Louisiana Governor Asks Judge to Lift Deepwater Drilling Ban
By Laurel Brubaker Calkins
June 21 (Bloomberg) -- Louisiana Governor Bobby Jindal and state Attorney General Buddy Caldwell asked a U.S. judge to lift a six-month moratorium on deepwater drilling in the Gulf of Mexico within 30 days to avoid “turning an environmental disaster into an economic catastrophe.’’
The drilling ban may cost Louisiana’s economy, “which was already weakened by Katrina and is now crippled by the Deepwater Horizon disaster,’’ almost 11,000 direct and indirect jobs in five months, Caldwell said in papers filed yesterday in federal court in New Orleans.
“Even after the catastrophic events of Sept. 11, the government only shut down the airlines for three days,’’ Caldwell said in support of Hornbeck Offshore Services LLC’s lawsuit seeking to end the moratorium.
U.S. President Barack Obama temporarily halted all drilling in water deeper than 500 feet on May 27 in response to the worst oil spill in U.S. history, caused by the April sinking of the Deepwater Horizon drilling rig off the Louisiana coast. The ban, implemented at the recommendation of Interior Secretary Kenneth Salazar, gives a presidential commission six months to study ways to improve the safety of deepwater drilling.
Hornbeck and more than a dozen Louisiana offshore service and supply companies have sued U.S. regulators to lift the ban, which has idled 33 deepwater drilling rigs in the Gulf of Mexico. The companies claim the ban is costing between $165 million and $330 million each month in lost wages for Louisiana jobs tied to the drilling.
Delay Sought
U.S. District Judge Martin Feldman ordered regulators and the offshore companies to appear in his New Orleans court today, after rejecting the government’s request to delay the litigation until late July.
“The issues presented are of national significance and to delay resolution would be irresponsible,’’ Feldman said in a handwritten note at the bottom of his order denying the government’s request.
In court papers last week, lawyers for U.S. regulatory agencies said the ban is necessary to “ensure more lives are not lost and that new blowouts and spills do not occur.
“A second deepwater blowout could overwhelm the efforts to respond to the current disaster and dramatically set back recovery,’’ the government said.
Caldwell argued that drilling can be safely resumed within 30 days if federal inspectors are permanently stationed on each rig. The inspectors would re-certify all blowout prevention equipment, enforce compliance with all drilling procedures, and ensure training of all rig personnel to industry standards, including any new safety recommendations made by the presidential commission.
‘Balanced Approach’
“After confirming the correctness and preparedness of each rig and well design, these deepwater rigs should be permitted to resume work, and the Department of Interior should resume issuing permits,’’ Caldwell said in yesterday’s brief. Such a “balanced approach’’ would allow safe resumption of a vital portion of the state’s economy “without the necessity of shutting down an entire industry segment,’’ he said.
Caldwell and Jindal said regulators failed to consult with state officials or conduct a “risk benefit analysis’’ of the impact an extended ban would have on Louisiana’s economy. A moratorium lasting as long as 18 months could cost the state 20,000 new and existing jobs, the Louisiana Department of Economic Development estimates
Deepwater rigs probably will ship out for work overseas during the U.S. ban, Caldwell said, so “there will likely be no deepwater rigs available to resume drilling in the Gulf of Mexico. Having to wait an additional year or more for available rigs will turn the short-term adverse effects of the moratorium into a long-term economic disaster for Louisiana.’’
Canceled Contracts
Hornbeck’s suit was joined by Bollinger Shipyards Inc., Chouest Shipyard Cos., Bee Mar LLC and other deepwater support companies that employ a total of more than 13,000 workers and 7,000 vendors. The companies told Feldman they have been contacted by customers planning to cancel contracts because of the deepwater ban.
Diamond Offshore Co., owner of the world’s second-largest fleet of floating drilling rigs, sued last week in federal court in Houston seeking to overturn the moratorium. Houston-based Diamond accused the government of illegally “taking’’ its drilling contracts, worth as much as $500,000 a day, and causing analysts to downgrade the company’s shares because of the ban.
The case is Hornbeck Offshore Services LLC v. Salazar, 2:10-cv-01663, U.S. District Court, Eastern District of Louisiana (New Orleans).
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