Judge rules against Obama’s deep-water drilling moratorium

A federal judge on Tuesday struck down the Obama administration’s six-month moratorium on deep-water drilling in the Gulf of Mexico and suggested the federal government acted “arbitrarily and capriciously” in imposing the halt.

The 22-page order by U.S. District Judge Martin L.C. Feldman amounted to a stinging rebuke of a central element of the Obama administration’s response to BP’s oil leak in the Gulf of Mexico. A White House spokesman said the administration would file an immediate appeal.

The ruling comes at a time when little is going the president’s way. The oil is still leaking, the economy is still bad and to top it off, President Obama may be on the brink of firing Army Gen. Stanley A. McChrystal, the commander running the war in Afghanistan, over comments published in a magazine article.

Worse, the ruling undermined one of the main claims of the Obama administration: that it is thoughtful and deliberate in all things. “The plaintiffs have established a likelihood of successfully showing that the administration acted arbitrarily and capriciously in issuing the moratorium,” the judge wrote.

In announcing an appeal, White House spokesman Robert Gibbs said, “The president strongly believes, as the Department of Interior and the Department of Justice argued yesterday, that continuing to drill at these depths without knowing what happened … potentially puts the safety of those on the rigs and safety of the environment in the gulf at a danger that the president does not believe we can afford right now.”

Mixed reaction from within the president’s own party underscored the challenge facing Obama as he tries to revamp national energy policy.

Sen. Mary L. Landrieu (D-La.) said she would urge the administration not to appeal the ruling but to find a way to achieve its goal of ensuring safety without harming her state’s fragile economy.

Another Louisiana Democrat, Rep. Charlie Melancon, said the ruling was “encouraging” for Louisianans whose jobs depend on the oil and gas industry and expressed hope that Obama wouldn’t fight it.

“As long as the administration is appealing the decision, the future of energy production in the gulf remains unclear,” he said. “I hope the president will stand with the thousands of Louisiana families who have spoken loudly with one voice about the dangers this moratorium poses to our economy and order his administration not to appeal today’s decision.”

But Sen. Frank R. Lautenberg (D-N.J.) called the ruling “incredibly shortsighted,” given that oil is still gushing into the gulf. Sen. Patty Murray (D-Wash.) added, “We shouldn’t even consider putting our environment, our economy, or our workers at risk on deep-water drilling projects until we know what caused this tragedy in the Gulf Coast, and until we understand exactly how to prevent anything like it from ever happening again.”

A vigorous challenge of the ruling may cheer environmentalists, but it puts Obama on one side of what David DiMartino, a former Democratic Senate aide working with a pro-environment coalition, describes as “a division between folks who stand with Big Oil and folks who don’t.”

That could create political problems for a president who has tried to straddle that divide, and who is hounded by criticism that he has been unresponsive to the nationwide unemployment crisis.

Though not faulting Obama, some environmentalists fretted Tuesday over the perception of presidential impotence in the face of tragedy.

“What does it say about our system that even the president of the United States can’t pause Big Oil’s dangerous deep-water drilling?” Larry Schweiger, president and chief executive of the National Wildlife Federation, said in a statement.

The decision was cheered by the oil industry and the workers whose paychecks depend on the deep-water rigs. Louisiana officials estimate the moratorium would have eliminated about 11,000 jobs from their state.

“It’s a good thing they stopped that because we were going to lose a lot of jobs,” said Nacis Theriot of Galliano, La., owner of a small fleet of oil industry crew boats. “The majority of your big oil companies would leave … and we would all suffer.”

In coastal Lafourche Parish, parish spokesman Brennan Matherne said the decision helped the community dodge a proposed 40% budget cut that would have resulted from lost tax revenue generated by the oil and gas industry. “The whole community breathed a sigh of relief,” he said.

Feldman’s order granted a preliminary injunction to the plaintiffs in the case, a group of oil services support companies headed by Hornbeck Offshore Services, a Covington, La.-based marine company.

Neither Justice Department nor Minerals Management Service officials returned calls inquiring about the ruling’s immediate effect on gulf drilling.

Interior Secretary Ken Salazar said in a statement, “The decision to impose a moratorium on deep-water drilling was and is the right decision.” He added that “based on this ever-growing evidence, I will issue a new order in the coming days that eliminates any doubt that a moratorium is needed, appropriate and within our authorities.”

Catherine Wannamaker, senior attorney at the Southern Environmental Law Center, believed the order meant that drilling could resume immediately — although she said that as a practical matter, companies might hold off until there was some clarity about the appeals process.

Wannamaker, who argued before the court on behalf of environmental groups, said it was probable that the defendants could seek a stay from Feldman, which could continue the drilling ban until the case is resolved by the U.S. 5th Circuit Court of Appeals.

The uncertainty of the legal process could cause hesitation among oil companies, some analysts said.

“If you have the plans in place and the crews ready, it would not be that difficult to start up, but since there will be an appeal, I’m not so sure they would want to face the possibility of having to shut down again quickly if the appeal succeeds,” said Phil Weiss, an analyst for Argus Research.

In the order, Feldman called the Deepwater Horizon spill “an unprecedented, sad, ugly and inhuman disaster.” But he took the government to task for overreaching in its May 28 moratorium, which suspended all current and pending deep-water drilling operations in the Gulf of Mexico, putting 33 rigs temporarily out of service.

That “blanket moratorium, with no parameters,” Feldman wrote, “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.”

Elsewhere, he wrote: “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 heavy-handed, and rather overbearing.”

Feldman agreed that the plaintiffs would suffer “irreparable harm” from the moratorium, noting that the movement of the rigs to other points around the globe “would clearly ripple throughout the economy in this region.”

He also criticized the government for asserting, in a post-explosion report on gulf drilling policy that Obama commissioned, that the call for a moratorium had been peer-reviewed by seven expert engineers. Feldman noted that five of those experts agreed only with a “much more limited kind of moratorium.” Feldman suggested the government was playing dirty, writing that its handling of the issue “might cause some apprehension about the probity of the process.”

Questions also arose Tuesday about Feldman and his previous ties to oil and gas companies that may be affected by his ruling. A financial disclosure report for 2008 — the latest to be released by the federal courts — showed that he held investments in Transocean Ltd., one of the world’s largest drilling companies and the owner of the Deepwater Horizon rig, as well as a number of other energy companies.

Kate Gordon, vice president of energy policy for the liberal Center for American Progress, said the judge’s holdings in Transocean were particularly disturbing. Transocean spokesman Guy Cantwell said the company had 14 rigs in the gulf that were affected by the moratorium.

“Every day [Transocean] isn’t getting its daily rental fees, their profits go down, and every day their profits go down is bad for their shareholders,” Gordon said. Feldman, she said, “has got a clear conflict.”

But other ethics watchdogs, including Thomas Fitton, president of Judicial Watch, said that little could be made of the financial document because it was not clear whether Feldman was still invested in the companies.

Feldman did not return a call for comment.

richard.fausset@latimes.com

richard.simon@latimes.com

Times staff writers Molly Hennessy-Fiske in Lafourche Parish, La., and Ronald D. White in Los Angeles, and Peter Nicholas in the Washington bureau contributed to this report.