Interior Imposes Moratorium Without Economic Analysis

By August 9, 2010Energy, Regulations

Attorneys for the Department of Interior will be in federal court in New Orleans Wednesday to argue for the dismissal of the suit by Hornbeck Offshore Services Inc. of Covington, La., challening the federal moratorium on deepwater drilling. (New Orleans Times-Picayune, “2 offshore drilling firms to argue the legality of Obama moratorium.”

We recommend this opening statement to Interior’s lawyers: “Your honor, we ask you to dismiss this lawsuit because it has become moot. Secretary of Interior Ken Salazar today ordered the lifting of the moratorium.”

Absent that smart choice, the legal question is whether Interior has the authority to issue a moratorium despite its failure to lay out solid, fact-based case for the action. The Administration has, in effect, embraced the “precautionary principle” — because there’s some slight, slight, slight, slight danger of another catastrophic spill, drillers must affirmatively prove that there is NO risk. And you can’t prove a negative.

U.S. District Court Judge Martin Feldman has previously ordered the lifting of the federal moratorium because of Interior’s “arbitrary and capricious” case versus the economic harm the halt to drilling inflicted on the Gulf Coast.  But since then, the Administration has analyzed the economic impact and concluded the risks justify the effect on local economies and jobs. Right? There’s been an in-depth, serious analysis?

From “Meet the Press,” Sunday, August 8, David Gregory interview with White House energy and environmental advisor Carol Browner:

MR. GREGORY:  You talk about all the work here being done for safety.  Did the White House do any economic analysis about what a moratorium–what impact it would have on jobs in the Gulf Coast?

MS. BROWNER:  There is, there is an economic analysis being done.  It’ll be ready later…

MR. GREGORY:  But it was never done before the moratorium was put in place? Because those who are down there say, “You know what, the moratorium by the Obama administration is far worse than the spill itself.”

MS. BROWNER:  Here’s what we knew the minute the accident happened:  that if there was another accident of equal size, we didn’t have the equipment to respond.  All the boats, all the resources were being used.  We had a close–over 6,000 vessels, we embedded private citizens into this effort.  It was a massive undertaking, and if another accident were to occur, we would not have had the ability to respond.  And, you know, that formed a basis for putting a pause on drilling while we looked at the safety, while we looked at how we would contain it, ultimately, and then clean it up.

Well, since Interior needs an economic analysis, here’s a solid, even conservative one offered by Joseph R. Mason, the chairman of banking at the E.J. Ourso School of Business, Lousiana State University, at a Senate Small Business Committee on July 27, “The Deepwater Drilling Moratorium: A Second Economic Disaster for Small Businesses?


These projections are lower than those presented by other studies because I estimate the period of new production loss to be only six months. However, if we were to extend the loss in new production in our model to the 18 months assumed by other sources, we would see a loss of 36,137 jobs nationally, 24,532 jobs lost in the Gulf region, and 14,156 jobs lost in Louisiana.

His study also examines the loss of earnings and state tax revenues.

Michael Bromwich, the head of the Bureau of Ocean Energy Management Regulation and Enforcement – formerly the Minerals Management Service — last week said the Administration might lift the moratorium early: “I think it’s everybody’s hope that we will feel comfortable enough that the moratorium can be lifted significantly in advance of Nov. 30.”

Wednesday, August 11, would be significantly in advance of Nov. 30.

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