Federal Court Ruling Puts Biden Leasing Freeze in Crosshairs

Copyright © 2023 Energy Intelligence Group All rights reserved. Unauthorized access or electronic forwarding, even for internal use, is prohibited.

A federal court ruling has put the Biden administration’s signature oil and gas policy -- an open-ended freeze on new leasing pending a wholesale review of the federal drilling program -- in jeopardy. Gas industry officials applauded the ruling even if the Interior Department decides to appeal. Mike Moncla, interim president of the Louisiana Oil & Gas Association, said the ruling counts as a “plus" after Louisiana Attorney General Jeff Landry “stood up for us and won in federal court.” Moncla said the producer trade group remains concerned about how evenly the leasing restrictions would be applied across the US. Louisiana, Alabama, Alaska, Arkansas, Georgia, Mississippi, Missouri, Montana, Nebraska, Oklahoma, Texas, Utah and West Virginia signed onto the lawsuit. The US District Court for the Western District of Louisiana on Jun. 15 found a “substantial likelihood” that a suit brought by 13 states would succeed in its argument that Biden’s Jan. 27 executive order directing the Interior Department to “pause” new leasing oversteps federal authority. The ruling purportedly means that lease sales should now resume, but Interior retains some latitude for restricting future leasing if it chooses. In the 44-page opinion, the court held that “by pausing the leasing, the agencies are in effect amending two Congressional statutes” the Outer Continental Shelf Lands Act (OCLSA) and the Mineral Leasing Act (MLA) which they don’t have authority to do. “Neither OCSLA nor MLA gives the Agency Defendants authority to pause lease sales” and both laws mandate continued sales of eligible leases. Under the OCSLA, two lease sales that were included in the 2017 five-year leasing plan approved in the last days of the Obama administration were scrapped under the Biden executive order (NGW Feb.1'21). Both OCSLA and the MLA have requirements regarding lease sales, but OCSLA’s are believed to be more prescriptive and the onshore requirements more open-ended. An Interior spokesman said the department is “reviewing the judge's opinion and will comply with the decision.” An “interim” on the department’s review of the federal oil and gas permitting, leasing, and royalty program is expected out in “early summer,” Interior officials have said. The report will include "initial findings on the state of the federal conventional energy programs, as well as outline next steps and recommendations for the department and Congress to improve stewardship of public lands and waters, create jobs, and build a just and equitable energy future," the spokesman said. Legal Fallout New Mexico has suggested that it could seek a variance from future leasing restrictions, citing its environmental regulations as stricter than federal rules and heavy reliance on revenue from drilling in the gas-rich portion of the Permian that underlies the state. But because the OCS is federal territory in which Texas, Louisiana, Mississippi, and Alabama all share in offshore production, it is harder for those states to make the same argument. Interior Secretary Deb Haaland faced questions from senators during a budget hearing last week about whether the department plans to hold lease sales following the ruling, but gave mostly noncommittal answers, calling it a “fresh decision” that needs further review. The district court put aside its historic hesitance to issue a national injunction, saying it is necessary because lease sales apply on public lands and in offshore waters across the nation. "Uniformity is needed despite this court's reluctance to issue a nationwide injunction," the ruling said. The department may elect to appeal the ruling to the US Court of Appeals for the 5th Circuit, especially given that a second challenge to the leasing freeze is still frozen in a Wyoming district court pending the outcome of the Louisiana case (NGW May3'21). How the court will enforce the injunction is another open question, especially given that that the leasing mandates under the MLA are not as “clear cut” as OCSLA, one Denver-based energy attorney notes. That source adds that a “two track” approach is likely -- appealing the ruling while pursuing a broader fix to the flaws underscored in the ruling, such as a legislative measure to amend the federal leasing laws to allow for a pause. “They could try to stick something in the infrastructure bill” as a vehicle for passage, that source notes. There is also the possibility that Interior could take a more practical tack like it did earlier this year in issuing an order that temporarily allowed only top tier Interior officials to sign off on new permitting or leasing decisions. A ClearView Energy Partners analysis noted that the "Biden administration may hope to rewrite onshore resource management plans and offshore five-year plans for oil and gas leasing to limit the available acreage they would be compelled to lease, and that Secretary Haaland could use Interior's vast statutory authorities to cancel some or all sales in such new, de minimis plans." Bridget DiCosmo, Washington

Wanda Ad #2 (article footer)
Legislation that cleared the House and Senate this week include some of the top permitting reforms urged by the E&P, LNG and pipeline sectors — but it's only a start.
Fri, Jun 2, 2023
Scaling up CCS is both an opportunity and a responsibility for the oil and gas industry, the head of the Global CCS Institute tells Energy Intelligence.
Wed, Jun 7, 2023