Judge Blocks Offshore Oil Drilling Moratorium

| by The Volokh Conspiracy

By Jonathan H. Adler

A federal district court judge in Louisiana has issued a preliminary injunction blocking the six-month moratorium on deep water oil drilling in the Gulf of Mexico imposed by the Interior Department.  Judge Martin Feldman found that the plaintiffs were substantially likely to prevail on the merits in their legal challenge to the moratorium on the grounds that the Interior Department failed to provide an adequate explanation for the scope of the ban and that the moratorithe Interior Department failed to adequately justify the drilling ban under the relevant federal statutes. 

In his opinion accompanying the order, Judge Feldman explained that there was no apparent relationship between the agency’s findings and the scope of the moratorium imposed.  The Interior Department said it plans to appeal.  AP coverage is here. [UPDATE: I’ve posted an excerpt of the opinion below the fold.]

In other spill-related news, the Times-Picayune reports that Georgetown University law professor Richard Lazarus has been named staff director of the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling.

UPDATE: As has been widely reported, the moaratorium was the one measure recommended by Interior Secretary Salazar that had not been reviewed and endorsed by a National Academy of Engineering panel, suggesting it was driven more by political considerations than anything else.  The language of Judge Feldstein’s opinion is likely to reinforce that view.  Here is an excerpt of the relevant portion of the opinion:

After reviewing the Secretary’s Report, the Moratorium Memorandum, and the Notice to Lessees, the Court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium. The Report, invoked by the Secretary, describes the offshore oil industry in the Gulf and offers many compelling recommendations to improve safety. But it offers no time line for implementation, though many of the proposed changes are represented to be implemented immediately. 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. While the Report notes the increase in deepwater drilling over the past ten years and the increased safety risk associated with deepwater drilling, the parameters of “deepwater” remain confused. And drilling elsewhere simply seems driven by political or social agendas on all sides. The Report seems to define “deepwater” as drilling beyond a depth of 1000 feet by referencing the increased difficulty of drilling beyond this depth; similarly, the shallowest depth referenced in the maps and facts included in the Report is “less than 1000 feet.” But while there is no mention of the 500 feet depth anywhere in the Report itself, the Notice to Lessees suddenly defines “deepwater” as more than 500 feet.

Of course, the present state of the Administrative Record includes more than the Report, the Notice to Lessees, and the Memorandum of Moratorium. It includes a great deal of information consulted by the agency in making its decision. The defendants have submitted affidavits and some documents that purport to explain the agency’s decision-making process. The Shallow Water Energy Security Coalition Presentation attempts at some clarification of the decision to define “deepwater” as depths greater than 500 feet. It is undisputed that at depths of over 500 feet, floating rigs must be used, and the Executive Summary to the Report refers to a moratorium on drilling using “floating rigs.” Other documents submitted summarize some of the tests and studies performed. For example, one study showed that at 3000psi, the shear rams on three of the six tested rigs failed to shear their samples; in the follow up study, various ram models were tested on 214 pipe samples and 7.5% were unsuccessful at shearing the pipe below 3000psi. How these studies support a finding that shear equipment does not work consistently at 500 feet is incomprehensible. 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.

The Court recognizes that the compliance of the thirty-three affected rigs with current government regulations may be irrelevant if the regulations are insufficient or if MMS, the government’s own agent, itself is suspected of being corrupt or incompetent. Nonetheless, the Secretary’s determination that a six-month moratorium on issuance of new permits and on drilling by the thirty-three rigs is necessary does not seem to be fact-specific and refuses to take into measure the safety records of those others in the Gulf. There is no evidence presented indicating that the Secretary balanced the concern for environmental safety with the policy of making leases available for development. There is no suggestion that the Secretary considered any alternatives: for example, an individualized suspension of activities on target rigs until they reached compliance with the new federal regulations said to be recommended for immediate implementation. Indeed, the regulations themselves seem to contemplate an individualized

determination by authorizing the suspension of “all or any part of a lease or unit area.” 30 C.F.R. §250.168. Similarly, OCSLA permits suspension of “any operation or activity . . . pursuant to any lease or permit.” 28 U.S.C. §1334(a)(1). The Court cannot substitute its judgment for that of the agency, but the agency must “cogently explain why it has exercised its discretion in a given manner.” State Farm, 463 U.S. at 48. It has not done so.

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. The plaintiffs have established a likelihood of successfully showing that the Administration acted arbitrarily and capriciously in issuing the moratorium.