Case: 10-30585 Document: 00511164042 Page: 1 Date Filed: 07/06/2010

No. 10-30585

IN THE UNITED STATES COURT OF APPEALS

FOR THE FIFTH CIRCUIT

HORNBECK OFFSHORE SERVICES, LLC, ET AL.,

Plaintiff-Appellee,

v.

KENNETH SALAZAR, in his official capacity as Secretary of the Interior,

UNITED STATES DEPARTMENT OF THE INTERIOR,
THE BUREAU OF OCEAN ENERGY MANAGEMENT, REGULATION,
AND ENFORCEMENT, and MICHAEL R. BROMWICH, in his official
capacity as Director of that Bureau,

Defendant-Appellants.

On Appeal from the U.S. District Court for the Eastern

District of Louisiana, No. 10-CV-1663(F)(2)
(Hon. Martin Feldman)

REPLY IN SUPPORT OF MOTION FOR A STAY PENDING APPEAL

Of Counsel: IGNACIA S. MORENO

HILARY C. TOMPKINS
Solicitor
Department of the Interior
1849 C Street, NW
Washington, DC 20240
Assistant Attorney General
GUILLERMO A. MONTERO
BRIAN COLLINS
MICHAEL T. GRAY
U.S. Department of Justice
Environment & Natural Res. Div.
P.O. Box 23795 (L’Enfant Station)
Washington, DC 20026
(202) 305-4903
 Case: 10-30585 Document: 00511164042 Page: 2 Date Filed: 07/06/2010

In response to an unprecedented and ongoing disaster, the Department of the

Interior acted to prevent the possibility of further environmental and economic

harm from another oil spill by suspending deepwater drilling in the Gulf for 6

months. The district court’s order preliminarily enjoining that action misperceived

Interior’s authority, the rationale for the suspensions, and the relative harms

present in the Gulf. Plaintiffs and amici rely on those same misperceptions in

opposing the motion. When Interior issued the suspensions in this case, oil had

been flowing into the Gulf for more than a month. And it continues to do so

today—with catastrophic consequences to the environment and local economy—

despite repeated efforts, using every available technology, to stop it. Because this

deepwater spill has been impossible to fully contain, Interior had to take immediate

action to minimize the risk of another spill, especially while efforts to contain and

clean up this one are ongoing. The stakes are even higher now that it is hurricane

season. The suspension orders give Interior time to further implement 22 already-

identified new safety measures and to develop others as it gathers more

information. Therefore, that decision was a rational exercise, under emergency

circumstances, of Interior’s substantial discretionary authority under the Outer

Continental Shelf Lands Act and its own regulations for suspending lease

operations. The district court was wrong to substitute its judgment for Interior’s

and enjoin those suspensions. This Court should stay the district court’s order.

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ARGUMENT

I. INTERIOR IS LIKELY TO SUCCEED ON THE MERITS OF ITS APPEAL.

The district court concluded, and Plaintiffs argue in their opposition, that

Interior did not provide any reason for suspending deepwater drilling for a 6-month

period. Opp. 11-12. That is simply not true; the 6-month term is fully supported in

the record. Dkt. 7-2, 33-1, 33-2. The Safety Report recommends adopting new

safety measures in three categories: those that could be adopted immediately, those

that required exercise of Interior’s emergency rulemaking power by publication of

interim final rules, and those that required full notice-and-comment rulemaking.

Dkt. 7-2 A at 18-19. Interior also created “strike teams” to “further develop” some

measures, and those groups are to “present their recommendations for additional

environmental protection and safety measures within six months.” Id. at 19

(emphasis added). The Executive Summary then recommended a corresponding

suspension of deepwater drilling in the Gulf of Mexico for 6 months, until “the

safety measures can be implemented and further analysis completed.” Id. at 1-3.

The Secretary, after considering the Safety Report and other documents in

the administrative record, directed a 6-month suspension of deepwater drilling, Id.

at 66, and MMS (now BOEM) issued a Notice to Lessees stating that a 6-month

suspension was warranted “because of the significant risks of OCS drilling in

deepwater without implementation of the safety equipment, practices and

procedures recommended in the Report.” Id. at 69. That was implemented through

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individual suspension notices to each lessee. The 6-month suspensions were

obviously intended to allow Interior to implement the immediate safety measures,

develop the interim final rule for other measures, receive further information from

the strike teams as well as other ongoing investigations about additional necessary

safety measures before deepwater drilling resumes, and provide an important

measure of safety against another blowout. Courts should uphold an agency’s

decision where, as here, its “path may reasonably be discerned.” FCC v. Fox

Television Stations, Inc., 129 S.Ct. 1800, 1810 (2009). 1

The district court also faulted Interior for not offering a clear rationale for

suspending drilling of exploration and development wells in water deeper than 500

feet. As we have explained, Interior chose 500 feet because it is beyond that depth

where drilling is done by floating rigs, which present a greater risk of blowout than

jack-up rigs because their blowout preventers are generally not on the surface. Dkt.

33-2 at 6 ¶13. Plaintiffs no longer directly contest the point. Opp. 10-15.

Both Plaintiffs and the district court also fault Interior for reacting to a single

incident with a suspension of all deepwater drilling in the Gulf, Opp. 12, 16; Dkt

1
Though Plaintiffs suggest that 6-month suspensions are an improper “one-size-
fits-all policy,” Opp. 16, and one amicus suggests Interior has already adopted
some of the Safety Report’s recommendations and thus no further suspension is
warranted, IPAA at 3, neither they nor anyone else argues that any of the measures
in the Safety Report are unnecessary, and it is undisputed that some of the Safety
Report’s recommendations must be implemented through emergency and notice-
and-comment rulemaking. Dkt. 7-2 A at 17-28.

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67 at 4, 19-21. But the Deepwater Horizon accident’s catastrophic impacts justify

Interior’s response because the harm from a potential second incident is

inestimable (particularly where most cleanup resources are already devoted to the

current spill). See Gulf Oil Corp. v. Morton, 493 F.2d 141, 143 (1973). In Gulf Oil,

Interior immediately suspended all operations on certain leases in the Santa

Barbara Channel after a blowout of a drilling rig, and followed that immediate

suspension with a longer-term suspension imposed to give Congress time to act on

proposed legislation that would have cancelled those leases. Id. Even though

Interior recognized that the risk of another blowout or spill was not “acute,” it

determined that the risk nonetheless justified a suspension until Congress had a

chance to act. Id. The Ninth Circuit concluded that, because of the “unexpected”

events of the Santa Barbara oil spill, it was rational for Interior to find that the

possibility Congress would cancel the leases justified a decision “not to run the risk

of substantial environmental damage” in the interim, “even if that risk were not

acute.” Id. at 148. The court thus held that an 18-month suspension of operations

while Congress considered proposed legislation was not arbitrary. Id. at 149; Cf.

Canal Authority of Florida v. Calloway, 489 F.2d 567, 577 (5th Cir. 1974) (relying

on Gulf Oil for proposition that “temporary administrative action to meet

previously unconsidered environmental dangers may be appropriate if it furthers

the public policy expressed by Congress” in NEPA).

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Here, Interior adopted a limited 6-month suspension of deepwater drilling to

implement new safety measures through rulemaking or directives to lessees. By

contrast, there was no finding in Gulf Oil that new safety measures were necessary,

and indeed there was an admission that if Congress did not cancel the leases the

risk of drilling “would be acceptable.” 493 F.2d at 143. Nonetheless, the Ninth

Circuit found that an 18-month suspension imposed only to allow Congress to

consider adopting more restrictive legislation was rational, notwithstanding that the

levels of risk for drilling were acceptable. In this case, a 6-month suspension to

implement specific, necessary safety measures for deepwater drilling based on the

expert agency’s judgment that they are necessary to reduce the risks of that drilling

is surely also rational. The risk of a second spill that cannot be controlled poses a

far greater threat than the non-acute risk involved in Gulf Oil (that spill, after all,

involved significantly less oil and had ended before Interior issued the

suspensions). Interior acted rationally when it issued the suspensions in this case

based on the threat to marine, coastal, and human environment and the need for

additional environmental safety equipment. 30 C.F.R. §§ 250.172(b), (c).

After Gulf Oil, Congress amended the OCSLA to give Interior more

sweeping authority to issue lease suspensions. See Pub. L. No. 95-372, 92 Stat. 629

(1978); H.R. Rep. No. 95-590, at 55, 74 (1977); S. Rep. No. 95-284, at 43 (1977)

(OCSLA is “essentially a carte blanche delegation of authority” to Interior).

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Congress added 43 U.S.C. § 1334(a)(1) “to put some ‘flesh on the bones’” of the

OCSLA by providing Interior clear authority to suspend operations because of a

“threat” of “serious or irreparable” harm to the “marine, coastal, or human

environment.” Id. Interior promulgated regulations implementing that authority,

including 30 C.F.R. § 250.172, and here it relied on and interpreted that authority

in the face of serious harm to the environment. Those additions give Interior even

greater latitude than it had in Gulf Oil to suspend leases, and Interior’s actions here

are rational by any standard. By disagreeing with Interior’s determination that

there is a “threat of serious, irreparable or immediate harm or damage” that

requires additional “safety or environmental protection equipment,” 30 C.F.R. §§

250.172(b), (c), the court failed to give Interior’s interpretation of its regulations

the controlling weight it deserves. Auer v. Robbins, 519 U.S. 452, 461 (1997).

Moreover, when Congress passed the 1978 amendments to the OCSLA it

did not require Interior to balance harms before issuing suspension orders. Thus,

Plaintiffs and the district court erroneously argue that Interior’s finding of a threat

of serious harm is not sufficient to justify the alleged economic consequences in

this case. Dkt. 67 at 4, 20-21; Opp. 13 & n. 14, n.15. The statute requires only that

Interior conclude, in the exercise of its discretion, that there is a threat of serious or

irreparable harm to the marine, coastal, or human environment. 43 U.S.C. §

1334(a)(1). That provision stands in stark contrast with the next section of the

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statute, which allows Interior to cancel leases if it finds that an activity would

“probably cause” the same harms listed for suspensions, that those harms will not

disappear, and that “the advantages of cancellation outweigh the advantages of

continuing” the lease. Id. at 1334(a)(2)(A)(i)-(iii). Congress thus chose to include a

balancing requirement for cancellations but not for suspensions. Congress intended

Interior to immediately suspend leases upon a threat of serious harm, and to cancel

them when necessary after assessing the relative advantages of all factors. 2 The

district court wrongly read a balancing test into 43 U.S.C. § 1334(a)(1).

Finally, Plaintiffs contend that Interior’s plan to issue new suspensions is

grounds to deny the motion to stay. Opp. 14-15. Interior is expected to issue new

suspensions soon (and we will immediately notify the Court when it does). The

alternative request for a stay pending any new decision is intended to forestall

irreparable harm until Interior gathers and reviews additional information and

exercises its discretion to issue a corresponding decision. Plaintiffs cite no

principle of law that would prevent this Court from exercising its equitable powers

to grant a stay in those circumstances, and we are aware of none. Instead, the

likelihood of new suspension orders further tips the equities in favor of a stay
2
H.R. Rep. 95-590, at 132 (1977) (“The Secretary’s decision to cancel is thus
based on a twofold consideration, balancing of risks, and time. First, the criteria for
cancellation is a showing of harm or damage which outweighs the advantages of
continued activity. Second, it was the intention of the committee that the Secretary
would first suspend or temporarily prohibit activities when there is a potential of
serious harm.”)

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because the new order may preclude the same activities that plaintiffs seek to

engage in by challenging the suspension orders in this case.3

II. THE BALANCE OF HARMS AND PUBLIC INTEREST SUPPORT A STAY.

As we explained in our stay motion, absent a stay there exists the potential

for serious or irreparable harm to the marine and coastal environment. Interior has

concluded that new safety measures for deepwater drilling are essential to reduce

the risk of another spill. Plaintiffs argue that the harm is hypothetical and

speculative. Opp. 15-16. But the harm from a second spill is not hypothetical at

all—the consequences of a spill are evident every day. Plaintiffs’ real complaint is

with the risk of harm, but Congress explicitly authorized Interior to determine how

much risk of harm is necessary to justify suspending leases, 43 U.S.C. §

1334(a)(1), and neither the district court nor this Court should second guess

Interior’s judgment that the threat here is significant enough to warrant the

suspensions “while enhanced technology is installed and tougher regulatory

standards are put in place.” Decl. of Walter Cruikshank at 3-4. See Winter v.

NRDC, 129 S.Ct. 365, 379 (2008). The magnitude of potential impacts from a

3
Indeed, this Court has recognized that it may withhold equitable relief when a
new agency decision is imminent. El Paso Elec. Co. v. Federal Energy Regulatory
Commission, 667 F.2d 462, 467 (5th Cir. 1982) (recognizing that, though
possibility of new regulatory action did not moot that case, where “a newly
promulgated rule of [FERC] could extinguish almost immediately any relief this
court grants” the court should be reluctant to rule “without first permitting the
Commission to use its own expertise to promulgate a new rule which subsequently,
in the proper order of administration, will be subject to judicial review”).

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second spill support a stay, especially because a second spill would “further stress

the capacity of US national assets for oil spill containment, response, cleanup and

restoration.” Id. The risk of a second spill—which industry has shown limited

ability to contain—and its attendant impacts on the United States’ already stressed

response efforts plainly justifies a stay. 4

Furthermore, Plaintiffs have not demonstrated that, absent the district court’s

injunction, they will suffer irreparable injury. As we explained in our motion,

Hornbeck conceded that the suspension orders would not cause it irreparable injury

in a statement to its investors. Mot. at 18. Plaintiffs do not contest the point;

instead they attempt to deflect it by pointing to an unsubstantiated claim that the

suspension orders will cause the depletion of a highly skilled workforce, without

explaining how that will irreparably injure Plaintiffs. Opp. 18. Plaintiffs also do not

contest that they have no direct legal interest in the deepwater leases that Interior

has suspended, again relying on allegations that the entire Gulf of Mexico oil

industry will collapse if the district court’s injunction is stayed. Mot. at 18-19;

Opp. 18. But wells in production are unaffected, and Interior, and this Court, must

consider the effects of a second spill on the larger, long-term health of the

4
For example, on June 28 the Coast Guard and EPA allowed certain commercial
and military vessels normally required to be available for spills in other regions to
be deployed in support of the Deepwater Horizon spill response. See “Temporary
Suspension of Certain Oil Spill Response Time Requirements to Support
Deepwater Horizon Oil Spill of National Significance Response.” 33 C.F.R. 154,
155 & 40 C.F.R. 112.

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environment and the economy. Those same failures plagued the Plaintiffs’

submissions in the district court, and without irreparable injury no injunction

should have issued in the first place.

Finally, as our motion demonstrates, the public interest demands a stay.

Interior must protect the long-term public interest of the Nation in the prudent and

safe exploitation and management of the OCS’s resources to ensure their viability

for the future. A short-term suspension of deepwater drilling while safety

regulations are updated is necessary to achieve that goal. Indeed, in delegating to

Interior the authority to suspend lease operations based solely on environmental

and safety concerns, supra at 6-7, Congress decided that, if in Interior’s judgment

drilling poses a threat of serious or irreparable environmental harm, the public

interest in avoiding that threat would trump economic considerations in the short

term. 43 U.S.C. § 1334(a)(1). When Congress has itself “decided the order of

priorities in a given area,” a court of equity must follow “the balance Congress has

struck” and lacks discretion to strike a different balance. United States v. Oakland

Cannabis Buyers’ Coop., 532 U.S. 483, 497 (2001) (quoting TVA v. Hill, 437 U.S.

153, 194 (1978)). The district court erred by striking its own balance in this case.

CONCLUSION
This Court should grant a stay pending Interior’s appeal of the injunction

and issuance of new suspension decisions.

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Respectfully submitted,

Of Counsel: /s/ Michael T. Gray

HILARY C. TOMPKINS IGNACIA S. MORENO
Solicitor Assistant Attorney General
Department of the Interior
1849 C Street, NW GUILLERMO A. MONTERO
Washington, DC 20240 BRIAN COLLINS
MICHAEL T. GRAY
U.S. Department of Justice
Environment & Natural Res. Div.
Washington, DC 20026
July 6, 2010 (202) 514-5442
90-1-18-13146

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CERTIFICATE OF SERVICE
On July 6, 2010, in accordance with Fifth Circuit Rule 25.2.5, I served
copies of the foregoing reply on all counsel of record by filing the reply using the
Court’s the EC/CMF system.

/s/ Michael T. Gray

MICHAEL T. GRAY
U.S. Department of Justice
Environment & Natural Res. Div.
P.O. Box 23795 (L’Enfant Station)
Washington, DC 20026
(202) 514-5442