While many of us have been distracted by the news surrounding Russia’s buildup of personnel and supplies on the Ukraine border and US president Joe Biden’s responses combined with the threat of gas shortages for most European countries, quietly, there has been a very interesting development in US courts.
Last week on January 27, 2022, a federal judge cancelled the biggest sale of US oil and gas leases ever.
The development of the court case is linked to an executive order issued by Biden in January 2021.
The now-cancelled leases, located in the Gulf of Mexico, covered roughly 80 mn acres- an area twice the size of Florida and were put up for auction initially in November 2021.
The January 2022 decision was made by the United States District Court for the District of Columbia with a federal judge invalidating the sale of the leases saying that the administration did not adequately consider the total costs to the world’s climate of the hydrocarbons produced from these leases. At issue was the climate impact analysis conducted under former president Donald Trump, which the plaintiffs, Friends of the Earth et al claimed was critically flawed and insufficient.
This decision has very far-reaching implications but it has an equally interesting background.
Like many leaders who participated in the fall 2021 talks in Glasgow, Biden had long affirmed his interest in slowing the US’s contributions to climate change. In one of his first actions to follow up on his mandate, Biden had signed an executive order in January of 2021 to pause oil and gas leasing on US federal lands and waters. It was one of several executive actions that Biden took to address the climate crisis and as expected, there was pushback.
By March 2021, a coalition of over a dozen states filed a lawsuit challenging the pause, including Louisiana, Arkansas, Mississippi, Texas, Oklahoma, West Virginia, Montana, Nebraska, and Alaska. It’s interesting to note that all the states had republican attorneys general except for one.
Their lawsuit alleged that the Biden administration’s pause on leasing violated the mineral leasing act that required quarterly lease sales. The state of Wyoming also said that the administration was required to conduct an environmental review of the leasing suspension itself under the national environmental policy act before taking any actions.
In its complaint, Wyoming stated, “the real consequences of the action are far from certain and far from uniformly environmentally friendly.”
In essence, the coalition claimed the pause on leasing would cause undue harm to the economies of the states that are reliant on fossil fuel production and harm to the energy industry in general. By June 2021 a federal judge in Louisiana ruled in favor of the coalition of states and issued a nationwide preliminary injunction. The Biden administration appealed that decision but agreed to resume lease sales in the interim.
In November 2021, while attending the start of the COP26 climate conference, Joe Biden was assuring world leaders that the US would fulfill its promise to slash greenhouse gas emissions in half by the end of the decade- referencing his pledge earlier in the year that the US would cut its greenhouse gas emissions 50 to 52% by 2030 compared with 2005 levels.
Just days after his pronouncements, the US Department of the Interior oversaw one of the largest oil and gas lease sales in American history. It’s hard to tell whether it was just bad timing or perhaps a calculated misstep for the administration. Of the 80 mn acres of the Gulf of Mexico put on the auction block, just 1.7 mn acres were bid on by companies like Exxon Mobil. As expected, immediately the lease auction was decried by environmentalists.
“This is an administration that campaigned on dealing with climate change,” said Drew Caputo, attorney at Earthjustice. “That’s why this lease sale is so disappointing because it is the most significant action that the administration will have taken on oil and gas development and it goes in the wrong direction.”
Environmental groups argued that there were many avenues for Biden to stop the sale if he were serious about transitioning away from fossil fuels. Pro-energy advocates asserted that the law was very clear, stating that the Department of the Interior must have and maintain a leasing program and cannot cancel it without a rationale and legal basis.
Although pro-energy advocates claimed a move to stop lease sales would have a devastating impact on the US oil and gas industry, environmental groups countered quoting conservation-based nonprofit reports saying that a pause on leasing would have “negligible” economic impacts in the short term.
As expected, environmental groups vowed to push on. Randi Spivak, public lands program director at the Center for Biological Diversity said, “The judge’s order turns a blind eye to runaway climate pollution that’s devastating our planet. We’ll keep fighting against the fossil fuel industry and the politicians that are bought by them.”
Earthjustice had proactively filed a lawsuit on behalf of Healthy Gulf, the Center for Biological Diversity, the Sierra Club, and Friends of the Earth on August 31, 2021, against the Secretary of the Interior and the Bureau of Ocean Energy Management regarding the notice of lease sale (#257).
They pressed on with the August lawsuit with an argument that the 2017 environmental analysis which the Biden administration relied on to hold the sale was fatally flawed and claimed it was illegal and based on a previously debunked environmental analysis.
By January 27, 2022, they succeeded in overturning the lease sale. The DC District Court invalidated the Department of the Interior’s decision to offer 80 mn acres in the Gulf of Mexico for oil and gas leasing, holding that the department had failed to accurately disclose and consider the greenhouse gas emissions that would result from the lease sale -violating bedrock environmental law.
In addition, Earthjustice claims on their website, that the DC District Court decision holds the Department of the Interior accountable for grossly underestimating the climate impacts and risks to Gulf communities as they reaffirmed their promise to “ keep fighting against the fossil fuel industry.”
This leaves the US Department of the Interior in an awkward position – delaying the sale because they are compelled to do a new time-consuming analysis if they desire to put the same section of the Gulf of Mexico up in a new lease sale.
“The cancellation exacerbates three factors that many low-carbon policy proponents are blind to,” says Tony Cioni, international energy analyst and co-founder of CITO Energy Group.
“The first is that some hydrocarbons (natural gas is a prime example) will be required for the next 30-50 years – you can’t rationally just cancel it all in the proposed timeliness. The second is that the lack of new reserves and hydrocarbon investment is already leading to inflation across entire economies in the West – which will hit the lower-income citizens the hardest. The third is the loss of Western geopolitical independence from countries like Russia and Saudi, who can ease the first two burdens. It’s a recipe for economic and political erosion in my view, and even has links to things like the Ukrainian crisis.”
It seems surreal, that this endless legal fight and delay of energy development is occurring at a time of great energy insecurity.
As Europe strains under extreme shortage of gas supply, and Biden meets with Qatari officials to discuss the security of natural gas supply, America is fighting at home to produce less.
As Americans face increasing costs not only of fuel like gasoline and natural gas but also of other products due to runaway oil and natural gas prices, they will most surely see even higher oil and gas commodity prices. Industry insiders are predicting prices rising to well over $100 a barrel for oil while interest groups relentlessly block the development of domestic production which could meet domestic and global needs.
It is perhaps Joe Biden’s best moment to become the statesman he aspires to be and broker a peace at home in the environmental war against hydrocarbons.
Maureen McCall is an energy professional who writes on issues affecting the energy industry