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API leads dozen trade groups in suing Interior over pause on new oil, gas leases

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API leads dozen trade groups in suing Interior over pause on new oil, gas leases

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Claim Interior violated NEPA, other federal laws

Asks court to vacate the 'leasing moratorium'

A dozen oil, gas and extraction-related industry groups are suing the US Department of the Interior over its nearly seven-month-long pause on new federal oil and gas leases.

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The groups, led by the American Petroleum Institute, asked a federal court to vacate the pause, claiming that the Biden administration's "leasing moratorium" violated various federal laws, including the Administrative Procedure Act and the Mineral Leasing Act.

They also said Interior's leasing pause violated the National Environmental Policy Act because officials did not "take the necessary hard look at the potential environmental impacts before its implementation," according to the Aug. 16 lawsuit filed in the US District Court for the Western District of Louisiana. Interior declined to comment on the new lawsuit.

As part of a sweeping executive order on Jan. 27, President Joe Biden issued a pause on new oil and gas leases on federal lands and waters. Interior has since canceled its first- and second-quarter oil and gas lease sales and had not held a third-quarter sale as of the lawsuit's filing, the groups said. The pause drew swift condemnation from the industry and Republican lawmakers in addition to various lawsuits.

"Defendants' radical departure from prior policy in implementing the moratorium without a reasoned explanation was arbitrary, capricious, an abuse of discretion, otherwise not in accordance with law, and in excess of their authority," the industry groups said.

S&P Global Platts Analytics continues to expect the leasing review to have a muted impact on the US production outlook. It expects Interior to reschedule Gulf of Mexico Lease Sale 257 for sometime in the fourth quarter.

"Biden's relatively pragmatic oil policy has balanced a Keystone XL rejection and tougher methane rules with supporting the DAPL pipeline, the Alaska Willow project, and drilling permits on existing federal leases," chief geopolitical analyst Paul Sheldon said in a recent note.

But the trade groups said their members are "significantly harmed" by the leasing pause, having "invested millions of dollars in acquiring and exploring federal oil and gas leases in reliance that adjacent tracts needed to complete the development of an oil and gas prospect would be available for lease in scheduled or statutorily mandated lease sales."

Such leases are especially important for companies active in deepwater drilling, they said.

"If operators cannot obtain access to these additional leases necessary to complete development, their substantial investment is substantially diminished or may be lost entirely," the groups said.

Interior officials have responded vaguely to questions about the timeline of the leasing pause and reiterated that the temporary ban on new leasing does not affect existing leases. They have also pointed to a backlog of approved unused drilling permits.

In June, a federal judge in Louisiana struck down the leasing pause, pointing to federal laws that require the agency to hold lease sales. Interior Secretary Deb Haaland told federal lawmakers shortly thereafter that Interior was reviewing the decision.

Haaland also said in late July that Interior's review of the leasing program would be released "very soon."