A US district court judge in Louisiana on June 15 ordered the Department of the Interior to end its moratorium on oil and gas leasing sales on federal lands and in offshore waters, finding the move has likely hurt economies and revenues in producing states.
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Register NowThe Louisiana-led group of 13 states brought the suit in March, two months after the Biden administration said it was pausing all new federal lease sales and conducting a review of the program's climate and fiscal considerations.
S&P Global Platts Analytics expected the leasing pause to have limited production impact in the near term because permitting activity on existing leases has continued.
Judge Terry Doughty of the US District Court for the Western District of Louisiana granted a preliminary injunction in the case, ordering Interior to end the pause for Lease Sale 257 in western and central Gulf of Mexico and Lease Sale 258 in Alaska's Cook Inlet.
Doughty's order said the states alleged "very substantial damages" from the leasing pause, "which would be difficult, if not impossible to recover, due to sovereign immunity."
"Even though existing leases are proceeding, the fact that new oil and gas leases on federal lands and in federal waters are paused will ultimately result in losses to Plaintiff States which they will likely not be able to recover," the order said.
Doughty said the preliminary injunction would remain in effect pending the final resolution of the case or subsequent orders from appellate courts.
The suit was brought by Louisiana, Alabama, Alaska, Arkansas, Georgia, Mississippi, Missouri, Montana, Nebraska, Oklahoma, Texas, Utah and West Virginia.
The Interior Department did not immediately respond to a request for comment on the ruling.
Permitting continues
An Interior official testified to Congress late April that the department had approved more than 500 drilling permits on federal lands and waters since January, and operators hold nearly 8,000 permits that are ready to use.
"To be clear, as we're conducting the review, industry continues to produce from existing operations while submitting new drilling permits," Nada Culver, Bureau of Land Management deputy director of policy and programs, told the Senate Energy and Natural Resources Committee during a hearing on Interior's leasing review.
S&P Global Platts Analytics estimates a permanent ban on federal leasing would lower US onshore production by 1 million-1.2 million b/d in the next five years, or by as much as 1.6 million b/d if operators with existing leases are not able to get new permits, which it considers unlikely. Risks to offshore production would not show up for at least 10 years.
Platts Analytics estimates US oil production at 10.7 million b/d in June, rising to 11.4 million b/d in December.
The Energy Information Administration expects US oil production to average 11.08 million b/d in 2021 and 11.79 million b/d in 2022. US production fell just below 11 million b/d in May, EIA said, and will close out the year at 11.5 million b/d.