U.S. Oil and Gas Permits Delayed After Federal Court Ruling

(Bloomberg) -- Permits to drill for oil and gas on U.S. public land will be delayed after a federal judge ruled against the Biden administration’s estimates of the social costs of greenhouse gas emissions, the Interior Department said Saturday.

At issue is a 2021 executive order directing federal agencies weighing environmental permitting and regulatory decisions to consider a metric for estimating the societal costs from carbon dioxide associated with those moves. A Louisiana-based federal district judge last week blocked federal agencies from using that “social cost of carbon” plan, following a lawsuit by Louisiana and other states challenging the way it was imposed.

The Biden administration could rely on a higher social cost of carbon to justify moves against fossil fuels and to counter climate change. But because the court ruling bars the federal government from adopting or relying on the metric, in the short term it upsets current work on federal drilling permits as well as new regulations. For instance, the Interior Department said the injunction is expected to lead to delays in permitting and leasing for federal oil and gas programs.

“The Interior Department continues to move forward with reforms to address the significant shortcomings in the nation’s onshore and offshore oil and gas programs,” the agency said. “Specifically, the Department is committed to ensuring its programs account for climate impacts, provide a fair return to taxpayers, discourage speculation, hold operators responsible for remediation, and more fully include communities, tribal, state and local governments in decision-making.”

Social Cost

The court’s ruling will have wide impact across the federal government, as the Biden administration moves to counter climate change and advance environmental rules.

In a filing Saturday, the Justice Department said the social cost of the carbon decision will affect 21 rules being developed at the Energy Department, five at the Environmental Protection Agency, nine at the Transportation Department and three at the Interior Department. That includes a $2.3 billion Federal Transportation Administration grant program and a draft Interior Department rule to combat methane emissions and the waste of natural gas from wells on federal land, the administration said. 

In addition, at least 27 environmental reviews at the Interior Department are also affected, the Justice Department told the court. “The injunction has halted work” on applications for permits to drill on “at least 18 wells on federal oil and gas leases in New Mexico,” the administration said. 

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