The Louisiana government has asked a U.S. judge to lift a six-month deepwater oil drilling ban to prevent the demolishment of local livelihood and the collapse of the oil industry.
Louisiana Gov. Bobby Jindal and state Attorney General Buddy Caldwell filed papers Sunday in a New Orleans federal court petitioning for the moratorium to be lifted in 30 days. The papers noted that lifting the ban would avoid "turning an environmental disaster into an economic catastrophe."
The U.S. government requested to delay a hearing until July, but U.S. District Judge Martin Feldman ordered regulators and offshore companies to appear in court yesterday (Monday).
"The issues presented are of national significance and to delay resolution would be irresponsible," Feldman wrote on the order denying the government's request.
Feldman heard opening statements Monday and promised to rule on the ban by noon on Wednesday – though he could rule as early as today (Tuesday).
"The court has to decide if there is a rational basis for the choice the government has made," Judge Martin Feldman said during the case's opening statements.
The ban, which prohibits drilling in water deeper than 500 feet, was recommended by Interior Secretary Kenneth Salazar after the BP PLC (NYSE ADR: BP) oil spill to give a commission six months to study safety conditions of drilling rigs. Companies claim the ban is costing between $165 million and $330 million a month in lost wages for Louisiana's drilling sector.
Jindal and Caldwell said regulators never consulted state officials before enforcing the ban, and did not fully assess its effect on Louisiana's economy. The ban could result in the loss of 11,000 jobs over the next five months and threatens the jobs of 20,000 workers in 18 months' time.
The ban has idled 33 deepwater rigs in the Gulf of Mexico, many of which might ship out for work in other waters and not be available when drilling does resume.
Lawyers for regulatory agencies filed court papers last week supporting the ban to ensure no other blowouts occur.
"A second deepwater blowout could overwhelm the efforts to respond to the current disaster and dramatically set back recovery," wrote the government.
But Gov. Jindal and Attorney General Caldwell are calling for federal inspectors to be stationed on rigs to enforce compliance with safety regulations, and their presence should allow for drilling to resume within 30 days.
"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," said Caldwell.
The plea from Louisiana's government comes in support of Hornbeck Offshore Services Inc. (NYSE: HOS), which is suing U.S. regulators to lift the ban, citing "irreparable harm" as its cause of action.
More than a dozen companies that provide support to the oil industry have joined, including Bollinger Shipyards Inc., Chouest Shipyard Cos., and marine transportation company Bee Mar LLC. The litigants are all worried that customers are going to cancel contracts.
"There is nothing in the report [of the oil spill] that suggests [deepwater] drilling is more dangerous today than it was on the day immediately preceding the tragic incident involving the Deepwater Horizon," Carl Rosenblum, an attorney for Hornbeck, said in a complaint filed in New Orleans federal court.
Hornbeck's supply boats service almost all of the idle rigs in the Gulf of Mexico.
Diamond Offshore Drilling Inc. (NYSE: DO), the largest U.S. offshore drilling contractor, asked a U.S. District Court Friday to issue a temporary restraining order to prevent the Interior Department from enforcing the moratorium, and requested a preliminary injunction to allow new well drilling to resume. Diamond accused the government of "taking" its drilling contracts and costing the company $500,000 a day.
Louisiana's local fishermen, shrimpers and oystermen say the ban does more harm than good.
"It's not only hurting us, it's hurting people who work on those [drilling] jobs," shrimper Anthony Bourgeois told Reuters. "This puts us out of work and it's going to put them out of work. You can't blame all oil companies for what one did."
Louisiana's government set up an online petition opposing the moratorium, and it has over 154,000 signatures already. The ecological damage done by the spill remains a concern, but the drilling ban has a more immediate effect on the income of most local communities.
"Our fishing and oil industries are tied at the hip," said Ewell Smith, executive director of the Louisiana Seafood Promotion and Marketing Board. "We've coexisted for going on 50 years."
The oil spill effects have crept into seafood prices, especially for Gulf products. Oyster prices are up 33% since before the spill. The Gulf provides 67% of the U.S. oyster supply. Now U.S. restaurants have started raising their menu prices, foreseeing increasing demand and limited supply, although the exact long-term effects are not clear.
"It's almost impossible to tell how bad it's going to be," Robert Santangelo, of the National Oceanic and Atmospheric Administration's National Marine Fisheries Service, told The Wall Street Journal.
Although the local industries recognize the need for safety attention to prevent fatal oil drilling accidents, representatives say the ban is "arbitrary and capricious," and lacks the foresight into what the oil industry's demise would do for some states' economies.
"New policies, procedures, strike forces, whatever, they need to inspect those rigs out there. That needs to happen now. But to have a knee-jerk reaction – I believe the president is out of character," said Smith. "Normally he's composed and I think he's getting caught up in the emotion of this and he's making a call that's going to really, really hurt us."
News and Related Story Links:
Louisiana Governor Asks Judge to Lift Deepwater Drilling Ban
Hornbeck Sues U.S. to Lift Deepwater Drilling Ban
Despite oil woes, Louisiana wants rig ban lifted
Judge to Rule on Obama Drilling Ban Suit by Wednesday
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Impact on Seafood Prices Limited
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