New Moratorium Could Spell More Legal Fights

(Reuters) – The Obama administration issued a revised moratorium on deepwater oil drilling Monday but will likely face another tough legal battle with the companies which have so far successfully sued to get the original drilling suspension lifted.

The Justice Department said it will now seek to have the court order blocking the original moratorium thrown out, with the administration arguing a pause is needed because of the BP Plc oil spill in the Gulf of Mexico.

But opponents may argue the new moratorium is simply a repackaging of the old one and should also be blocked.

* The Interior Department attempted to offer more justification for the moratorium in its revised order so it can pass muster with U.S. courts which rejected its first suspension order as too broad and arbitrary.

The new ban removes a specific depth of 500 feet and instead focuses on the equipment and technology used by the drillers. It specifically points to new difficulties drillers have had with the blowout preventers used on the relief wells being drilled to kill the rogue BP well.

The administration says the moratorium could be lifted on new wells once drillers provide more evidence of their ability to prevent a blowout and respond adequately should another deepwater catastrophe occur, and detail what assets are available to contain a second spill should it occur.

The new moratorium roughly covers the same period of time, ending by November 30, a move that could draw the ire of drillers and the courts. The original moratorium was issued in late May and was to last six months, i.e. until late November.

“The arguments for a moratorium on deepwater drilling are compelling in the wake of the Gulf tragedy, but the government faces an uphill battle convincing a skeptical federal district court that the new suspension does not simply repackage the moratorium that the court already struck down,” said David Uhlmann, a professor at the University of Michigan Law School.

* The uncertainty means oil companies probably won’t go back to work drilling right away, whatever the courts decide.

Hornbeck Offshore Services Inc and Diamond Offshore Drilling Inc last month won a district court judgment lifting the original moratorium. The Justice Department says that ruling is now moot and will ask an appeals court to vacate the order blocking the original moratorium.

Carl Tobias, a professor at the University of Richmond School of Law, said the legal system probably would not move fast enough for the companies to get back to work as quickly as they would like. “It just takes a long time to grind through.”

In light of that reality, about an hour after the new moratorium was announced, Diamond Offshore said it was moving one of its rigs from the Gulf of Mexico to the coast of Africa.

* The Interior Department, in an attempt to show the new moratorium should survive judicial scrutiny, pointed to new information collected and noted that drillers now have an avenue to prove they are operating safely.

Obama administration officials have said repeatedly that a drilling moratorium was needed so they could investigate the cause of the BP well blowout and ensure other rigs are operating safely.

* But the administration may again run up against the economic impact of a moratorium, since the district court found the economic harm to the workers and affected communities outweighed the risk of another oil well blowout.

Louisiana officials have said the drilling business is worth $3 billion a year to its economy, including more than 20,000 jobs. The state’s governor, Republican Bobby Jindal, has pleaded with the White House to provide some certainty so companies and their employees can get back to work.

Article by Jeremy Pelofsky; edited by Simon Denyer and Todd Eastham; appearing courtesy Reuters.

Photo: Ken Lund

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