Judge Requests More Detail Before Deciding Drill Ban

U.S. regulators and the oil industry have until Oct. 11 to answer U.S. District Judge Martin Feldman’s questions before he decides whether to reject or uphold the offshore drilling ban, Feldman ordered today.

Feldman today asked both sides for more evidence and legal opinions before he determines if Interior Secretary Kenneth Salazar properly issued a second drilling ban on July 12 after Feldman struck down the first one, finding it arbitrary and overly broad. Feldman conducted a two-hour hearing in New Orleans yesterday on the industry’s challenge to the U.S. ban.

The judge has repeatedly cited Salazar’s public statements and congressional testimony, made within hours of Feldman’s overthrow of the first drilling ban on June 22, as indicators that Salazar may not have followed federal laws requiring him to reanalyze the situation, using new evidence, before issuing new drilling restrictions.

“What other evidence, if any, exists to establish that the secretary had decided to issue a second blanket moratorium even before initiating the process of assembling new supporting information?” Feldman asked lawyers for both sides. “Is this sufficient under the case precedents to establish that the secretary’s decision to issue the second moratorium was arbitrary, capricious and an abuse of discretion?”

Worst Spill

Salazar said he followed the rules and acted within his authority by halting drilling until Nov. 30, to give regulators time to study improvements to drilling practices and spill- response capabilities following the worst offshore oil spill in U.S. history.

President Barack Obama imposed the initial drilling suspension following the BP Plc oil spill, caused by the sinking of the Deepwater Horizon rig off the Louisiana coast in April.

Hornbeck Offshore Services Inc. and other offshore service and supply companies sued U.S. regulators, including Salazar, in June. The companies were joined by Louisiana Governor Bobby Jindal, who argued the regional economy would suffer irreparable economic harm from the drilling suspension.

Feldman threw out the ban as too far-reaching and barred the government from enforcing it. Within hours of that decision, Salazar said publicly that he would find another way to keep the deep-water rigs idle, even as he complied with Feldman’s ruling.

New Limits

On July 12, Salazar issued new limits on deep-water drilling, while appealing Feldman’s decision scrapping the first ban. Salazar also asked the appeals court in New Orleans to find the Hornbeck suit irrelevant because the new rules superseded the scrapped ban. Yesterday, the appellate court sided with the government and said the lawsuit challenging the first ban was “legally and practically dead” because the first ban no longer technically exists.

Ensco Offshore Co. filed a separate lawsuit directly challenging Salazar’s new moratorium, calling it a “mirror image” of the overturned ban.

Ensco spokesman Sean O’Neill didn’t immediately respond to requests for comment on the judge’s order. Interior Department spokeswoman Kendra Barkoff declined to comment by e-mail.

The cases are Ensco Offshore Co. v. Salazar, 2:10-cv-1941, and Hornbeck Offshore Services LLC v. Salazar, 2:10-cv-01663, both in U.S. District Court, Eastern District of Louisiana (New Orleans). The appeal case is Hornbeck v. Salazar, 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; Laurel Brubaker Calkins in Houston at laurel@calkins.us.com.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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