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Ticking Clock on Oil Leasing Spurs Industry to Mull Litigation

Feb. 8, 2022, 2:30 PM

The oil and gas industry is bracing for the possibility of the Biden administration missing a promised deadline to announce an upcoming oil and gas lease sale—with litigation among the potential responses.

The Interior Department has until Feb. 14 or Feb. 15—depending on how time is officially counted—to schedule the sale before March 31. The March date is Interior’s target for selling the leases, after U.S. District Judge Terry Doughty last summer ordered the administration to end its leasing pause in Louisiana v. Biden.

If the department’s Bureau of Land Management chooses not to hold a lease sale this quarter, “the relief that industry and other seek is a motion to compel them to try and hold these lease sales,” said an oil and gas industry trade group attorney who spoke on condition of anonymity due to the sensitivity of ongoing litigation.

Even if the Interior Department claims to have ended the leasing pause but doesn’t hold a sale this quarter, “it’s another quarter where they would not be in compliance with the Mineral Leasing Act,” the attorney said.

The land bureau announced in August it would sell leases in nine states in February and March. It has yet to issue notices for any of them. Bureau headquarters spokesman Richard Packer said the agency has nothing “to share” yet and declined further comment. Federal regulations require the agency to give 45 days notice prior to a lease sale.

A sale held this quarter would follow several federal court rulings tossing out leases sold without an analysis of what effects oil and gas production from the leases would have on the global climate.

The court rulings—especially one from January canceling 80 million acres of federal leases in the Gulf of Mexico for climate reasons—don’t control the land bureau’s ability to hold a lease sale.

“But it illustrates why BLM needs to take the time to do a credible analysis of climate and other impacts,” said Mike Freeman, an attorney from the environmental advocacy law firm Earthjustice.

‘Hard-Pressed’

The Western Energy Alliance, which represents oil and gas drillers in the West, contends that the land bureau has been obligated under the Mineral Leasing Act to hold lease sales every quarter—including the current one—since the White House paused leasing more then a year ago. The group sued in Western Energy Alliance v. Biden in U.S. District Court for the District of Wyoming last year.

After working on this quarter’s planned lease sale since Doughty ruled, the agency has shown no sign of working on future lease sales, said Kathleen Sgamma, the alliance’s president.

A delay this quarter “indicates they’re going to be hard-pressed to meet their second, third, and fourth-quarter obligations as well,” Sgamma said.

Other legal experts say Interior has wide latitude to go back to the drawing board on the sales to account for their effects on climate change.

“They have the right to postpone it if they’re postponing it to make sure they have the proper NEPA analysis and comply with the law,” Freeman said.

‘Uncharted Procedural Waters’

The Louisiana ruling enjoined the Interior Department from “implementing the pause.” It doesn’t limit the agency’s ability to decide which lands are eligible for leasing by conducting further environmental reviews under the National Environmental Policy Act, said John Leshy, a professor at the University of California Hastings College of the Law.

States that sued to end the pause can easily challenge any Interior claim that it’s delaying leasing to conduct a deeper environmental analysis.

But “I don’t see how they could argue Interior is violating Doughty’s order,” said Leshy, a former Interior solicitor in the Clinton administration.

With the Biden administration appealing Doughty’s ruling in the Federal Circuit Court of Appeals for the Fifth Circuit, “we are entering somewhat uncharted procedural waters,” said Sam Kalen, a natural resources law professor at the University of Wyoming.

“I suspect that we might see both a filing at the district court and the court of appeals,” Kalen said.

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