An Alaska corporation is already teeing up a legal battle over the Biden administration’s decision to cancel contested oil and gas leases in a massive wildlife refuge.
The Interior Department announced plans last week to revoke seven leases held by the Alaska Industrial Development and Export Authority (AIDEA) that were sold in the final days of the Trump administration. The state corporation has vowed to pursue legal action against the federal government for the cancellation of the leases spanning 365,000 acres in the coastal plain of the Arctic National Wildlife Refuge, also known as ANWR.
“A willingness to circumvent laws passed by Congress has consequences reaching far beyond ANWR’s boundaries, and will impact future development across this country,” the authority said in a statement last week. “AIDEA will aggressively defend our lease rights and oppose this unlawful action.”
The Biden administration’s move is likely on solid legal ground, said some court watchers. Legal observers said the decision to cancel the leases — based on what the administration called an inadequate National Environmental Policy Act review process — appears to fall within the Interior Department’s well-established power.
But the strength of the department’s legal argument for cancellation could depend on which laws a federal court might rely on to decide if the Biden administration could withdraw the leases — legislation that is specific to leasing in part of Alaska, or a broader lease cancellation standard.
“Generally, there is the authority to cancel leases if the leases were issued unlawfully, for whatever reason,” said Mark Squillace, director of the Natural Resources Law Center at the University of Colorado, Boulder.
The Mineral Leasing Act gives Interior discretion to cancel a lease for a mistake or inadequate NEPA review, said Rebecca Watson, a former department official under the George W. Bush administration.
She noted that the government doesn’t often cancel leases because it is required to pay back the lease bonus paid at the time of the sale, and the lease holder can also negotiate for costs.
“Unless the ‘flawed NEPA’ decision is arbitrary and unsupported by law and facts, the feds are likely to prevail,” said Watson, who is now special counsel at the firm Welborn Sullivan Meck & Tooley PC.
The Biden administration’s claims may also be complicated by Congress’ directives to develop an oil and gas program in the Arctic refuge. Former Trump Interior Secretary David Bernhardt, who oversaw the January 2021 lease sale, said that Interior had “multiple legal obligations” under the 2017 Tax Cuts and Jobs Act, which required the department to offer two lease sales in the refuge.
The Biden administration is planning to revoke leases from the first of these sales. Interior must offer a second sale by the end of 2024.
The 2017 law directs Interior to follow a similar cancellation criteria to the standard set for leases in Alaska’s National Petroleum Reserve, or NPR-A. There are other provisions of the Tax Act that may or may not be relevant, like acreage limitations, said Bernhardt.
The first question a court must resolve is whether the process for canceling leases in the reserve applies, or if the decision is subject to Bureau of Land Management regulatory requirements or some other standard, said Bernhardt. Then a court must determine whether the Biden administration offered adequate rationale for the cancellation.
“Depending on the difference in the standard, that could be material in the flexibility that the secretary does or does not have,” Bernhardt said.
Romany Webb, deputy director of Columbia University’s Sabin Center for Climate Change Law, said the decision to cancel the leases is not a legal “slam dunk” for the Biden administration.
“I do think there are some legal questions and complexities associated with the decision,” Webb said. “But there are good arguments that the secretary of Interior has the authority to cancel the leases.”
Like Bernhardt, she pointed to the Tax Act language requiring Interior to follow a similar cancellation process for NPR-A leases.
According to Webb’s 2020 blog post on the subject, the law allows cancellation of a lease that isn’t producing oil and gas “if the lessee fails to comply with any legal requirement” imposed on it. A lease producing oil and gas, or one that is “known to contain valuable deposits of oil and gas,” can be canceled by court order.
But Webb also noted that Interior had canceled the Arctic refuge leases due to violations of procedural requirements, including NEPA, and those decisions have been upheld by federal courts.
Cancellation on NEPA grounds
In its announcement of the cancellation, Interior said its new supplemental draft NEPA review published Wednesday supported the agency’s finding in June 2021 that the lease sale was “seriously flawed and based on a number of fundamental legal deficiencies.”
Interior found that the Trump administration had failed to adequately consider alternatives to the lease sale, had not done enough to account for the resulting greenhouse gas emissions and had misinterpreted the Tax Act.
The decision to revoke the leases comes a month after a federal court found the Biden administration had acted within its power when it put the leases on ice as it reviewed its predecessor’s process for approving the sale.
While that case was not about the cancellation of the leases, the ruling by Judge Sharon Gleason, an Obama appointee to the U.S. District Court for the District of Alaska, also backed Interior’s authority to revoke leases, said Brook Brisson, a senior staff attorney for Trustees for Alaska.
“That decision is important and helpful in that it does recognize and reinforce this long-standing authority to cancel leases that were issued unlawfully,” said Brisson, whose group legally supported Interior’s decision to pause the leases.
She called Interior’s cancellation of the Arctic refuge leases a recognition of “well accepted” secretarial authority that is separate from the Tax Act or the NPR-A statute.
The context of the cancellation is also important, said John Leshy, a former Interior official under the Clinton administration. The only remaining leaseholder is a unit of the state of Alaska, and the oil and gas industry has made clear it is not interested in development there, he said.
“While Judge Gleason’s ruling upholding Interior’s decision to take another look does not guarantee she would uphold Interior’s decision to rescind these leases, it is a positive sign for Interior,” Leshy added.
‘Calculated bet’
Canceling the leases after keeping them on hold throughout much of Biden’s term “is not a huge additional step,” said Squillace, who was also an Interior official in the Clinton administration.
“The government has made a calculated bet that whatever liability might exist, it’s going to be sufficiently modest that they’re willing to take the hit,” Squillace said. “It seems, politically, like a smart move for them.”
The Biden administration’s cancellation decision also comes as Interior proposed new protections for 13 million acres in the NPR-A that are home to important wildlife habitat.
The department announced its intent to introduce the protections after greenlighting the massive ConocoPhillips Willow oil project within an undeveloped part of the reserve.
Brisson said the dual announcements are an important move for the Biden administration.
The decision to protect the Arctic writ large — rather than just one area — is “recognizing this is an entire region that is all interconnected,” said Brisson.
She added: “Really taking action regionwide was incredibly important and monumental and a really big step forward in policy.”
