Marcella Burke and I. Cason Hewgley, King & Spalding
One week after his inauguration, on January 27, 2021, President Biden issued an executive order titled, “Tackling the Climate Crisis at Home and Abroad.” Section 208 of that order, pertaining to “Oil and Natural Gas Development on Public Lands and in Offshore Waters,” directs the Secretary to pause offshore leasing pending what will likely be a comprehensive overhaul of federal permitting and leasing. Offshore permits remain suspended for 60 days under a January 21 order signed by Acting Interior Secretary Scott de la Vega.
Biden’s executive order is unwelcome news for the offshore oil and gas industry and may be an initial step towards a complete ban on offshore leasing. Biden is, after all, on the record saying that there should be “no more drilling on federal lands … including offshore.” Moreover, President Biden’s nominee to lead the Department of the Interior, Representative Deb Haaland, supported the Green New Deal and has publicly proclaimed her goal to stop all oil and gas leasing on federal lands.
These bold moves can expect to see legal challenges. Biden’s executive order can be challenged as inconsistent with the federal statute governing offshore production—the Outer Continental Shelf Lands Act (“OCSLA”), 43 U.S.C. §§ 1331-1356(b) which provides, “The Secretary … shall prepare and periodically revise and maintain an oil and gas leasing program to implement the policies of this subchapter.” Id. § 1344. The Secretary’s ending of offshore leasing entirely would likely violate the statutory duty to “prepare … and maintain an oil and gas leasing program.” Id. To the extent the Secretary’s actions are construed to completely end offshore leasing, it is likely subject to challenge as contrary to law, or an agency action “unlawfully withheld,” under the Administrative Procedure Act (APA). 5 U.S.C. § 706.
OCLSA also provides that “[m]anagement of the outer Continental Shelf shall be conducted in a manner which considers economic, social, and environmental values of the renewable and nonrenewable resources contained in the outer Continental Shelf … .” 43 U.S.C. § 1344. Litigants might argue that a total ban on offshore production ignores the “economic … values” of the industry, which is contrary to OCSLA and the APA’s requirements of reasoned decision-making.
Something other than a complete ban on offshore leasing will likely be more difficult to successfully challenge, in part due to the considerable deference that would be given to the agency’s interpretation of OCSLA under Chevron U.S.A., Inc. v. NRDC, Inc., 467 U.S. 837 (1984). But the agency’s discretion to reduce or limit leasing is not unlimited. See State of Cal. By & Through Brown v. Watt, 668 F.2d 1290, 1317 (D.C. Cir. 1981) (“Although the secretarial discretion we have described is broad, as a result of both the general wording of the statute and the nature of the task Secretary is asked to perform, the Secretary’s discretion is not unreviewable.”).
In particular, OCSLA instructs the Secretary, when establishing a leasing program, “to obtain a proper balance between the potential for environmental damage, the potential for the discovery of oil and gas, and the potential for adverse impact on the coastal zone.” 43 U.S.C. § 1344. A significant reduction of leasing could be challenged for failing to give adequate weight to “the discovery of oil and gas,” among other considerations. Id.
Finally, Acting Secretary de la Vega’s order also temporarily pauses offshore permitting. Regulations currently require drilling permits for not just exploration activities, which is contemplated by OCSLA, see 43 U.S.C. § 1340(d), but also for development and production activities, see 30 C.F.R. § 250.281(a)(1), which is not. Because offshore operators’ general approach has always been just-in-time permits, drilling activity in the Gulf could slow down quickly if this pause is extended.
However, a long-term freeze on permits would also be subject to challenge. If OCSLA requires that leases be granted, the government cannot prevent a lessee’s intended use of the property through a permitting requirement that does not appear in the statute. In addition to violating OCSLA itself, such procedural chicanery could arguably be an unconstitutional taking. See Union Oil Co. of California v. Morton, 512 F.2d 743, 750–51 (9th Cir. 1975) (“[R]efusal to permit installation of that platform now or at any time in the future deprives Union of all benefit from the lease in that particular area.”).
Litigation is already underway. On the same day as Biden’s order, the Western Energy Alliance filed suit in the U.S. District Court for the District of Wyoming, arguing that the order runs contrary to the Mineral Leasing Act, National Environmental Policy Act, and the Federal Lands Policy and Management Act. See W. Energy Alliance v. Biden, No. 0:21-cv-00013. Although it is unclear whether this challenge will be limited to the onshore aspects of the executive order, similar arguments could be raised in a challenge by offshore industry stakeholders. The Biden administration should not expect the offshore energy industry to take these measures lightly nor take for granted the significant legal risk resulting from such sharp changes in offshore energy policy.
The authors
Marcella Burke is an energy regulatory partner at King & Spalding where she leads the Houston office’s Environmental Health and Safety practice. Burke served at the Environmental Protection Agency as Deputy General Counsel. She also served at the Department of Interior as Deputy Solicitor for Energy and Natural Resources, and Senior Counselor to the Assistant Secretary for Land and Minerals Management. Burke also served as Counsel to the Royalty Policy Committee and received appointments with the Regulatory Reform Task Force and as National Environmental Policy Act (NEPA) team lead for all energy project approvals. She specializes in energy and environmental issues and represents companies in a range of regulatory and enforcement matters.
Cason Hewgley is an associate in the Trial and Global Disputes practice and a member of King & Spalding's Appellate, Constitutional and Administrative Law team. His practice focuses on high-stakes legal issues in complex litigation at both the appellate and trial level.
