Biden handed major legal defeat in attempt to restrict oil, gas drilling in Gulf of Mexico

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A federal court struck down the Biden administration's last-minute restrictions on an upcoming offshore oil and gas lease sale in a ruling late Thursday evening.

Judge James Cain of the Western District of Louisiana granted a preliminary injunction request from plaintiffs — the State of Louisiana, industry association American Petroleum Institute (API) and oil companies Chevron and Shell — to block the Bureau of Ocean Energy Management's (BOEM) restrictions on Lease Sale 261. The lease sale spanning millions of acres across the Gulf of Mexico is slated for next week.

Cain ruled the federal government must proceed with the lease sale by Sept. 30 under its original conditions. As a result of a July settlement with environmental groups, BOEM removed about six million acres from the sale and imposed various restrictions on oil and gas vessels associated with the leases auctioned to protect the Rice’s whale species found in parts of the Gulf of Mexico.

"The court observes that plaintiffs have demonstrated substantial potential costs resulting from the challenged provisions," Cain wrote in his decision. "While the government defendants largely focus on the acreage withdrawal and dynamics of the sale itself, many of plaintiffs’ alleged hardships arise from the vessel restrictions." 

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The Biden administration's actions — rejected by a federal court late Thursday — removed about six million acres of potentially oil-rich leases from an upcoming federal lease sale. (Getty Images)

"Industry plaintiffs have shown a likelihood that these will burden their operations on current and planned leases," the ruling continued. "The resulting costs would not be undone by the court’s entry of a permanent injunction and order of another sale."

Cain also said the Biden administration's actions appeared to be an attempt to "provide scientific justification to a political reassessment of offshore drilling." And he said the administration's process looked "more like a weaponization of the Endangered Species Act than the collaborative, reasoned approach prescribed by the applicable laws and regulations."

In a statement following the ruling Thursday, API Senior Vice President and General Counsel Ryan Meyers said it was a positive step in ensuring energy security.

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"We are pleased that the court has hit the brakes on the Biden Administration’s ill-conceived effort to restrict American development of reliable, lower-carbon energy in the Gulf of Mexico," Meyers said in a statement. 

"Today’s decision will allow Lease Sale 261 to move forward as directed by Congress in the Inflation Reduction Act, removing the unjustified restrictions on vessel traffic imposed by the Department of the Interior and restoring the more than 6 million acres to the sale," he added. "This decision is an important step toward greater certainty for American energy workers, a more robust Gulf Coast economy and a stronger future for U.S. energy security."

Interior Secretary Deb Haaland speaks in Las Vegas on April 14, 2023. The Department of the Interior's Bureau of Ocean Energy Management put the lease sale restrictions forward after a settlement with eco groups. (AP Photo/John Locher, File)

In late August, API and its fellow plaintiffs filed the lawsuit against the Biden administration calling for the court to require the Biden administration to "fulfill its obligations to the American people." According to industry, sales like Lease Sale 261, which is the final federal offshore lease sale scheduled, are vital to ensure long-term oil and gas production.

Overall, BOEM said — following its eco settlement in July — it would offer 12,395 blocks across approximately 67 million acres in multiple regions of the Gulf of Mexico, less than the 13,620 blocks across 73.4 million acres it originally planned to offer. The acreage stripped from the sale included potentially oil-rich tracts located in the middle of the lease area.

Offshore lease sales often span large swaths of federal waters, but earn bids on a fraction of blocks projected by companies to contain more resources and to have a higher return on investment. For example, BOEM auctioned off 73.3 million acres during Lease Sale 259 in March, but received bids worth $263.8 million for 313 tracts spanning 1.6 million acres.

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"The injunction is a necessary and welcome response from the court to an unnecessary decision by the Biden administration," said Erik Milito, the president of the National Ocean Industries Association (NOIA). "The removal of millions of highly prospective acres and the imposition of excessive restrictions stemmed from a voluntary agreement with activist groups that circumvented the law, ignored science, and bypassed public input."

In addition to removing acreage from the sale, BOEM also imposed restrictions on oil and gas vessel traffic associated with the leases set to be auctioned during Lease Sale 261. Among the requirements, BOEM said specially-trained visual observers must be aboard all vessels traversing the area, all ships regardless of size must travel no quicker than 10 knots and vessels should only travel through the area in the daytime.

An oil platform is pictured in the Gulf of Mexico about 200 miles south of Galveston, Texas. Judge James Cain blasted the Biden administration for its restrictions on offshore drilling Thursday. (AP Photo/Jon Fahey, File)

BOEM's restrictions came in response to the administration's settlement last month with a coalition of four environmental groups led by the left-wing Sierra Club.

In a federal stipulated stay agreement filed on July 21, the National Marine Fisheries Service (NMFS) agreed to a number of conditions requested by the groups which, in response, agreed to temporarily pause litigation in the related case. The case dates back nearly three years when, in October 2020, the environmental coalition sued the NMFS for failing to properly assess the oil industry impacts on endangered and threatened marine wildlife in the Gulf of Mexico. 

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The groups pursued the lawsuit after the NMFS coordinated a multiagency consultation studying the effects all federally regulated oil and gas activities would have on species like the Rice's whale listed under the Endangered Species Act in the Gulf of Mexico over the next 50 years. The groups argued in the original complaint that the NMFS' biological opinion resulting from its consultation was not based on the best science.

API and NOIA also argued BOEM's action had contravened the congressional intent of the Inflation Reduction Act, which reinstated multiple lease sales, including Lease Sale 261, after the Biden administration axed them in May 2022. In the sale's record of decision, it is mandated to be region-wide while its environmental analysis didn't acknowledge risks it may pose to the Rice’s whale.