Ruling

[dan_s]

NEW ORLEANS (AP) -- A federal judge struck down the Obama administration's six-month ban on deepwater oil drilling in the Gulf of Mexico as rash and heavy-handed Tuesday, saying the government simply assumed that because one rig exploded, the others pose an imminent danger, too.

The White House promised an immediate appeal. The Interior Department had imposed the moratorium last month in the wake of the BP disaster, halting approval of any new permits for deepwater projects and suspending drilling on 33 exploratory wells.

White House spokesman Robert Gibbs said President Barack Obama believes that until investigations can determine why the spill happened, continued deepwater drilling exposes workers and the environment to "a danger that the president does not believe we can afford."

Several companies that ferry people and supplies and provide other services to offshore rigs argued that the moratorium was arbitrarily imposed after the April 20 explosion that killed 11 workers and blew out a well 5,000 feet underwater. It has spewed anywhere from 67 million to 127 million gallons of oil.

U.S. District Judge Martin Feldman, who was appointed by President Ronald Reagan and has owned stock in a number of petroleum-related companies, sided with the plaintiffs.

"If some drilling equipment parts are flawed, is it rational to say all are?" he asked. "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."

He also warned that the shutdown would have an "immeasurable effect" on the industry, the local economy and the U.S. energy supply.

Interior Secretary Ken Salazar said in a statement late Tuesday that within the next few days he will issue a new order imposing a moratorium that eliminates any doubt it is needed and appropriate.

Feldman's ruling was welcomed by the oil and gas industry and decried by environmentalists.

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 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.

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

Josh Reichert, managing director of the Pew Environment Group, said the ruling should be rescinded if the judge still has investments in companies that could benefit. "If Judge Feldman has any investments in oil and gas operators in the Gulf, it represents a flagrant conflict of interest," Reichert said.

Feldman's ruling prohibits federal officials from enforcing the moratorium until a trial is held. At least two major oil companies, Shell and Marathon, said they would wait to see how the appeals play out before resuming drilling.

In his ruling, the judge called the spill "an unprecedented, sad, ugly and inhuman disaster," but said Salazar's rationale for the moratorium "does not seem to be fact-specific and refuses to take into measure the safety records of those others in the Gulf." Feldman said he was "unable to divine or fathom a relationship between the findings and the immense scope of the moratorium."

The judge said the blanket moratorium "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."

The lawsuit was filed by Hornbeck Offshore Services of Covington, La. 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.

Earlier in the day, executives at a major oil conference in London warned that the moratorium would cripple world energy supplies. Steven Newman, president and CEO 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.

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.

BP stock dropped 81 cents, or 2.7 percent, to $29.52, near a 14-year-old low for the company in U.S. trading. The stocks of other companies associated with the spill remained low despite Feldman's ruling.

The drilling moratorium was declared May 6 and originally was to last only through the month. Obama announced May 27 that he was extending it for six months.

Rep. Edward Markey, D-Mass., chairman of the Select Committee on Energy Independence and Global Warming, slammed the ruling.

"This is another bad decision in a disaster riddled with bad decisions by the oil industry," said Markey, who was at the forefront of the effort to force BP to make underwater video of the spill public. "The only thing worse than one oil spill disaster in the Gulf of Mexico would be two oil spill disasters."

In Louisiana, Gov. Bobby Jindal and corporate leaders had complained that the moratorium would cost the region thousands of lucrative jobs, most paying more than $50,000 a year.

Feldman agreed, writing: "An invalid agency decision to suspend drilling of wells in depths 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."

He said Gulf drilling accounts for 31 percent of total domestic oil production and 11 percent of domestic natural gas production, and an estimated 150,000 jobs are directly related to offshore operations.

Tim Kerner, mayor of the fishing town of Lafitte, La., cheered the ruling. "I love it. I think it's great for the jobs here and the people who depend on them," he said.

The American Petroleum Institute, one of the industry's main lobbying groups, also welcomed the decision: "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."

In its response to the lawsuit, the Interior Department had argued the moratorium was necessary while the effort to stop the leak and clean the Gulf continues and new safety standards are developed. "A second deepwater blowout could overwhelm the efforts to respond to the current disaster," the department said.

The government also challenged contentions that the moratorium would cause long-term economic harm. There are still 3,600 oil and natural gas production platforms in the Gulf.

As Feldman was issuing his ruling, the people in charge of a $20 billion fund to compensate those whose livelihoods have been ruined by the spill were on the coast Tuesday to talk with officials about the claims process.

Kenneth Feinberg, tapped by the White House to run the fund, has pledged to speed payments to fishermen, business owners and others. He was to meet with Alabama Gov. Bob Riley.

BP claims director Darryl Willis visited a claims center in a rundown strip mall in Bayou La Batre, Ala., and said the company has already cut 37,000 checks for $118 million. Claims totaling about $600 million have been filed so far.

"Anyone who feels like they have been damaged or hurt or harmed has every right to file a claim," Willis said. "These are complicated in some cases, and in some cases they're straightforward. But every person should file their claim, and they will be looked at fairly."

Associated Press Writers Pauline Arrillaga in Lafitte, La., and Jane Wardell and Robert Barr in London, and Mitch Stacy in Bayou La Batre, Ala., contributed to this report.

[mdwitte]

...and Salazar is going to impose/issue a new moratorium...SHEESH!

But the goal of the admin, imho, is to prolong this "crisis" until they get their Cap-n-Tax legislation thru...adding addl misery to LA residents is a small price, in their warped thinking.

I'm sticking to Canadian E&Ps ...the investing climate here in the US is hostile to oil and gas...new drilling restrictions and higher taxes on energy cos profits make Canada an attractive alternative.

[dan_s]

The Obama administration suffered a setback Thursday in its efforts to keep its six-month ban on new deepwater drilling after the worst oil spill in U.S. history.

After overturning the ban this week, a federal judge in New Orleans rejected an administration request to put his decision on hold while the government appeals it.

The government, which can still ask an appeals court to stay Judge Martin Feldman's decision, is revising the ban to make it more flexible and possibly open some areas to drilling.

The judge's ruling was more unwelcome news for the administration, which has been on the defensive over what critics call a slow and ineffective response to the 66-day-old spill in the Gulf of Mexico.

The AP reported Wednesday that Feldman, a 1983 appointee of President Ronald Reagan, is an investor who holds shares of oil rig operator Transocean [RIG 49.75 -3.01 (-5.71%)], one of the firms implicated in the Gulf disaster.

A Wall Street Journal/NBC News poll found half of those surveyed disapproved of President Barack Obama's handling of the spill. Overall his approval rating stood at 45 percent. For the first time in the survey, more people, or 48 percent, said they disapproved of his job performance.

Another poll by the Pew Research Center found Obama's approval little changed at 48 percent compared to 49 percent in January 2010.

In Washington, the administration faced pressure from some Republican lawmakers to ease offshore drilling restrictions, imposed after a well owned by energy giant BP ruptured on April 20, spewing a torrent of oil into the sea.

At a Senate energy committee hearing, Republican Senator Lisa Murkowski said she was worried the owners of offshore rigs that have been idled by the moratorium will take their business out of the United States.

"We're starting to see what I'm calling this flight of investment from the Gulf," Murkowski told a hearing attended by Interior Secretary Ken Salazar.

Oil services companies, who say the ban is too far-reaching and will lead to major layoffs, went to court this week to overturn the ban, leading to Feldman's ruling.

Salazar told the hearing he was aware of the moratorium's impact on the Gulf Coast economy, but it was necessary "until we get to a level where we can provide a sense of safety to the American people that drilling can in fact continue."

BP said on Thursday its oil-capture systems at the leak collected or burnt off 16,830 barrels of oil on Wednesday, a 38 percent drop from its record rate of 27,100 on Tuesday due to a 10-hour shutdown of one of the systems.

The shutdown happened when an underwater robot apparently hit a containment cap atop failed blowout preventer equipment that channels oil to a drillship a mile (1.6 km) up on the water's surface, according to the U.S. Coast Guard.

BP removed the cap Wednesday morning to assess its condition, then replaced it about 10 hours later. In the interim, crude gushed unchecked from the leak site.

BP shares in London [BP-GB 325.25 -8.25 (-2.47%)] were lower Thursday. The U.S.-traded shares[BP 28.74 -0.93 (-3.13%)] also lost ground.