Bloomberg Law
Aug. 11, 2021, 2:23 PM

Industry Warns UN Report Can’t Defend Interior Leasing ‘Pause’

Bobby Magill
Bobby Magill

If the Biden administration cites this week’s United Nations climate report as evidence to support keeping federal oil and gas leasing on pause, it may not have the law on its side, industry representatives say.

“Until they are able to convince a majority of lawmakers to change the law, they are still bound by the law,” including the Mineral Leasing Act, said Kathleen Sgamma, president of the Western Energy Alliance, which represents oil and gas producers operating on federal land.

The U.N. report, published Monday by the Intergovernmental Panel on Climate Change and ratified by 195 U.N. member countries, represents the scientific consensus that climate change is unequivocally caused by human greenhouse gas emissions, primarily from burning fossil fuels.

It says that without “immediate, rapid and large-scale reductions” in greenhouse gas emissions, the globe can’t avoid catastrophic global warming.

But the report is insufficient to suspend the requirement under the Mineral Leasing Act for Interior to hold quarterly oil and gas lease sales, said John C. Martin, a partner at Holland & Hart LLP in Wyoming.

The White House ordered the Interior Department in January to “pause” federal oil and gas leasing to allow for a review of the federal leasing program in the context of climate change. A Louisiana federal judge in June said the pause violates the Administrative Procedure Act because Interior offered no reason for canceling 2021 lease sales, and he issued a preliminary injunction against it.

Interior is expected to issue an interim report on the future of the leasing program soon. Interior Secretary Deb Haaland said in July that the agency is complying with the injunction, but the pause remains in effect. When asked how the IPCC’s findings will factor into Interior’s decisions about oil and gas leasing, department spokesman Tyler Cherry declined to comment.

NEPA Review Next?

The agency’s next step is widely expected to be a formal environmental review of the leasing program under the National Environmental Policy Act. The IPCC’s report is expected to play a major role in what could be a years-long process involving public comment and environmental analysis.

The report “would be bigger than a data point,” said Emily Schilling, a partner at Holland & Hart LLP in Salt Lake City. “It would be part of the narrative that would drive the decision-making.”

But including the IPCC report in a NEPA process to substantiate a proposal to shut down leasing won’t be enough for the administration to succeed, Sgamma said.

“NEPA also requires a look at all best available information,” Sgamma said. “It is not the only information that must be considered in the type of programmatic analysis” that Interior wants to do to comply with the Biden administration’s order to review the leasing program.

Shape Unclear

The eventual shape of the NEPA process isn’t yet clear, said Ann Navaro, a partner at Bracewell LLP in Washington.

“It may be that they conduct NEPA reviews, where required, for component actions such as rulemakings and revised resource management plans that govern what onshore public lands are considered available for oil and gas leasing,” Navaro said.

Interior will likely propose a new leasing rule and prepare a draft environmental impact statement on the leasing program, which will take some time, said Mark Squillace, a natural resources law professor at the University of Colorado Law School.

The public will benefit from that NEPA process because the bureau will need to lay out a range of alternatives for the leasing program, he said.

“If they don’t prepare a NEPA document of some kind they will likely get sued on those grounds and I would hate to see leasing reform stalled due to procedural errors,” Squillace said.

Deference to Agencies

If an Interior decision based on the IPCC report is challenged in court, the report may be strong evidence in a defense of the decision because judges show deference to agency analysis when it involves scientific or technical review, Navaro said.

“This is because agency action can only be overturned if the action is ‘arbitrary and capricious or otherwise not in accordance with the law,’ and because agencies are entitled to rely on their own experts,” Navaro said. “Courts aren’t going to adjudicate a technical dispute.”

But courts also would consider whether it was reasonable for Interior or other agencies to rely on the IPCC report and whether they fully considered other important factors in their decision-making, such as public comment, Navaro said.

The urgency of the IPCC’s report puts Interior on solid ground to curb fossil fuel production on federal lands and waters in many different ways, said Squillace.

“I expect they will announce increased royalty rates and rental fees, and I would like to see Interior adopt more stringent requirements on development in their drilling permits, including things like methane capture,” Squillace said.

However, decades of urgent IPCC reports have so far yielded little actual curtailment of oil and gas leasing, said Michael McKenna, a GOP energy strategist and former energy adviser to the White House during the Trump administration.

“Those who advocate for transformative change seem unwilling to ask themselves why no one seems to care about their message despite the steady drumbeat,” McKenna said.

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