US court forestalls threat of oil & gas shutdown in Gulf of Mexico with a reprieve

A court decision, which was interpreted to pose a serious risk to new and existing oil and natural gas operations in the U.S. Gulf of Mexico with some fearing that it would have unintended consequences for the offshore wind program too, has been replaced with a new one. This has prolonged the deadline to give the National Marine Fisheries Service (NMFS), part of NOAA and known as NOAA Fisheries, time to carry out an environmental review of the effects of oil and gas drilling in the Gulf of Mexico.

After the U.S. District Court for the District of Maryland vacated earlier this year the NMFS 2020 Biological Opinion for Gulf of Mexico Oil and Gas activities (BiOp), effective December 20, the oil and gas industry argued that the ruling did not allow enough time for NMFS to issue a new BiOp, which is required for offshore drilling. This addresses the risks oil and gas operations present for endangered species such as Rice’s whale.

The court’s decision, made by District Judge Deborah Boardman due to a lawsuit filed by the Sierra Club, Earthjustice, and other climate organizations and activists, was seen as a dangerous one that had the potential to put an end to all oil and natural gas activities in the region responsible for producing 14% of total U.S. crude oil production and 2% of natural gas production in 2024.

The environmental activists, together with Earthjustice, claimed that the BiOp enabled the oil and gas industry to end the lives of “an extraordinary number of endangered animals,” such as about 13,000 rare sea turtles per year in the Gulf of Mexico, forcing them to face “a marine nightmare” as they were subjected to underwater air gun blasts, oil spills, and marine pollution while less than 100 remaining Gulf of Mexico Rice’s whales were forced to contend with vessel strikes at a speed that could drive the species to extinction.

Mike Sommers, President and CEO of American Petroleum Institute (API), wrote a letter to Gina Raimondo, U.S. Secretary of Commerce, in September 2024 to warn about the so-called “significant bureaucratic bottleneck for the federal government” that could spring up as the result of the judge’s decision to declare the 2020 BiOp as unlawful and order for it be vacated as of December 20, 2024, potentially leading to a halt in oil and gas activities in the Gulf of Mexico.

As the National Marine Fisheries Services revealed that a new BiOp would not likely be complete until early spring of 2025 even before the court expanded NMFS’ areas of analysis in its decision, Sommers stated in the letter: “Without a solution in place, this court decision has the potential to halt or seriously slow all operations in the U.S. Gulf of Mexico, leaving a critical source of energy supply and economic security in jeopardy. In FY 2023, the Gulf of Mexico generated 674 million barrels of oil and 795 billion cubic feet of natural gas.

“The U.S. Gulf of Mexico produces some of the lowest carbon-intensity barrels in the world. Constrained production in this region could be 200 Massachusetts Avenue NW, Suite 1100, Washington, DC 20001-5571 USA 202-682-8500 api.org replaced by higher carbon-intensity barrels from elsewhere in the world. This region is also an important driver of economic growth, contributing over $34.3 billion to the U.S. GDP, supporting more than 412,000 jobs across the United States, and generating $6.1 billion in federal government revenue.”

The critics of Judge Boardman’s ruling were quick to point out that the biological opinion process would probably take a long time due to political considerations as this is an election year. However, no matter which decision was made further litigation was on the horizon either from Big Oil or climate activists, as no compromise seemed likely by the set deadline.

Aside from the ruling spelling trouble for oil and gas activity in the Gulf of Mexico, analysts noted that it could have implications for offshore wind leasing, as it also faced the prospect of being put on a hiatus until the BiOp issue is ironed out due to a provision in the Inflation Reduction Act (IRA) that stipulates no offshore wind leases to be issued one year after the last oil and gas lease sale, which gathered close to a whopping $382.2 million in high bids last year, as the largest amount such a sale has collected in almost a decade.

This was the final lease sale mandated by the Inflation Reduction Act and will most likely be the last offshore sale until 2025, since the final program for 2024-2029 offshore oil and gas leasing in the Gulf of Mexico comes with the lowest number of lease sales in U.S. history, covering a maximum of three potential oil and gas lease sales, which are slated for 2025, 2027, and 2029, respectively.

However, these three proposed lease sales are said to be the minimum number that would enable the Interior Department to continue to expand its offshore wind leasing program through 2030 in compliance with the IRA. Therefore, Judge Boardman’s decision was expected to prolong the next oil and gas lease sale and further delay wind leases.

The U.S. Bureau of Ocean Energy Management (BOEM) has been very active on the wind auctions front, as reported by Offshore Energy’s sister site, offshoreWIND.biz. However, cancellations and postponement have also featured in BOEM’s recent decisions, as confirmed by the delay in the lease sale for offshore wind areas in federal waters off Oregon due to the lack of interest on the bidders’ part. This comes when rumors abound about certain oil majors allegedly contemplating divestment of some of their offshore wind business assets like they sold off their onshore wind affiliates.

These speculations came after the Vineyard Wind offshore wind farm blade failure incident occurred a few months ago, which seems to have spotlighted economic challenges for the wind industry. GE Vernova recently confirmed a three-point plan after a preliminary analysis pinpointed a manufacturing deviation as the primary root cause of the blade incident that the quality assurance process at the blade manufacturing facility failed to spot.

Meanwhile, the latest development in the BiOp court case, which is a continuation of a legal battle ongoing since 2020, saw Judge Boardman extend the previous date by five months, giving the National Marine Fisheries Service until May 21, 2025, to come up with a new biological opinion on the potential impact of oil and gas exploration and production in the U.S. Gulf of Mexico on endangered species.

This decision has been interpreted by many as an attempt to stave off an energy security disaster that the oil industry claimed would likely come if the previous deadline stayed in place. However, not everyone is happy with how things turned out, as confirmed by Chris Eaton, Senior Attorney with Earthjustice, who expressed disappointment that the Fisheries Service could further delay any action to protect rare Gulf species like the Gulf of Mexico Rice’s whale.

Given that the Bureau of Safety and Environmental Enforcement (BSEE) is said to have greenlighted 757 applications for drilling permits, 3,668 permit modifications, 913 pipeline modifications, repair or decommission permits, 116 structure permits, and 375 facility safety permits each year since the 2020 BiOp came into effect, NMFS justified its request for a deadline extension by pointing out the risks delays in permitting could bring.

These risks that cover failures that could arise from permitting delays refer to operational safety issues and environmental hazards, such as sorting out threats of well blowouts and prolonged decommissioning of abandoned wells, alongside pipeline leaks and repairs – all carrying the potential to cause safety problems for workers.

After the federal court granted the National Marine Fisheries Service more time to complete a new biological opinion for the U.S. Gulf of Mexico and avoid the “significant consequences” for American energy security over which the Big Oil lobby raised the alarm, the American Petroleum Institute welcomed the ruling, as expected.

On this occasion, Ryan Meyers, API’s Senior Vice President and General Counsel, emphasized: “We welcome the court’s pragmatic decision to allow NMFS more time to complete a new biological opinion for oil and natural gas operations in the U.S. Gulf of Mexico. Today’s ruling provides only temporary relief and work still must be done to avoid disruptions to the backbone of our nation’s energy supply.

“We stand ready to work with NMFS and offer our industry’s expertise to complete a new biological opinion that balances environmental protection and the world’s growing need for affordable, reliable energy.”