Early Drill-Down on Biden Administration Oil and Gas Policy

February 1, 2021

As expected, President Biden’s first days in office were marked by a number of executive orders and other actions aimed at unwinding Trump-era environmental policies. For example, President Biden rejoined the Paris Agreement, revoked the Keystone XL oil pipeline’s federal permit and called for an immediate review of agency actions taken during the Trump administration. (See Biden’s Jan. 20, 2021, Executive Order No. 13990, 86 Fed. Reg. 7037, Executive Order on Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis.)

President Biden also ordered the secretary of the Department of the Interior to place a temporary moratorium on all activities relating to oil and gas leases on federal lands and waters. President Biden did so in light of alleged legal deficiencies underlying the Coastal Plain Oil and Gas Leasing Program, including the inadequacy of the environmental review required by the National Environmental Policy Act.

Acting Secretary of the Interior Scott de la Vega quickly complied with the new executive order. Indeed, on Jan. 20, 2021, Secretary Vega signed Order No. 3395, suspending the issuance of all new drilling permits and leasing on federal land, unless approved by the Interior Department’s senior leadership. More specifically, Order No. 3395 prohibits the department from issuing “any onshore or offshore fossil fuel authorization, including but not limited to a lease, amendment to a lease, affirmative extension of a lease, contract, or other agreement, or permit to drill” for 60 days. Consistent with President Biden’s executive order, Order No. 3395 was issued with the goal of conducting “a targeted and time limited elevation of relevant decisions at the Department of the Interior … for the purposes of reviewing the questions of fact, law, and policy they raise.”

While these actions reflect President Biden’s first steps toward fulfilling his campaign promises to promote renewable energy sources, the moratorium has already spurred its first lawsuit. On Jan. 27, 2021, the Western Energy Alliance filed a petition for review with the District of Wyoming. The petition alleges that “[t]he suspension is an unsupported and unnecessary action that is inconsistent with the Secretary’s statutory obligations.” See Western Energy Alliance v. Joseph R. Biden, Jr., et al., No. 0:21-cv-00013-SWS (D. Wyo. Jan. 27, 2021). It also argues that, “[b]ecause the suspension is both arbitrary and capricious and contrary to law, the Court should find the suspension invalid and set aside the challenged government action.”

It is unclear how the District of Wyoming will handle the lawsuit attacking only a “temporary” ban. Secretary Vega’s order bases its authority in Section 2 of Reorganization Plan No. 3 of 1950, 64 Stat. 1262, which sets forth the secretary’s authority to reorganize the bureaus and offices of the Department of the Interior. But any permanent ban would place companies, such as those within the Western Energy Alliance, in a difficult position. Oil and gas exploration companies have paid for property rights that the federal government may now prohibit them from developing. The Mineral Leasing Act of 1920 also requires the federal government to hold quarterly lease sales for oil and gas on public lands. See 30 U.S.C § 226(B)(1)(a), “Lease sales shall be held for each State where eligible lands are available at least quarterly and more frequently if the Secretary of the Interior determines such sales are necessary.”

The full extent of litigation challenging the Biden administration’s imminent rules and regulations aimed at the oil and gas industry is also unclear. The Western Energy Alliance’s lawsuit may be only the tip of the iceberg for industry challenges to the new administration’s plan to combat climate change and shift toward renewable energy. The Western Energy Alliance represents approximately 200 companies engaged in all aspects of oil and natural gas exploration and production in the West, but the Biden administration’s policies will affect the entire oil and gas industry in the United States.

States are also likely to be litigants in the coming litigation. Texas Gov. Greg Abbott recently promised that the state is primed to sue the Biden administration over its recent environmental regulations. He also signed an executive order to protect Texas’ energy industry from “regulatory overreach in the energy sector,” which could “damage the stability of the Texas economy and the livelihoods of countless Texans.” See Exec. Order GA 33 (Jan. 28, 2021), “Relating to protection of Texas’ energy industry from federal overreach.”

Only time will tell how the Western Energy Alliance’s petition will be resolved, as well as a projected wave of litigation involving environmental regulations. Regardless of the outcome, courts will face important decisions as to the extent of the federal government’s reach and how to appropriately balance that reach with state’s rights.