US Government Pauses Fossil Fuel Leasing on Federal Land in Focus on Climate Change and Environmental Protection
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This week, as part of a series of significant executive actions, President Biden issued an executive order directing the United States Department of Interior (DOI) to pause new oil and natural gas leasing on federal public lands and federal offshore waters "to the extent consistent with applicable law." This pause on oil and gas leasing on federal lands was one of multiple actions taken in the order titled "Tackling the Climate Crisis at Home and Abroad," signed by President Biden on January 27, 2021, which the Biden administration named "Climate Day" as part of the renewed federal government response to climate change. The President also announced in the order that the federal government will start a rigorous review of its existing oil and natural gas leases and permitting practices, with a focus on potential climate impacts from oil and gas activities.
Long-term impacts to domestic oil and gas development from the suspension are difficult to predict, though it is clear that companies with substantial operations offshore or within onshore federal lands – particularly in New Mexico, Wyoming and Alaska – will be disproportionately impacted by the order. It is important to note that the suspension on federal leasing does not impact oil and gas activities on private lands, State lands or tribal lands, where the vast majority of US oil and gas development is located.
Upstream companies that already hold leases on public lands and in offshore waters can continue drilling new wells, regardless of the new suspension. Anticipating that the new administration would prioritize climate considerations, many US producers built up an inventory of active federal leases and approved Applications for Permit to Drill (APD) for near-term development, so the shorter-term impacts on the industry are more certain than longer-term effects. Existing APDs are valid for two years, with a mutual right to renew for another two years that has historically been granted without issue by the Department of the Interior. However, it remains to be seen if the renewal process in two years' time will be significantly impacted.
The pause on federal leasing for oil and gas development is a fulfillment of campaign promises made by then-candidate Biden, and follows the January 20, 2021 (Inauguration Day) order signed by Acting Interior Secretary Scott de la Vega that imposed a 60-day prohibition on new federal leases and permits, lease amendments or lease extensions from the DOI. The Biden administration's action is similar to a moratorium on new coal leases that the Obama administration issued in 2016.
The Biden administration's "Climate Day" order should not come as a surprise. On the campaign trail and leading up to his inauguration, then-candidate Biden communicated that climate considerations would be an essential element of his administration. Preservation of federal lands fits within the administration's climate focus, and the January 27 executive order sets a goal of conserving 30 percent of the United States' forests and waters by 2030. More broadly, the January 27 order and announcements evidence an increased focus by the Biden administration on a more aggressive approach towards environmental regulation and mitigating climate change than the approach taken by the Trump administration, and an emphasis on science- and evidence-based decision-making across federal agencies.
This more aggressive approach was also evidenced on Inauguration Day when President Biden signed an executive order to recommit the United States to the Paris Climate Agreement. The US signed the agreement when it was opened for signature by Parties to the United Nations Framework Convention on Climate Change in April 2016. Former President Trump withdrew from the agreement on June 1, 2017, and President Biden formally began the 30-day process of re-joining the agreement immediately upon taking office.
On Inauguration Day, President Biden also signed an executive order titled "Protecting Public Health and the Environment and Restoring Science to Tackle the Climate Crisis," directing executive agencies to review dozens of Trump administration actions and to "address [any such] actions that conflict with [the order's] important national objectives." According to this Inauguration Day order, the new administration's policies are:
". . . to listen to the science; to improve public health and protect our environment; to ensure access to clean air and water; to limit exposure to dangerous chemicals and pesticides; to hold polluters accountable, including those who disproportionately harm communities of color and low-income communities; to reduce greenhouse gas emissions; to bolster resilience to the impacts of climate change; to restore and expand our national treasures and monuments; and to prioritize both environmental justice and the creation of the well-paying union jobs necessary to deliver on these goals."
Executive agencies are required to submit a final set of proposed actions within 90 days. The Inauguration Day order specifically targets the Trump administration rules on vehicle emission standards (the Safer Affordable Fuel-Efficient Vehicles Rule), methane emission standards (the Bureau of Land Management's Methane and Waste Prevention Rule), and other areas related to public health and the environment. The order also rescinds Trump administration guidance analyzing greenhouse gas emissions in reviews conducted pursuant to the National Environmental Policy Act. The Biden administration also announced in the order a review of a number of regulations and policies finalized by the Trump administration involving the Endangered Species Act, Migratory Bird Treaty Act, and other related species laws.
Other environmental law actions targeted for review or modification on Inauguration Day relate to specific oil and gas projects and the Clean Water Act. For example, President Biden revoked an executive order signed by then-President Trump directing the Environmental Protection Agency to review the "Waters of the United States" Rule and narrow the definition of "navigable waters" subject to regulation under the Clean Water Act (resulting in the April 21, 2020 Navigable Waters Protection Rule). It is expected that the Biden administration will undo the Navigable Waters Protection Rule and propose replacing it with a rule similar to the Obama-era Waters of the United States Rule.
President Biden's recent orders do not specifically target the Trump administration's 2019 rule concerning greenhouse gas emissions from power plants that was intended to repeal and replace the Obama-era Clean Power Plan. This is likely because the Trump administration's 2019 rule was recently struck down by the United States Court of Appeals for the District of Columbia Circuit on January 19, 2021 – the day before President Biden was inaugurated. A new rule that regulates greenhouse emissions from stationary sources in a manner similar to the Obama-era Clean Power Plan may be issued by the Biden administration.
This rule, together with other regulations targeting greenhouse gas emissions, is particularly likely to be issued given that the January 27 order includes a commitment to "achieving net-zero emissions, economy-wide, by no later than 2050." In a push toward this net-zero emissions target, the Biden administration is also focusing on the development of renewable energy projects on federal lands. Specifically, the January 27 order directs the Secretary of the Interior to "review siting and permitting processes on public lands and in offshore waters" to "increase renewable energy production on those lands and in those waters, with the goal of doubling offshore wind by 2030."
While the January 27 order directing the DOI to suspend new oil and gas leases on public federal lands and in offshore waters may have relatively limited immediate impacts on the overall production of oil and gas in the US, other actions taken and anticipated to be taken by the Biden administration demonstrate an increased government-wide focus on environmental regulation and mitigating climate change. This focus is driven by both the federal government and interest groups outside the government, such as the Climate 21 Project. According to the organization's website, the Climate 21 Project is a group of more than 150 experts with government experience—including nine former cabinet appointees—that has provided detailed recommendations to the Biden administration on mitigating climate change. While the new administration's environmental policies will certainly be quite different than those of the previous administration, the overall long-term impact of such policies and regulations on oil and gas producers remains to be seen.
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