Federal judge cites climate effect in canceling Gulf of Mexico oil and gas lease sale

A federal judge invalidated leases to drill for oil and gas in a broad swath of the Gulf of Mexico, telling the Biden administration to weigh climate impacts before allowing development.

The ruling late Thursday handed a victory to environmental groups that had challenged the Interior Department’s move to comply with a separate court order and reinstate leasing for oil and gas development.

U.S. District Judge Rudolph Contreras of the District of Columbia’s ruling canceled the lease sale a reluctant Biden administration held in November. That sale came after a federal judge in Louisiana sided with the state and Republican attorneys general from 12 other states and ordered the lease sales to move forward.

But the lease sales were based on a botched environmental analysis, Contreras ruled. The Bureau of Ocean Energy Management, an agency within Interior that conducts lease sales for offshore energy development, failed to consider the leases’ effect on foreign oil consumption, the judge wrote.

Biden climate goal

The ruling fit into President Joe Biden’s previously thwarted goal to curb domestic fossil fuel leases in the name of climate action.

Shortly after taking office in 2021, Biden issued an executive order pausing new oil and gas leases for federal lands and waters as Interior reviewed how the leasing program could be reshaped to fit the administration’s climate goals.

In June, U.S. District Judge Terry Doughty of Louisiana found the pause violated federal law that required quarterly lease sales. The administration then moved forward with lease sales under a five-year plan put in place by the Bureau of Ocean Energy Management during President Donald Trump’s administration. 

The November lease sale was the only one held in 2021. Of 80 million acres offered for leases, 1.7 million acres received bids, making it the largest lease sale in U.S. history.

Environmental groups Friends of the Earth, Healthy Gulf, Sierra Club and Center for Biological Diversity challenged the sale. Contreras ruled in their favor Thursday.

The Interior Department, the nominal defendants in the suit, did not appear overly dismayed by the decision.

In a statement, Interior spokeswoman Melissa Schwartz said the June decision compelled the department to hold the lease sale, despite the administration’s reservations about the federal oil and gas leasing program.

“We have documented serious deficiencies in the federal oil and gas program,” she wrote. “Especially in the face of the climate crisis, we need to take the time to make significant and long overdue programmatic reforms. Our work will be guided by the law, science and sound policy. That’s why the President called for a pause on leasing in his Executive Order, and why we are appealing the decision enjoining implementation of the pause.”

Flawed Trump-era analysis 

The 2017 BOEM analysis found that greenhouse gas emissions would slightly increase if no lease sales were held, as demand for oil would be filled by foreign sources that created more emissions than Gulf drilling.

The BOEM model also projected a decrease of billions of barrels of oil consumption overseas if the leases were not issued — but the agency did not consider that decrease in its analysis of the environmental costs of issuing the leases.

“The problem is that considering foreign consumption likely does change the bottom line,” Contreras wrote. 

The order appears to conflict with the one issued by Doughty last year. Doughty ordered the administration to lift its pause on issuing oil and gas leases, saying the law governing lease sales did not give the executive branch authority to stop holding them.

Legal experts said Friday the more recent decision handled a different legal issue — the validity of BOEM’s environmental analysis. To comply with the two rulings, the agency must both fix the environmental analysis and hold lease sales.

Keith Hall, the director of the energy law center at the Louisiana State University School of Law, said in an interview that because BOEM had already done the projection, it may be relatively simple for the agency to update its environmental analysis.

“I think [industry] would be arguing, ‘Well look, you already had a kind of a first-pass estimate at the impact,’” he said. “All you got to do is now put that into it into an emissions calculation.”

Because the ruling only applied to an offshore lease sale governed by BOEM, it would not affect onshore leases conducted by the Bureau of Land Management.

Industry, key Democrat react

Frank Macchiarola, the senior vice president for economics and regulatory affairs at the American Petroleum Institute, an industry group that joined the lawsuit as a defendant, said in a statement the ruling would push production to overseas suppliers with lower environmental standards. 

“This ruling is yet another example of the increasing policy and legal uncertainty that is jeopardizing the future of American energy leadership and leading to greater dependence on foreign energy sources that result in higher emissions,” he said. 

House Natural Resources Chairman Raúl Grijalva, an Arizona Democrat, said in a Thursday statement that Contreras was right to require a stricter environmental consideration.

“These leases were a climate disaster waiting to happen,” he said. “This decision is a welcome chance to reset our federal fossil fuel leasing policies and limit carbon emissions while there is still time to prevent the most disastrous outcomes of climate change.”