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Judge lifts Obama's offshore drilling ban

Tuesday, June 22, 2010 | 4:59 p.m. CDT; updated 8:40 a.m. CDT, Wednesday, June 23, 2010

NEW ORLEANS — A federal judge struck down the Obama administration's six-month ban on deepwater oil drilling in the Gulf of Mexico as rash and heavy-handed Tuesday, saying the government simply assumed that because one rig exploded, the others pose an immediate danger, too.

The White House promised an immediate appeal. The Interior Department had imposed the moratorium last month in the wake of the Deepwater Horizon disaster, halting approval of any new permits for deepwater projects and suspending drilling on 33 exploratory wells.

White House spokesman Robert Gibbs said President Barack Obama believes that until investigations can determine why the spill happened, continued deepwater drilling exposes workers and the environment to "a danger that the president does not believe we can afford."

Several companies that ferry people and supplies and provide other services to offshore rigs argued the moratorium was arbitrarily imposed after the April 20 explosion that killed 11 workers and blew out the well 5,000 feet underwater. It has spewed anywhere from 67 million to 127 million gallons of oil.

Judge has petroleum ties

U.S. District Judge Martin Feldman, who was appointed by President Ronald Reagan and has owned stock in a number of petroleum-related companies, sided with the plaintiffs.

"If some drilling equipment parts are flawed, is it rational to say all are?" he asked. "Are all airplanes a danger because one was? All oil tankers like Exxon Valdez? All trains? All mines? That sort of thinking seems heavy-handed, and rather overbearing."

He also warned that the shutdown would have an "immeasurable effect" on the industry, the local economy and the U.S. energy supply.

The ruling was welcomed by the oil and gas industry and decried by environmentalists.

Feldman's financial disclosure report for 2008, the most recent available, shows holdings in at least eight petroleum companies or funds that invest in them, including Transocean Ltd., which owned the Deepwater Horizon. The report shows that most of his holdings were valued at less than $15,000; it did not provide specific amounts.

It was not clear whether Feldman still has any of the energy industry stocks. Recent court filings indicate he might no longer have Transocean stock. The 2008 report showed that he did not own any individual shares in big companies such as BP, which leased the rig that exploded, or ExxonMobil.

Feldman did not immediately respond to a request for more information about his current holdings.

Josh Reichert, managing director of the Pew Environment Group, said the ruling should be rescinded if Feldman still has investments in companies that could benefit from Tuesday's ruling.

"If Judge Feldman has any investments in oil and gas operators in the Gulf, it represents a flagrant conflict of interest," Reichert said.

Feldman's ruling prohibits federal officials from enforcing the moratorium until a trial is held. He did not set a date.

Executives applaud decision

In his ruling, the judge called the spill "an unprecedented, sad, ugly and inhuman disaster," but said Interior Secretary Ken Salazar's rationale for the moratorium "does not seem to be fact-specific and refuses to take into measure the safety records of those others in the Gulf."

The judge said the blanket moratorium "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 there are about 3,600 structures in the Gulf that account for 31 percent of total domestic oil production and 11 percent of domestic natural gas production. More than 60 percent of active leases are at depths surpassing 1,000 feet. He also said an estimated 150,000 jobs are directly related to offshore operations.

The lawsuit was filed by Hornbeck Offshore Services of Covington, La. CEO Todd Hornbeck said after the ruling that he is looking forward to getting back to work. "It's the right thing for not only the industry but the country," he said.

Earlier in the day, executives at a major oil conference in London warned that the moratorium would cripple world energy supplies. Steven Newman, president and CEO of Transocean, called it unnecessary and an overreaction.

"There are things the administration could implement today that would allow the industry to go back to work tomorrow without an arbitrary six-month time limit," Newman said.

BP CEO Tony Hayward skipped the event after coming under fire for attending a yacht race in England on Saturday rather than dealing with the spill.

White House, Democrats slam judge's ruling

BP stock dropped 81 cents, or 2.7 percent, to $29.52, near a 14-year-old low for the company in U.S. trading. The stocks of other companies associated with the spill remained low despite Feldman's ruling.

The drilling moratorium was declared May 6 and originally was to last only through the month. Obama announced May 27 that he was extending it for six months.

Rep. Edward Markey, D-Mass., chairman of the Select Committee on Energy Independence and Global Warming, slammed the ruling.

"This is another bad decision in a disaster riddled with bad decisions by the oil industry," said Markey, who was at the forefront of an effort to force BP to make underwater video of the spill public. "The only thing worse than one oil spill disaster in the Gulf of Mexico would be two oil spill disasters."

In Louisiana, Gov. Bobby Jindal and corporate leaders had complained that the moratorium would cost the region thousands of lucrative jobs, most paying more than $50,000 a year.

Feldman agreed, writing: "An invalid agency decision to suspend drilling of wells in depths over 500 feet simply cannot justify the immeasurable effect on the plaintiffs, the local economy, the Gulf region and the critical present-day aspect of the availability of domestic energy in this country."

Tim Kerner, mayor of the fishing town of Lafitte, La., cheered the ruling.

"I love it. I think it's great for the jobs here and the people who depend on them," he said.

The American Petroleum Institute, one of the industry's main lobbying groups, welcomed the decision: "With this ruling, our industry and its people can get back to work to provide Americans with the energy they need, and do it safely and without harming the environment."

In its response to the lawsuit, the Interior Department had argued the moratorium was necessary while the effort to stop the leak and clean the Gulf continues and new safety standards are developed.

"A second deepwater blowout could overwhelm the efforts to respond to the current disaster," the department said.

The government also challenged contentions that the moratorium would cause long-term economic harm. There are still 3,600 oil and natural gas production platforms in the Gulf.


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