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Vol. 27, No.20 Week of May 15, 2022
Providing coverage of Alaska and northern Canada's oil and gas industry

Lease sale uproar

Fed confirms no Cook Inlet sale, appeals panel hears arguments

Kay Cashman

Petroleum News

The Interior Department confirmed Wednesday, May 11, that it will not hold three offshore oil and gas lease sales - one in Alaska’s Cook Inlet and two in the Gulf of Mexico.

The confirmation from Interior comes at a time when U.S. gasoline prices have reached record highs.

That said, a near halt in oil and gas leasing on and offshore by the Biden administration is old news.

As reported in the May 1 issue of Petroleum News, Interior’s Bureau of Ocean Energy Management has been conducting offshore federal lease sales under its 2017-2022 program. Under the 2017-2022 program BOEM had planned a Cook Inlet lease sale for October 2021.

However, in early February 2021 the Biden administration, as part of its strategy to pause federal oil and gas leasing, cancelled the public comment process for the lease sale’s Environmental Impact Statement, or EIS.

Subsequently, in response to the June 2021 injunction by the Louisiana District court, BOEM announced that it would continue with preparations for a Cook Inlet lease sale. On Dec. 13 the agency closed the public comment period for a draft EIS for the lease sale. BOEM has not yet announced a timeframe for conducting the sale.

Nor has the agency announced its next five-year lease sale program.

The current five-year leasing program will lapse at the end of June. Interior cannot hold any new oil and gas lease sales until it has completed a replacement plan. But though the federal government is legally obligated to prepare one, the administration has not released its proposal - nor have officials said when it might be coming.

Lack of industry interest

Interior also doesn’t have enough time left to hold the three remaining offshore oil and gas lease sales scheduled under the current plan.

In a statement shared first with CBS News, the Department of the Interior cited a “lack of industry interest in leasing in the area” for the decision to “not move forward” with the Cook Inlet lease sale.

Steve Milloy, a former Trump-Pence EPA transition member and founder of JunkScience.com, told FOX Business on May 11: “I blame Biden for all lack of production. He has scared away investment.”

In Alaska, Milloy said, “the greens scared off virtually everyone. It’s expensive to explore and drill, and the greens made it pretty clear, they were going to make it even more difficult.”

Frank Macchiarola, senior vice president of policy, economics and regulatory affairs at the American Petroleum Institute, told FOX Business in a statement: “Unfortunately, this is becoming a pattern. The administration talks about the need for more supply and acts to restrict it. As geopolitical volatility and global energy prices continue to rise, we again urge the administration to end the uncertainty and immediately act on a new five-year program for federal offshore leasing.”

Court action

On May 10 a federal attorney argued in front of a 5th U.S. Circuit Court of Appeals panel that Biden legally called for suspending oil and gas lease sales while considering their effect on climate change.

The current offshore lease sale plan states specifically that the U.S. Secretary of the Interior “may reduce or cancel lease offerings on account of climate change,” Department of Justice attorney Andrew B. Bernie told the panel.

Land-based sales “were not postponed by the executive order. They were postponed because of a need to comply with NEPA” - the National Environmental Policy Act, he said.

Arguing for 13 states that challenged Biden’s January 2021 order, Louisiana Deputy Solicitor General Joseph Scott St. John said laws passed in response to the 1970s oil crisis require lease sales.

The Biden administration failed to “grapple with prior analyses” of the planned sales to give a valid reason for postponing or canceling them, he said.

Judges James L. Dennis, Patrick E. Higginbotham and James E. Graves Jr. did not indicate when they will rule.

Louisiana is joined in the lawsuit by Alabama, Alaska, Arkansas, Georgia, Mississippi, Missouri, Montana, Nebraska, Oklahoma, Texas, Utah and West Virginia.

The state challenge to Biden’s order has not yet gone to trial but a federal judge blocked the order in a preliminary injunction, writing that since the laws did not state the president could suspend oil lease sales, only Congress could do so.

Bernie said, “It is routine for individual lease sales or proposed lease sales not to be held for various reasons.” The federal brief said nine five-year leasing plans have been approved and all had fewer sales than originally scheduled.

“We don’t know why prior lease sales were withdrawn,” St. John responded. “Presumably there was some kind of rationale. That was not the case here.”

U.S. District Judge Terry Doughty found that states which challenged the order were likely to prove the Interior Department violated the Administrative Policy Act by acting without “any rational explanation.”

Some sales in June

After Doughty ruled for the states, the Interior Department held an offshore lease sale, which a federal judge in Washington canceled. Four onshore lease sales are scheduled in June - in Nevada on June 14; New Mexico, Oklahoma and Colorado on June 16; Wyoming on June 22 and Utah, Montana and North Dakota on June 28.

However, the administration scaled back the amount of land originally on offer and raised royalty rates 50% from 12.5% to 18.75%. That’s the amount usually charged for desirable deep water offshore leases, while those in less than 656 feet (200 meters) of water are charged the 12.5% minimum.

Biden has come under pressure to increase U.S. crude production as fuel prices spike as Russian oil is taken off the market. From within his own party, the president faces calls to do more to curb emissions from fossil fuels.

- Associated Press contributed to this story



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