Appeals Court Blocks Biden Bid to Limit Oil Drilling Auction

(Bloomberg) -- A federal court left in place an order forcing the Biden administration to expand an upcoming sale of offshore drilling rights in the Gulf of Mexico, while giving the government more time to hold the auction. 

The decision by the Fifth Circuit Court of Appeals in New Orleans late Monday was a blow to environmental groups who’d sought to swiftly reinstate auction limits they argued are essential to protect the endangered Rice’s whale.

The three-judge panel ordered the auction take place no later than Nov. 8 but otherwise left in place a lower court order forcing the Interior Department to sell more territory for potential oil development. Under that order, the agency must include 6 million acres it previously had pulled off the auction block and scrap planned vessel traffic limitations in an area that may provide habitat for the species.

Louisiana and representatives of the oil industry, including the American Petroleum Institute, units of Chevron Corp., and Shell Plc, had challenged the limitations, with Chevron saying they could raise the costs and time to complete projects in the region.

“We are pleased that the Fifth Circuit upheld the district court’s decision to compel the Department of the Interior to reinstate the removed acreage and remove the burdensome stipulations, but this administration has once again found a way to delay oil and gas lease sales,” said Ryan Meyers, API senior vice president and general counsel. 

Earlier: US Government Ordered to Expand Gulf of Mexico Oil Auction 

Environmentalists, who had joined the Biden administration in appealing the lower court ruling and seeking a stay of the lower court’s order, argued that oil and gas activities in the northern Gulf of Mexico pose a serious threat to the continued survival of the Rice’s whale, given estimates there are just 51 remaining.

Although the Fifth Circuit panel directed the Interior Department to take “necessary actions” to implement the order and warned there would be no extension of the Nov. 8 sale deadline, the extra time allows for the court to consider the environmental groups’ appeal on its merits. 

“Today’s ruling denies the oil industry’s frantic attempt to rewrite the rules of the game just as the clock runs out,” said Earthjustice lawyer Steve Mashuda. “We’ll continue this fight to protect the nearly extinct Rice’s whale from needless harm from the oil industry.”

A spokeswoman for the Interior Department declined to comment Monday night.

Oil and gas companies had been preparing to submit sealed bids for the auction originally set to take place Wednesday. The sale, mandated by the Inflation Reduction Act, is the last clear opportunity for oil companies to buy new leases in the Gulf. The Interior Department has yet to issue its final plan for selling offshore oil and gas leases over the next five years, a legally required precursor to holding the auctions. 

A potential federal government shutdown could stall planning for even a Nov. 8 auction. Congress is still sparring over a spending plan for the federal government necessary to keep the government open past the new fiscal year beginning Oct. 1. 

(Updates with detail on case process, in the seventh paragraph.)

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