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Oil-Industry Suit on U.S. Drilling Rules Set for Trial

Nov. 9 (Bloomberg) -- A New Orleans judge will conduct a two-day bench trial next year in an oil industry lawsuit claiming U.S. regulators continue to stall deep-water drilling in the Gulf of Mexico.

U.S. District Judge Martin Feldman, after a closed-door meeting today with lawyers in three lawsuits challenging the Obama administration’s offshore drilling policy, said he would try two of the cases next year in New Orleans federal court.

“Trial will commence on Monday, July 25, 2011, at 9:00 a.m. without a jury,” Feldman said in an order handed down today in a suit by Ensco Offshore Co. against the administration’s second drilling ban.

Feldman also said he would conduct a separate two-day bench trial Oct. 11 on remaining claims in a separate industry lawsuit against the first U.S. drilling ban, which President Barack Obama imposed in May after the BP Plc oil spill in the Gulf of Mexico.

That lawsuit, by Hornbeck Offshore Services LLC., was joined by the state of Louisiana and more than 200 regional business and trade groups who claimed U.S. Interior Secretary Kenneth Salazar improperly restricted exploration in waters deeper than 500 feet. Feldman struck down the initial ban in late June, calling it overly broad and punitive to the Gulf Coast economy.

Second Moratorium

After Feldman struck down the first moratorium, Salazar ordered a second one in July, saying regulators needed more time to study improvements to drilling safety and oil-spill response capabilities. In October, Salazar rescinded the second ban, saying the industry was meeting milestones for improving drilling safety and that the sealing of BP’s runaway well on Sept. 19 had freed up oil-spill response capacity.

Feldman last week threw out Ensco’s claims against the second ban, finding the latest rules lifting the moratorium rendered the lawsuit moot. Feldman earlier ruled that drilling safety rules Salazar issued along with the first ban in May should be scrapped as well.

This leaves Ensco’s claims that the U.S. is using its new rules, including allegedly unlawful permitting requirements, to block the industry from resuming drilling in the deep-water Gulf.

In the other lawsuit, led by Hornbeck, the trial will consider industry allegations that regulators are interfering with oil company leases and exploration contracts, according to court filings.

Interior Department spokeswoman Melissa Schwartz and Ken Dennard, one of Hornbeck’s attorneys, declined in e-mails to comment on the judge’s order. Ensco Vice President Sean O’Neill didn’t immediately respond to a call seeking comment.

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).

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

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

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