Biden admin abruptly delays major oil and gas lease sale mandated under Inflation Reduction Act

The Biden administration announced Thursday that it would indefinitely postpone a major oil and gas lease sale mandated by the Inflation Reduction Act (IRA) pending an upcoming court decision.

The Department of the Interior's Bureau of Ocean Energy Management (BOEM) explained that it would delay Lease Sale 261 — which is set to span nearly 73 million acres across the Gulf of Mexico — as a result of legal uncertainty. Under the IRA, BOEM was ordered to hold the sale by the end of September, but it became the subject of litigation after the agency added last-minute environmental restrictions.

"Until the court rules, BOEM cannot be certain of which areas or stipulations may be included in the sale notice. Potential bidders in Lease Sale 261 should not submit bids until BOEM provides additional instruction," BOEM said in a statement. "BOEM will hold any bids already received and will hold the sale after it receives further direction from the Court of Appeals."

In late August, the fossil fuel industry group American Petroleum Institute (API), alongside the State of Louisiana and U.S. oil company Chevron, sued BOEM after the agency issued its Lease Sale 261 notice of sale, which made six million fewer acres available to oil and gas extraction than previously scheduled, as part of a settlement with eco groups. The agency also created multiple vessel restrictions for companies that obtain leases.

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Then, on Sept. 21, Judge James Cain of the Western District of Louisiana granted a preliminary injunction to plaintiffs and ordered the Biden administration to proceed with Lease Sale 261 without restrictions. After the government appealed, the U.S. Court of Appeals for the Fifth Circuit allowed BOEM to delay the sale until Nov. 8.

And last week, the appeals panel issued an indefinite stay on the lower court's preliminary injunction. The next arguments in the case are set for Nov. 13.

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"From issuing the weakest 5-year program for offshore leasing in U.S. history to repeatedly delaying congressionally-mandated lease sales, the Department of the Interior continues to demonstrate its willingness to ignore the clear and growing need to expand American energy leadership and reduce reliance on foreign energy sources," said API Vice President of Upstream Policy Holly Hopkins.

"Beyond the sale that was postponed today, there will be no offshore sales until 2025 – the longest gap in offshore sales since 1966," she added. "The U.S. oil and natural gas industry stands ready to support the nation's energy security through reliable, lower carbon-intensive energy produced here in the U.S. Gulf of Mexico, but the Interior Department’s inconsistent policies undermine the certainty needed to invest in future production."

Following the Fifth Circuit Appeals Court ruling last week, bipartisan leaders on the Senate Energy and Natural Resources including Chairman Joe Manchin, D-W.Va., called on BOEM to move forward with the sale on Nov. 8.

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"The Biden administration must stop using a much needed American energy project as a political football," Sen. John Barrasso, R-Wyo., the panel's ranking member, said. "There is no reason to consider more last-minute changes and unnecessary delays."

"The Biden administration must move forward with this lease sale as announced on October 5. They should not attempt to reattach unlawful restrictions or remove substantial acreage in an attempt to choke off domestic oil and gas production."

In the federal stipulated stay agreement filed on July 21, the National Marine Fisheries Service (NMFS) agreed to a number of conditions requested by the groups that, in response, agreed to temporarily pause litigation in the related case. The case dates back nearly three years when, in October 2020, the environmental coalition sued the NMFS for failing to properly assess the oil industry's impacts on endangered and threatened marine wildlife in the Gulf of Mexico. 

The groups pursued the lawsuit after the NMFS coordinated a multi-agency consultation studying the effects that all federally regulated oil and gas activities would have on species listed under the Endangered Species Act in the Gulf of Mexico over the next 50 years. The groups argued in the original complaint that the NMFS' biological opinion resulting from its consultation was not based on the best science.

The settlement specifically expands protections for the Rice’s whale, a species listed as endangered.