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Texas Oil and Gas Operator Obtains Deepwater Drilling Permit After Federal Drilling Moratorium – Part II

Texas oil and gas attorneys are watching the recent series of drilling moratoriums by the federal government with great interest. In a recent blog post, I discussed the legal background behind the first deepwater drilling moratorium and the litigation that followed.Because a federal judge ruled that the first deepwater drilling moratorium should be set aside as “arbitrary and capricious” under the Administrative Procedure Act (“APA”), the U S Department of the Interior (“DOI”) was left with a choice: either lift the deepwater drilling moratorium completely, or try to instate a new moratorium that might pass APA muster.

In an unsurprising move, the DOI issued a second deepwater drilling moratorium. The second moratorium banned exactly the same activities as the first moratorium, although it used slightly different grounds to do so. While the first moratorium banned activities occurring at depths greater than 500 feet, the second moratorium restrained all rigs that use subsea blowout preventers or surface blowout preventers on a floating facility. In reality, the second moratorium restrained precisely the same rigs as the first moratorium. The DOI defended their second attempt by explaining that, although the second moratorium was similar in effect to the first moratorium, the second moratorium did address the technical concerns highlighted in the District Court’s first order.

In November 2010, the DOI lifted the second moratorium. However, despite the fact that the moratorium was lifted, the DOI was slow to issue new permits for activities covered by the two moratoriums.

In light of what the Louisiana District Court deemed “purposeful defiance” of its ruling, the Court held that the DOI was in “contempt of court.” In its contempt ruling, the District Court noted that “each step the government took following the Court’s imposition of a preliminary injunction showcases its defiance.” In light of what the District Court viewed as “dismissive conduct,” Judge Feldman held that the plaintiffs had demonstrated the government’s contempt by clear and convincing evidence. Judge Feldman’s contempt order was dated February 2, 2011. Later that month, the DOI started issuing the first deepwater drilling permits since the BP disaster.

Many in the oil and gas industry are still unhappy. They note that the only projects being permitted right now are those that were already given the green light before the BP oil disaster.

This saga is sure to continue in the coming weeks and months, although slowly, more and more drilling permits are being granted. For example, Texas-based Exxon Mobile recently became the fourth company cleared for drilling.

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