On January 27, 2021, President Biden issued an executive order — effective immediately — directing the Secretary of the Interior to pause new oil and natural gas leases on federal public lands or offshore waters to the extent consistent with applicable law, until the completion of a comprehensive review and reconsideration of Federal oil and gas permitting and leasing practices, and to identify steps that can be taken to double renewable energy production from offshore wind by 2030. The Secretary immediately issued the suspension order and one lawsuit has already been brought, challenging the suspension. There is no end date specified for the halt to leasing or the completion of the review.
The order does not directly affect leasing activities on state or private lands, and a White House fact sheet indicates that the order will not directly affect Indian lands, or lands held by the U.S. in trust for Tribes. Even as to federal public lands, the order only impacts new leasing: existing leases and existing permits are unaffected by the order. However, operators with existing leases who are seeking new permits to carry on activity within the existing lease areas may have difficulties obtaining such permits due to a separate memo issued by the Department of Interior. In addition, the order suggests that after the comprehensive review, oil and gas activities may face increased regulatory burdens and royalty payments.
What does this mean for new leases on federal public land (onshore)?
The Department of Interior (DOI) oversees oil and gas leasing on all federal lands, the Bureau of Land Management (BLM) within DOI issues leases for onshore oil and gas exploration and development. Under the Federal Mineral Leasing Act (FMLA), the federal government must periodically offer leases of federal land for natural resource development activities. Today’s executive order does not require a complete halt to leasing, because that would be contrary to the FMLA. Instead, it implements an indefinite pause on new leasing while DOI conducts a “comprehensive review and reconsideration of Federal oil and gas permitting and leasing practices.” As part of the process, DOI will also consult with other federal agencies, including Agriculture (which oversees National Forest Service lands), Commerce (which oversees certain endangered species issues), and the Department of Energy.
While the order does not expressly address Indian lands, a White House fact sheet indicates that the order does not restrict energy activities on lands that the United States holds in trust for Tribes, and indicates that DOI will continue to consult with Tribes regarding the development and management of renewable and conventional energy resources, in conformance with the United States’ trust responsibilities to those Tribes. The order has no impact on any new leasing on state or private land.
What does this mean for new leases on federal waters (offshore)?
The United States holds title to natural resources located in federal offshore waters, including those on the Outer Continental Shelf (OCS). Under the Outer Continental Shelf Lands Act (OCSLA), the Secretary is required to prepare an oil and gas leasing program that consists of a five-year schedule of proposed lease sales to best meet national energy needs, showing the size, timing, and location of leasing activity as precisely as possible. Within DOI, the Bureau of Ocean Energy Management (BOEM) prepares the five-year schedule of proposed lease sales consistent with certain stated principles of OCSLA.1 As with onshore federal lands, the order puts an indefinite pause on future oil and gas leasing in federal waters while the comprehensive review and reconsideration is underway, but does not directly impact existing federal leases or leases in state waters.
What does this mean for existing leases and future oil and gas activities on federal public land or water?
The order does not affect existing federal leases, and lessees may continue to conduct oil and gas operations under the terms of their existing lease. The order also does not directly impact any existing permits, or the ability to obtain permits, including APDs for these existing leases while the comprehensive review is underway. However, DOI earlier issued a separate memo temporarily suspending until March 21, 2021, the authority of local offices to approve such permits while allowing only the highest level Department officials to give such approvals. As a practical matter this will likely mean no permits will be issued in the next few months, and further delays in receiving permits should be expected even if the directive is not extended and permitting decisions return to more local office control.
The order also does not change the regulations or policies that apply to oil and gas operations under existing leases. However, the order signals that there will be future changes to federal oil and gas leasing and permitting policies that may limit or discourage future operations.
The order suggests:
- The Biden Administration plans to revisit its regulations (potentially including those regarding fracking, methane emissions, royalties, and other issues), which could result in increased regulation and changes in key commercial terms in the upcoming years. For example, the order specifically instructs DOI to “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.”
- There is likely to be a new emphasis on prioritizing renewable project development on public lands. For example, the order instructs the Secretary to identify steps that can be taken to increase renewable energy production on those lands and in those waters, with the goal of doubling offshore wind by 2030.
- There may be a new push to address environmental issues related to oil and gas operations (even outside of Federal lands). For example, the order also flags plugging leaks in oil and gas wells as an opportunity to “create well-paying union jobs in coal, oil, and gas communities while restoring natural assets, revitalizing recreation economies, and curbing methane emissions.”
The public will be provided with advanced notice and the opportunity to comment on many of these changes, as well as to challenge them in court if and when they are finalized. Indeed, one industry group has already challenged the order for “indefinitely suspending the federal oil and gas leasing program” in a federal court in Wyoming. And while that regulatory and legal processes unfold, operators can also expect much closer enforcement scrutiny to determine whether operators are conforming to all permit and related regulatory requirements, such as environmental requirements.
1 The principles are set out in Section 1334(a)(1) and (2)(A)-(H) of OCSLA, 43 U.S.C. §1331 et seq.