In the latest round of energy-related political football, a federal judge has put the brakes on plans to lease millions of acres of energy-rich parcels below the waters of the Gulf of Mexico.
As we wrote last year, the Biden Administration previously hit pause on a significant offering of oil and gas leases, which former President Donald Trump had initially approved. More than a dozen states challenged the moratorium. The offering, Lease Sale 257, was eventually executed after Judge Terry A. Doughty of the U.S. District Court issued a preliminary injunction blocking the administration from implementing the suspension.
The sale generated nearly $200 million in bids. However, in the latest episode of this saga, another federal district judge, Rudolph Contreras, issued a decision essentially invalidating the Lease 257 offering. In this latest decision, Judge Contreras contended that the environmental impact study carried out by the Trump Administration failed to account for how the lease would change global fossil fuel demand, potentially worsening climate change.
What happens now?
Well, the Department of the Interior, the Biden Administration cabinet-level agency offering the lease, has several options at its disposal. Depending on the new environmental analysis, the Department could hold the sale or reduce its scope. Or, it could choose to hit the pause button on 257 until the current leasing period ends, possibly spurring more litigation from affected states.
Whatever the solution may be, there needs to be a viable path forward for future U.S. offshore oil and gas production. Why? Offshore drilling is an essential variable in the equation, ensuring that the U.S. has an affordable and reliable domestic energy supply. Annually, it provides up to 30% of U.S. domestic energy needs.
And we can’t overlook the financial impact these leases have on the U.S. economy, which is huge!
Oil and gas leases in U.S. waters generate significant federal revenues each year. Drilling leases often contribute more to the U.S. Treasury than any other source save federal income taxes. These leases also contribute billions of dollars to state and local governments and create tens of thousands of jobs.
In his decision last year, Judge Doughty noted that losing out on this revenue would cause “irreparable injury” if the original suspension were to remain in place.
“The U.S. offshore region is vital to American energy security and continued leases are essential in keeping energy flowing from this strategic national asset,” said Erik Milito, president of the National Ocean Industries Association, which represents both offshore drilling and offshore wind interests.
“Uncertainty around the future of the U.S. federal offshore leasing program” would benefit Russia and other adversaries, he continued.
We agree. If left unchallenged, Judge Contreras’ ruling will take Lease 257, a proven domestic source of affordable and reliable energy, off the table. It will make the U.S. more reliant on foreign sources of oil and gas and remove a substantial source of revenue from the U.S. Treasury. That’s not good for the U.S. consumer or the U.S. taxpayer!