Avoiding conflicts-of-interest charges, feds argue irreparable harm in Judge Martin Feldman's injunction
Hearing before three-judge panel set for July 8...
By Ernest A. Canning on 7/7/2010, 1:53pm PT  

Guest blogged by Ernest A. Canning

[Ed Note: Ernie Canning appeared as my guest on last night's Mike Malloy Show to discuss Feldman's conflicts-of-interest and the government's appeal described below. The audio archive of that interview can be heard here. - BF]

In a powerful and carefully-crafted 5th Circuit Court of Appeal motion [PDF] filed in Hornbeck Offshore Services vs. Salazar --- a motion which did not touch upon the question of whether U.S. District Court Judge Martin Feldman's substantial investments in the oil industry mandated a recusal --- the government argued that, in enjoining the Department of Interior's six month suspension of offshore drilling on just 33 "of the approximately 3,600 structures in the Gulf dedicated to offshore oil exploration and production," following the BP/Transocean Deepwater Horizon disaster, Judge Feldman abused his discretion by substituting his own personal judgment over matters that, by statute and federal regulations, are the province of federal officials.

The Department of Interior and the Bureau of Ocean Energy Management, Regulation, and Enforcement ("BOEMRE") have the legally mandated duty and authority to regulate such matters, the government is arguing.

"While Plaintiffs’ concerns appear limited to the next financial quarter," the motion explains, "[the Department of] Interior must ensure not only that OCS [Outer Continental Shelf] drilling operations are safe and secure but also that the Nation’s fisheries, coastal ecosystems, and other public lands continue to provide jobs, recreation opportunities, habitat for wildlife, healthy ecosystems, and economic resources for all of the public."

The appellate motion by federal officials calling for a stay of Judge Feldman's recent preliminary injunction on the exploratory drilling moratorium will be argued before a three-judge panel on Thursday...

Federal law supports suspension of deep water drilling

In its brief, the government stressed that the Outer Continental Shelf Lands Act ("OCSLA") --- which "describes the OCS as 'a vital national resource' that should be developed 'subject to environmental safeguards,'" along with federal regulations adopted in accordance with the Administrative Procedures Act (APA) --- provided ample support for the moratorium.

Congress expected that drilling operations would employ “technology, precautions and techniques sufficient to prevent or minimize the likelihood of blowouts, loss of well control, fires, spillages . . . or other occurrences which may cause damage to the environment or to property.”

BOEMRE regulations in turn authorize the agency to direct a suspension if it determines that “activities pose a threat of serious, irreparable, or immediate harm or damage” to human or animal life, “property, any mineral deposit, or the marine, coastal, or human environment”...or “[w]hen necessary for the installation of safety or environmental protection equipment.”

The government noted that "the challenged suspension order targets only those deepwater operations that present safety concerns similar to those raised by the Deepwater Horizon event."

The explosion at the Deepwater Horizon rig not only claimed eleven lives but, as detailed in the motion, produced "the largest spill in American history" which "already ranks among the worst environmental disasters this Nation has ever confronted." The government argued that on May 28 Secretary of Interior Ken Salazar acted on multiple sources and not just a Safety Report relied upon by Judge Feldman, who, the government claimed, ignored relevant data furnished in a declaration from Deputy Secretary of Interior David Hayes.

Secretary Salazar determined "that 'at this time and under current conditions...offshore drilling of new deepwater wells poses an unacceptable threat of serious and irreparable harm to wildlife and the marine, coastal, and human environment.'"

The judge --- not the government --- abused his discretion

In its motion, the government noted:

The APA [Administrative Procedure Act] provides that an agency action may be overturned only if it is “arbitrary, capricious, an abuse of discretion, or otherwise not in accordance with law.”… A reviewing court examines only whether the agency based its decision “on a consideration of the relevant factors and whether there has been a clear error of judgment.’”… The decision must be sustained if it articulates a rational relationship between the facts it finds and its policy choices.

Without reference to the disturbing oil industry conflicts-of-interest we described in our article, "Case for Impeachment of Judge Martin Feldman Strengthened by New Details on Oil Firm Holdings," the government argued that Judge Feldman exceeded his authority under the APA by arbitrarily substituting his personal judgment over that which the OCSLA has delegated to the Department of Interior and the BOEMRE.

Instead of deferring to Interior’s technical judgments, [Judge Feldman] dismissed them wherever [he] disagreed. For example, the court independently concluded that a 7.5% failure rate in certain blowout preventer equipment was acceptable, and chastised Interior for concluding that this failure rate justified the temporary suspensions.

The government did not disagree with Judge Feldman's observation that "[m]ost of the currently permitted rigs passed MMS inspection after the Deepwater Horizon exploded." However, it argued that the Deepwater Horizon spill exposed the inadequacies of the existing regulations and technologies.

[W]hen Interior suspended activities at leases "similarly situated" to Deepwater Horizon…it merely recognized the obvious: an intolerable disaster has identified inadequacies in existing safety regulations and practices, which in turn justify a suspension targeted at those similar drilling operations.

The government observed, "The Deepwater Horizon blowout is itself powerful proof that a ‘serious’ threat exists on the rigs that Interior targeted with suspension orders, all of which use ‘the same technologies employed by Transocean’s Deepwater Horizon.’"

Plaintiff failed to demonstrate irreparable harm

In its motion, the government argued:

A preliminary injunction is an “extraordinary and drastic” remedy…a plaintiff must make a “clear showing” that: (1) it is likely to succeed on the merits; (2) it stands a substantial threat of irreparable harm absent an injunction; (3) the balance of equities tips in its favor; and (4) the requested injunction serves the public interest.

The plaintiff in the suit, Hornbeck, does not own or operate any of the 33 deepwater offshore drilling platforms affected by the moratorium. It only offers support services for them. Per its representations to its own investors, Hornbeck can "mitigate its exposure" by shifting its vessels to "foreign markets and domestic non-oilfield markets."

Where Judge Feldman claimed that "150,000 jobs are directly related to offshore operations," he ignored the fact that "the suspensions apply only to certain drilling operations, only to waters over 500 feet deep, and only for six months." While the Gulf furnishes 31% of domestic oil, "the temporary suspensions affect less than 1% of the existing structures in the Gulf dedicated to oil exploration and production."

Motion to be heard by three judge panel on July 8

A three judge panel will hear oral arguments on July 8 on the government's motion for a stay of Judge Feldman's preliminary injunction. Two of the judges, W. Eugene Davis and Jerry E. Smith are Reagan appointees. The third, James L. Dennis was appointed by President Clinton.

In a November 2009 case, this same panel ruled in favor of Gulf Coast property owners, holding that they had demonstrated a right to bring a class action tort claim for public nuisance and negligence against dozens of oil and chemical companies whom the property owners alleged had added to the "ferocity" of Katrina by their emissions.

UPDATE 07/08/10: Tresa Baldas of the National Law Journal reports that all three 5th Circuit Court of Appeal judges assigned to hear today's motion have historical ties to the oil industry.

Jerry Smith and W. Eugene Davis, repeatedly represented the oil and gas industries while in private practice...

In their 2008 financial disclosure reports, Davis listed $15,000 to $65,000 in investments in gas and oil, and Smith listed none.

The third judge on the panel, James Dennis, has extensive financial holdings in at least 18 companies in the energy industry worth between $15,000 and $300,000.

Baldas, relying upon a report from the Alliance for Justice, notes that Judge "Dennis did not recuse himself from the attempted en banc rehearing of Comer v. Murphy Oil USA" and that, because so many 5th Circuit judges recused themselves, the 5th Circuit Court of Appeal "court found it lacked an en banc quorum, forcing it to reinstate a district court ruling that favored the oil industry."

An en banc decision is one made by the entire Circuit Court of Appeal as opposed to a decision made by a three judge panel. A party who loses before a three judge panel can seek a rehearing en banc.

Baldas failed to mention, however, that Judge Dennis authored the panel decision in Comer, which decision had reversed the district court ruling so as to reinstate the property owners' claims of negligence and public nuisance against the oil companies. The 5th Circuit's en banc decision essentially reversed the panel's decision due to a lack of a quorum.

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Ernest A. Canning has been an active member of the California state bar since 1977. Mr. Canning has received both undergraduate and graduate degrees in political science as well as a juris doctor. He is also a Vietnam vet (4th Infantry, Central Highlands 1968).