In the aftermath of the BP spill, federal regulators promulgated sweeping new rules governing the drilling and operation of offshore wells. These new rules apply not only to the operators of deepwater wells, like BP’s Macondo, but to shallow water drilling as well. Largely as a result of these new rules, and uncertainty among regulators and the oil and gas operators as to their meaning and application, new drilling permits ground to a halt.

Offshore oil and gas activity is covered under a voluminous set of federal rules known as 30 CFR 250. Amending the Code of Federal Regulations is a process that requires some time and deliberation. Specifically, the process is designed to allow for public comment, and for the agency to take those comments into account in crafting a final rule.

But the Department of the Interior, through the old MMS and its successor agency BOEMRE, didn’t amend the CFR in imposing these new rules. Instead, they circulated the new rules, without benefit of public comment, as “Notices to Lessees”. Lessees are the oil and gas companies who operate on federal leases. By design, NTLs are supposed to be interpretive; their intent is not to create new laws or new regulations, but to provide guidance on existing ones.

Judge Martin Feldman in New Orleans District Court calls foul.

By the way, that’s the same Judge Feldman who threw out the first deepwater drilling moratorium.

Judge rejects drilling rules

U.S. District Judge Martin Feldman in New Orleans said Tuesday that the government was obliged to offer notice and accept comments on 10 new safety measures imposed on deep-water oil and gas operators in May. Feldman didn’t address Interior Department rules, known collectively as NTL-05, when he struck down the moratorium in June. The administration first banned deep-water drilling in May and issued new rules in July after Feldman threw out the original moratorium as too broad. Regulators lifted the second ban last week, while retaining the rules imposed in May.

Feldman issued Tuesday’s ruling in a lawsuit challenging the second moratorium from July. The U.S. last week asked Feldman to dismiss this lawsuit, calling it irrelevant. Feldman said he’d rule on that after a Nov.  3 hearing. The government had no comment Tuesday.

The changes in NTL-05 are far from trivial. One of its provisions requires a Sarbanes-Oxley-style statement from each company’s CEO.

It looks as though we’ll have an interesting test of the limits of bureaucratic rulemaking.

Cross-posted at VladEnBlog.

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