THE BLOG
06/23/2010 11:25 am ET | Updated May 25, 2011

Court's Decision to Overturn the Drilling Moratorium Was Just Plain Wrong

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Yesterday, a Federal judge in Louisiana suspended the only sensible action taken by the Federal government since BP's spill occurred. Justice Feldman of the U.S. District Court ordered that the Obama administration's moratorium on deepwater drilling be removed pending a further investigation into the safety of the existing and future drilling operations. He effectively overturned the drilling moratorium.

There are a number of problems with his ruling. And, many sources indicate that the Judge has significant stock in oil and thus served to suffer significant personal loss if the moratorium was upheld. These allegations have not been confirmed, but if the intellectual missteps in Feldman's decision are any indication of his bias, this adjudicator was seriously influenced by something other than the rule of law.

The Federal government is allowed to temporarily prohibit any activity that causes a "threat of serious, irreparable, or immediate harm or damage to life (including fish and other aquatic life), to property, to any mineral deposits... or to the marine, coastal, or human environment." (OCSLA s. 1334(a)(1)). A decision to suspend activity under this act can only be set aside if the decision is "arbitrary, capricious, an abuse of discretion, or not otherwise in accordance with law." (5 U.S.C. s.706(2)(a)).

The Supreme Court has found that a decision is "arbitrary and capricious" if it relied on factors not contemplated by Congress, ignored an important part of the problem at hand, ignored evidence to the contrary or came up with a decision that is so implausible it could not be attributed to a difference of opinion within the agency (State Farm, 463 U.S. 43).

Feldman looked at this law and made two important and faulty decisions.

First, he determined that you cannot suspend all deepwater operations without first taking into account the particular safety practices and regulations followed by each suspended rig. This is a problematic conclusion. When the Federal government has determined that the agency in charge of oversight might be incompetent or corrupt, assessing the safety of each individual operation becomes impossible. When the Federal government has determined that the safety standards in place and understood by experts in the field are woefully inadequate, assessing the safety of future drilling operations becomes impossible. Feldman actually acknowledged these two points, but insisted on finding that the government must still, despite these roadblocks, engage in an individual assessment.

Even if you wanted individual assessments, the decision not to conduct this kind of review before issuing a moratorium is not arbitrary and capricious. The establishment of the moratorium can easily be ascribed to a difference in opinion between experts within the Federal agency.

Second, Feldman granted the oil companies a preliminary injunction (in other words, he found that, until further review, the status quo stands and the moratorium cannot be enforced). Preliminary injunctions can only be granted if there is a substantial risk of irreparable harm (Ridgely v. FEMA, 512 F.3d 727). Irreparable harm only exists when the damage cannot be quantified monetarily after the fact and the parties cannot be reimbursed after the fact. It is most certainly not the kind of harm that results when a company stands to lose money because of suspension of corporate practices. If, and it is unlikely, Feldman was right in his analysis, the oil companies would be free to sue after the fact and recover the damage done to their respective businesses. The oil isn't going anywhere. They could drill in six months, sue for the interim losses and be put back in the same position as present day. The use of a preliminary injunction in this case creates unnecessary risk in an environment that is already fragile.

The Federal government has stated that it will appeal the ruling. For all our sakes, I hope the appeal is swift. Most important, I hope the appeal is in front of a judge without ties to the oil industry (a rare find it turns out) who understands how to interpret the law accurately and fairly.