Appeals court ends challenge to 2021 Gulf oil, gas lease sale

• A federal appeals court in Washington has rejected a challenge to the federal government’s sale of oil and gas leases for the Gulf of Mexico that were auctioned in 2021. 
• The sale had been blocked early last year but was cleared under provisions of a compromise climate bill signed into law last year by President Joe Biden.
• Energy companies offered $192 million for drilling rights on federal oil and gas reserves in the Gulf of Mexico.

A lawsuit by environmentalists seeking to block the 2021 sale of Gulf of Mexico oil and gas leases auctioned off by the federal government was rejected Friday by a federal appeals court in Washington.

Energy companies including Shell, BP, Chevron and ExxonMobil offered a combined $192 million for drilling rights on federal oil and gas reserves in the Gulf of Mexico.

Leases from the sale were issued under provisions of a compromise climate bill, dubbed the Inflation Reduction Act by its supporters, which was signed into law last year by President Joe Biden. The appeals court said Friday that the legislation made the legal challenges moot.

The ruling noted the challenges were based on arguments that the government scheduled the sale without properly following procedures under the National Environmental Protection Act.

“But the leases are now being issued pursuant to the Inflation Reduction Act, so the challenged agency action is no longer the basis for the issuance of the leases,” the ruling from the U.S. Appeals Court for the District of Columbia said.

DEMOCRATIC SENS. KELLY, MANCHIN PRESS BIDEN OVER GULF OIL LEASES

The ruling officially vacated a federal judge’s January 2022 order blocking the sale, and ordered dismissal of the case. “Even if we agreed with the environmental groups that the sale failed to comply with the National Environmental Policy Act, the result will be the same: The highest bidders will receive their leases,” the appellate court said.

Friday’s ruling was a victory for the administration and for oil companies that had fought to preserve the sale.

It also highlighted political pressures on the Biden administration, with Biden running for reelection and needing continued support from environmentalists and young voters. The oil and gas industry and Republicans, meanwhile, have accused the administration of not doing enough to enable domestic oil and gas production.

The American Petroleum Institute, an industry group, praised Friday’s ruling, calling it a “positive step toward more certainty and clarity for energy producers.”

The group said it would continue to work with the Department of the Interior to meet its obligation to finalize a five-year program enabling oil and gas leasing on the Outer Continental Shelf.

Steve Mashuda, an attorney for the environmental group Earth Justice, expressed disappointment with the ruling and criticized the sale.

“This massive industry handout will take a significant toll on Gulf communities and ecosystems and make addressing the climate crisis increasingly challenging,” Mashuda said in an email. “In light of this, it’s even more important for the Biden administration to limit the climate impacts of the Interior Department’s offshore oil and gas leasing program.”

Challenges are still pending to a sale held in March, also under mandates from the climate bill, in which oil and gas companies offered a combined $264 million for Gulf drilling rights.