Federal Oil and Gas Leasing in the Courts: Why Recent Losses Could Actually be Good News for the Biden Administration

By Romany Webb

During his campaign for President, Joe Biden promised to “use the full authority of the executive branch to . . . significantly reduce [greenhouse gas] emissions,” including by “banning new oil and gas permitting on public lands and waters.” Consistent with that promise, one week after taking office, President Biden issued Executive Order 14008 directing the Secretary of the Interior to “pause new oil and natural gas leases on public lands or in offshore waters pending completion of a comprehensive review.” Over the following weeks, the Department of the Interior (“DOI”) delayed a number of planned lease sales, prompting court challenges from several states and industry. In one of the cases—State of Louisiana v. Biden—a federal court in Louisiana issued a preliminary injection preventing DOI from implementing the pause. The Biden administration has appealed the decision but, pending resolution of the appeal, has moved forward with leasing in some areas.

Last November, DOI’s Bureau of Ocean Energy Management (“BOEM”) held the largest offshore oil and gas lease sale in U.S. history, putting over eighty million acres in the Gulf of Mexico up for sale (in so-called “Lease Sale 257”). DOI was, however, again reined in by the courts. In January, in Friends of the Earth v. Haaland, a federal district court invalidated the sale on the ground that BOEM had violated the National Environmental Policy Act (“NEPA”). Several other courts have also recently found problems with DOI’s NEPA review of oil and gas leases. While such court losses are generally viewed as setbacks for the government, they may actually be good news for the Biden administration. In several of the cases, the courts’ reasoning suggests that they make take a more favorable view of future administration moves to stop oil and gas leasing on public lands, at least where those moves are justified as a way of avoiding climate or other environmental harms.

There is little doubt that, if President Biden is to deliver on his campaign promise to end oil and gas leasing on public land, he will have to do it without help from Congress. There have been no significant changes to the laws governing public land leasing since the 1980s. While some in Congress have recently expressed support for limited reforms—e.g., increases in the rents and royalties payable under leases—even those proposals have been unsuccessful. The Biden administration will, therefore, be forced to look for ways to end leasing under existing law.

The law governing oil and gas leasing on public lands differ for onshore versus offshore areas. Onshore, DOI’s Bureau of Land Management (“BLM”) oversees leasing pursuant to the Mineral Leasing Act (“MLA”), which authorizes it to lease public land that is “known or believed to contain oil or gas.” Under the MLA, BLM must hold quarterly lease sales in “each State where eligible lands are available.” BLM identifies land that is eligible for leasing in so-called “resource management plans” (“RMPs”). Briefly, RMPs define resource goals for specified tracts of public land, and identify management practices and land uses that are consistent with those goals. Oil and gas leasing can only occur on land that has been designated as suitable therefor in the applicable RMP. Even where land has been so designed, before holding a lease sale, BLM must conduct an environmental review under NEPA, and may also need to complete other reviews or consultations (e.g., under the Endangered Species Act).

The process for leasing offshore land is equally complex. Offshore leasing is overseen by BOEM under the Outer Continental Shelf Lands Act (“OCSLA”). Under the OCSLA, BOEM must develop “an oil and gas lease program,” including a “schedule of proposed lease sales . . . [that BOEM determines] will best meet national energy needs for the five-year period.” BOEM then holds individual lease sales in accordance with the five-year plan. NEPA reviews must be conducted prior to adoption of the five-year plan and again before lease sales are held.

In January 2017, BOEM adopted a five-year leasing plan, under which it proposed to hold ten lease sales in the Gulf of Mexico and one off the coast of Alaska between 2017 and 2022. Seven of the Gulf of Mexico sales were held during the Trump administration. In January 2021, just days before President Trump left office, BOEM approved an eighth sale (Lease Sale 257). Soon after, President Biden took office and issued Executive Order 14008, calling for a “pause” of new oil and gas leases. BOEM then withdrew the approval of Lease Sale 257 “to comply with [the] Executive Order.” BLM also postponed several onshore lease sales, which had been scheduled for March and April 2021.

Fifteen states and one industry group—the Western Energy Alliance—challenged the leasing pause in federal courts in Louisiana, North Dakota, and Wyoming. In June 2021, in Louisiana v. Biden, the U.S. District Court of the Western District of Louisiana issued a nationwide preliminary injunction, preventing BOEM and BLM from implementing the pause.

The court held that the “OCSLA does not grant specific authority to [the] President to pause offshore oil and gas leases.” Thus, according to the court, “there is a substantial likelihood that President Biden exceeded his powers” when he ordered a pause in Executive Order 14008. The court further held that, by implementing the pause, BOEM violated the OCSLA because that Act requires the sale of offshore leases in accordance with the schedule set in an approved five-year plan and, in the court’s view, BOEM cannot cancel scheduled sales “without going through the same procedure by which the five-year plan was developed.” The court similarly held that BLM’s postponement of lease sales violated the MLA because, according to the court, that Act requires BLM “to sell oil and gas leases” and does not give it “authority to pause lease sales.”

In reaching these conclusions, the court arguably misconstrued BOEM and BLM’s authority under the OSCLA and MLA, respectively. As the Biden administration has pointed out on appeal, the Acts give BOEM and BLM significant discretion to determine when and how to conduct lease sales. For example, under section 18 of the OCSLA, BOEM can “revise and reapprove” a five-year leasing plan “at any time.” The section requires “significant” revisions to be adopted “in the same manner as [the plan was] originally developed,” but leaves it to BOEM to determine what is “significant.” BOEM has, since the 1980s, taken the view that delaying or even cancelling planned lease sales does not constitute a “significant” plan revision.

BLM has similarly broad discretion. Section 17 of the MLA provides that public land “may”—not must—be leased for oil and gas development. While the section does require quarterly lease sales in states “where eligible land is available,” again, it is left to BLM to decide when land should be deemed “eligible” and made “available.” As the Biden administration has noted, the MLA “says nothing about the . . . the amount of land to be leased, and certainly does not mandate the leasing of any particular parcel.” On the contrary, as the Supreme Court has held, the MLA gives BLM “discretion to refuse to issue any lease . . . on any given tract of land.”

All of this suggests that the Biden administration could stand a good chance in its appeal of the preliminary injunction. Perhaps more importantly, it also suggest that the Biden administration has authority to go beyond merely pausing lease sales to stopping them.

A number of scholars (including this author) have argued that BLM could, in compliance with the MLA, avoid making lease sales if it designated land as ineligible for leasing (see, for example, the articles here, here, and here). Of course, BLM would have to provide a reasoned explanation for any designations, lest it be found to have acted in an arbitrary and capricious manner in violation of the Administrative Procedure Act. The courts would, almost certainly, be called upon to judge the adequacy of BLM’s explanation. The decision in Louisiana v. Biden, as well other recent cases, suggest that the courts may accept an explanation that is tied to the climate and other environmental harms resulting from leasing.

Notably, in Louisiana v. Biden, the court made clear that it was focused on the legality of BOEM and BLM’s decision to “stop[] or paus[e] lease sale . . . only as a result of Executive Order 14008.” The court emphasized that there is a “huge difference” between that and a decision to “stop or pause a lease sale because the land has become ineligible for a reason such as an environmental issue.” The court suggested, albeit in obiter dicta, that BLM and BOEM had authority to do the latter.

Other courts have similarly held that environmental considerations might justify stopping lease sales. This was most recently recognized by the U.S. District Court for D.C. in Friends of the Earth v. Haaland. That case focused on the adequacy of the environmental review conducted by BOEM prior to Lease Sale 257. The court held that the review was inadequate because BOEM had arbitrarily declined to consider the impact of changes in foreign oil consumption when comparing the downstream greenhouse gas emissions associated with the lease sale versus a “no action” alternative. The court expressly rejected claims that BOEM “did not need to consider . . . emissions at [the time of leasing] because it lacks authority under OSCLA to withhold leasing” on climate or other environmental groups (internal citations omitted). The court noted that agencies are not required to “gather or consider environmental information” if they have “no statutory authority to act on that information.” Importantly, however, the court concluded that “BOEM had the ability to cancel Lease Sale 257 on the ground that it would be too harmful to the environment.”

The relevance of environmental factors to BOEM’s leasing decisions is reflected in multiple sections of the OCSLA. Most notably, section 20 of the OCSLA directs BOEM to “consider available relevant environmental information in making decisions.” Section 20 also makes clear that offshore oil and gas leasing must be balanced “with protection of the human, marine, and coastal environments,” and section 25 authorizes BOEM to require changes to lease operations where doing so “will lead to greater . . . environmental protection.”

Environmental factors are likewise relevant to BLM’s management of onshore leasing. The Federal Land Policy and Management Act requires BLM to manage public land “in a manner that will protect the quality of scientific, scenic, historical, ecological, environmental, air and atmospheric, water resource, and archeological values.” Consistent with that requirement, when overseeing the use of public land, including for oil and gas leasing, BLM must “take[] into account the long term needs of future generations” and avoid “impairment of the . . . environment.” Thus, like BOEM, BLM could refuse to lease public land “on the ground that it would be too harmful to the environment.” Whether the bureaus will exercise that authority to impose broader restrictions on leasing remains to be seen.