ATLANTA — A federal judge Tuesday struck down the Obama administration’s six-month ban on deep-water drilling in the Gulf of Mexico, saying the federal government acted “arbitrarily and capriciously” in imposing the halt.
In a 22-page ruling, U.S. District Judge Martin Feldman called the Deepwater Horizon spill “an unprecedented, sad, ugly and inhuman disaster.” But he took the government to task for overreaching in its May 28 moratorium that suspended all current and pending deep-water drilling operations in the Gulf of Mexico, temporarily putting 33 rigs out of service.
That “blanket moratorium, with no parameters,” Feldman wrote, “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, who was appointed by President Ronald Reagan and has owned stock in a number of petroleum-related companies, wrote: “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 heavy-handed, and rather overbearing.”
Feldman wrote that the plaintiffs, a group of oil-rig service companies, were able to show that the Obama administration failed to “explicitly justify” why such abroad suspension of drilling activities was necessary.
The White House promised an immediate appeal. Later Tuesday, Interior Secretary Ken Salazar said in a statement that within the next few days he will issue a new order imposing a moratorium that will eliminate any doubt that it is needed and appropriate.
Sen. David Vitter, R-La., said the decision “recognizes that the president’s powers are certainly not unlimited and that this moratorium is wreaking havoc on jobs in Louisiana.”
The American Petroleum Institute, an industry group, hailed the ruling in a statement. The moratorium, the group stated, “would have a tremendous impact on the nation’s energy security - and cause significant harm to the region of the country that was already suffering from the spill - without raising safety or improving industry procedures.
“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.”
Rep. Edward J. Markey, D-Mass., chairman of the Select Committee on Energy Independence and Global Warming, called the ruling “another bad decision in a disaster riddled with bad decisions by the oil industry. The only thing worse than one oil spill disaster in the Gulf of Mexico would be two oil spill disasters.”
“The president strongly believes, as the Department of Interior and the Department of Justice argued yesterday, that continuing to drill at these depths without knowing what happened ... potentially puts the safety of those on the rigs and safety of the environment in the Gulf at a danger that the president does not believe we can afford right now,” White House spokesman Robert Gibbs said.
Environmental groups agreed with the Obama administration’s position that a temporary break from deepwater drilling was needed to consider and enact new safety standards in the wake of the Deepwater Horizon explosion, which killed 11 rig workers and began the worst offshore oil spill in U.S. history.
“Unfortunately, today’s court decision allows short term profit for some to trump safety, lives and the environmental health of the Gulf Coast upon which so many depend,” Catherine Wannamaker, an attorney at the Southern Environmental Law Center, said in a prepared statement. “Continuing the same business-as-usual approach to risky deep-water drilling that led to the loss of life and environmental disaster in the Gulf as if nothing had happened is outrageous.”
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 drilling rig that blew up. 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 that he may 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.
There was disagreement over whether the oil industry would be able to immediately commence drilling new wells.
“Starting up is not a verybig deal,” said Fadel Gheit, a senior energy analyst with Oppenheimer and Co. “It can be easily done, but they will put in a lot of redundancies. Everyone knows about the mess the industry is in, and all of them will be looking over their shoulders. They will proceed with extreme caution.”
Other analysts were not so sure that new drilling would begin quickly.
“If you have the plans in place and the crews ready, it would not be that difficult to start up, but since there will be an appeal, I’m not so sure they would want to face the possibility of having to shut down again quickly if the appeal succeeds,” said Phil Weiss, an analyst for Argus Research.
Weiss added that the industry has been chastened by reports that blowout preventers, when used 11 times at various sites during emergencies over recent years, worked only six times. Some companies would be looking at implementing some of the regulations that may be imposed, such as having two blowout preventers instead of just one, having third-party inspections to review whether the equipment was working as designed, and tests to ensure that the so-called blind shear ram can actually cut the well pipe to complete a shutdown.
“Even if activity resumes, I’m not so sure they will move that quickly. It will take time to put things like that in place,” Weiss said.
Earlier in the day, executives at an oil conference in London warned that the moratorium would cripple world energy supplies. Steven Newman, president and chief executive 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.
It was unclear whether the Interior Department would have to begin issuing new permits to drill. The department has split up the Minerals Management Service, the agency that oversees drilling on federal land and in federal waters, and has issued a raft of safety precautions in response to the disaster.
The moratorium was imposed to give a presidential panel time to come up with recommendations on how to avoid a repeat of the disaster.
Also on Tuesday, BP said it will donate to the National Fish and Wildlife Foundation proceeds raised by selling oil from the leaking well.
The British energy firm said Tuesday that the foundation will use the money on projects that help wildlife along the Gulf Coast. BP is providing an initial $5 million to get the fund running.
BP CEO Tony Hayward said in a written statement that the foundation has a record of finding solutions to America’s “toughest conservation challenges.”
On Monday, BP captured about 21,000 barrels of oil using a containment cap sitting over the leaking well. That oil will eventually be taken to shore, refined and sold. There are 42 gallons in a barrel.
There’s no estimate yet of how much might be raised.
Information for this article was contributed by Richard Fausset, Ronald D. White and Richard Simon of the Los Angeles Times and by Michael Kunzelman, Pauline Arrillaga, Jane Wardell, Robert Barr and Mitch Stacy of The Associated Press.
Front Section, Pages 1 on 06/23/2010