Courts split over legality of federal halt in oil, gas lease sales

A federal court in Wyoming ruled Sept. 2 in favor of the Biden administration's halting of some oil and gas lease sales, a ruling that came just 2 weeks after a court in Louisiana issued a permanent injunction against the administration’s “pause” of quarterly lease sales.

The US District Court for the District of Wyoming agreed with government attorneys that the administration provided an adequate argument for canceling—at least temporarily—lease sales in March in several states, notably Wyoming, Colorado, Utah, and the Dakotas.

The government argued that it needed to do more analysis to satisfy the National Environmental Policy Act (NEPA), in keeping with three recent court rulings. Judge Scott Skavdahl found the administration’s argument persuasive.

Skavdahl rejected other complaints by the oil and gas plaintiffs on a narrowly procedural ground, leaving open the possibility of more lawsuits to challenge the administration’s moratorium on lease sales. The case is Western Energy Alliance v. Biden.

Injunction requires sales

But the Biden administration’s halt to lease sales was hit with a permanent injunction Aug. 18 by the US District Court for the Western District of Louisiana. The halt violated the Mineral Leasing Act and the Outer Continental Shelf Lands Act, which require sales, the court ruled in a case brought by 13 states.

President Biden had no legal authority to order his agencies to violate laws, Judge Terry Doughty added.

The judge tempered his ruling by saying the injunction would not apply in states that did not join in the lawsuit.

The states that joined the suit were Alabama, Alaska, Arkansas, Georgia, Louisiana, Mississippi, Missouri, Montana, Nebraska, Oklahoma, Texas, Utah, and West Virginia. The case is Louisiana v. Biden.

Impact of new law awaited

The split between the courts might prove temporary. The Inflation Reduction Act of 2022, a tax and spending bill signed by Biden Aug. 16, includes provisions intended to push the administration into a resumption of onshore and offshore oil and gas lease sales by legally linking those sales to wind and solar energy development.

That raises the possibility that court fights over the “pause” could be put aside if Interior resumes lease sales to satisfy the new law. But that remains to be seen. For now, Western Energy Alliance, lead plaintiff in the Wyoming case, plans to appeal.

Kathleen Sgamma, president of Western Energy Alliance, told Oil & Gas Journal that the Wyoming decision is unfortunate, because the judge essentially gives the government a “get-out-of-jail-free card” when it comes to NEPA obligations. “Interior can just claim that it isn't done with the NEPA analysis and therefore it doesn't have to hold sales,” she said.

“This ruling conflicts with the decision out of Louisiana and we'll have to see how that all works out between the two courts and on appeal,” she said. “Luckily we have the law the Democrats just passed that requires leasing if the government wants to move forward with federal wind and solar projects.”

Oil, wind connection

Buried deep in the 755-page new law is a requirement that for 10 years the government may not issue a right-of-way (ROW) on federal onshore lands for wind or solar energy development unless an onshore oil and gas lease sale has been held during the 120-day period before the ROW is issued.

In addition, the total acres offered for lease during that year before the ROW is issued must amount to at least 2 million acres or 50% of the acreage for which expressions of interest have been submitted during that year.

For offshore lands, the new law says a lease may not be issued for offshore wind development unless an offshore oil and gas lease sale has been held during the year ending on the date of the issuance of the wind lease. The oil and gas lease sales during that year must total at least 60 million acres.