Federal Moritorium on Deep Water Drilling

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WASHINGTON — A federal appeals court on Thursday turned down the Obama administration’s effort to enforce a six-month moratorium on deepwater drilling in the Gulf of Mexico.

A three-judge panel of the United States Court of Appeals for the Fifth Circuit, in New Orleans, ruled shortly after a hearing in a lawsuit filed by companies that claim they are being financially crippled by the suspension of drilling.

The Interior Department said the moratorium was necessary because of the uncertainties about the cause of the BP oil well blowout in April, a shortage of response equipment and a need to write strict new drilling rules. The moratorium was struck down by a lower court on June 22 by a federal judge who found it arbitrary and economically ruinous to industry.

The appeals court found that the Interior Department failed to show the federal government would suffer “irreparable injury” if the moratorium is lifted while it appeals the trial court’s decision.

A senior administration official said earlier Thursday that the Interior Department would immediately issue a new moratorium if it lost the court case. Those new regulations, revising the earlier suspension, could come as early as Friday.

In the afternoon hearing, industry lawyers urged the court to uphold the lower court ruling striking down the moratorium. “People are being put out of jobs,” said Carl D. Rosenblum, a lawyer representing Hornbeck Offshore Services, a Louisiana firm that provides goods and services to offshore drilling and pumping platforms. “Rigs are leaving the gulf, and going to foreign waters.”

Government lawyers responded that the suspension of drilling was justified. Michael T. Gray, a Justice Department lawyer representing the administration, said Congress gave the Interior Department the authority to take such actions to protect the environment and worker safety.

Hornbeck and a dozen other oil industry companies brought the suit last month, claiming their livelihoods were threatened by the federal drilling ban. They were supported by Gov. Bobby Jindal of Louisiana and other local officials around the Gulf Coast.

Mr. Jindal said outside the courtroom on Thursday that the oil spill had already ruined Louisiana’s seafood industry and dampened tourism throughout the region. The drilling ban, he said, is costing thousands of Louisianans their jobs.

Judge Martin L. C. Feldman of United States District Court in New Orleans agreed with the oil industry in a ruling handed down on June 22, saying that the federal moratorium was overly broad. He said the suspension of drilling was punitive to companies with good safety records and not supported by fact or history.

The administration’s order halted 33 exploratory drilling projects and suspended new permits, but did not affect more than 3,000 platforms already in production.

Alliance for Justice, a liberal advocacy group, reported on Thursday that two of the judges on the appeals court panel, Jerry E. Smith and W. Eugene Davis, both appointed by President Ronald Reagan, had represented the oil and gas industries while in private practice. Judge Smith’s clients included Exxon Mobil, ConocoPhillips and Sunoco. Judge Davis represented a number of companies involved in offshore drilling and other oil field operations.

Judge Davis’s 2008 financial disclosure reports listed $2,000 to $30,000 in investments in gas and oil concerns; Judge Smith had none.

The third judge on the panel, James L. Dennis, appointed by President Bill Clinton, had investments in at least 18 energy companies valued at between $31,000 and $300,000, the group found. Judge Dennis sold a stake in Transocean, the company that was drilling the well under contract to BP, in 2006, according to financial disclosure reports compiled by the group.


David Winkler-Schmit contributed reporting from New Orleans.