U.S. Judge to Rule Temporary Drilling Moratorium

(Dow Jones Newswires), June 21, 2010

A federal judge in New Orleans plans to decide by Wednesday whether the Obama administration's temporary ban on deepwater offshore drilling can continue, a court official said Monday.

At a hearing Monday in the U.S. District Court for the Eastern District of Louisiana, Judge Martin Feldman said that he aimed to rule "no later" than Wednesday at noon local time on a lawsuit brought against the federal government by oil-service companies affected by the ban, said Feldman's case manager, Steve Hill. Hill said the judge would try to rule as early as Tuesday.

The lawsuit, filed in early June by Hornbeck Offshore, a small oil-services company based in Covington, La., says the U.S. Department of the Interior's May 28 move to stop offshore drilling for six months after the Gulf of Mexico spill is "arbitrary" and "capricious."

The suit was joined by a host of other small providers of services to the offshore oil industry, and counts the support of Louisiana Gov. Bobby Jindal, underscoring the growing rebellion against the moratorium in the Gulf Coast, a region where oil and gas drilling plays a significant economic role. On Friday, giant drilling contractor Diamond Offshore Inc. (DO) filed a similar lawsuit in Houston.

In a filing with the court, the Interior Department said it instituted the moratorium with a view "for the long-term future," to reduce the likelihood of another disaster. "The public's interest weighs heavily in favor of making sure that a tragedy like this does not occur again," the filing said. Environmental groups--such as the Sierra Club, the Natural Resources Defense Council and the Center For Biological Diversity--have filed briefs backing the moratorium.

If the judge decides to overturn the moratorium, the ruling could take effect immediately, said University of Texas at Austin law professor Charles Silver. However, an appeal is likely, and in that case judges often stay the effect of an injunction pending the appeal, Silver said.

But in any case, Judge Feldman has the power to make drilling resume. "It's a discretionary call," Silver said.

Oil has been leaking into the Gulf of Mexico since the explosion and sinking of the Deepwater Horizon rig in late April. As the oil slick has grown, the owner of the well, BP, has faced withering criticism, and deepwater drilling has come under scrutiny.

The announcement of the moratorium last month sparked big losses for the share prices of companies involved in deepwater drilling, particularly in the Gulf of Mexico. Since then, uncertainty has swirled about the possibility of tighter regulations.

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