Thwarting business through uncertainty

Mario Loyola:

The same week that the burning Deepwater Horizon rig collapsed through its pontoons and sank to the bottom of the sea, Fred Hiatt of the Washington Post admiringly observed that Obama accomplishes “usually by executive action” those priorities that he can’t achieve through the normal political process. Hiatt didn’t know the half of it.

America’s economic strength has always depended upon a healthy legal climate for business activity — an environment in which rights and obligations are legally enforceable. Obama has discovered that, using federal regulatory action to create uncertainty and prohibitive risk for private commerce, he has almost unchecked power to advance his green-energy agenda by shutting down entire sectors of the U.S. economy. And there isn’t anything that any court or any legislature can do about it — at least, not fast enough to make a difference.

On May 28, Obama declared a sweeping moratorium on existing and future offshore drilling below the depth of 500 feet — in other words, the vast majority of all new offshore oil development in the United States. Just a few weeks later, a federal district court in Louisiana struck down the moratorium, calling it “arbitrary and capricious.” Then the government’s interlocutory appeal sped to the Fifth Circuit, where it was summarily dismissed. There was simply no logical justification for a moratorium on offshore drilling that didn’t take into account each rig’s compliance with safety measures or how close it might be to a high-pressure oil and gas reservoir. As far as the judicial branch of the federal government was concerned, Obama had no right to declare such a sweeping moratorium.

The administration promptly issued a new decree, replacing the ban on drilling below 500 feet with a ban on drilling from floating platforms. But as the government’s own lawyers had explained to the Fifth Circuit panel, the purpose of the 500-foot threshold was to ban drilling by the most common floating platforms — which are used for almost all projects at depths greater than 300 feet. If anything, the change of focus from the depth to the type of drilling apparatus only expanded the moratorium.

Meanwhile, in the Gulf of Mexico, not a single stopped rig has started drilling again....

There is more.

Obama is achieving his objective through uncertainty. The cost of operation is too high to risk doing so in this environment. When you consider that the stated objective for the moratorium was to assure that in the event of another blowout, the industry had a way to deal with it, and now having capped the original blowout what is the reason for the continuing moratorium? Also check the post below where those dealing with the spill are having trouble finding oil to clean up at this point.


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