* A victory for drillers
* White House to challenge ruling
* Offshore operators say they await appeal outcome
(Adds comment from industry, Sierra Club)
By Mary Rickard
NEW ORLEANS, June 22 A U.S. judge ruled on
Tuesday against the six-month moratorium that President Barack
Obama's administration imposed on deepwater drilling over the
Gulf of Mexico oil spill.
The order, in a New Orleans federal court, was a blow to
the White House which had insisted a ban on offshore drilling
below 500 feet (152 meters) would allow enough time to ensure
other exploratory drilling was proceeding safely.
The White House swiftly pledged to appeal the ruling to the
U.S. Court of Appeals for the Fifth Circuit in New Orleans.
"Continuing to drill at these depths without knowing what
happened does not make any sense, and puts the safety of those
involved ... at a danger that the president does not believe we
can afford," said White House spokesman Robert Gibbs.
The ruling in the case, the oil industry's first challenge
to a moratorium that had halted operations of 33 offshore rigs,
was a victory for big offshore energy producers like BP Plc.
(BP.L)(BP.N), Chevron Corp (CVX.N) and Royal Dutch Shell
(RDSa.L). Their operations have been hamstrung by the ban and
they considered relocating their giant drilling rigs to other
basins like Brazil.
A suit was filed by Louisiana-based Hornbeck Offshore
Services LLC (HOS.N) and was joined by more than a dozen
companies involved in offshore drilling operations to reverse
the drilling ban imposed by the U.S. Department of Interior.
The April 20 explosion of the Transocean Ltd
(RIGN.S)(RIG.N) Deepwater Horizon rig killed 11 people and
caused the worst oil spill in U.S. history. The well is
majority-owned by BP.
Deepwater drilling, newer than shallow-water drilling, is
also riskier because the bit must bore through many more layers
of rock and salt under more extreme pressures and
Federal Judge Martin Feldman, appointed by former President
Ronald Reagan in 1983, granted the drillers' request for a
preliminary injunction that prevents the ban from taking
effect, saying that they would likely succeed in showing that
the suspension was "arbitrary and capricious".
"The court is unable to divine or fathom a relationship
between the findings and the immense scope of the moratorium,"
the judge wrote a day after hearing arguments in the case.
Environmental groups lambasted Feldman's decision as a gift
to Big Oil. "To open more drilling now would be to invite a
second disaster of the same magnitude, or a third," said Sierra
Club executive director Michael Brune.
The Center for American Progress, headed by former
President Bill Clinton's White House chief of staff John
Podesta, circulated public documents showing that he held
shares in offshore rig owner Transocean Ltd in 2008.
The American Petroleum Institute, an oil industry lobbying
group, applauded the ruling and said it means that "our
industry and its people can get back to work."
But big offshore operators like Shell said they would wait
until the outcome of the appeal by the Obama administration
before they restart drilling operations.
"We need to understand what the lower court's decision was,
and we'll await the outcome of the appeal," said Shell
spokesman Bill Tanner.
"It would be very difficult to see someone start up an
ultra deepwater operation with just one court's ruling because
there is so much at stake," said Pierre Conner, an analyst with
Capital One Southcoast in New Orleans.
Standard & Poor's Equity Research analysts said legal
battles over the moratorium are far from over and they
"anticipate some rigs to leave the U.S. Gulf for international
drilling regions given elevated domestic uncertainty."
The moratorium on drilling in deep waters does not affect
existing producing platforms but halts new development plans by
the oil industry.
Wood Mackenzie, an energy consulting agency, previously
estimated a six-month ban would delay 80,000 barrels a day in
U.S. oil production that was expected in 2011.
(Additional reporting by Patricia Zengerle, James Vicini,
Jeremy Pelofsky and Deborah Zabarenko in Washington and Kristen
Hays in Houston. Writing by Chris Baltimore; editing by Howard
Goller and Chris Wilson)