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Judge to rule on deep-water drilling moratorium

The oil industry and Louisiana officials support a lawsuit challenging the restrictions, saying they will cause more economic pain for gulf states already reeling from the spill fallout.

June 22, 2010|By Richard Fausset and Molly Hennessy-Fiske, Los Angeles Times

Reporting from New Orleans and Atlanta —

Inside New Orleans' federal courthouse Monday, a judge was deliberating the points of law that could determine the fate of the Obama administration's six-month moratorium on deep-water drilling.

Outside, Lucy Lailhengue was marching up and down Poydras Street with a sign that offered a more blunt line of reasoning: "If you support the moratorium, stop using oil and gas!"

Lailhengue, 52, says she can smell the spilled oil in the gulf from her home in suburban Chalmette, and she worries about the crude despoiling nearby wetlands. Yet on the whole, the oil industry has been good to Lailhengue — very good. With a high school degree, she pulls down white-collar money as a title analyst for a drilling company. It's a common story in a state where the offshore oil and gas industry alone has an estimated $3-billion economic impact.

"I just think it's ridiculous to shut down a whole industry and ruin thousands of lives to punish one company," she said.

"We've had a lot of fatalities on the bridges. You don't see them shutting down the bridges."

That argument, echoed by Gov. Bobby Jindal (R-La.), the oil industry and a multitude of regular folks living close to the disaster, is at the heart of a lawsuit challenging the moratorium, which was filed this month by companies that provide ships and supplies to the offshore rigs.

The plaintiffs, led by marine company Hornbeck Offshore Services, argue that the government overstepped its bounds last month when it announced the moratorium that halted work on 33 deep-water rigs. They also argue that there is nothing to suggest that deep-water drilling "is more dangerous today than it was on the day immediately preceding the tragic incident involving the Deepwater Horizon."

In a two-hour hearing Monday morning, U.S. District Judge Martin Feldman weighed those arguments as well as rebuttals from environmental groups. He is expected to decide by Wednesday morning whether to issue an injunction overturning the moratorium.

Whatever Feldman's decision, it will likely make waves far beyond Louisiana. Overturning the moratorium would be an embarrassing setback for the Obama administration, which has been criticized for not moving aggressively enough to solve the oil spill, and hammered by conservative critics for what they say are bullying, anti-business tactics across a range of industries.

Upholding the moratorium could mean even more economic pain for states like Louisiana already reeling from the blow to their seafood and tourism industries. A friend-of-the-court brief filed Sunday by Jindal and state Atty. Gen. James D. "Buddy" Caldwell asserts that the moratorium could convince big oil companies to move their rigs out of the Gulf of Mexico to Brazil or Africa, with "little chance of their immediate return."

Such a wholesale flight from the gulf would result, directly and indirectly, in the loss of about 11,000 Louisiana jobs, including businesses such as contract employment, shipping and transport, tool rental, equipment servicing —- even grocery stores and restaurants, the officials said.

Plaintiffs also note that Louisiana stands to lose "enormous" revenue, since federal law entitles the state to a 32% cut of all mineral revenue generated in 8 million acres recently opened for drilling in the gulf.

Outside the courthouse Monday, plaintiff Donald T. "Boysie" Bollinger, 60, said he was already feeling the pain. As owner of Bollinger Shipyards in nearby Lockport, he has seen business fizzle in the wake of the moratorium. Bollinger, a former state campaign finance chairman for President George W. Bush, said he had lost three contracts for deep-water support vessels, the supply ships that bring groceries and parts to the rigs, and he fears he will lose more as the moratorium drags on.

"When the rigs quit working, they don't need the boats," said Bollinger, whose tanned face gleamed above a seersucker suit. 'Never before has the government shut us down."

In their complaint, the plaintiffs contend that the moratorium decision made by President Obama and Interior Secretary Ken Salazar was arbitrary and made despite "an absence of facts concerning the risks presented by drilling at water depths that exceed 500 feet." They also argue that the government violated federal laws that mandate a balancing of environmental protection and resource development.

Government lawyers counter that the secretary has every right to issue the moratorium and that the lawsuit is invalid because the plaintiffs failed to provide a required a 60-day notice. The moratorium, they noted, is meant to give the Interior Department time to implement new proposed safety regulations for rigs, including rules governing undersea blowout preventers like the one that apparently failed to stop the blowout on the Deepwater Horizon.

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