Court verdict could allow future bans on New Mexico oil and gas leases

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A federal judge upheld the government’s authority to block oil and gas leases on public land in New Mexico and other states after the administration of President Joe Biden did so upon assuming office in 2021.

At the start of Biden’s tenure in office, the U.S. Department of Interior imposed a temporary halt on new federal oil and gas leases, seeking to reform its fossil fuel programs and intending to address the environmental impacts of extraction.

The move drew immediate outcry from the oil and gas industry and its supporters, with several Republican-led states not including New Mexico suing the DOI and asserting the block on new leases was illegal under federal law.

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That summer, the DOI completed its review and sought to increase royalty rates and address pollution during an expanded review process that was also subsequently challenged in separate litigation.

Lease sales resumed in New Mexico, with the Bureau of Land Management conducted a sale June 30, 2022 after reconducting its environmental reviews and imposed an increased royalty rate of 18.75 percent from the past rate of 12.5 percent.

The sale included about 536 acres in Lea and Chaves county, targeting the southeast New Mexico Permian Basin region, and earned about $632,385.

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The BLM had yet to plan a subsequent sale despite calls from industry leaders that not leasing the land for energy production could stymie the industry and threaten U.S. fuel supplies.

And despite the recent sale, critics of the federal government continued to challenge the administration’s authority in imposing the halt or subsequent pauses in Wyoming federal court.

But that challenge was denied by U.S. District Judge Scott Skavdahl of the District of Wyoming in a Sept. 2 ruling that upheld the DOI’s actions.

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The case was brought by the Western Energy Alliance against Biden, Interior Secretary Deb Haaland, herself a former New Mexico congresswoman, and the BLM.

Santa Fe-based WildEarth Guardians joined with a coalition of environmental groups to intervene in the case, meaning they were also allowed to make arguments in support of the leasing pause.

Climate and Energy Program Director Jeremy Nichols said the court decision proved oil and gas companies are not entitled to public land for their operations, and that the federal government has the power whether or not to offer such lands to the industry.

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“The law is clear, the oil and gas industry doesn’t have a right to frack public lands,” Nichols said. “And given our climate crisis, it’s more critical than ever to ensure the industry is not fracking public lands.”

This latest verdict in the continual legal battle over federal oil and gas leases followed an Aug. 18 ruling from a federal judge in Louisiana, where the moratorium was initially halted and sales were ordered to resume.

In that ruling, a federal judge blocked leasing pauses in the 13 states that had sued, not including New Mexico, but could have set a precedent for other oil-producing states to prevent any interruption of lease sales.

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Melissa Hornbeing, senior attorney with the Western Environmental Law Center said the federal government should conduct any lease sales without adequate environmental analysis under the National Environmental Policy Act (NEPA).

“We find it reassuring that the court affirmed the Bureau of Land Management’s authority to postpone oil and gas lease sales in order to make certain they adhere to the law,” she said. “The judge called out as nonsensical the state and industry group’s argument that postponing a lease to ensure compliance with NEPA requires a NEPA analysis of its own.

“This suggests any appeal of this decision will have an uphill battle in court.”

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Records show the oil and gas industry already holds 426,266 acres in leased but unused federal lands, per a report from New Mexico economist Kelly O’Donnell.

O’Donnell reported about 90 percent of New Mexico’s leased federal land was already in production.

She said federal action from the administration or Congress would have “minimal” impact on New Mexico’s oil and gas production and the revenue it brings to the state.

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In 2021, when no lease sales were held in the state, New Mexico continued to see growing oil and gas production and revenue, money used to pay for public services like schools and infrastructure like roads.

In an August report, the state’s Legislative Finance Committee reported New Mexico since January 2021 saw production increase from about 1,000 barrels of oil per day to almost 1,600 barrels per day in August of the following year.

“Congress and the Department of Interior are weighing a variety of reforms that could impact operators on federal land in New Mexico, however, my analysis shows these impacts would be minimal to state revenue,” O’Donnell said.

“Despite claims by the industry and its allies, these reforms will have no impact on gas prices and pose little threat to oil and gas production in New Mexico, which is expected to continue rising in the coming decade.”