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Antsy Industry Awaits Interior Oil Lease Sale After Court Order

July 15, 2021, 8:02 PM

Oil and gas industry-aligned lawyers say the Interior Department could be held in contempt of court if it doesn’t soon comply with a Louisiana federal judge’s order to restart federal oil and gas leasing.

The department paused quarterly oil and gas leasing nationwide in January while it reviewed the leasing program. But Louisiana U.S. District Judge Terry Doughty on June 15 issued a preliminary injunction enjoining and restraining Interior from implementing the pause in Louisiana v. Biden.

Interior Secretary Deb Haaland said Tuesday that the department is complying with Doughty’s order and will follow the law, but she declined to say how exactly it’s doing so.

If Interior doesn’t conduct a quarterly lease sale soon, “the secretary risks a contempt citation from Judge Doughty,” said John Martin, an oil and gas lawyer and Wyoming-based partner at Holland & Hart LLP. “One would expect that those lease sales would have to go forward forthwith.”

Interior Communications Director Melissa Schwartz said Thursday that the department is still reviewing Doughty’s preliminary injunction and declined to comment on whether a lease sale announcement is imminent.

Interior needs to resume quarterly lease sales in most Western states where land is available for leasing to comply with the order. But it doesn’t need to “offer all of the lands” that are available, said Mark Squillace, a natural resources law professor at the University of Colorado-Boulder.

“I’m expecting that we’re going to see both on shore and offshore lease sales soon,” Martin said. “I do believe that Judge Doughty will be watching those closely.”

Drilling Permits Moving Ahead

Some of Interior’s oil and gas activity is moving ahead despite the leasing pause.

Interior’s Bureau of Land Management, which is in charge of onshore oil and gas leasing, is actively issuing drilling permits on existing leases nationwide. The pause applies only to new leases.

The land bureau approved 616 drilling applications for federal leases nationwide in May—418 of which were in New Mexico, according to its most recent data. It has approved a total of 3,994 drilling applications during FY2021.

The bureau’s oil and gas permitting activity shows that its leasing pause hasn’t adversely affected oil and gas production on federal lands, said Bob Abbey, a former land bureau director in the Obama administration.

Counting Down

Others challenging the leasing pause say the clock is ticking on Interior announcing a lease sale.

“Every day that goes by without any movement risks intervention by the judge,” said Kathleen Sgamma, president of the Western Energy Alliance, which represents producers operating on federal lands. The alliance in January filed a separate challenge, Western Energy Alliance v. Biden, in Wyoming federal district court.

The Alliance agreed to halt its own motion for a preliminary injunction after Doughty issued his, so that it can directly argue the full merits of its case with the state of Wyoming, Sgamma said.

“The Wyoming judge is not going to look favorably on the foot dragging from Interior in light of the Louisiana order,” Sgamma said.

Interior is preparing a status report on its review of the leasing program, and Haaland has said it would be released this summer. The agency is reviewing its oil and gas programs in light of the Biden administration’s climate-change plan.

Oil and gas producers are getting impatient.

“The report was supposed to come out weeks ago, but still no plan is forthcoming,” Sgamma said. “The Interior Department seems to be in disarray on not only how to move forward with the lease sales but also with how it’s going to comply with the president’s order on reviewing the federal program.”

Wisdom in Silence

Others say Doughty’s injunction isn’t clear about how Interior should proceed with leasing, so Interior is wise to say little about its strategy.

The injunction implies that Interior needs to resume its pre-existing leasing process, but “there is no court mandate directing how or when that ought to occur,” said Sam Kalen, a natural resources law professor at the University of Wyoming.

Interior is likely trying to figure out if environmental reviews underlying the land bureau’s leasing plans for public lands fully comply with the National Environmental Policy Act, Kalen said.

The Biden administration’s silence seems to be a strategy to show it is complying with the law, Abbey said.

The ongoing delay in leasing is “a wise and prudent action by Secretary Haaland,” he said.

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

To contact the editors responsible for this story: Chuck McCutcheon at cmccutcheon@bloombergindustry.com; Rebecca Baker at rbaker@bloombergindustry.com

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