Judge refuses to delay hearing on drilling moratorium

Michelle Massey Jun. 16, 2010, 6:15am



A U.S. District Judge has denied the government's request to postpone a hearing on the six-month deepwater drilling moratorium.

The hearing is set for June 21 in federal court in New Orleans.

"The issues presented are of national significance and to delay resolution would be irresponsible," said U.S. District Court Judge Martin Feldman in a handwritten note on the order denying the motion for continuance.

At the hearing, several Louisiana companies will argue the six-month ban on deepwater drilling in the Gulf of Mexico is illegal. The companies are hoping Judge Feldman will enjoin the moratorium and rule it violates the Outer Continental Shelf Lands Act (OSCLA) and Administrative Procedure Act (APA).

Lead plaintiff Hornbeck Offshore Services filed a lawsuit against the Interior Department and the Minerals Management Service (MMS) June 7 in federal court.

The lawsuit asserts the moratorium issued by Interior Secretary Ken Salazar on May 28 and the MMS document that provides a notice to the applicable lessees regarding the moratorium are "arbitrary, capricious, an abuse of discretion and otherwise not in accordance with the APA, OSCLA and its implementing regulations."

Hornbeck performs services in connection with offshore oil and gas drilling, exploration and production activities at the Gulf of Mexico's Outer Continental Shelf.

With 1,300 employees, Hornbeck representatives say they are losing customers and significant revenue as a result of the moratorium. They say each of Hornbeck's vessels has a limited life, so the company will suffer irreparable harm. They say it will be impossible to recover time lost in the intended Jones Act trade.

According to court records, Salazar's report entitled "Increased Safety measures for Energy Development on the Outer Continental Shelf" provides the basis for the moratorium suspending deepwater drilling.

The report recommends a "six-month moratorium on permits for new wells being drilled using floating rigs" and "an immediate halt to drilling operations on 33 permitted wells, not including the relief wells currently being drilled by BP, that are currently being drilled using floating rights in the Gulf of Mexico."

The report also recommends "drilling operations should cease as soon as safely practicable for a 6-month period."

The plaintiff and other Louisiana companies that joined the lawsuit argue the report does not contain any facts, data and analysis or risk assessments concerning the administration's moratorium on further drilling by the 33 permitted wells.

In May, MMS found no violations of governing regulations or systemic problems on 27 of the 29 drilling rigs inspected and only minor violations on the other two.

"There is nothing in the report that suggests that OCS drilling is more dangerous today than it was on the day immediately preceding the tragic incident involving the Deepwater Horizon," Hornbeck argues.

Compliance with the report is effectively a moratorium on all drilling because it may take years for the industry to comply with report's standards, some of which have not yet been determined, Hornebeck argues.

The APA authorizes courts to review an agency's action to "hold unlawful and set aside final agency action, findings and conclusions found to be...arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law."

The OSCLA requires the government to balance orderly resource development with protection of the human, marine and coastal environments. It also requires a suspension of operations be based on appropriate factual findings to support serious harm or damage to life or property.

The lawsuit asks the Court to issue a preliminary and permanent injunction ending the moratorium as applied to all drilling activities for any wells in depths of water greater than 500 feet.

The plaintiffs are represented by Carl Rosenblum, Grady Hurley, Alida Hainkel and Marjorie McKeithen of Jones, Walker, Waechter, Poitevent, Carrere & Denegre in New Orleans and John F. Cooney of Venable in Washington, D.C.

U.S. District Judge Martin L.C. Feldman is assigned to the case.

Case No. 2:10cv01663

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