By: A+J Energy Litigation Team
January 20, 2021 has come and gone and the new Biden Administration is moving rapidly on its climate change priorities. After halting the Keystone Pipeline and pledging to rejoin the Paris Climate Agreement on his first day in office, President Biden this week suspended new onshore oil and gas leasing on federal property and offshore leasing as well. The President’s executive order also hints at new restrictions on oil and gas development likely to come in the not so distant future.
President Biden’s “Executive Order on Tackling the Climate Crisis at Home and Abroad,” issued on January 27, 2021, is one of the new administration’s most lengthy and detailed executive orders to date. With respect to oil and gas development, the order directs the Secretary of the Interior to:
- Pause all oil and gas leasing on public lands;
- Pause all oil and gas leasing in offshore waters;
- Complete “a comprehensive review and reconsideration of Federal oil and gas permitting and leasing practices . . . [on] public lands and in offshore waters, including potential climate and other impacts associated with oil and gas activities on public lands or in offshore waters[;]”
- In conducting this review, the Secretary must “consider whether to adjust royalties associated with coal, oil, and gas resources extracted from public lands and offshore waters, or take other appropriate action, to account for corresponding climate costs.”
The order also directs the heads of federal agencies to search for any direct federal fossil fuel subsidies provided by their respective agencies and to take steps to eliminate such subsidies. Moreover, the order indicates that the suspension of new leases on public lands and in offshore waters will remain in place until the review is completed.
Reading between the lines, oil and gas leasing and permitting on public lands and in offshore waters is likely to be reduced and potentially eliminated in sensitive areas. For oil and gas leasing and permitting allowed under new rules, lessees are likely to face demands for increased royalties from the Bureau of Land Management (“BLM”) for leases on public lands and from the Bureau of Ocean Energy Management (“BOEM”) for offshore leases, as well as higher fees and charges associated with leasing and permitting.
These developments present immediate challenges to an industry already suffering from drastically reduced demand for oil and natural gas due to the COVID-19 pandemic. Nevertheless, companies must also brace for the new regulations and restrictions likely to be proposed as a result of the comprehensive review to be undertaken by the Secretary of the Interior and related federal agencies, including BLM and BOEM.
Some policy and rule changes may be required to undergo a mandatory period of notice and comment before implementation. Oil and gas operators and drilling service providers need to be prepared to participate in this process and consider legal remedies where appropriate and necessary.
At A+J we will continue to monitor these and other changes amid what is certain to be a more challenging legal and regulatory environment for oil and gas exploration and production, even for companies unaffected by the Biden Administration’s executive actions to date. We are here to help you navigate these changes and challenges.