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Judge Was Right to Lift Obama's Deepwater Drilling Moratorium (Updated)

In what I think is the first judicial ruling that the Obama administration exceeded its authority and had to be reined in, U.S. District Court Judge Martin Feldman (no relation) on Tuesday lifted the administration’s six-month moratorium on deepwater oil drilling and enjoined the government from enforcing it.

Bloomberg reports:

Obama temporarily halted all drilling in waters deeper than 500 feet on May 27 to give a presidential commission time to study improvements in the safety of offshore operations. More than a dozen Louisiana offshore service and supply companies sued U.S. regulators to lift the ban. The U.S. said it will appeal the decision.

U.S. District Judge Martin Feldman today granted a preliminary injunction, halting the moratorium. He also “immediately prohibited” the U.S. from enforcing the ban. Government lawyers told Feldman the ban was based on findings in a U.S. report following the sinking of the Deepwater Horizon rig off the Louisiana coast in April.

“The court is unable to divine or fathom a relationship between the findings and the immense scope of the moratorium,” Feldman said in his 22-page decision. “The blanket moratorium, with no parameters, 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.”

“The court cannot substitute its judgment for that of the agency, but the agency must ‘cogently explain why it has exercised its discretion in a given manner,’” Feldman said, citing a previous ruling. “It has not done so.” (Bloomberg video).

Judge Feldman in a separate order “immediately prohibited” the U.S. from enforcing the drilling moratorium, finding the offshore companies would otherwise incur “irreparable harm.”

The Department of Justice will apparently seek an emergency stay of that order, but for the reasons I’ll explain I think the judge was right and there is no way his order can be stayed without the drillers and the public suffering irreparable injury. I also believe it is unlikely the government can persuade the U.S. Court of Appeals for the 5th Circuit to overturn the lower court because the facts are so clearly on the side of the plaintiffs and the judge’s opinion is so sound.

Courts should not enjoin administrative actions lightly, but in this case Secretary of the Interior Ken Salazar acted capriciously, irrationally, mendaciously, and without regard to the great injury to the public interest in issuing a moratorium which would have destroyed the deepwater oil drilling industry and the economies of the Gulf states which are heavily dependent on the industry.

As the court said in its order:

In the Executive Summary to the Report, the Secretary recommends “a six-month moratorium on permits for new wells being drilled using floating rigs.” He also recommends “an immediate halt to drilling operations on the 33 permitted wells, not including relief wells currently being drilled by BP, that are currently being drilled using floating rigs in the Gulf of Mexico.”

Much to the government’s discomfort and this Court’s uneasiness, the Summary also states that “the recommendations contained in this report have been peer-reviewed by seven experts identified by the National Academy of Engineering.” As the plaintiffs, and the experts themselves, pointedly observe, this statement was misleading. The experts charge it was a “misrepresentation.” It was factually incorrect. Although the experts agreed with the safety recommendations contained in the body of the main Report, five of the National Academy experts and three of the other experts have publicly stated that they “do not agree with the six month blanket moratorium” on floating drilling. They envisioned a more limited kind of moratorium, but a blanket moratorium was added after their final review, they complain, and was never agreed to by them. A factor that might cause some apprehension about the probity of the process that led to the Report

This is really an extraordinarily harsh indictment of Salazar and the decision-making processes of this administration. One rarely sees a court make such a scathing assessment of the decision-making method of the executive branch. But then one rarely sees such faulty decision-making and bald-faced lying by a Cabinet officer.

The district court described the economic significance of this industry and the role of the federal government in overseeing it. The law, outlined by the court, sets limits on that federal power:

The Outer Continental Shelf Lands Act governs federal offshore oil and gas leasing and declares as national policy that “the outer Continental Shelf is a vital national resource reserve held by the Federal Government for the public, which should be made available for expeditious and orderly development, subject to environmental safe-guards, in a manner which is consistent with the maintenance of competition and other national needs.” 43 U.S.C. §1332(3). OCSLA establishes four distinct stages in the administrative process: (1) formulation of a five-year leasing plan by the Secretary; (2) lease sales; (3) exploration by the lessees; and (4) development and production. Sec’y of the Interior v. California, 464 U.S. 312, 337 (1984). In the preparation and maintenance of this federal leasing program, OCSLA mandates consideration of the “economic, social, and environmental values of the renewable and nonrenewable resources contained in the outer Continental Shelf, and the potential impact of oil and gas exploration on other resource values … and the marine, coastal, and human environments.” 43 U.S.C. §1344(a)(1).

The court noted that the Administrative Procedure Act governs suits challenging the secretary’s actions under the OCSLA and detailed the high hurdle a plaintiff must meet to bring a successful suit under the APA:

The APA cautions that an agency action may only be set aside if it is “arbitrary, capricious, an abuse of discretion, or not otherwise not in accordance with law.” 5 U.S.C. §706(2)(A); see Citizens to Preserve Overton Park v. Volpe, 401 U.S. 402, 416 (1971). The reviewing court must decide whether the agency acted within the scope of its authority, “whether the decision was based on a consideration of the relevant factors and whether there has been a clear error of judgment.” Overton Park, 401 U.S. at 415-16; see Motor Vehicle Manf. Ass’n of the U.S. v. State Farm Mutual to. Ins. Co., 463 U.S. 29, 42-43 (1983). While this Court’s review must be “searching and careful, the ultimate standard of review is a narrow one.” Overton Park, 401 U.S. at 416; see Delta Found., Inc. v. United States, 303 F.3d 551, 563 (5th Cir. 2002). The Court is prohibited from substituting its judgment for that of the agency. Overton Park, 401 U.S. at 416. “Nevertheless, the agency must examine the relevant data and articulate a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.’” State Farm, 463 U.S. at 43 (quoting Burlington Truck Lines v. United States, 371 U.S. 156, 168 (1962)).

Reviewing the administrative record (which appears frankly to have been thrown together hastily to support a predetermined outcome), the judge found the secretary’s actions were not supported by the facts he claims to have relied on. In a statement sure to be quoted by courts in other opinions, he observed:

How these studies support a finding that shear equipment does not work consistently at 500 feet is incomprehensible. 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.

But the plaintiff’s hurdles in such cases are not cleared simply because the administrative determination is arbitrary, capricious, and unsupported by the facts on the record. He must show irreparable injury. Mere money damages, for example, can be recouped at a later time. Therefore, injunctive relief should not be granted to prevent only such injuries, but, as this court notes, injury to the public and its interests can be considered in determining this question. When that is considered, the court held, there is no question but that the plaintiffs cleared that second hurdle, too:

The effect on employment, jobs, loss of domestic energy supplies caused by the moratorium as the plaintiffs (and other suppliers, and the rigs themselves) lose business, and the movement of the rigs to other sites around the world will clearly ripple throughout the economy in this region.

This Court is persuaded that the public interest weighs in favor of granting a preliminary injunction. While a suspension of activities directed after a rational interpretation of the evidence could outweigh the impact on the plaintiffs and the public, here, the Court has found the plaintiffs would likely succeed in showing that the agency’s decision was arbitrary and capricious. An invalid agency decision to suspend drilling of wells in depths of over 500 feet 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.

I think the judge’s determination on the irreparable nature of the damage is manifestly correct and unlikely to be overturned on appeal. The larger question, however, is not a legal one. How much uncertainty can an administration operating in such a cavalier fashion introduce into the U.S. economy before they force it into a major tailspin? Not much more is my guess.

Update: The AP is reporting that Secretary of the Interior Ken Salazar plans to issue a new order for a drilling moratorium based on a  different finding of facts. This would apparently have the effect of circumventing the injunction.

Second update: Politico notes the plaintiffs have returned to Judge Feldman’s courtroom arguing that the announcement by Salazar that he intends to impose a new moratorium after some additional factual basis is added to the initial (discredited) report defies the Court order:

While Defendants have the right to challenge this Court’s Preliminary Injunction Order on appeal … and further have the right to engage in appropriate fact finding, data analysis and risk assessment followed perhaps by additional agency action, the law precludes Defendants from continuing today to enforce the Moratorium in defiance of this Court’s prohibition against its enforcement. At present, Defendants have not filed a Notice of Appeal to the Fifth Circuit, nor have they filed a motion with this Court seeking a stay of the Preliminary Injunction Order pending appeal. Accordingly, the Preliminary Injunction Order is in full force and effect, and is the law of this case. Nevertheless, Defendants have chosen to ignore and disobey it. Secretary Salazar’s comments have the obvious effect of chilling the resumption of OCS activities, which is precisely the wrong this Court sought to redress through its Preliminary Injunction Order.

It’s hard to imagine how Salazar can come up with new facts so quickly, or how they will be seen by the jaundiced eye of the court, justifiably dismissive of the credibility of the initial one. This is especially the case as the U.S. has just lent Brazil $2 billion to encourage oil drilling in waters three times deeper than Salazar wants to halt here.

And while we’re at it perhaps the government can explain what if any disciplinary action it plans against its own counsel, who seem to have tried to fob off Salazar’s patent misrepresentations to the Court as fact?

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