Beveridge & Diamond
 

Strike Two - District Court Invalidates Offshore Drilling NTL 2010-N05

Beveridge & Diamond, P.C., October 22, 2010

On October 19, 2010, the United States District Court for the Eastern District of Louisiana struck down Notice to Lessees No. 2010-N05 (“NTL-05”).  Ensco Offshore Co. v. Salazar, No. 10-01941, 2010 U.S. Dist. LEXIS 111226 (E.D. La. Oct. 19, 2010).  This order was issued by the same Court that recently invalidated the first deepwater drilling moratorium imposed following the Deepwater Horizon incident.  Hornbeck Offshore Servs., LLC v. Salazar, No. 10-01663, 2010 U.S. Dist. LEXIS 61303 (E.D. La. June 22, 2010).

The Bureau of Ocean Management, Regulation, and Enforcement (“BOEM”) issued NTL-05 on June 8, 2010, imposing several new requirements on all Outer Continental Shelf (“OCS”) drilling operations.  BOEM relied upon its general authority to immediately issue NTLs as “guidance documents.”  30 C.F.R. § 250.103.  The Court disagreed that NTL-05 was simply interpretative guidance.  Instead, the Court found that NTL-05 constituted a substantive rule because it imposed new requirements and went beyond existing regulations.  Since it was a substantive rule, BOEM could not issue NTL-05 without public notice and comment required under the Administrative Procedure Act.  Accordingly, the Court granted summary judgment to the plaintiffs, holding that NTL-05 was procedurally defective and could not stand.

Even though NTL-05 is no longer effective following the Court’s decision, the practical impact of the ruling may be muted by intervening regulatory developments.  On October 14, 2010, BOEM published an interim final rule known as the “Drilling Safety Rule.”  See 75 Fed. Reg. 63346 (Oct. 14, 2010).  This rule expressly incorporates most of the requirements under NTL-05.  As an interim final rule, the Drilling Safety Rule is effective immediately.  However, BOEM will be accepting public comments on the rule through December 13, 2010.  At the conclusion of this 60-day comment period, BOEM will publish a notice either confirming the interim final rule or issuing a modified final rule. 

In the interim, most of the requirements of NTL-05 still apply to OCS operators as codified in the Drilling Safety Rule.  However, reinstatement of other NTL-05 requirements not included or repeated in the Drilling Safety Rule, such as mandated one-time operator certifications of compliance with every BOEM regulatory requirement, may be more suspect to the extent they lack notice and comment rulemaking.

For more information on this ruling or other developments in offshore energy regulations and litigation, please contact Peter Schaumberg at pschaumberg@bdlaw.com (202-789-6043), Fred Wagner at fwagner@bdlaw.com (202-789-6041), or James Auslander at jauslander@bdlaw.com (202-789-6009). 

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