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Temporary Ban on New Federal Oil and Gas Leases Under Fire

First Quarter of Biden Presidency Impactful for Energy Industry

On January 27, 2021, President Biden signed Executive Order 14008 ("E.O. 14008"), implementing a temporary pause on the auction of new oil and gas leases on federal land and water while the President's administration reviews the program. The review will consider potential climate and other impacts of current federal oil and gas permitting/leasing practices and whether to take action to account for corresponding climate costs. E.O. 14008 will not affect existing leases or drilling permits for valid, existing leases. In addition, E.O. 14008 will not restrict energy activities on private or state lands.

The Bureau of Land Management ("BLM") and the Bureau of Ocean Energy Management ("BOEM") promptly took action to implement E.O. 14008. On February 4, 2021, BOEM cancelled a public comment period for the Draft Environmental Impact Statement being prepared for the proposed lease sale of acreage in Cook Inlet, Alaska ("Proposed Lease Sale 258"). On February 18, 2021, BOEM rescinded the planned lease sale of acreage within the Gulf of Mexico ("Lease Sale 257"), which was scheduled to take place on March 17, 2021.

In addition, BLM issued several notices during January, February, and March, postponing first quarter lease sales previously scheduled to be held during March and April for federal lands located in Colorado, North Dakota, Montana, Nevada, New Mexico, Oklahoma, South Dakota, and Utah, as well as states located east of the Mississippi River. BLM also issued notice during April that no second quarter lease sale will be held for certain states (collectively, "Postponed Sales").

States Challenge Postponed Sales

On March 24, 2021, Alabama, Alaska, Arkansas, Louisiana, Georgia, Mississippi, Missouri, Montana, Nebraska, Oklahoma, Texas, Utah, and West Virginia (collectively, the "Plaintiff States"), filed suit in the Western District of Louisiana against President Biden and various officials within the Department of the Interior ("DOI"), challenging the Postponed Sales. The Plaintiff States allege that E.O. 14008 and the Postponed Sales contravene the statutory mandates of the Outer Continental Shelf Lands Act ("OCSLA") and the Mineral Leasing Act ("MLA"). They allege that, under OCSLA, the DOI Secretary must conduct lease sales in accordance with the five-year leasing program in effect at the time. The Plaintiff States further allege that, under the MLA, the DOI Secretary must auction federal oil and gas leases at least quarterly in each state where eligible lands are available. They seek declaratory and injunctive relief, stating that the Postponed Sales were delayed without sufficient rationale because E.O. 14008 did not provide any basis to deviate from the statutory mandates of OCSLA or the MLA. Accordingly, Plaintiff States allege that the Postponed Sales are arbitrary and capricious under the Administrative Procedure Act ("APA") and must be vacated.

On April 27, 2021, several environmental groups filed a joint motion to intervene and, on the same day, the Biden Administration filed a motion to transfer the case to the District of Wyoming, where a similar suit was filed by the State of Wyoming less than one hour before the Plaintiff States' lawsuit in Louisiana and asserts similar claims. The Plaintiff States opposed both motions on May 4, 2021.

This is not the first time a federal moratorium on oil and gas activities has been challenged under the APA. For example, after the Obama Administration implemented a six-month moratorium on offshore drilling operations after the Deepwater Horizon incident, several companies filed suit in the Eastern District of Louisiana and obtained an injunction under the APA. While the case was never resolved due to the Obama Administration lifting the moratorium, it demonstrates that litigants can achieve at least limited success using the APA to challenge government action in this area. But litigants also face difficulties pursuing relief under the APA, including limited or no discovery, judicial deference to agency action, and establishing final agency action that is properly subject to review. As the Biden Administration digs in and prepares its initial responses to the lawsuits, the energy industry will be closely watching these cases.

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