Yesterday, the 5th Circuit dealt the government a swift rejection in Hornbeck v. Salazar, the case over the offshore drilling moratorium.
Oral argument on the government's motion to lift the stay began from 3:00. By close of business, the court had issued a two-page opinion, ruling 2 to 1 against the government. Yet, it seems pretty clear that no company is going to restart drilling. In fact, the Court's ruling hinged on that fact. The court stated:
- The motion for stay pending appeal is denied because the Secretary has failed to demonstrate a likelihood of irreparable injury if the stay is not granted; he has made no showing that there is any likelihood that drilling activities will be resumed pending appeal.
So, what just happened?
What Judge Feldman decided on June 22 was that Hornbeck and the other plaintiffs were entitled to a preliminary injunction preventing the government from enforcing the Moratorium until a hearing could be held on the moratorium's validity. That hearing is scheduled for August 30th. Judge Feldman's decision was clearly wrong, as I previously blogged here. In order to grant the injunction, Judge Feldman had to find that the Moratorium caused Hornbeck irreparable harm. If enjoining the moratorium will not mean that drilling resumes, it is hard to see how the Moratorium is harming Hornbeck.
The Department of Interior appealed the grant of preliminary injunction to the 5th Circuit. DOI was requesting that the 5th Circuit stay the preliminary injunction granted by Judge Feldman (this is one instance where two negatives really do make a positive) arguing that judge inappropriately substituted his judgment for that of the agency, and emphasizing the threat that resumed deepwater drilling would pose to the nation. Given Judge Feldman's financial holdings, it is a bit surprising that the government has not pursued his disqualification on conflict of interest grounds.
So, why aren't the oil companies immediately sending their rigs out with great fanfare?
Even though the standard for obtaining a preliminary injunction is a likelihood to prevail on the merits, it is entirely possible that the government will ultimately prevail on the validity of the moratorium. So, until August 30, the level of uncertainty over whether deepwater drilling will be permitted is probably enough to keep the rigs home.
In addition, DOI has indicated that before resuming drilling, permit holders must first seek revised permits and demonstrate compliance with two new safety directives that aim to fix the most egregious flaws in the pre-existing regulatory system.
The first directive, issued June 8, requires third-party certifications of key equipment, like the blowout preventer. More importantly, it borrows an idea from Sarbanes Oxley, and requires each company's CEO sign a sworn statement certifying that all safety equipment works properly and all well designs are safe. This requirement means that the CEO might be subject to personal criminal liability for any false statements.
The second directive, issued June 18, requires the companies to submit detailed spill control and cleanup plans, including descriptions of worst-case scenarios.
The government then has 90 days to approve the permit revision (before the spill, the government only had 30 days).
So, while I think Judge Feldman's initial decision was outrageous, and wish that Judge Chin's viewpoint had prevailed, it does not look like much offshore drilling will be happening in the next two months anyway.