The People of America's Oil and Natural Gas Indusry

Three-Judge Panel Strikes Down Moratorium

Jane Van Ryan

Jane Van Ryan
Posted July 9, 2010

A three-judge panel in New Orleans yesterday struck down the six-month deepwater drilling moratorium which had led to the layoff of thousands of Gulf Coast energy workers.

John Cooney, an attorney for Hornbeck Offshore Services, the company that challenged the moratorium in a lower court, said:

"The problem with the moratorium is it's a one size fits all mechanism: the industry leader is treated the same way as the industry laggard."

He also predicted that offshore drilling would remain "in limbo" for a period of time due to the uncertainty caused by the drilling freeze and new restrictions that have been placed on shallow-water drilling.

A few hours before the Fifth Circuit Court of Appeals issued its decision, API President and CEO Jack Gerard called the blanket moratorium "a step too far," noting that inspections after the Deepwater Horizon accident no significant violations were found on the 33 deepwater Gulf drilling rigs.

According to the Louisiana Mid-Continent Oil & Gas Association, each job on a deepwater drilling rig supports as many as 1,400 direct and indirect jobs elsewhere, meaning that the moratorium could have cost as many as 46,200 jobs short-term. These jobs pay an average weekly wage of $1,804, with lost wages totaling as much as $10 million per month per rig.

Interior Secretary Ken Salazar is expected to impose another deepwater drilling moratorium that can withstand the court's scrutiny. Salazar also can ask the court for emergency relief to stop deepwater drilling. The court set the week of August 30 to hear arguments on the merits of the case.