Judge rules against U.S. government on oil drilling

HOUSTON A federal judge on Wednesday rejected the U.S. government's request to dismiss an industry lawsuit challenging its deepwater oil and gas drilling moratorium, dealing another blow to the Obama administration.

Hornbeck Offshore Services Inc and other drilling companies sued the administration on June 7 after it first ordered a halt to deepwater drilling in the Gulf of Mexico following BP Plc's well rupture that killed 11 workers and caused the world's worst offshore oil spill.

As a result of Louisiana-based Hornbeck's lawsuit, U.S. District Court Judge Martin Feldman in New Orleans blocked implementation of the drilling ban on June 22.

The Obama administration then issued a reworked second drilling moratorium and asked that the Hornbeck lawsuit be thrown out because the first ban was no longer relevant.

But in his 20-page ruling on Wednesday, Feldman said the administration's new moratorium offered "no substantial changes" from the first one, and denied the motion to dismiss the Hornbeck lawsuit.

The original moratorium, which banned drilling below 500 feet for six months, was put on hold because Feldman found that the administration had failed to properly weigh the economic impact it would have on the industry and the surrounding communities.

Hornbeck and the other companies also had questioned whether the Obama administration, through the Interior Department which oversees and regulates offshore drilling, could rescind the original moratorium, which was blocked by the court, and issue a second one.

Feldman ruled that while the Interior Department could do so, he said the department had failed to follow proper procedures by seeking permission from the court since the original moratorium had been blocked.

A Justice Department spokeswoman said the department was reviewing the decision.

Another drilling company, Ensco Plc, has filed another lawsuit challenging the government's new moratorium, which bans until late November the use of deepwater drilling equipment similar to what was employed on the BP well.

The Obama administration has defended its moratorium plans as necessary to provide the time needed to ensure that exploratory drilling was proceeding safely in light of the BP spill, which began in April.

Deepwater drilling, newer than shallow-water drilling, is also riskier because the drill bit must bore through many more layers of rock and salt under more extreme pressures and temperatures.

The case is Hornbeck Offshore Services LLC et al v Ken Salazar et al, U.S. District Court for the Eastern District of Louisiana, No. 10-cv-01663.

(Reporting by Anna Driver in Houston and Jeremy Pelofsky in Washington, editing by Will Dunham)