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Thursday, July 8, 2010

Obama Will Issue New Drilling Ban if Appeal Fails

US Government Will Issue New Drilling Ban if Appeal Fails
Published: Thursday, 8 Jul 2010 | 12:18 PM ET Text Size
By: Reuters

The Obama administration will "immediately" issue a revised drilling ban if a federal appeals court agrees with a lower court's decision to block the government's initial six-month moratorium on drilling in deep waters, an Interior Department official told Reuters on Thursday.

However, if the appeals court supports the administration's initial drilling moratorium, the department will not impose a new drilling ban, the official said.

The Obama administration heads to court Thursday aiming to reinstate a six-month moratorium on deepwater oil drilling imposed after the devastating BP [BP 33.662 0.472 (+1.42%) ] Gulf of Mexico oil spill, but blocked by a federal judge.

The showdown starts at 3 p.m. local time at the U.S. Court of Appeals for the Fifth Circuit in New Orleans, where government lawyers will square off for one hour against drilling companies before a three-judge panel.

Regardless of the ruling, industry is not expected to resume drilling in deep waters any time soon because of the legal uncertainties.

The Obama administration said it suspended drilling in waters deeper than 500 feet to avoid another oil well blowout and give a special presidential commission time to investigate the disaster.

BP's leaking undersea well in the Gulf of Mexico has soiled the shores of all five U.S. Gulf Coast states.

But drillers like Hornbeck Offshore Services [HOS 16.48 0.69 (+4.37%) ] won a reprieve when U.S. District Court Judge Martin Feldman said the moratorium was too broad and arbitrary.

Feldman ruled last month that the Interior Department failed to adequately take into account the economic impact the drilling suspension would have on the industry as well as local communities.

The Justice Department, which appealed, will argue that Feldman wrongly substituted his judgment in place of Interior Department expertise and that the moratorium was narrow by only affecting drilling at 33 sites.

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