Page 18: of Marine News Magazine (October 2010)

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LEGAL PERSPECTIVES

In response to the oil spill in the Gulf of Mexico, the Department of Interior (DOI) issued a moratorium on all deepwater drilling in the Gulf of

Mexico and Pacific regions. Although only a portion of our industry is direct- ly involved in the day-to-day work of offshore drilling, the entire industry is being dramatically affected by this moratorium.

Specifically, vessel owners and operators are watching their vessels sit idle and charters and master service agreements are being cancelled by well operators.

As the vessels currently available to the industry are not being utilized, the market to purchase, sell, or build new vessels has also collapsed. As orders for new vessels are not forthcoming, ship builders, repairers, and suppliers are all experiencing a reduction in work.

Thus, based upon the trickle-down effect from the off- shore oil and gas exploration business, all aspects of the marine industry are significantly impacted by the issuance of such a ban.

Although the Obama administration appears to be dead set on curtailing offshore oil and gas exploration, various companies involved in oil and gas exploration have chal- lenged the legality of the drilling ban. This article provides a description of what has happened to date and the rea- sons why the drilling ban should be declared invalid.

With regard to the history of the drilling ban, on April 20, 2010, a well blow-out and explosion occurred on a rig while it was working in the Gulf of Mexico, resulting in an oil spill. On April 30, 2010, President Obama directed the Department of the Interior to conduct a review of the incident and issue a report with recommendations for making oil and gas exploration safer. On May 27, 2010, in accordance with President Obama’s April 30th direc- tive, Secretary Kenneth Salazar issued a report entitled “Increased Safety Measures for Energy Development on the Outer Continental Shelf” (Safety Report). This report identified an initial set of safety measures that could be implemented to improve the safety of offshore oil and gas development. The Safety Report included a three page

Executive Summary written by Secretary Salazar. This

Executive Summary was written after the report was com- plete.

The Safety Report did not assess how to implement the recommended safety measures, how long it would take to implement the measures, or whether any type of morato- rium was necessary.

Nonetheless, Secretary Salazar’s Executive Summary rec- ommended an “immediate halt to drilling operations on all 33 permitted wells, not including the relief wells cur- rently being drilled by BP, that are currently being drilled using floating rigs in the Gulf of Mexico” so as to “allow for implementation of the measures proposed” in the

Safety Report. The Secretary instructed that drilling oper- ations should cease for at least a six month period.

The Executive Summary to the Safety Report stated that the recommendations in the report were peer reviewed by experts identified by the National Academy of

Engineering. Although these experts did participate in a peer review of the Safety Report, they were not provided with a copy of Secretary Salazar’s Executive Summary that recommended the drilling ban. In fact, eight experts who had either peer reviewed or consulted on the drafting of the Safety Report stated that they did not agree with the six month moratorium on drilling. These experts further added that the moratorium would not reduce risk and would have a lasting impact on the nation’s economy that could be greater than the oil spill. Furthermore, some of these experts also believed that the moratorium will make deepwater drilling less safe in the long run.

On May 28, 2010, Secretary Salazar issued a one page memorandum directing a six month suspension of pend- ing, current, or approved offshore drilling operations of new deepwater wells in the Gulf of Mexico and Pacific

Although the Obama administration appears to be dead set on curtailing offshore oil and gas exploration, various companies involved in oil and gas exploration have challenged the legality of the drilling ban. 18 MN October 2010

Why the Drilling Moratorium is

Unlawful & Should be Lifted

By Larry DeMarcay