Biden Administration Resumes Offshore Leasing After Court Order

offshore oil and gas
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Published Aug 18, 2021 7:02 PM by The Maritime Executive

The U.S. Department of the Interior has announced that it will comply with a court order compelling it to restart offshore and onshore oil and gas lease sales. The agency halted its federal lands leasing program in April pending a top-to-bottom review, but after an industry lawsuit contending that lease auctions are required by law, a federal judge ordered that the department must restart the auction process. DOI is appealing the judge's order, citing the climate impact of fossil fuel extraction on federal lands, but the agency said that leasing will resume while the appeal is pending.

"Federal onshore and offshore oil and gas leasing programs are responsible for significant greenhouse gas emissions and growing climate and community impacts," said the department in a statement. "Yet the current programs fail to adequately incorporate consideration of climate impacts into leasing decisions or reflect the social costs of greenhouse gas emissions including, for example, in royalty rates."

While the appeal moves forward, lease sales will resume, though the department reserved the right to "conduct leasing in a manner that takes into account the program's many deficiencies." It is compiling an internal review of the lease sale program and plans to propose changes to bring it in line with the Biden administration's climate targets, which call for a nationwide greenhouse gas emissions cut of 50 percent by the end of the decade.

DOI also cited a long series of government watchdog reports that suggest that the federal government could be earning much more from leasing drilling rights to private companies. In 2019, the Government Accountability Office assessed that Interior's Bureau of Ocean Energy Management "systematically underestimates" the value of offshore oil and gas leases, costing the government hundreds of millions of dollars in lost revenue. Management of federal oil and gas resources is one of the areas on GAO's "high risk list" due to persistent shortfalls in human capital, oversight capability and revenue-collecting capacity. 

Despite its concerns, DOI promised that some amount of lease activity will resume while the court case moves forward, and the offshore oil and gas industry welcomed the announcement. “It is past time for U.S. offshore leasing to resume,” said Erik Milito, head of the National Ocean Industries Association, speaking to Bloomberg. “The administration should follow the plain letter of the law, and support high paying jobs and climate and emissions progress.”