U.S. judge voids 80 million acres of offshore oil and gas leases

WASHINGTON (Bloomberg) --The sale of offshore oil and gas leases on more than 80 million acres in the Gulf of Mexico was canceled by a U.S. judge who ordered regulators to take a harder look at the impact on climate change.

U.S. District Judge Rudolph Contreras in Washington vacated the lease sale in a 67-page decision, issued Thursday. The judge found that the Interior Department underestimated the climate impacts of the leases and doing a further analysis wouldn’t overly harm the companies seeking the leases.

“The leases have not become effective and no activity on them is taking place,” the judge wrote. If the leases were to take effect, it would be much harder to cancel them, Contreras said.

The judge also criticized the Interior Department -- writing that it acted “arbitrarily” -- for failing to factor into its assessment the climate effect of the burning of oil and gas from the leases in countries outside the U.S.

The court’s decision throws into doubt the November sale of some 308 tracts spanning 1.7 million acres (688,000 hectares) of the Gulf of Mexico. Thirty-three oil companies spent about $192 million buying the drilling rights in the auction, the second-to-last scheduled under a five-year program drawn up by the Obama administration. And it raises questions about a possible Gulf auction in spring.

In one of his first acts as president, Joe Biden put a temporary halt on all new oil and gas leasing. But last year, a federal judge in Louisiana ordered the Biden administration to move ahead with the leases. Environmental groups then sued to halt the sale.

The Interior Department said in a statement that it was compelled to proceed with the state by the Louisiana court and is reviewing the latest ruling.

“Our public lands and waters must be protected for generations to come,” the department said. “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.”

By vacating Interior’s decision to hold the lease sale, the court has ensured that no harm will result from it, the environmental groups, including Earthjustice and Center for Biological Diversity, said in a statement after the ruling.

Whatever Interior decides to do, it must start with a blank slate on the lease program and consider the full environmental costs associated with auctioning off public waters to the fossil-fuel industry, the groups said. 

“This is a huge victory for our climate, Rice’s whales and Gulf communities,” said Kristen Monsell, oceans legal director at the Center for Biological Diversity. “I’m thrilled the court saw through the Biden administration’s horribly reckless decision to hold the largest oil lease sale in U.S. history without carefully studying the risks.”

The National Ocean Industries Association, which represents offshore oil and gas drillers, called on the Biden administration to pursue the development of more offshore production.

“American investment, jobs, and infrastructure development continue to suffer because of the continued expansion of the bounds of the National Environmental Policy Act by the judiciary,” NOIA President Erik Milito said in a statement. “Uncertainty around the future of the U.S. federal offshore leasing program may only strengthen the geopolitical influence of higher emitting -- and adversarial -- nations, such as Russia.”

Scott Lauermann, a spokesman for the American Petroleum Institute, called the ruling disappointing and said the group is considering its options.

“Offshore energy development plays a critical role in strengthening our nation’s economy and energy security,” Lauermann said in a statement.