Jan 31, 2022 - Energy & Environment

The nuanced yet far-reaching oil leasing ruling

Illustration of a scale with the Earth on one end and an oil barrel on the other.

Illustration: Annelise Capossela/Axios

The court decision late last week to halt a large lease sale in the Gulf of Mexico was both nuanced and far-reaching. It is unlikely to lead to the long-term ban of future oil and gas leases both on and offshore, experts tell Axios.

Why it matters: The decision to cancel a $192 million lease sale and send it back to the Interior Department for a new environmental analysis under the National Environmental Policy Act provides the Biden administration with some breathing room to review its leasing policies.

The big picture: Based on the decision, the Interior Department has to review how it takes into account greenhouse gas emissions from oil and gas development, including the effects of lease sales on the global energy market.

  • The Jan. 27 decision by U.S. District Judge Rudolph Contreras in D.C. could have significant repercussions beyond this single lease.
  • But it’s also relatively narrow in scope and consistent with other recent court rulings finding that environmental reviews need to take greenhouse gas emissions into consideration.

Zoom in: Contreras took issue with what he saw as a lack of consistency in the Interior's methods for its environmental review. For instance, the judge noted that it failed to consider the emissions implications of the lease sale on global oil consumption.

  • Jay Austin, a senior attorney with the Environmental Law Institute, a nonpartisan environmental law research group, said the ruling allows Interior to move ahead with a similar lease in the near future.
  • “The court is just invalidating the paperwork and sending it back to the agency. But of course, without the paperwork, you know, no drilling can proceed,” Austin told Axios. “And this does give a chance for a rethink,” he said, referring to oil and gas drilling policies overall.

What's next: "They have to fix this before they can have any Gulf leases at all," said Brettny Hardy, a senior attorney with Earthjustice, an environmental group that was one of the plaintiffs in the case.

  • Christy Goldfuss, who headed the Council on Environmental Quality in the Obama administration and is now at the Center for American Progress, a liberal think tank, said the ruling will give the Interior Department “the space to review the leasing program,” but that it doesn’t signify an end to oil and gas drilling on public lands.
  • “This isn’t going to stop all oil and gas drilling but this will give us more clarity on what the impacts are,” she said.
  • The Interior Department pointed to a statement from Jan. 27 that it is reviewing the decision.
U.S. and Gulf of Mexico crude oil production
Data: U.S. Energy Information Administration; Chart: Thomas Oide/Axios

The Gulf of Mexico is a key source of U.S. oil production but has become a much smaller slice of the pie since the onshore shale boom began over a decade ago.

  • The Gulf now accounts for roughly 15% of U.S. crude production, and support for that development is a key industry on the Gulf Coast.

Go deeper: Crude oil prices could hit $100 a barrel

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