Thursday, June 24, 2010

The U.S. federal judge who earlier this week overturned a six-month ban on deepwater drilling activity denied a motion Thursday filed by the Obama administration $bp

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(Updates to add more details, analyst and legal expert comments) By Naureen Malik and Brent Kendall Of DOW JONES NEWSWIRES The U.S. federal judge who earlier this week overturned a six-month ban on deepwater drilling activity denied a motion Thursday filed by the Obama administration to allow the ban to stay in place during the appeal process. U.S. District Court Judge Martin Feldman in New Orleans had issued an injunction Tuesday that bars the government from enforcing a drilling ban put in place in late May in response to the massive oil spill in the Gulf of Mexico. U.S. Interior Secretary Ken Salazar filed a motion Wednesday to stay that injunction while the government pursued an appeal with the New Orleans-based 5th U.S. Circuit Court of Appeals. In an order Thursday, Judge Feldman denied this motion "for the same reasons given" in the Tuesday ruling. In his original ruling, Feldman said the administration hadn't provided enough facts and that the administration's decision "simply cannot justify the immeasurable effect" on the plaintiffs, local economy, Gulf region and domestic energy needs that rely on oil. The judge gave Salazar 30 days rather than 21 days "to report compliance" with Tuesday's order. Officials from the Interior Department referred
questions to the Department of Justice, whose officials weren't immediately available for comment. Feldman also denied a motion Thursday by the plaintiffs, including Hornbeck Offshore Services LLC (HOS), to enforce his own injunction. This means the government can file an emergency motion with the appeals court asking them to keep in place the drilling moratorium until the legal fight over Feldman's injunction is resolved. The judge also ordered the Administrative Office of U.S. Courts to release the most recent disclosure of his own financial interests. Intervenors in the lawsuit had filed a motion requesting the information after recent disclosures showed that the judge had investments in the energy sector. The government is expected to file an emergency motion with the 5th Circuit asking them to keep the moratorium in place until the legal battle comes to a close. An official in the 5th Circuit clerk's office has said that the court has emergency three-judge panels on standby to handle emergency motions. The judge's rulings on the drilling ban have been a blow to the Obama administration's efforts to respond to the ongoing oil spill and counter growing concerns about the impact it is having on the environment. The administration has found itself battling the competing interests of those who are concerned about the environmental toll even as they fret about the economic impact that the moratorium could have on the Gulf Coast. Carl Tobias, a law professor at the University of Richmond, said that he is "not surprised" that the judge denied the government's request for a stay. To do so would have "blunted the force" of his injunction against the moratorium, Tobias said. Amid the legal wrangling over the six-month drilling ban, the executive branch is already considering issuing a new, scaled-back drilling moratorium, Salazar told lawmakers Wednesday. Offshore drilling companies and oilfield services companies with extensive operations in the Gulf of Mexico have been hit particularly hard by the uncertainty surrounding the future of deepwater drilling. Shares of companies such as Diamond Offshore Drilling Inc. (DO) and Noble Corp. (NE) briefly jumped on the judge's latest ruling before quickly giving back those gains. In fact, these companies seem to be settling in for a long lull. The day after the moratorium was struck down, Noble agreed to slash the daily rate the company charges for one of its rigs in the Gulf by 70% over the next six months, and by 40% from December through the end of the contract in November 2011. "Noble clearly felt [they had] little leverage for aggressive negotiation in the current environment," wrote analysts with RBC Capital Management. They added that other drillers are likely to make similar concessions. -By Naureen S. Malik and Brent Kendall, Dow Jones Newswires; 212-416-4210; (Angel Gonzalez and Brian Baskin contributed to this article) Click here to go to Dow Jones NewsPlus, a web front page of today's most important business and market news, analysis and commentary: You can use this link on the day this article is published and the following day. (END) Dow Jones Newswires 06-24-10 1353ET Copyright (c) 2010 Dow Jones & Company, Inc. 13:53 062410
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