June 25, 2010

Administrative law and the Deepwater Horizon disaster

By Administrative law and the Deepwater Horizon disaster

Author:  Damien M. Schiff

Earlier this week, Judge Martin Feldman, in Hornbeck Offshore Services v. Salazar, issued a preliminary injunction overturning the Obama Administration's six-month moratorium on new deepwater well drilling in the Gulf of Mexico.  The plaintiffs, a collection of gulf-oil-dependent businesses, had filed suit against the Interior Department alleging that the moratorium violated the Outer Continental Shelf Lands Act and implementing regulations.  Under the Act and its regulations, the Interior Department (via the Minerals Management Service) is authorized to impose a moratorium if the proscribed activity would create an unacceptable risk of serious or irreparable harm to life and property, including animal and aquatic life and the environment.

In late May, the Interior Department imposed the moratorium, basing the decision on a Report put together by several experts to recommend improved safety measures for offshore drilling.  As Judge Feldman observed, the Report's advocacy of a blanket moratorium was not based on the concurrence of the experts:  "[The experts] envisioned a more limited kind of moratorium, but a blanket moratorium was added after their final review, . . . and was never agreed to by them."  Further, the court noted that the Report maked no effort to justify the moratorium.

The Report, invoked by the Secretary, describes the offshore oil industry in the Gulf and offers many compelling recommendations to improve safety. But it offers no time line for implementation, though many of the proposed changes are represented to be implemented immediately. The Report patently lacks any analysis of the asserted fear of threat of irreparable injury or safety hazards posed by the thirty-three permitted rigs also reached by the moratorium. It is incidentspecific and driven: Deepwater Horizon and BP only. None others.

It is a basic principle of administrative law that an agency must explain the reasons for its decision, and that there must exist a rational connection between the facts before the agency and the decision made.  This standard, in my experience, is extremely lax:  administrative agencies can and do get away with significant impingements on individual liberties and property rights.  But the Administration's moratorium could not even pass this muster.  As the court trenchantly questioned:

If some drilling equipment parts are flawed, is it rational to say all are?  Are all airplanes a danger because one was?  All oil tankers like Exxon Valdez?  All trains?  All mines?  That sort of thinking seems heavyhanded, and rather overbearing.

The court also observed that "[m]ost of the currently permitted rigs passed [government] inspection after the Deepwater Horizon exploded."

Importantly, the court recognized that the case was about more than keeping federal agencies bounded by rationality:  "An invalid agency decision to suspend drilling of wells in depths of over 500 feet simply cannot justify the immeasurable effect on the plaintiffs, the local economy, the Gulf region, and the critical present-day aspect of the availability of domestic energy in this country."

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