Analysis: Biden may hinder oil and gas drilling even after court loss

© Reuters. FILE PHOTO: An oil and gas drilling platform stands offshore in Dauphin Island, Alabama, October 5, 2013. REUTERS/Steve Nesius

By Nichola Groom and Valerie Volcovici

(Reuters) - U.S. President Joe Biden's administration has the power to stymie oil and gas development on government-controlled lands and waters, industry and environmental experts said, even though a court decision ended his freeze on federal drilling auctions.

Some options, they said, include offering sparse acreage or imposing more time-consuming permitting requirements.

"We lived through the Obama administration, and they did a lot of things to constrain leasing and other activity on federal lands," Kathleen Sgamma, president of industry trade group Western Energy Alliance, said in an interview.

"And frankly they have the power to do so."

In January, Biden temporarily suspended drilling lease sales on federal lands and waters to weigh the program's environmental costs. The move was widely seen as a first step to delivering on his campaign promise to permanently ban new federal leasing to fight climate change.

Several oil-drilling states sued, arguing the pause was illegal and would hurt their economies. On Tuesday, Louisiana federal court Judge Terry Doughty, who was appointed by former President Donald Trump, ordered the government to lift the suspension.

The U.S. Mineral Leasing Act of 1920 says the government must schedule lease sales at least quarterly in "each state where eligible lands are available".

Changing that law is unlikely in a politically divided Congress. Yet industry and green groups agree that Biden's Interior Department, which oversees oil and gas development on federal acreage, has plenty of other ways to avoid or at least slow new leasing.

The administration, for example, has the power to decide what "eligible lands" are.

Previous administrations have removed areas from consideration for leasing. Trump's Republican administration, for example, deferred leases within 10 miles of New Mexico's Chaco Culture National Historical Park. President Barack Obama, a Democrat who had Biden as his vice president, withdrew parts of the Atlantic and Arctic oceans from offshore drilling eligibility.

“When you think about it, the system can’t operate unless there’s a fair amount of discretion built in," said Drew Caputo, vice president of litigation for lands, wildlife and oceans at environmental group Earthjustice. "Otherwise, any oil company could come in at any time and demand a lease in location X."

In the coming weeks, Biden's Interior Department is expected to release a report with recommendations on how to reform the century-old oil and gas leasing program, Interior Secretary Deb Haaland said on Wednesday.

The Department declined to comment on whether it will hold new lease sales, but said it will honor the court ruling.

If Interior resumes leasing, it has the authority to do so with strict stipulations and prolonged permitting timelines, experts said. It can also put up a limited number of acres up for auction, frustrating bidders.

The industry is anticipating that Interior will prolong the review of potential lease areas using the National Environmental Policy Act (NEPA), which requires that federal agencies assess the environmental impacts of projects.

"NEPA is a great tool for paralysis by analysis... we will see NEPA take longer," Sgamma said.

The Biden administration has argued that reforms to the programs are needed in part because the Trump administration failed to conduct thorough reviews of lease areas. That resulted in many canceled leases and set back Trump's efforts to maximize fossil fuel production.

“Every time we challenged lease sales in the courts, we were able to demonstrate there was a failure to account for the climate crisis and we prevailed in every one of those lawsuits,” said Erik Schlenker-Goodrich, director of the Western Environmental Law Center (WELC).

Environmental groups like WELC and WildEarth Guardians are ready to sue again if drilling lease sales resume, according WELC's Schlenker-Goodrich and WildEarth’s climate and energy program director, Jeremy Nichols.

“We hope we don’t have to name Deb Haaland as a defendant in a case. That would really be sad,” Nichols said. “But we have to do what we have to do, and this program is off the rails."