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Judge Strikes Down Industry Challenge to Requirements in Western Gulf

In his first favorable ruling for the Interior Department, U.S. District Judge Martin Feldman in Louisiana rejected industry allegations that the department exceeded its authority under the Outer Continental Shelf Lands Act (OCSLA) by imposing new permitting requirements for developmental drilling in the western Gulf of Mexico (GOM).

Specifically, Ensco Offshore Co. and other operators challenged Interior's requirements that operators in the Gulf prepare 1) development operations coordination documents (DOCD); and 2) applications for permits to drill (APD) in connection with production and development activities in the areas of the Gulf that are removed from the state of Florida [Ensco Offshore Co., et al, vs. Kenneth Lee Salazar, et al. Civil Action No. 10-1941, Section "F"].

Ensco argued that the DOCD requirement was similar to the development and production plan (DPP), which the plaintiffs said may be imposed only in the Florida Gulf under OCSLA. It contends that the DOCD requirement "is simply a DPP in disguise" and is an "intentional delay" in the post-BP plc Macondo well spill environment.

In contrast, the federal government "concedes that the DOCDs are subject to many of the same requirements as DPPs but stresses that these requirements are not identical," the court ruling said.

With respect to APDs, Ensco challenged as unlawful the government's requirement that each lessee obtain drilling permits for development and production drilling. It said OCSLA authorized a permit requirement only in connection with exploration drilling.

"The court concludes that plaintiffs' [Ensco and others] arguments fail" with respect to their challenge of permits for development and production activities, Feldman wrote. With regard to the challenge involving DOCDs, "the court is faced with an obstacle, which necessitates more factual development: whether the new delays posed by the DOCD requirement amount to an intentional delay," he said.

Last June Feldman issued a stunning decision when he barred the federal government from enforcing its industrywide moratorium on deepwater oil and natural gas drilling in the GOM (see Daily GPI, June 23, 2010). He said Interior failed to justify its decision to impose a prolonged ban on deepwater drilling in the wake of the explosion on board the BP plc-leased Deepwater Horizon rig, and essentially sought swift retribution against an entire industry for the actions of one company: BP.

That was the first in a series of court rulings that were favorable to the oil and gas industry. In September Feldman denied the government's second attempt to dismiss the lawsuit challenging the six-month moratorium (see Daily GPI, Sept. 2, 2010). Interior had asked the court to dismiss the industry challenge as moot since the department had revoked the first moratorium, which was the target of the June court ruling, and replaced it with a second moratorium.

And in late October the judge overturned Interior's decision imposing an additional regulatory burden on offshore oil and natural gas operators in the wake of the Gulf spill (see Daily GPI, Oct. 21, 2010).

Feldman ruled then that Interior violated the Administrative Procedure Act by failing to give the public notice and an opportunity to comment on the NTL-05 (notice to lessees), issued in early June, which require operators to implement additional safety measures for energy development on the Outer Continental Shelf .

Earlier this year Feldman granted a preliminary injunction ordering the Interior's Bureau of Ocean Management, Regulation and Enforcement to act within 30 days on five pending permit applications to drill wells in the deepwater GOM (see Daily GPI, Feb. 18). The decision granted the petition of Ensco Offshore Co. and others regarding five permit applications in which Ensco holds a contractual stake.

However, the U.S. Circuit Court of Appeals for the Fifth Circuit last month issued a stay that blocked Feldman's ruling ordering the government to take action on pending permit applications by Ensco Offshore and ATP Oil & Gas Corp.

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