Wyoming’s energy industry reacted with cautious optimism Wednesday to a court ruling blocking the Biden administration’s freeze on new oil and gas leasing on federal lands.
U.S. District Judge Terry Doughty of Louisiana found the Biden administration’s order to be an overreach of executive power and ruled that it is “hereby enjoined and restrained from implementing the Pause of new oil and natural gas leases on public lands,” which the administration instituted on Jan. 27 in an effort to address climate change.
Oil and gas lease sales for federal lands are overseen by the Bureau of Land Management. Tuesday’s ruling requires the BLM to resume quarterly lease sales, but does not mandate that a certain number of leases be made available.
“The oil and gas leasing program is completely a discretionary action on the part of the Department of Interior,” said Shannon Anderson, staff attorney for the Powder River Basin Resource Council, a landowner and conservation group based in Wyoming. “There’s no legal obligation for them to sell oil and gas resources to industry. There’s no law that makes them do that.”
Nearly half of Wyoming is made up of federal public lands. An even greater share of underground resources are federally managed, leaving the state — which relies heavily on natural resource revenue to fund its public services — highly dependent on the federal government to facilitate resource extraction.
Wyoming’s first two lease sales of 2021 have already been canceled. If Doughty’s preliminary injunction stands, quarterly auctions are expected to resume this fall.
At present, it’s unclear how many leases will be available for purchase. Many drillers expect the BLM to offer just a handful of leases at the next sale, a sharp decline from the hundreds auctioned in past quarters.
A separate lawsuit over the executive action remains underway in Wyoming. Unlike the Louisiana lawsuit, the Wyoming case asks that the first and second quarterly lease sales of 2021 be held retroactively to make up for the state’s lost revenue.
The Petroleum Association of Wyoming is one of the parties suing over the executive order in Wyoming. That suit alleges that the Biden administration violated federal law by halting oil and gas lease sales.
“The Mineral Leasing Act is pretty clear that the [Department of Interior] is required to hold quarterly lease sales,” said PAW president Pete Obermuller. “By not having any sale at all, and having no justification for that, it seems to us as a pretty clear violation of the Mineral Leasing Act.”
Prior to 2020, revenue from oil and gas lease sales on federal lands topped $100 million. That income plummeted last year amid uncertainty and logistical challenges brought on by the COVID-19 pandemic. And Wyoming hasn’t made any money from federal lease sales in 2021.
The obstacles to leasing federal land have incentivized oil and gas companies to look for better deals elsewhere — often private lands in different states, or other countries that have fewer restrictions in place, Obermuller said.
“All of our plays in the Rockies have been put on hold until this gets addressed, and then how it is addressed is going to be a major outcome for our continued operation here,” said Steve Degenfelder, land manager for Kirkwood Oil & Gas.
The freeze put forth by the Biden administration only applies to the sale of new drilling leases on federal lands. All other parts of the drilling process, including lease sales on private lands and permitting on already-leased federal lands, have continued to move forward.
But nearly five months into the moratorium, many Wyoming policymakers welcomed the Louisiana decision.
“This preliminary injunction is outstanding news for Wyoming and our energy workers,” Gov. Mark Gordon said in a statement Wednesday. “It confirms the position we have maintained since this ‘pause’ was implemented. The Biden Administration has in fact put in place an unlawful, de-facto moratorium, causing economic harm to states like ours that rely on lease sale revenue to fund our schools and critical functions of government.”
Despite Tuesday’s ruling, the ongoing uncertainty around lease availability remains a major worry.
“Wyoming has a patchwork of both federal and private land,” said Michael Pearlman, communications director for Gordon. “When oil and gas companies look at leasing and drilling, they look at a big picture. And so when there’s uncertainty surrounding the parcels they’re interested in drilling, the federal parcels in particular, that certainly gives them reason to pause.”
But most of Wyoming’s oil and gas revenue comes from production, not leasing, through property taxes, severance taxes and royalties.
The judge presiding over the Wyoming case on Wednesday ordered additional briefings from involved parties following the Louisiana decision. Though a stay is possible, the Wyoming case is likely to continue moving forward.
Biden’s executive order was intended to allow the Department of Interior time to reevaluate the leasing program, which has faced criticism over issues like cratering lease prices in areas with low oil and gas potential and a lack of transparency in its decision-making processes. The freeze did not come with a set end date.
“The leasing program itself is broken,” said John Rader, a conservation advocate at the Wyoming Outdoor Council. He described the pause as an opportunity to reform the program and address major concerns, and said he hopes to see that reform happen through legislation, rather than through the courts.
It is unclear how the Department of Interior intends to proceed following the ruling.
In the meantime, an interim report from the Department of Interior on the status of federal energy programs, including the leasing program, could be released as soon as next week. The report’s preliminary recommendations are expected to inform future lease sales.