A federal appeals court in New Orleans last Thursday struck down the Obama administration's attempt to reinstate its six-month moratorium on deepwater drilling in the Gulf of Mexico (GOM).

But it said Interior Secretary Ken Salazar could seek an emergency moratorium if drilling is about to resume in the deep waters of the Gulf. In light of the mixed message, oil and natural gas producers still are hesitant about resuming operations.

"Basically the industry still is in limbo. Nobody is going to move forward until a new [Interior Department] moratorium comes out," said Nicolette Nye, a spokeswoman for the National Ocean Industries Association (NOIA).

"As the court recognized, the secretary can seek a stay on an emergency basis in the event that an operator seeks to resume deepwater drilling in the Gulf. We continue to believe that it is not appropriate to drill new deepwater wells in the Gulf until we can be assured that future drilling activity can be conducted in a safe and environmentally responsible manner," an Interior spokeswoman said.

"Based on what we have learned since the BP oil spill it has become increasingly clear that companies may not have adequate containment and response capabilities to respond to a spill and therefore as the secretary has said previously, he will be issuing a new moratorium," she said. The new moratorium could be issued as early as Friday.

The announcement of a revised moratorium only "adds confusion and uncertainty for the offshore industry at the worst possible time," NOIA said.

The Fifth Circuit Court of Appeals upheld a district court's decision, which blocked the federal government from enforcing its ban on deepwater drilling in the Gulf. On June 22 U.S. District Court Judge Martin Feldman ruled that Interior had "acted arbitrarily and capriciously" and had failed to justify a need for imposing a blanket moratorium following the explosion on board the BP-leased Deepwater Horizon rig (see NGI, June 28).

The Justice Department asked the appeals court to stay Feldman's ruling pending a decision on the merits. Although the Fifth Circuit Thursday rejected the bid for a stay, this won't be the final word, the Associated Press reported.

Circuit Judge W. Eugene Davis said the three-judge panel is likely to hold a hearing on the merits of the government's appeal of Feldman's decision in late August or early September. In the meantime, Feldman's decision will stay in effect until at least Aug. 30.

Some believe the legal battle over the moratorium could become a moot issue if BP manages to finish the drilling of relief wells by later this month or in early August and stop the flow of oil. This would take some of the political pressure off the Obama administration and allow it to ease up on the restrictions.

But NOIA's Nye disagreed. "I'm not sure it would have any impact. The cleanup issue would still be out there and all the investigations."

On the day that the Fifth Circuit heard the case, a Washington, DC-based advocacy group issued a report that said the three Fifth Circuit judges assigned to the case have close ties to the industry.

Two judges on the appeals panel, Jerry Edwin Smith and Davis, frequently represented the oil and gas industries while in private practice, while the third judge on the panel, Dennis, has extensive financial holdings in at least 18 companies in the energy industry, according to the report by Alliance for Justice.

Similar accusations were made against Feldman last month after he struck down the federal government's ban on deepwater drilling.

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