(Updates paragraphs 1-11 with filing of appeal)
The American Petroleum Institute (API), the EnerGeo Alliance, the National Ocean Industries Association (NOIA), and Chevron U.S.A. Inc. jointly appealed a Maryland court decision that they say could shut down myriad offshore oil and gas operations and activities on Dec. 20.
“If this ruling is left uncontested, a critical source of current and future U.S. energy supply could be in jeopardy at a time of persistent inflation and geopolitical instability,” the trade groups said in a joint statement released Sept. 12. “We intend to pursue all legal means to prevent the far-reaching consequences of this ruling for Gulf Coast economies and American families that depend on access to affordable, reliable energy.”
Specifically, the trade groups Wednesday filed their appeal of the U.S. District Court for the District of Maryland’s decision to vacate the National Marine Fisheries Services’ (NMFS) Biological Opinion in the Gulf of Mexico.
Under the ruling, the Biological Opinion (BiOp) for the U.S. Gulf of Mexico will lapse effective Dec. 20, threatening to halt new and existing oil and natural gas production and activity in the region.
“American oil and natural gas production in the Gulf of Mexico is a driving force of energy security here in the U.S. and around the world, supports hundreds of thousands of jobs, and generates billions for state and local revenue,” according to the groups’ filing.
By vacating the BiOp without allowing enough time for NMFS to issue a revised opinion, they say the court decision threatens to significantly slow down or halt all permits for routine, daily operations, in turn, leaving current and future energy production at risk. It also undermines worker safety and environmental protection efforts, they said.
According to the U.S. Energy Information Administration, U.S. Gulf of Mexico production accounts for nearly 15 percent of total U.S. crude oil production, or nearly two million barrels of oil per day. If the Gulf of Mexico were a country, it would be one of the top 12 producing nations in the world, the groups said in their statement.
In 2023, for example, the Gulf of Mexico oil and natural gas industry is estimated to have supported more than 412,000 jobs, contributed roughly $34 billion to the U.S. gross domestic product, and generated upwards of $6 billion in federal government revenue.
In fact, the revenue from offshore energy production, especially in the Gulf of Mexico, goes toward funding the Land and Water Conservation Fund, as well as other initiatives focused on protecting green spaces, public parks and recreation areas, wildlife, and other community programs across all 50 states.
From 1965 to 2019, the industry contributed nearly $41 billion to the program and provided more than 42,000 state grants for park restoration, the groups say.
The appeal filing comes on the heels of statements released Tuesday by API, the Energy Workforce & Technology Council, the Independent Petroleum Association of America (IPPA), the US Oil and Gas Association, the National Ocean Industries Association, the Western Energy Alliance, and the International Association of Drilling Contractors (IADC) in response to the decision issued by Maryland District Court Judge Deborah Boardman to vacate the 2020 Gulf of Mexico BiOp.
The BiOp was meant to serve as the primary Endangered Species Act consultation for most oil and gas activities in the Gulf of Mexico, with only a few additional actions requiring further review, according to the trade groups, which seek a legal, regulatory or legislative solution in place before Dec. 20 that prevents a gap between biological opinions being in place.
They said this would include those with past leases at the time the 2020 opinion was issued, regardless of when the lease was awarded, in addition to actions associated with new leases through approximately 2030.
API said Boardman’s decision to vacate the NMFS BiOp in the Gulf of Mexico highlights how the lack of a resolution by December could lead to significant consequences for American energy security, including a potential halt to all new and existing oil and natural gas production in the region.
“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,” API President and CEO Mike Sommers wrote in a Sept. 6 letter sent to U.S. Commerce Secretary Gina Raimondo.
“Constrained production in this region could be replaced by higher carbon-intensity barrels from elsewhere in the world,” wrote Sommers. “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.”
It’s in the best interest of U.S. consumers, the federal government, and oil and gas producers to partner to resolve this issue, he added, noting that API looks forward to working with the department and its agencies to minimize any disruptions and to find a solution.
Energy Workforce & Technology Council President Tim Tarpley agreed, saying the “misguided ruling” could jeopardize hundreds of thousands of jobs and billions in economic activity.
“The Gulf of Mexico is a cornerstone of American oil and gas production, providing nearly 15 percent of our nation’s crude oil and supporting an estimated 372,000 jobs in the United States,” Tarpley said. “Abruptly halting these operations would have devastating consequences for energy prices, national security, and American families already struggling with inflation.”
The council urged immediate action to prevent any interruption of Gulf energy operations, and said that the Biden administration and Congress must use all tools at their disposal to maintain continuity and provide certainty to Gulf operators.
“America cannot afford to lose this vital source of domestic energy production,” said Tarpley.
Dan Naatz, chief operating officer for the IPPA, said that independent oil and natural gas producers operating in the Gulf of Mexico already adhere to the highest environmental and safety standards.
“If production in the area were to stop, the United States’ energy security and supply would be severely impacted, along with the livelihoods of all those who work in the offshore oil and natural gas industry and in gulf state communities,” said Naatz. “IPAA urges quick action to ensure continued offshore oil and natural gas production in the Gulf of Mexico.”
According to Tim Stewart, president of the US Oil and Gas Association, if the judge’s decision goes into effect, then it could cause massive price shocks across all sectors of the U.S. economy and every business.
“National security and our balance of trade are about to be impacted,” said Stewart. “Worst of all, within weeks, millions of low- and moderate-income families will find themselves pushed back into energy poverty. Immediate action must be taken to overturn this ruling.”
Likewise, Erik Milito, president at the National Ocean Industries Association, said that the potential for the ruling to cause disruptive economic consequences for the United States and energy markets as a whole could not be understated.
“Any disruption due to vacatur of the 2020 Biological Opinion could not only impact hundreds of thousands of energy workers in the region but would potentially increase energy insecurity by jeopardizing oil production coming from the Gulf of Mexico,” he said. “Immediate action is now required to avert a potentially devastating coverage gap for offshore oil and gas operations in the U.S. Gulf of Mexico.”
Kathleen Sgamma, president of the Western Energy Alliance, said the industry has seen how judges far removed from production areas have “underappreciated” the local economic and social impacts of their rulings in other states.
“Further, the ruling went far beyond what even the environmental plaintiffs thought was reasonable,” said Sgamma. “We hope the appellate court will appreciate the cascading impacts and the long timelines for corrective action.”
IADC President Jason McFarland called the Dec. 20 deadline “arbitrary” and “woefully inadequate” for developing a sustainable solution, and said Congress and the administration must provide the NMFS with sufficient time and resources to conduct a thorough, science-based review.
“Rushing this process,” he said, “risks compromising both environmental protections and energy security.”
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