Judge Blocks Offshore Drilling Moratorium

Last Updated 5:01 p.m. ET

A judge has blocked the offshore drilling moratorium imposed by the Obama administration after the devastating Gulf of Mexico oil spill.

The six-month moratorium halted the approval of any new permits for deepwater drilling, and suspended drilling at 33 existing exploratory wells in the Gulf of Mexico and in the Pacific.

U.S. District Judge Martin Feldman heard two hours of arguments Monday when companies that service oil rigs asked that the moratorium be lifted.

Calling the Interior Department's decision an "invalid" one, Feldman wrote that a blanket suspension of all offshore drilling in depths of more than 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."

White House Press Secretary Robert Gibbs said the administration would immediately appeal the decision to the 5th Circuit.

Hornbeck v. Salazar (pdf)
Special Section: Disaster in the Gulf

Asked about the ruling at the end of his briefing Tuesday, Gibbs said, "The president strongly believes ... that continuing to drill at these depths without knowing what happened does not make any sense, and potentially puts the safety of those on the rigs and in the Gulf at risk."

The April 20 disaster on the Deepwater Horizon killed 11 workers and blew out a well that has gushed anywhere from 68 million to 126 millions of oil into the Gulf.

Feldman's financial disclosure report for 2008, the most recent available, shows holdings in at least eight petroleum companies or companies 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, though it did not provide specific amounts.

It's not clear whether Feldman still has all of the energy industry stock listed in the report. Recent court filings indicate he may no longer have Transocean shares. He did not own any shares in big companies such as BP PLC, which was leasing the rig that exploded, or ExxonMobil.

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

Josh Reichert, managing director of the Pew Environment Group, said his ruling should be rescinded if he still has investments in companies that could benefit from Tuesday's ruling.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," he said. "It is possible that he has sold off those assets. We just don't know."

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

Hornbeck Offshore Services, a Covington, La.-based company, had sued
for declaratory and injunctive relief, and was later joined by other plaintiffs who asked for a preliminary injunction prohibiting the government from enforcing the drilling moratorium.

Hornbeck 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.

Tim Kerner, the mayor of Lafitte, La., cheered Feldman's ruling.

"I love it. I think it's great for the jobs here and the people who depend on them," said Kerner, whose constituents make their living primarily from commercial fishing or oil.

Catherine Wannamaker, a lawyer for environmental groups that intervened in the case and supported the moratorium, called the ruling "a step in the wrong direction."

"We think it overlooks the ongoing harm in the Gulf, the devastation it has had on people's lives," she said. "The harm at issue with the Deepwater Horizon spill is bigger than just the Louisiana economy. It affects all of the Gulf."

Lawmakers came down on both sides of the ruling.

Republican Sen. David Vitter of Louisiana applauded the decision, saying it recognizes the president's powers aren't unlimited. Vitter also says the moratorium is "wreaking havoc on jobs" in his state.

Massachusetts Democrat Edward Markey, who chairs a House energy independence committee, called the ruling "another bad decision in a disaster riddled with bad decisions by the oil industry."

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

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.

Shares of BP, which owns 65 percent of the blown-out well, dropped 81 cents, or 2.7 percent, to $29.52, near a 14-year-old low for the shares in U.S. trading. Shares of other companies associated with the spill remained low despite Feldman's ruling.

On the plaintiffs' complaint that the moratorium would have a devastating effect on their oil service industry business, Feldman writes, "…[A]n estimated 150,000 jobs are directly related to offshore operations. The government admits that the industry provides relatively high paying jobs in drilling and production activities. Oil and gas production is quite simply elemental to Gulf communities."

The Court, Feldman wrote, was persuaded that "the public interest weighs in favor of granting a preliminary injunction," and found that the palintiffs would likely succeed in showing that the agency's decision was "arbitrary and capricious."

In his 22-page decision, Judge Feldman excoriates the Obama administration for making what is labeled an "arbitrary and capricious" decision that "does not seem to be fact-specific," and even labels statements made to justify the moratorium as "factually inaccurate."

The judge even indicates that he sees a "pattern" to the administration's decision-making and reasoning, leading to the shutdown on deepwater exploration.

The federal moratorium had suspended all pending, current or approved drilling operations of new deepwater wells (depths greater than 500 feet) in the Gulf of Mexico and in the Pacific for six months.

Feldman writes that Interior Secretary Ken Salazar's decision was based on a finding "that new deepwater wells pose an unacceptable risk of serious and irreparable harm to life and property and a finding that the installation of additional safety or environmental protection equipment is necessary to prevent injury or loss of life and damage to property and the environment."

Also suggested as contributing to the Secretary's decision was concern that government resources already deployed to deal with the BP spill were stretched too thin to deal with another hypothetical blowout.

The findings were issued in a report released May 27 by the Interior Department.

"[T]he Court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium," Feldman writes. "The Report patently lacks any analysis of the asserted fear of threat of irreparable injury or safety hazards posed by the thirty-three permitted rigs also reached by the moratorium. It is incident specific and driven: Deepwater Horizon and BP only. None others."

He also questioned the government's rationale to in effect block the use of equipment, such as shear rams, because of the failures at Deepwater Horizon.

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

"The Deepwater Horizon oil spill is an unprecedented, sad, ugly and inhuman disaster. What seems clear is that the federal government has been pressed by what happened on the Deepwater Horizon into an otherwise sweeping confirmation that all Gulf deepwater drilling activities put us all in a universal threat of irreparable harm. While the implementation of regulations and a new culture of safety are supportable by the Report and the documents presented, 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.

"On the record now before the Court, the defendants have failed to cogently reflect the decision to issue a blanket, generic, indeed punitive, moratorium with the facts developed during the thirty-day review."