Court Won't Block Deepwater Drilling During Appeal

NEW ORLEANS (Dow Jones Newswires), July 9, 2010

A federal appeals-court panel on Thursday quickly rejected the Department of the Interior's bid to keep intact a moratorium on deepwater drilling while it appeals a federal judge's decision overturning the ban.

The three-judge panel ruled that Interior Secretary Ken Salazar didn't prove the U.S. would suffer irreparable harm without an immediate ban on exploratory drilling in deep waters.

"The secretary has failed to demonstrate a likelihood of irreparable injury if the stay is not granted," reads the panel's decision, issued late Thursday shortly after the panel heard arguments from both sides in the Fifth Circuit Court of Appeals in New Orleans. "He has made no showing that there is any likelihood that drilling activities will be resumed pending appeal." The Interior Department didn't have immediate comment.

The decision came quicker than expected as the judges announced Thursday that they would rule by early next week.

President Barack Obama enacted the six-month ban on exploratory drilling in water of depths of 500 feet or greater on May 27 in the weeks following the blowout of a BP-owned well off Louisiana's coast. The government argues that it needs time to determine what caused the disaster and how it can be prevented in other wells.

However, a few oil-services companies led by Hornbeck Offshore sued to overturn the ban, arguing that it unfairly hurt companies with good operating records. On June 22, U.S. District Judge Martin Feldman sided with the oil-services companies and struck down the moratorium, saying that it was arbitrary.

The government had hoped to get permission to stop any drilling in deep water until the appeals court rules on Judge Feldman's decision later. The panel indicated it expects to hear arguments next month on the appeal of the decision to strike down the ban.

But throughout the hearing Thursday, the judges appeared skeptical of the government's arguments. While they also peppered lawyers for oil-services companies who opposed the ban, they aimed their harshest inquiries at the government.

Judge Eugene Davis noted that Interior hadn't requested emergency relief, meaning it hadn't shown that it would suffer irreparable harm without the ban in place in the short term. "I have inferred from that [failure to request emergency relief] that there really is no likelihood that drilling will commence during the pendency of this appeal," Judge Davis said to Interior's lawyers.

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