District Judge Blocks Moratorium on Gulf Drilling

U.S. District Judge Martin Feldman granted a preliminary injunction against the U.S. government's blanket moratorium on deepwater drilling in the U.S. Gulf of Mexico, ruling that Hornbeck Offshore and other plaintiffs would likely succeed in showing that the Department of the Interior's decision to ban drilling was arbitrary and capricious.

Feldman ruled in favor of the plaintiffs' assertions that they would suffer "immediate and irreparable" harm to their businesses without the request to block the drilling ban, and determined that the Department of the Interior and other defendants in the case had failed to provide evidence to cogently reflect the decision to issue a "blanket, generic, indeed punitive" moratorium in the 30-day review of the Deepwater Horizon tragedy.

"The Report [that recommended the six-month moratorium on deepwater drilling] makes no effort to explicitly justify the moratorium: it does not discuss any irreparable harm that would warrant a suspension of operations, it does not explain how long it would take to implement the recommended safety measures," Feldman said in his ruling.

"The Deepwater Horizon oil spill is an unprecedented, sad, ugly and inhuman disaster. What seems clear is that the federal government has been pressed by what happened on the Deepwater Horizon into an otherwise sweeping confirmation that all Gulf deepwater drilling activities put us all in a universal threat of irreparable harm."

U.S. Secretary of the Interior Ken Salazar on May 28 suspended drilling activity in more than 500 feet of water on the Gulf Outer Continental Shelf, arguing that the ban was needed to allow Interior to investigate the cause of the Deepwater Horizon blowout and oil spill and to implement new safety guidelines for oil and gas exploration and production activities.

Following the Deepwater Horizon incident on April 20, Salazar issued a report, compiled with input from government, academic and industry experts, to recommend immediate and long-term reforms to improve drilling safety. In the Executive Summary of that report, Salazar recommended a six-month moratorium on permits for new wells being drilled with floating rigs.

"Much to the government's discomfort and this Court's uneasiness, the summary also stated that 'the recommendations contained in this report have been peer-reviewed by seven experts identified by the National Academy of Engineering.' As the plaintiffs, and the experts themselves, pointedly observe, this statement was misleading," Feldman said.

While the experts agreed with the safety recommendations contained in the body of the main report, five of the National Academy experts and three of the other experts have said they disagree with the six-month blanket moratorium, saying the blanket moratorium was added after their final review and never agreed to by them. Instead, the panel of experts had recommended a six-month moratorium on exploratory wells deeper than 1,000 feet to allow for the implementation of suggested safety measures.

"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 said.

The defendants also failed to provide evidence indicating that the Secretary balanced the concern for environmental safety with the policy of making leases available for development, such as suspending activity on individual rigs until they reached compliance with the new federal regulations to be recommended for immediate implementation.

Feldman noted that the report's parameters on what constituted deepwater were confused, with the report defining deepwater as greater than 1,000 feet, while the Notice to Lessees regarding the drilling ban suddenly defined deepwater as more than 500 feet.
Hornbeck Offshore Services was joined by several oil service companies in filing an injunction on June 7 against the moratorium in the U.S. District Court Eastern District of Louisiana in New Orleans, questioning whether the federal government's imposition of a general moratorium on drilling was done contrary to law. The court ordered an expedited hearing for June 21 on the matter because of the national importance of these issues, Feldman said.

"Judge Feldman recognized that the potential for the ban to cause significant economic harm to our country and the Gulf Coast, not to mention the damage it would do to America's maritime industry," said Offshore Marine Service Association President Ken Wells.

"Our members are not the drilling companies or the oil companies. They are the companies that carry supplies and people to and from the offshore energy projects. Even though they had nothing to do with the BP accident, it was clear that they would bear the brunt of the negative consequences of the ban. While this is clearly not the end of the legal process, it is extremely good news and gives our industry hope that we will survive this government action," Wells said.