By Steven Mufson
Washington Post Staff Writer
Wednesday, June 23, 2010; A01
The oil industry won a round in the legal battle over offshore drilling Tuesday when a federal judge in New Orleans issued an injunction blocking the six-month moratorium President Obama imposed on deep-water drilling in late May.
The decision, which included a stinging rebuke of the Obama administration, was hailed by oil companies that work in the Gulf of Mexico. But the White House said it would immediately appeal to the U.S. Court of Appeals for the 5th Circuit, which could grant an emergency stay while weighing the case.
Secretary of Interior Ken Salazar said Tuesday evening that "I will issue a new order in the coming days that eliminates any doubt that a moratorium is needed, appropriate and within our authorities."
Oil companies said they would not restart costly, long-term deep-water drilling projects while the legal wrangling continued.
U.S. District Judge Martin L.C. Feldman said in issuing his injunction that the Interior Department had failed to show that the oil spill triggered by the Deepwater Horizon rig blowout in April meant that there was imminent danger on all deep-water drilling rigs in the gulf. By contrast, he said, the "blanket, generic, indeed punitive, moratorium" has clearly harmed the industry and region.
"An invalid agency decision to suspend drilling of wells in depths of 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," Feldman wrote in a case brought by Hornbeck Offshore Services and three other offshore oil service firms.
Groups supporting the moratorium quickly took aim on Tuesday at the judge, who was appointed to the federal bench in 1983 by President Ronald Reagan. Disclosure forms from 2008 obtained by the group Judicial Watch show that Feldman has invested in companies involved in offshore oil and gas exploration, including deep-water rig owner Transocean, shallow-water drillers Hercules and Rowan, and international rig and tool provider Parker Drilling. The investments were as much as $15,000 each, according to the forms.
The court did not make the 2009 disclosure form available, and Feldman could not be reached for comment.
Decisions by federal agencies are sometimes challenged in courts, however, and a recent law review article said such efforts are successful nearly a third of the time.
David F. Engstrom, a law professor at Stanford University, said there are several justifications for such challenges under the Administrative Procedures Act. In this case, Feldman granted the preliminary injunction after deciding that the oil companies would probably prevail in their arguments that Interior's actions were "arbitrary and capricious" and that they were being harmed irreparably by the moratorium. Under that standard, Feldman -- and the appeals court that will review his order -- must decide whether there is "a rational connection between the facts that the agency found and the action that it took," Engstrom said.
In his order Tuesday, Feldman emphatically said there was not. "The Court is unable to divine or fathom a relationship between the [Interior Department's] findings and the immense scope of the moratorium," he said.
He added that the administration's drilling suspension "does not seem to be fact-specific and refuses to take into measure the safety records of those others in the Gulf." He said that "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."
Obama issued the moratorium on drilling in waters over 500 feet deep after receiving a report that Interior had ordered in the wake of the Deepwater Horizon drilling rig blowout April 20. The moratorium affected 33 rigs involved in exploration drilling. Each rig costs about $1 million a day to operate and employs hundreds of people if support jobs are counted, so the stakes for the oil industry are high.
At the same time, many of Obama's key political supporters and many environmental groups oppose offshore drilling whether in deep or shallow water. "I think they're both dangerous," said David Pettit, an attorney at the Natural Resources Defense Council, noting that earlier disastrous oil spills had taken place in shallow waters off the coasts of Santa Barbara, Calif., Australia and Mexico.
The Sierra Club, the Florida Wildlife Federation, the Natural Resources Defense Council and other environmental groups filed briefs in support of the administration. But a group of scientists who worked on the report to Interior said the department had mischaracterized their position on the moratorium to make it seem as though they fully supported it.
The Obama administration said it would fight to reinstate the moratorium. "We will immediately appeal to the 5th Circuit," White House spokesman Robert Gibbs said, adding that until the safety issues are fully understood, drilling at those depths does not "make any sense."
One issue Feldman raised was how Interior extrapolated to other deep-water rigs. "Are all airplanes a danger because one was?" he asked rhetorically. "All oil tankers like Exxon Valdez? All trains? All mines? That sort of thinking seems heavy-handed and rather overbearing."
Lois Epstein, an oil and gas consultant to nonprofit organizations, said that the government can and has grounded certain types of planes after accidents. She said that the administration "needs the time to develop ways of distinguishing good operations and operators from bad." And she added that it would be irresponsible to risk another accident.
Companies involved in deep-water exploration responded cautiously.
"It is unclear how that appeal will affect the ability of the deep-water drillers to return to work," Michael Kearns, director of external affairs at the National Ocean Industries Association, said in a note to members. "We will keep a close eye on developments and keep you apprised as the situation develops."
Shell Oil issued a statement calling the injunction "an important step in returning thousands of oil service workers to their jobs." The company had suspended activity on two offshore wells to comply with the moratorium, and a well scheduled to be drilled this summer was postponed.
Company spokesman Kelly OpDeWeegh added that "you don't just start drilling even if all the legalities of this were very clear."
For now in the gulf, she said, "nothing changes."
Staff writer Robert Barnes contributed to this report.