The deep water drilling industry has won an initial battle against the Obama Administration's six-month deepwater drilling moratorium after U.S. District Judge Martin L.C. Feldman ruled the ban is "arbitrary and capricious" and possibly violates the Outer Continental Shelf Lands Act and other regulations.
In Feldman's order issued today, he wrote that the moratorium did not have justification and that the Interior Department did not issue an explanation for the suspension of operations.
The ruling comes a day after Feldman heard arguments from several Louisiana companies who are losing business and are laying off employees due to the ban.
The companies employee more than 11,000 people and provide services in support of offshore oil and gas drilling, exploration and production activities. According to court documents, the ban could cause the loss of an estimated 150,000 jobs which are directly related to offshore operations.
Lead plaintiff Hornbeck Offshore Services argued that the deepwater drilling ban was arbitrary, not based on any evidence and in violation of legislation and regulations.
The moratorium was implemented in reaction to the Deepwater Horizon explosion on April 20 and the resulting oil spill.
Secretary of the Interior Department Ken Salazar was ordered to conduct a review of the incident and report what should be required to improve safety of oil and gas exploration and production operations.
Salazar's report recommended a six-month moratorium on permits for new wells being drilled using floating rig 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 recommended that drilling operations should cease "as soon as safely practicable" for a 6-month period.
The report stated that it was peer-reviewed by seven experts, but several of the experts have publicly stated that their positions were misrepresented and that they did not agree with "the six month blanket moratorium on floating drilling."
"While the implementation of regulations and a new culture of safety are supportable by the Report and the documents presented, the blanket moratorium, with no parameters, seems to assume that because one rig failed and although no one yet fully knows why, all companies and rigs drilling new wells over 500 feet also universally present an imminent danger," Feldman wrote.
Feldman pointed that the report was influenced by the government's concern that it could not cope with another blowout as the government's resources are stretched thin.
Feldman's order states that Louisiana companies have suffered irreparable harm and the harm will likely continue as a result of the deepwater drilling ban.
"[T]he Court is persuaded that it is only a matter of time before more business and jobs and livelihoods will be lost," he wrote.
Feldman stated that the public interest weighs in favor of granting the preliminary injunction as the moratorium will "clearly ripple throughout the economy in this region."
The Obama administration states that it will appeal the decision.
The Louisiana companies 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.
Case No. 2:10cv01663