Analysis: Biden gets climate victory with legal loss on oil leases in the Gulf of Mexico

January 28 (Reuters) – A U.S. judge’s surprise decision this week to cancel the Biden administration’s first oil auction in the Gulf of Mexico due to its climate change has raised questions about the future of the country’s federal drilling program – and played directly into the president’s hand.

President Joe Biden, a Democrat, made a campaign promise to halt federal oil and gas drilling to combat climate change, and he quickly announced a suspension of all new leases pending a broad review of drilling’s impact on global warming after accession. About 25% of US oil and gas production comes from federal states and waters.

But his administration was later forced into the sale after several drilling states successfully sued in a federal court in Louisiana. They argued that U.S. law requires the federal government to hold auctions on a regular basis to increase energy dependency and generate revenue.

The November auction generated more than $ 190 million, the highest since 2019, on 1.7 million acres sold, drawing bids from Exxon Mobil (XOM.N) and Chevron (CVX.N).

This week’s decision by a District Judge of Columbia, appointed by former President Barack Obama, came after a challenge from the Earthjustice environmental group. The judge left the auction completely, saying the Interior Ministry had not properly accounted for its impact on global warming.

The bid’s interior department had used an environmental impact statement for the auction, which was prepared by the administration of former President Donald Trump, a vociferous climate skeptic. It contained an argument that oil production in the Gulf of Mexico would reduce, not increase, greenhouse gas emissions because production is dirtier elsewhere in the world.

The interior department of the bidet must now do what it originally intended: take a fresh look at the environmental and climate impacts of drilling. It has not yet said whether it will suspend other planned drill auctions until the audit is awaited or how long the review will take.

“CONSIDERING OUR OPPORTUNITIES”

The environmental group that sued praised the court’s decision and hopes the administration will stop the letting. A Louisiana state official, meanwhile, accused Biden of sabotaging the auction. The U.S. drilling industry and its backers are likely to appeal the case in hopes of keeping sales going.

There are hints that Biden’s Home Office knew its oil auction in the Gulf of Mexico was on a weak legal basis.

In the decision-making protocol for the sale, it noted that months after the environmental review was completed, a federal appeals court in 2020 ruled that the government should consider foreign oil consumption in its analysis of how such a sale affects greenhouse gas emissions.

That decision had already effectively blocked US approval of Hilcorp’s Liberty drilling project in Alaska.

But the Home Office sales document said it did not consider it necessary to make any further analysis of how foreign consumption is affecting emissions.

An Interior Ministry official declined to comment.

Ali Zaidi, the White House’s vice national climate adviser, said the court’s decision shows that the US oil leasing program needs to be reformed and that the Department of the Interior should have room to carry out that work.

WildEarth Guardians, an environmental group that has repeatedly sued the federal government over the climate impact of land leasing and won several victories, said this week’s decision raises doubts about whether the administration can continue with other planned sales early this year.

“We have set a bar. This latest verdict I think sets an even stronger bar,” WildEarth Guardian lawyer Jeremy Nichols said. “And it certainly questions whether the Bureau of Land Management will be able to legally justify more onshore oil and gas leasing at this point.”

Last month, the group requested a court order from a federal judge in New Mexico to halt U.S. drilling permit approvals in packages included in three Trump administration leasing sales. The Bureau of Land Management has approved 118 drilling permits on the contested plots.

Scott Lauermann, a spokesman for the oil industry lobby group American Petroleum Institute, said late Thursday that the API reviewed the Gulf of Mexico decision and “is considering our options.”

Louis Murrill, attorney general in Louisiana, who is an intervener in the case, said the court and the Biden administration injured workers.

“It is extremely disappointing that the Biden administration continues to sabotage sales of oil and gas leases. These actions paralyze consumers, destroy jobs and jeopardize our national security,” she said.

Chevron CEO Michael Wirth, whose company was one of the high bidders in sales in the Gulf of Mexico, said Chevron was reviewing the decision.

“We are disappointed because these leases have been successfully implemented in the Gulf of Mexico for decades now and have resulted in us being one of the largest tenants out there with over 240 leases,” he said.

Additional reporting by Sabrina Valle in Houston; Author Richard Valdmanis; Edited by David Gregorio

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