U.S. News

Judge to rule on U.S. drilling ban in Gulf

NEW ORLEANS (Reuters) - A federal judge pledged to rule by Wednesday on whether to block implementation of a six-month government ban on deepwater drilling in the Gulf of Mexico imposed after the BP oil spill.

Escambia County Oil Spill Response workers set oil containment booms near the bridge to Pensacola Beach, Florida June 5, 2010, to protect an area from the Deepwater Horizon oil spill. REUTERS/Colin Hackley

The lawsuit -- originally filed by Louisiana-based Hornbeck Offshore Services LLC and joined by more than a dozen companies involved in offshore drilling operations -- is the first legal action seeking to reverse the drilling ban imposed by the U.S. Department of Interior.

The companies are seeking a restraining order to bar enforcement of the moratorium, declared after the Deepwater Horizon drilling rig in the Gulf of Mexico exploded on April 20, killing 11 workers and rupturing a deep-sea well that has sent oil gushing unabated into the Gulf.

“The court has to decide if there is a rational basis for the choice the government has made,” Judge Martin Feldman said in opening statements in U.S. District Court in New Orleans on Monday.

The judge said he would rule no later than noon CDT (1700 GMT) on Wednesday, and possibly as early as Tuesday.

In its legal complaint, Hornbeck says the moratorium is “arbitrary and capricious” and will result in job losses that could decimate the labor force needed on offshore oil rigs.

The moratorium, imposed on May 28, spurred the shutdown of 33 deepwater drilling rigs. President Barack Obama’s administration says the moratorium is needed to ensure safety after BP’s oil spill.

“The Deepwater Horizon was a game changer. The inspection protocols have to be upgraded to increase the margin of safety,” Justice Department attorney Guillermo Montero argued on behalf of the Interior Department.

“There is, in fact, a threat to persons, property and the environment and the need to establish safety,” Montero said, countering Hornbeck’s claim that the moratorium is arbitrary.

“The government’s unchecked authority has shut down this entire industry,” said Carl Rosenblum, representing the plaintiffs, noting that the government did not shut down airlines after the September 11 attacks on New York and Washington in 2001.


“The short-term economic harm asserted by plaintiffs fails to meet their burden of demonstrating irreparable harm,” Hayes said. “In contrast, the public interest is overwhelmingly served by the limited six-month suspensions.”

Louisiana Governor Bobby Jindal has sided with the offshore operators in the case. Environmental groups have joined the Interior Department in defending the ban in court.

Jindal warned in a court filing that the moratorium could cripple the offshore oil industry, which contributes about $3 billion a year to his state’s economy.

The moratorium will turn “an environmental disaster into an economic catastrophe,” the state of Louisiana said in its filing. “Every day that the moratorium is in effect costs the state untold millions of dollars.”

It could also worsen Louisiana’s budget crunch because about 32 percent of revenues from energy production in its waters go to the state.

The oil and gas industry is Louisiana’s biggest economic engine and accounts for about 16 percent of it gross domestic product, vastly overshadowing fishing (1 percent) and tourism (4 percent), according to the Tulane University Energy Institute.

In a related case, Diamond Offshore Drilling Inc is seeking to overturn the drilling ban in a lawsuit filed in a Texas court. It argues that the moratorium violates a provision in the U.S. Constitution that bars seizing private property without due process or compensation.

The case before Judge Feldman is Hornbeck Offshore Services LLC v. Kenneth Salazar et al in U.S. District Court for the Eastern District of Louisiana, No. 10-cv-1663. The case in Texas is Diamond Offshore Co. v. Kenneth Salazar et al in U.S. District Court for the Southern District of Texas, No. 10-cv-2136.

Additional reporting by Jeremy Pelofsky in Washington; writing by Chris Baltimore; editing by Chris Wilson