Federal Judge In Louisiana Rules Against Offshore Drilling Moratorium

By Angel Gonzalez and Isabel Ordonez Of DOW JONES NEWSWIRES A federal judge in Louisiana on Tuesday ruled against the Obama Administration's temporary ban on deepwater offshore drilling--opening the door for resumption of oil and gas exploration in an area that's still fighting a massive oil spill. The Administration's decision "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," judge Martin Feldman said in an opinion. The White House said it would immediately appeal the injunction. "Continuing drilling at these depths without knowing what happened does not make sense," said White House spokesman Robert Gibbs. He said the "safety" issues are too profound and uncertain to let slide. The judge's decision comes in response to a lawsuit filed in early June by Hornbeck Offshore LLC, a small oil-services company based in Covington, La. that said it would be crippled because of the six-month ban, decreed on May 28 by the Department of Interior in the wake of the spill at a BP PLC (BP)-owned well. Hornbeck Offshore was soon joined by other small oilfield service companies also afflicted, and got support from the state of Louisiana, underscoring the growing rebellion against the moratorium in the Gulf Coast, where the energy industry plays a significant role. On Friday, giant drilling contractor Diamond Offshore Inc. (DO) filed a similar lawsuit in Houston. Shares of companies with significant operations jumped immediately after news of the judge's ruling, though quickly came off those highs. Diamond shares were down 1% at $64.12 in recent trading, after jumping to $68.65. The judge's ruling represents a stunning defeat for the Obama administration and Interior Secretary Ken Salazar. The administration had said that a six-month "pause" in drilling at depths greater than 500 feet was needed to allow the U.S. government and industry time to implement new safety rules and procedures to prevent another accident like the April 20 explosion of the Deepwater Horizon oil rig. But the moratorium encountered vociferous resistance from the oil and gas industry, and many elected officials in oil-producing Gulf states, including Louisiana Gov. Bobby Jindal. Industry groups said the ban would cost $330 million a month in direct wages. The administration was also embarrassed when some petroleum engineers who were consulted by Salazar for advice on how to respond to the spill said their views had been misrepresented in an Interior Department report that called for a moratorium on deepwater drilling. The experts said they had never signed off on the moratorium, and echoed industry arguments that a broad ban on deepwater drilling was an overreaction that would unfairly punish workers and companies who had nothing to do with the Deepwater Horizon accident. In a filing with the court, the Department of Interior had said that it instituted the moratorium with a view "for the long-term future," to reduce the likelihood of another disaster. "The public's interest weighs heavily in favor of making sure that a tragedy like this does not occur again," the filing said. Oil has been leaking into the Gulf of Mexico since the explosion and sinking of the Deepwater Horizon rig in late April. As the oil slick has grown, BP has faced withering criticism and deepwater drilling has come under scrutiny. The announcement of the moratorium last month sparked big losses for the share prices of companies involved in deepwater drilling, particularly in the Gulf of Mexico. Since then, uncertainty has swirled about the possibility of tighter regulations. -By Angel Gonzalez and Isabel Ordonez, Dow Jones Newswires; angel.gonzalez@dowjones.com (Stephen Power contributed to this article) (END) Dow Jones Newswires June 22, 2010 14:19 ET (18:19 GMT)