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U.S. in Contempt Over Gulf Drill Ban, Judge Rules

Feb. 3 (Bloomberg) -- The Obama Administration acted in contempt by continuing its deepwater-drilling moratorium after the policy was struck down, a New Orleans judge ruled.

Interior Department regulators acted with “determined disregard” by lifting and reinstituting a series of policy changes that restricted offshore drilling, following the worst offshore oil spill in U.S. history, U.S. District Judge, Martin Feldman of New Orleans ruled yesterday.

“Each step the government took following the court’s imposition of a preliminary injunction showcases its defiance,” Feldman said in the ruling.

“Such dismissive conduct, viewed in tandem with the re-imposition of a second blanket and substantively identical moratorium, and in light of the national importance of this case, provide this court with clear and convincing evidence of the government’s contempt,” Feldman said.

President Barack Obama’s administration first halted offshore exploration in waters deeper than 500 feet in May, after the explosion and sinking of the Deepwater Horizon drilling rig off the Louisiana coast led to a subsea blowout of a BP Plc well that spewed more than 4.1 million barrels of oil into the Gulf of Mexico.

Overly Broad

Feldman overturned the initial ban as overly broad on June 22, after the offshore-drilling industry and Gulf Coast political and business leaders challenged it. U.S. Interior Secretary Kenneth Salazar said later that day that he would “issue a new order in the coming days that eliminates any doubt that a moratorium is needed, appropriate, and within our authorities.”

In July, Salazar instituted a second drilling moratorium that was also challenged by an industry lawsuit claiming the ban was harming the Gulf Coast economy, which is heavily dependent on deepwater drilling activities. That ban was rescinded in October, before Feldman could rule on its validity.

Feldman later ruled that enhanced drilling safety rules Salazar imposed to permit companies to resume offshore exploration violated federal law, and he struck down those as well. Opponents of those rules complained to Feldman that regulators were continuing to block the resumption of drilling after Feldman’s rulings.

Wyn Hornbuckle, a Justice Department spokesman, said the government is reviewing yesterday’s ruling. He declined to comment further.

Informal Moratorium

The Offshore Marine Service Association, a group representing offshore service vessels and shipyards, urged the president to end what it called an informal moratorium on offshore drilling.

“President Obama claims to have lifted the Gulf moratorium, yet not a single deepwater permit has been issued in nine months,” Jim Adams, the association’s president, said in a release after the ruling. “As a result, thousands of workers are out of jobs, Americans are paying more for gasoline and heating oil, and our nation is becoming even more dependent on unstable nations for our energy needs.”

Feldman also ordered the government to pay the legal fees of Hornbeck Offshore Services LLC, which filed the initial lawsuit. The company had described the fees as “significant.”

Hornbeck “was put to considerable expense, after Judge Feldman issued the injunction, contending with the government’s litigation posturing and defiance of the court’s order,” Sam Giberga, the company’s general counsel, said today in an e-mail.

“The government was not at liberty to impose its own will after the court struck down the policy,” Giberga said. “The government, like any citizen, had to obey the ruling, even if it didn’t like it.”

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

To contact the reporter on this story: 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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