U.S. Wins Partial Victory From Judge Who Scrapped Drill Ban

A federal judge in New Orleans rejected oil industry arguments that the U.S. government exceeded its authority by imposing new permitting requirements on developmental drilling in the western Gulf of Mexico.

U.S. District Judge Martin Feldman, who scrapped the Obama Administration’s original deep-water drilling moratorium as arbitrary and overly broad, today sided with the government, ruling that federal law gives regulators “broad authority” to oversee offshore drilling.

“Ultimately, then, an agency’s interpretation is permissible so long as it is reasonable,” Feldman said in a decision that allows other industry challenges to the agency’s drilling policy to continue.

Ensco Offshore Co., a unit of London-based Ensco Plc (ESV), along with other oil industry companies, sued Interior Secretary Kenneth Salazar last year over the agency’s decision to require the drilling permits after the Deepwater Horizon rig sank while drilling a well off the Louisiana coast for BP Plc (BP/) last April.

The companies complained that, in the wake of the Gulf oil spill, regulators imposed new permit requirements on development and production wells, which involve drilling additional holes into previously discovered underground reservoirs. Before the spill, such permits and production plans were only required for exploratory, or initial, wells or for drilling in waters near Florida.

Review Delays

Feldman said he’ll continue to hear claims that regulators are intentionally delaying the industry’s return to deep-water drilling by rescinding previously approved permits, imposing new permit requirements, and “taking much longer to review and approve permit applications than in the past.”

Laura Sweeney, a Justice Department spokeswoman, declined to comment on Feldman’s ruling. Sean O’Neill, an Ensco spokesman, didn’t immediately return a phone message after regular business hours.

Today’s ruling doesn’t affect a separate issue in the complex legal challenge, in which Feldman ordered regulators to act on seven stalled deep-water drilling permits within 30 days. Regulators appealed that order, and the U.S. Court of Appeals in New Orleans granted an emergency stay.

The case is Ensco Offshore Co. v. Salazar, 2:10-cv-01941, U.S. District Court, Eastern District of Louisiana (New Orleans).

To contact the reporters on this story: Laurel Brubaker Calkins in Houston at laurel@calkins.us.com; Allen Johnson Jr. in New Orleans at allenmct@gmail.com

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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