US Government Ordered to Expand Gulf of Mexico Oil Auction

By Bloomberg

Sep 22, 2023

image is BloomburgMedia_S1D8G0T0G1KW01_24-09-2023_16-00-07_638311104000000000.jpg

Offshore oil well platforms in the Gulf of Mexico off Port Fourchon, Louisiana, U.S., on Wednesday, April 21, 2021. Offshore rig utilization is starting to respond to the recovery in oil prices, though day rates haven't shown much improvement, and likely won't until usage moves closer to 80-90%. Photographer: Luke Sharrett/Bloomberg

A federal judge ordered the Biden administration to expand next week’s Gulf of Mexico oil lease sale, saying officials appear to have weaponized the Endangered Species Act by yanking 6 million acres off the auction block. 

The Interior Department’s Bureau of Ocean Energy Management “failed to justify” shrinking the territory offered in the Sept. 27 sale amid concerns it could harm one of the world’s most endangered whales, US District Judge James Cain wrote in a 30-page ruling late Thursday. 

The Louisiana-based judge noted that when the agency scaled-down the sale, it cited a 2022 study that indicated the Rice’s whale may be found in the affected waters — despite previously weighing the same research in determining restrictions weren’t needed. 

The administration’s decision was an “unexplained about-face” that leaves the impression the move “is merely an attempt to provide scientific justification to a political reassessment of offshore drilling,” Cain wrote. “The process followed here looks more like a weaponization of the Endangered Species Act than the collaborative, reasoned approach prescribed by the applicable laws and regulations,” he said.

Cain ordered the department to conduct the sale including the previously withdrawn acreage by Sept. 30, a deadline imposed under last year’s climate law. 

Louisiana Win

The decision is a win for Louisiana, which argued it stood to lose as much as $2.2 million in royalties. It’s also a victory oil industry challengers to the administration’s plan, including the American Petroleum Institute, Chevron USA Inc., and Shell Offshore Inc. Chevron had emphasized vessel delays would boost the time and money needed to complete projects in the area. 

Ryan Meyers, a senior vice president of the American Petroleum Institute, said the ruling “hit the brakes on the Biden administration’s ill-conceived effort to restrict American development of reliable, lower-carbon energy in the Gulf of Mexico.”

But environmentalists said the order would further imperil the Rice’s whale, a species whose numbers have dwindled to as few as 51. 

“These baseline protections for the Rice’s whale are quite literally the least we could be doing to save the species from extinction,” Earthjustice attorney Steve Mashuda said by email. “Meanwhile, the government is still enabling the oil industry to bid on 67 million acres of the Gulf. These oil companies are looking at the full glass after one sip and calling it empty.”

Earthjustice said it’s considering options for appeal. An Interior Department spokeswoman declined to comment. 

(Updates with additional details from ruling, from third paragraph)

©2023 Bloomberg L.P.

By Jennifer A. Dlouhy


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