Federal Government Opposes Attempt To Stop Drilling Moratorium

16th Jun 2010 00:16

By Mark H. Anderson and Siobhan Hughes Of DOW JONES NEWSWIRES WASHINGTON (Dow Jones)--The U.S. Justice Department on Wednesday asked a federal judge to reject an attempt by a deepwater oil-exploration company to strike down a temporary moratorium on deepwater exploration activities. Hornbeck Offshore Services LLC, based in Covington, La., in early June asked a U.S. District Court to issue a preliminary injunction that would allow deepwater exploration to resume. The Obama administration has halted exploration due to the ongoing BP PLC (BP, BP.LN) oil spill in the Gulf of Mexico. Hornbeck, in legal filings, said the moratorium is causing is "immediate irreparable harm to its business" and asked the court to lift restrictions on exploration and drilling in water at depths greater than 500 feet. The government's response came ahead of a June 21 hearing that has been scheduled on the matter. "The suspensions reduce the risk of a second spill by providing the time needed for further investigation and the implementation of any needed corrective measures," the Justice Department said in a legal filing. Government attorneys said a preliminary injunction overturning the moratorium isn't warranted and "would not be in the public's interest." Hornbeck's motion is being heard by a trial judge in New Orleans on June 21. Oil and gas companies began shutting down 33 deepwater exploration rigs last month after U.S. President Barack Obama imposed a six-month moratorium on developing new deepwater wells. The moratorium also posed new hardships for the hundreds oil-service companies, already hurt by an economic recession, that supply the steel-tubing, engineering services, drilling crews and marine supply boats critical to offshore exploration. The moratorium is causing concern among oil-state lawmakers because deepwater drilling is a growth area that already accounts for a quarter of all U.S. oil production and the lion's share of oil production in the Gulf of Mexico. Last week, the U.S. Energy Information Administration forecast that the reductions in crude oil production resulting from the moratorium would average about 26,000 barrels a day in the fourth quarter and roughly 70,000 barrels a day in 2011. Exxon Mobil Corp. (XOM) Chief Executive Rex Tillerson earlier this week said that the moratorium was "unnecessary in terms of the extent and length of it." -By Mark H. Anderson, Dow Jones Newswires; 202-862-9254; [email protected] (Isabel Ordonez contributed to this report). (END) Dow Jones Newswires June 16, 2010 19:16 ET (23:16 GMT)