US oil, gas lease sales caught in legal wrangling over the social cost of carbon

New US oil and natural gas leasing has again hit a stumbling block, as the Interior Department confirmed Feb. 22 that delays will ensue as the department assesses how to move forward after a key tool for calculating the climate risks of those sales was taken off the table by a federal district court.

The US District Court for the Western District of Louisiana Feb. 11 issued a preliminary injunction against the Biden administration's estimates for the social cost of greenhouse gas emissions, directing federal agencies to revert to Trump-era cost estimates and prohibiting reliance on estimates based on global effects (Louisiana, et al v. Biden, et al, 2:21-CV-01074).

The administration is appealing the ruling and over the weekend sought a stay of the court's order, arguing it "irreparably harms the government and the public interest" and has already "frozen, delayed or derailed numerous activities."

Oil, gas lease sales

Among those activities is the Bureau of Land Management's work on several planned onshore oil and gas lease sales, according to a court filing.

"BLM had prepared the work necessary for those anticipated sales, but the preliminary injunction foreclosed its ability to proceed," the Department of Justice said in a memo to the court in support of the stay.

DOJ explained that the National Environmental Policy Act analysis of those lease sales incorporated the social cost estimates at issue. "Revising the NEPA analysis — and thereby potentially returning to square one the public notice and comment process — would be a burdensome and time-consuming process for the agency," the filing said.

Interior spokesperson Melissa Schwartz confirmed that certain activities associated with the department's fossil fuel leasing and permitting programs are impacted by the injunction.

"The Interior Department has assessed program components that incorporate the interim guidance on social cost of carbon analysis from the Interagency Working Group, and delays are expected in permitting and leasing for the oil and gas programs," Schwartz said in an email Feb. 22.

Initial assessments by the administration point to similar ramifications for a multitude of agencies. Thus far, 21 Department of Energy rulemakings, nine Department of Transportation rules, five Environmental Protection Agency rules and three Interior rules have been identified that could be delayed or halted. And DOT has also identified around 60 records of decision or environmental impact analyses required by NEPA that would need revisions under the injunction, whereas Interior has identified 27 such NEPA-mandated analyses.

Schwartz said that Interior was still moving "forward with reforms to address the significant shortcomings in the nation's onshore and offshore oil and gas programs." Those reforms aim to ensure that those programs "account for climate impacts, provide a fair return to taxpayers, discourage speculation, hold operators responsible for remediation, and more fully include communities, Tribal, state and local governments in decision-making," Schwartz added.

But Senate Energy and Natural Resources Committee Ranking Member John Barrasso criticized Interior's delay claims as the "latest effort to undermine our nation's ability to produce oil and gas" as the Biden administration "continues to disregard the law and wage war on American energy."

"Families are already struggling to keep the lights on under record inflation. Now the administration wants to make their energy prices even higher at a time when they can least afford it," the Wyoming Republican said in an emailed statement Feb. 22.

Court battle

The Biden administration Feb. 19 appealed the Louisiana district court's ruling to the 5th US Circuit Court of Appeals. The notice of appeal was accompanied by a motion for a stay of the preliminary injunction order pending the outcome of the appeal. The administration asked the Louisiana court to rule on its stay request by Feb. 28, after which it will seek relief from the 5th Circuit.

The court battle was initiated last April by a group of 10 states, led by Louisiana, who challenged President Joe Biden's executive order reconvening the Interagency Working Group on the Social Cost of Carbon, or IWG, and that group's subsequent work updating the values for the social cost of carbon and other greenhouse gases.

The social cost of carbon offers an estimate of the economic damages from emitting a metric ton of carbon dioxide into the atmosphere and is used by federal agencies to calculate the costs and benefits of climate regulations.

The Trump administration had reduced the tool's value to around $1-$6/mt. The IWG, under Biden, set an interim value for carbon of $51/mt at a 3% discount rate and was slated to soon update that value.

DOJ's memo argues that the injunction would have "dramatic" consequences as it goes far beyond barring a mandatory obligation to use the IWG's analysis and estimates in agency actions.

Rather, the order also bars agencies "from exercising their authority to operate independently ... and to agree with the [IWG's] analysis to the extent the agency deemed appropriate within its statutory authority," DOJ said. "Those restrictions could be read so broadly as to apply even to agencies' deliberative processes, meaning that agency staff are now chilled from even discussing what they consider accurate estimates of the social cost of greenhouse gas emissions."

This "significant disruption" could have been avoided, DOJ contended, as "all of plaintiffs' alleged harms [would] be addressed by an order rendering the [IWG's] interim estimates nonbinding."