DC Circuit Says Inflation Act Moots Oil Lease Fight

WASHINGTON — A hard fought legal challenge to a 2021 oil and gas lease sale in the Gulf of Mexico was rendered moot by the passage of the Inflation Reduction Act last year, the U.S. Circuit Court for the District of Columbia has ruled.

The legal dispute harkens back to January 2021, when President Joe Biden issued an executive order pausing oil and gas lease sales on federal lands and in federal waters.

Several Republican attorneys general filed suit and eventually won an injunction from U.S. District Judge Terry Doughty in the federal court in Louisiana.

That victory eventually led to the federal oil and gas lease sale for about 1.7 million acres in the Gulf of Mexico in November 2021 that netted more than $189 million.

But then, U.S. District Judge Rudolph Contreras, presiding in Washington, intervened.

Contreras nixed the results of the sale, saying the federal government didn’t properly take account of its environmental impacts before carrying it out.

That ruling prompted a federal appeals court to send the case back to Doughty for clarification.

That’s when, in a twist, the politics of Capitol Hill intervened.

As one might remember from previous reporting in The Well News, by the early summer of 2022, Senate Republican Leader Mitch McConnell, R-Ky., had for weeks been saying his conference would not allow the CHIPS bill to pass the chamber if Democrats tried to pass their reconciliation package of climate and lower drug pricing legislation.

And it was only after Sen. Joe Manchin, D-W.Va., appeared to kill the reconciliation bill, that a vote was held on the CHIPS bill and it passed.

But then, just hours later and much to McConnell’s chagrin, Manchin and Senate Majority Leader Chuck Schumer, D-N.Y., announced they’d reached a deal on a $430 billion reconciliation package that they now called the Inflation Reduction Act.

The agreement between the two men pushed the Inflation Reduction Act across the finish line, and it had many provisions related to climate change and renewable energy. It also restored the Gulf of Mexico lease sale Contreras had thrown out, and mandated that the Bureau of Ocean Energy Management hold additional lease sales in the Gulf in March and September of this year as well as an additional sale of lease in Alaska’s Cook Inlet by January of 2024.

Now it was environmental groups turn to sue and they did, arguing the Inflation Reduction Act did not entirely negate the Interior Department’s discretion when it came to the November 2021 lease sale.

But in a ruling released Friday, a three-judge panel for the D.C. Circuit disagreed.

According to the judges, the Inflation Reduction Act mandated that the November 2021 sale be carried out and that the leases be awarded to the highest bidders.

They also said the new law made “clear” that the leases were no longer subject to the requirements of the National Environmental Policy Act, which requires a thorough assessment of the environmental impacts of proposed major federal actions.

In essence, it said, the grand bargain that resulted in the passage of the Inflation Reduction Act rendered Contreras’ ruling moot.

In a written statement, Earthjustice attorney Steve Mashuda said the group, which had been one of the plaintiffs in the challenge to the leases, was disappointed because as far as it is concerned, the November 2021 Gulf lease sale “should never have happened in the first place.”

“This massive industry handout will take a significant toll on Gulf communities and ecosystems and make addressing the climate crisis increasingly challenging,” Mashuda said.

Dan can be reached at [email protected] and @DanMcCue