is clear that the allegedly wrongful behavior could not reasonably be expected to occur,” Feldman wrote in today’s opinion. “The Interior Secretary’s second moratorium arguably fashions no substantial changes from the first moratorium.”

Feldman said he wasn’t ruling on the validity of the second moratorium. A second lawsuit challenging the newer moratorium also is pending before Feldman.

“We’re reviewing the decision,” said Hannah August, a Justice Department spokeswoman. She declined to comment further.

President Barack Obama announced the first ban on May 27 in reaction to the BP Plc oil spill, the worst in U.S. history.

Second Moratorium

After Feldman scrapped the first moratorium, Interior Secretary Kenneth Salazar imposed the second ban, saying regulators needed more time to recommend improvements in offshore drilling safety and to boost the industry’s ability to respond to oil spills.

Lawyers for Hornbeck Offshore Services Inc. and other offshore service companies told Feldman their lawsuit was still needed because deep-water drilling was blocked by the second moratorium.

“Obviously, we’re pleased Judge Feldman has recognized there are some very significant questions as to whether or not the second moratorium is very different than the first moratorium,” Hornbeck General Counsel Samuel A. Giberga said in a phone interview.

“He has kept our legal challenge intact,” Giberga said. “Yet, the moratorium is still intact.”

U.S. Appeal

The federal government appealed Feldman’s June 22 order to the U.S. Court of Appeals in New Orleans. It sent the case back to Feldman on Aug. 16, ruling he had to consider both bans, call witnesses as needed, and return the issue to the appeals court for a final decision.

The Hornbeck suit challenging the first moratorium was brought by more than a dozen offshore service and supply companies against U.S. regulators, including Salazar. They were joined by Louisiana Governor Bobby Jindal and state Attorney General Buddy Caldwell, who said the drilling suspension was costing thousands of jobs and threatening the regional economy.

“Judge Feldman said today what we have known all along -- that the second moratorium the federal government issued has ‘no substantial changes’ from the first one and the effects are the exact same -- to shut down drilling in the Gulf,” Jindal said today in a statement.

‘Carbon Copy’

Hornbeck’s lawyers told Feldman in court filings on Aug. 24 that the second moratorium was illegal, calling it a “carbon copy” of the first. The separate lawsuit challenging the second moratorium was filed by Ensco Offshore Co.

Government lawyers countered that Salazar weighed new evidence before issuing the July 12 drilling ban.

“The secretary conducted significant additional fact finding and analysis relevant to the various conclusions presented in the July directive,” the lawyers said in a court filing.

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 is 10-30585, U.S. Court of Appeals for the Fifth Circuit (New Orleans).

To contact the reporters on this story: Margaret Cronin Fisk in Southfield, Michigan, at mcfisk@bloomberg.net; Allen Johnson Jr. in New Orleans at allenmct@gmail.com.