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Biden Gets ‘Strong Prod’ on Climate With Ruling on Gulf Leases

Jan. 28, 2022, 7:52 PM

A federal court ruling canceling 80 million acres of oil and gas leases in the Gulf of Mexico is likely to force the Interior Department to ensure it looks twice at oil drilling’s effect on global climate change, lawyers say.

Judge Rudolph Contreras of the U.S. District Court for the District of Columbia on Thursday vacated a November Gulf of Mexico lease sale because Interior’s Bureau of Ocean Energy Management acted arbitrarily in its environmental review of the lease sale required under the National Environmental Policy Act.

The agency failed to account for the climate effects of overseas burning of fossil fuels from the leases, he said.

Contreras’ ruling broadens the agency’s obligation to assess the climate impacts of oil and gas production, reinforcing the Biden administration’s climate policies, said Ann Navaro, a partner at Bracewell LLP in Washington.

The ruling “gives the administration a strong prod to more carefully examine climate impacts before doing new leasing offshore, and probably onshore as well,” said John Leshy, a professor at the University of California Hastings College of the Law and a former Interior solicitor in the Clinton administration.

Narrow Scope

But the nationwide impact of the ruling is more evolutionary than revolutionary because its scope is narrow, representing a step toward requiring a full assessment of drilling’s emissions rather than a leap, said Murray Feldman, a partner at Holland & Hart LLP in Boise, Idaho.

The Interior Department a year ago tried to pause leasing to address climate change. That decision was tossed out last summer by a Louisiana federal district court, forcing it to move forward with Gulf of Mexico Lease Sale 257 in November. As part of the sale, 33 oil companies spent $192 million buying the drilling rights on the 80 million acres of the Gulf.

The government lost that case, but with climate change a top White House priority, Thursday’s decision “arguably plays right into the Biden administration’s hands,” said Mark Squillace, a natural resources law professor at the University of Colorado Law School.

The Interior Department responded to the ruling on Friday by emphasizing that public lands and waters must be protected amid climate change.

“We have documented serious deficiencies in the federal oil and gas program. Especially in the face of the climate crisis, we need to take the time to make significant and long overdue programmatic reforms,” Communications Director Melissa Schwartz said via email, responding to questions about the future of oil and gas leasing.

A ‘Hard Look’

The ruling is consistent with a trend of federal court rulings beginning during the Trump administration that have affirmed that the Interior Department must take a “hard look” at environmental impacts of energy projects, Feldman said.

In this case, BOEM quickly scheduled a lease sale on the Gulf’s Outer Continental Shelf, or OCS, to comply with U.S. District Court for the Western District of Louisiana Judge Terry Doughty’s June 15 preliminary injunction against Biden’s leasing pause in Louisiana v. Biden.

“A rushed look is not a hard look,” Feldman said.

The bureau was “compelled to proceed” with the lease sale based on a Trump administration environmental analysis and final approval, Schwartz said.

The agency arbitrarily ignored the adverse environmental impact of its leasing decision, Contreras ruled. “Barreling full-steam ahead with blinders on was simply not a reasonable action for BOEM to have taken here,” he wrote.

Incremental Ruling

Conteras’ decision doesn’t set a significant precedent until an appeals court rules— if Interior appeals at all, Feldman said.

“It is based on a very narrow set of facts where the report relied on by BOEM to calculate GHG emissions from the sale made an error in its calculation of foreign emissions based on faulty assumptions,” he said.

“The court emphasizes the importance of climate change issues, and thus implicitly the need to integrate the consideration of those issues into federal agency decision making,” Feldman added.

Contreras’ ruling doesn’t conflict with the Louisiana decision, and is “more carefully reasoned and grounded in applicable law” than Doughty’s ruling, Leshy said.

“I’d think it should hold up on appeal,” he said.

Overseas Impact

The environmental effects of U.S.-produced oil being burned abroad was one of the most important issues the case grappled with, lawyers said.

Contreras ruled that it’s not good enough for agencies to base decisions solely on the domestic greenhouse gas emissions of oil and gas produced in the U.S., said Kyle Tisdel, senior attorney for the Western Environmental Law Center in New Mexico.

If the ruling is allowed to stand, it means that federal NEPA analyses of oil developments won’t be confined to environmental consequences within U.S. borders, he said.

The math on that can be difficult for agencies to grasp, Squillace said.

“One of the difficult issues that agencies confront in dealing with fossil fuel development is determining whether denying that development would simply result in an equivalent level of development in another location—perhaps in a foreign country where emissions might actually be higher,” Squillace said.

In this case, the bureau failed to consider evidence that foreign oil production would fall by as much as 6 billion barrels if the agency avoided the lease sale altogether, Squillace said.

The case is: Friends of the Earth v. Haaland, D.D.C., 1:21-cv-02317, 1/27/22

To contact the reporter on this story: Bobby Magill at bmagill@bloombergindustry.com

To contact the editor responsible for this story: Chuck McCutcheon at cmccutcheon@bloombergindustry.com

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