Wednesday, June 23, 2010

Judge Throws Out Moratorium on Deepwater Drilling

Yesterday, Judge Martin Feldman of the US District Court of the Eastern District of Louisiana issued an order overturning the US government's six-month moratorium on deepwater oil drilling in the Gulf of Mexico, which it issued in the wake of the Deepwater Horizons oil spill - arguably, the single largest environmental disaster in US history. His ruling concludes that the government's moratorium violates the Administrative Procedures Act (APA), which requires that federal agency rules and regulations not be "arbitrary and capricious." In other words, rules and regulations must be supported by substantial evidence in the record. In Judge Feldman's view, such evidence was absent in this case. In particular, he cited the government's failure to explain why the moratorium applied to oil rigs drilling at depths between 500 and 1,000 feet.

Judge Feldman's brief opinion, which is available here, is hardly a model of careful legal analysis. If the government's moratorium is, as he concludes, cursory and devoid of real analysis, so too is the judge's treatment of the circuit split (5th v. DC) on jurisdiction under the Outer Continental Shelf Lands Act, 12 USC sec. 1349(a). Moreover, contrary to the judge's assertion (p. 20), the government moratorium was not based on a presumption that "all Gulf deepwater drilling activities put us all in a universal threat of irreparable harm." Rather, it was based on a reasonable presumption that any one or more of the other existing rigs in the Gulf might have similar structural problems as Deepwater Horizon, and all needed to be shut down temporarily to create an opportunity for inspection to ensure risks of spills were well managed. While stressing the economic costs of the moratorium, Judge Feldman failed to consider either the costs of Deepwater Horizon spill or a similar spill from other rigs in the Gulf.

That said, it is not obvious that Judge Feldman's legal conclusion under the APA was incorrect. Indeed, the Obama Administration  virtually conceded the case today in announcing that it would issue a new, replacement moratorium that would include greater evidentiary support (see here). If the Administration were more confident in the lawfulness of its existing moratorium, it presumably would just appeal Judge Feldman's ruling, rather than issue a replacement moratorium.

Finally, one troubling feature of Judge Feldman's ruling is the appearance of a conflict of interest. Numerous sources have reported that Judge Feldman has recently held (and may still hold) investments in numerous energy companies, including Transocean, the owner of Deepwater Horizon, and Haliburton, which did maintenance work on Deepwater Horizon (see, e.g., here and here). This does not necessarily mean he was biased in favor of the plaintiffs in the case, but it certainly creates that possibility. Apparently, the issue of recusal was not raised in court (see here). However, the judge could have, and probably should have, recused himself voluntarily to avoid even the appearance of impropriety. Other judges were available to hear the case who did not hold energy-company stocks (see here).

The problem of potential judicial conflicts of interest arising from investment portfolios has been increasing of late, and there is no easy solution to that problem. However, some judges are more sensitive to appearances of potential bias than others. Most recently, Justice Stevens recused himself voluntarily from a case before the Supreme Court on beach renourishment in Florida simply because he owns property there on a beach that might be a candidate for renourishment in the future. Compare his decision with Justice Scalia's refusal to recuse himself from a 2004 case in which then-Vice President Cheney, a personal friend of Scalia's, was directly involved. Apparently, Judge Feldman (like Scalia, a Reagan appointee), is a member of the recusal-refusal school.

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