Federal Judge Martin Feldman of the Eastern District of Louisiana issued a decision on October 19, 2010 overturning the Department of Interior’s (DOI) notice to lessees No. 2010-05 (“NTL-05″). Ensco Offshore Co v. Salazar, No. 10-1941 (E.D. La. filed Oct. 19, 2010). The Court determined that, in issuing NTL-05, the government failed to comply with the requisite procedural requirements and, therefore, ruled that NTL-05 has no legal force or effect. However, given that DOI has already codified most of the requirements of NTL-05 in an interim rule, the Court’s ruling may have little actual impact.

NTL-05 was issued on June 8, 2010, and imposed new requirements on all federal oil and gas lessees and operators located in shallow or deep water in the Outer Continental Shelf (OCS). These requirements ranged from submitting a certification of compliance with safety regulations to conducting additional inspection, maintenance and testing. DOI based the requirements in NTL-05 on drilling reform recommendations made in a May 27, 2010 report from DOI to the President.

Ensco Offshore Co., a company that provides offshore drilling and related services, challenged DOI’s issuance of NTL-05 by filing a lawsuit on July 9, 2010. Both Ensco and DOI agreed that NTL-05 constitutes a rule. The Court was faced with deciding whether the rule was an interpretive or substantive one. Interpretive rules are usually used to clarify terms, statutory duties, or statutory language. In contrast, substantive rules impose new or different requirements or duties. If NTL-05 was a substantive rule, under the Administrative Procedure Act, 5 U.S.C. § 553 (“APA”), DOI would have needed to propose the requirements as a rule and to provide the public an opportunity for notice and comment.

Because NTL-05 mandates that lessees and operators comply with new certification requirements and the like, the Court determined that NTL-05 is a substantive rule. Therefore, under the APA, DOI was required under law to subject the requirements provided in NTL-05 to public notice and comment. Since DOI did not comply with this procedural requirement, the Court declared that NTL-05 has “no lawful force or effect.”

That said, it appears that DOI may already have addressed the problems identified by the Court. On October 14, BOEMRE published its interim final rule entitled “Increased Safety Measures for Energy Development on the Outer Continental Shelf.” The interim final rule implements various safety measures recommended in Secretary Salazar’s May 27 report to the President and, with very limited exceptions, codifies the requirements of NTL-05. This subsequent regulatory action, conducted according to DOI’s emergency rulemaking authority, may in effect limit the significance of the Court’s ruling. The interim final rule was published in the Federal Register on October 14 and the public may submit comments on it until December 13, 2010.