Home Commodities US judge cancels auction of Gulf of Mexico offshore drilling leases

US judge cancels auction of Gulf of Mexico offshore drilling leases

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A US federal court has overturned a huge offshore oil and gas lease sale on the basis that the auction had failed to take full account of impacts on climate, in a significant victory for environmental campaigners.

Joe Biden’s administration had reluctantly opened 80m acres of drilling leases in the Gulf of Mexico in November — the largest auction in US history. The move drew accusations of contradicting the president’s pledge to lead a “transition” away from oil.

But in a ruling late on Thursday, Rudolph Contreras, a district court judge for the District of Columbia, said the government had incorrectly modelled the emissions that would result from the development of the leases.

Devorah Ancel, senior attorney at the Sierra Club, one of the plaintiffs, said: “The Biden administration’s failure to adequately evaluate the climate impacts of this massive lease sale wasn’t just out of step with their stated commitment to climate action, it was also illegal.”

The ruling puts the government, which has made tackling climate change a priority and had not wanted to proceed with the auction in the first place, in an awkward position. Joe Biden issued an executive order freezing the sale of new leases on federal lands, including the Gulf of Mexico, shortly after taking office. But the Department of the Interior was forced to proceed with an auction for leases in the Gulf after another court ruled that suspension was illegal.

An interior department spokesperson said the government agency was reviewing the decision.

The lease sale generated about $192m in high bids from companies including Chevron, BP, ExxonMobil and Shell for an area covering about 1.7m acres.

Thursday’s ruling complicated the outlook for lease sales in the Gulf, which accounts for about 15 per cent of US oil and 5 per cent of gas production.

“States along the western Gulf have long been the most supportive of offshore drilling,” said Daniel Cohan, a professor of environmental engineering at Rice University. “This ruling means that even there, federal approvals for more drilling will be hard to come by.”

The judge found that the lease sale was not in keeping with the 1970 National Environmental Policy Act, which forces federal agencies to consider environmental impact in the decision-making process.

He agreed with the plaintiffs that the government’s climate modelling made the “erroneous assumption” that not issuing the leases would lead to more emissions than issuing them would. The model assumed more carbon-intensive foreign production would replace domestic production in such a scenario. But the plaintiffs said this failed to take into account resulting changes in foreign demand.

The oil and gas industry reacted to the ruling with dismay.

Erik Milito, president of the National Ocean Industries Association, an industry group, criticised “the continued expansion of the bounds of the National Environmental Policy Act by the judiciary”.

“It will be incumbent on the administration to defend responsible US offshore production and to take the necessary steps, including the development of a new US offshore oil and gas leasing programme, to ensure continued leasing and energy production from the US Gulf of Mexico, for the benefit of all Americans,” Milito said.

A spokesperson for the American Petroleum Institute, the industry’s biggest Washington lobby group, described the decision as “disappointing” and said the organisation was “considering our options”.

But environmental groups said the administration had a responsibility to contemplate the big picture when evaluating the environmental impact of its actions.

“Environmental approvals aren’t just about avoiding oil slicks and local impacts any more,” Cohan said. “Small impacts on global climate add up, and the court is saying those can be reason to block drilling leases, too.”

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