The most comprehensive account you’ll ever read of the extra-legal approach that the Obama Administration has taken to dealing with drilling in the Gulf of Mexico. Attorney Adam Feinberg of Miller & Chevalier delineated the law-breaking for a legal readership over at Thompson Reuters; you’ll want to read the whole thing for the endnotes, citations, and twists and turns in the story.
Most of the violations described have to do with the Administrative Procedures Act of 1946; the Wikipedia article thereon is here. Feinberg’s document is not legalistic, though: it explains the real harm that has been done to the drilling industry, the Gulf States, and the country’s economy and energy independence by the thoughtless, illegal maneuvering of the knee-jerk environmental extremists in the White House—who in a number of ways have increased the risk profile of Gulf drilling rather than decreased it, due to their tendency to substitute their own intuition for sound science.
The sinking of the offshore drilling rig Deepwater Horizon in April 2010 was tragic in many regards. Eleven men lost their lives. Roughly 5 million barrels of oil leaked into the Gulf of Mexico, damaging wildlife and thousands of miles of coastline and requiring that huge portions of the Gulf be closed to commercial and recreational activities. Unfortunately, the government’s response to these events has also been tragic. The government initially imposed an overbroad moratorium on nearly all deepwater drilling in the Gulf of Mexico.
After that moratorium was struck down by a federal court, the government defiantly re-imposed the same flawed moratorium. It then denied the court an opportunity to review the second moratorium by replacing it with new drilling requirements that were both insufficiently articulated and issued in violation of the Administrative Procedure Act, resulting in another four-and-a-half months of a de facto moratorium.
These actions unnecessarily inflicted grave harm on the national domestic oil and gas supply, on the economy of the Gulf Coast region and on the long-term safety of deepwater drilling. As harmful as these effects have been, this article addresses separate, but no less important, transgressions by the government: its failures to follow the rule of law.
THE GOVERNMENT’S DEEPWATER DRILLING MORATORIUM
Ten days after the April 20, 2010, well blowout and ensuing explosion on the Deepwater Horizon, President Obama directed Interior Department Secretary Ken Salazar to conduct a review of the incident and to issue a report within 30 days on how to improve the safety of offshore oil and gas exploration and production operations. The resulting report offered an initial set of safety measures. The report was peer-reviewed by seven experts identified by the National Academy of Engineering. The Interior Department consulted with several other experts who also had been identified by the NAE. The report made no mention of any sort of moratorium.
Nevertheless, Salazar, in an executive summary added after the report was completed, recommended a six-month moratorium on deepwater drilling in the Gulf of Mexico. He offered no rationale for this recommendation. The executive summary stated that the “recommendations contained in this report have been peer-reviewed by seven experts indentified by the National Academy of Engineering.” These experts, however, had not seen the executive summary, had not reviewed the recommendation for a six-month moratorium, and had not recommended such a moratorium.
After learning of the moratorium, eight experts who either peer-reviewed or consulted on the report stated that they did “not agree with the six-month blanket moratorium on floating drilling.” Moreover, these experts had concluded that such a moratorium “will not measurably reduce risk further and … will have a lasting impact on the nation’s economy which may be greater than that of the oil spill.”
On June 22, 2010, a federal court preliminarily enjoined the moratorium, finding that it violated the APA. . . . Under the APA, agency decisions are to be set aside if they are “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.” . . . Under this APA standard, “the agency must examine the relevant data and articulate a satisfactory explanation for its action including a ‘rational connection between the facts found and the choice made.’” . . .
The court in Hornbeck found that the Interior Department had violated the APA because it “failed to cogently reflect the decision to issue a blanket, generic, indeed punitive, moratorium with the facts developed during the thirty-day review.” . . .
SUBSTANTIVE FLAWS IN THE SECOND MORATORIUM
Like the first one, the second moratorium seemed to be based more on politics than science. For example, six of the seven experts who peer-reviewed the Interior Department report in May 2010 and two additional experts who consulted on the report developed their own recommendations, which were presented to Salazar and other department officials in June 2010. These experts described four discrete ways in which a six-month moratorium would actually increase safety and environmental risks associated with deepwater drilling:
• It would stop drilling operations at an unplanned point in the middle of the process (possibly when a hydrocarbon zone would be exposed) that must be resumed at a later date; this is inherently more risky than a continuous drilling operation.
• It would lead to the export of the best rigs to other countries.
• It would lead to a loss of experienced drilling personnel.
• Because the United States would have to import more oil to make up for the eventual loss of domestic oil production caused by the moratorium, it would result in increased traffic in oil tankers, which have historically been responsible for more of the oil spilled in U.S. waters than have offshore platforms and pipelines.
These concerns were not even mentioned in the Interior Department’s analysis of the second moratorium, despite the fact that they had been presented to officials at the highest levels of the department just several weeks earlier.
Another problem with the second moratorium is that it was facially inconsistent, in that it barred some drilling activities that were safer than activities that were allowed to continue. Both the Interior Department’s in-house experts and the experts identified by the NAE performed detailed analyses of the risks of various types of deepwater drilling activities, such as drilling a development well into a known reservoir, drilling an exploration well into an unknown reservoir, completing a well and performing a workover of a well.
All of the experts agreed, for example, that drilling a development well was as safe, if not safer, than performing a workover. Nonetheless, the Interior Department barred the drilling of development wells because they purportedly “pose[d] an unacceptable level of risk” while at the same time allowing workover activities because they were “low risk.”6 The experts identified by the NAE who were still consulting with the Interior Department in June 2010 recommended that both activities be allowed because of their low risk.
A third glaring flaw in the second moratorium is that it applied equally to the drilling of both oil and gas wells, even though the government’s own analysis concluded that “the risk that a leak from a natural gas reservoir will cause a major environmental disaster is significantly less than from a predominantly oil-bearing reservoir” and that the risk of another major oil spill was “negligible” for gas development wells. . . .
By the time the moratorium was lifted, almost six months had passed since the incident. Yet the Interior Department was still contemplating what some of the basic requirements would be, such as those related to containment resources. That should have been addressed during the lengthy moratorium. . . .
In part because of these new, ever-changing requirements, it took more than four-and-a-half months after the formal lifting of the moratorium Oct. 12, 2010, before the first deepwater drilling operation was allowed to resume in late February. Even at that point, deepwater drilling permits were issued at a slow pace, and most of those were permits to resume previous operations, not to drill new wells. . . .
THE EFFECTS OF THE GOVERNMENT’S ACTIONS
Although the government’s formal moratorium was lifted a year ago, deepwater drilling activity has still not recovered. Some rigs have moved overseas, and it is unclear when or whether they will return. The government projected that the moratorium will end up decreasing production in the Gulf of Mexico by tens of millions of barrels of oil and hundreds of billions of cubic feet of gas.
The government also projected that the decreased production will lead to an increase in the price of oil and gas and will cause the federal government to lose close to $2 billion in direct and indirect tax and royalty revenue in fiscal year 2011 alone. It projected the loss of more than 23,000 jobs in the Gulf of Mexico region and that oil and gas industry spending in that region will be reduced by more than $10 billion. The actual impacts are probably higher because deepwater drilling activity did not resume until months after the moratorium was lifted in October 2010 and still is not back to pre-Deepwater Horizon levels.
These harms are difficult to stomach in light of the government’s failure to justify them based on the facts and science involved. They are even less tolerable considering the government’s failure to respect the rule of law and to follow the proper administrative procedures. . . .
The fact is, the Administration’s war on energy is so unrelenting that it’s difficult even to keep track of the body blows to our infrastructure—the most recent ones had to do, of course, with “delaying” the decision on the Keystone XL Pipeline (which may mean that the good Canadian oil will simply be sent to the Chinese), and the decision against shale drilling in Ohio.
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When there is a conflict between jobs and public employee unions, or a conflict between jobs and the environmentalist lobby, jobs lose every time under this Administration&mash;and that is the case even when the infrastructure around the jobs already exists, as in the Gulf. It’s the case even when the law is on the side of the workers, as in the Gulf.
How this President can claim that he’s interested in job-creation, or even job-maintenance, is simply beyond me.