Judge rules against sale of Gulf of Mexico oil drilling rights

(Bloomberg) – A federal district judge on Thursday ruled against a Biden administration sale of oil and gas drilling rights in the Gulf of Mexico, faulting the government with failing to sufficiently analyze its possible effects on the climate and endangered whales. 

However, U.S. District Judge Amit P. Mehta in Washington left open the question of what to do about the two-year-old sale, instead directing additional arguments on the best remedy. Options could include invalidating leases sold in the auction or ordering those contracts be revised to include more limitations.

The sale, which Congress mandated as part of the Inflation Reduction Act, made 13,600 blocks spanning approximately 73.3 million acres available. Ultimately, 32 companies, including Chevron USA, Inc., participated in that March 29, 2023 auction, paying the government $250.6 million for 299 leases.  

But Mehta said the Interior Department violated the National Environmental Policy Act by insufficiently analyzing the auction. Among the problems, Mehta found, was that Interior’s Bureau of Ocean Energy Management didn’t fully consider potential energy market changes in its analysis of the potential greenhouse gas emissions that would result from activity on new oil and gas leases. 

Mehta also said the bureau had made a “glaring omission” in not incorporating another agency’s assessment about the habitat and location of the endangered Rice’s whale. The bureau focused its impact analysis on the species’ core habitat, even though there was “credible evidence” it could be persistently found outside the area, the judge said. 

Although the Inflation Reduction Act required the sale, Mehta emphasized that the Interior Department still retained discretion to set terms and impose limits on available acreage. 

The challenge was brought by six environmental organizations. George Torgun, a lawyer with Earthjustice, called the ruling “a welcome moment of justice for the Gulf ecosystem and frontline communities who have been burdened by fossil fuel development in the region for decades.”

The Interior Department, which is expected to open new oil and gas leasing opportunities under President Donald Trump, said in an emailed statement its policy was not to comment on litigation. 

Nevertheless, according to the statement, the Interior Department maintains an “unwavering commitment to conserving and managing the nation’s natural and cultural resources, upholding tribal trust responsibilities and overseeing public lands and waters for the benefit of all Americans, while prioritizing fiscal responsibility for the American people.”