By Jill McLeod, Partner, Dorsey & Whitney LLP, Anchorage, Alaska
There has been a lot of press surrounding what President Trump has done in his first 100 days of office, especially when it comes to his actions that have an impact on domestic energy production in the U.S. Since taking office in January, President Trump has issued a number presidential memorandum and executive orders to prioritize both onshore and offshore energy development. He removed duplicative regulations that impeded industry, directed the U.S. Department of Interior to expedite the approvals of the Keystone XL and Dakota Access pipeline permits, and most recently opened access to federal lands for energy exploration and development.
The oil and gas industry applauded Trump’s actions but environmental groups vowed to challenge some of the President’s actions as unlawful. What does all this mean for the oil and gas industry? In short – lots of litigation to follow.
Before President Obama left office, using Section 12(a) of the Outer Continental Shelf Lands Act (OCSLA), Obama banned drilling in the U.S. Arctic and Atlantic Oceans by withdrawing federal lands in the outer continental shelf from future oil and gas leasing. President Obama also used his presidential authority under the Antiquities Act to designate millions of acres of federal lands and waters as national monuments and restricted the uses allowed on those public lands, effectively prohibiting energy development in those areas.
During his Presidential campaign, Trump promised to lift restrictions on federal lands and open them up to energy production as part of his “An America-First Energy Plan” and it didn’t take him long to keep his promise. On April 26, 2017, President Trump directed Secretary of the Interior Ryan Zinke to perform a review of all presidential designations under the Antiquities Act made since January 1, 1996. The executive order did not take away any monument designations, but required Secretary Zinke to review those monument designations and make recommendations on whether any should be reversed, resized or modified to allow for multiple uses on federal lands, including energy production.
On April 28, 2017 and on his 99th day of office, President Trump undid President Obama’s drilling ban by issuing an executive order that reversed Obama’s Arctic and Atlantic Ocean Section 12(a) withdrawal. In the “Implementing an America-First Offshore Energy Strategy” executive order Trump also instructed Secretary Zinke to consider revising the five-year offshore leasing program so that it would include lease sales in the Arctic and Atlantic Oceans, and he directed that the Interior Department reconsider several offshore regulations to encourage energy exploration and development.
Welcome News for Energy Industry
Trump’s decision to review monument designations and override Obama’s offshore oil and gas drilling ban was welcome news to the oil and gas industry. But environmental groups immediately voiced their opposition to the Antiquities Act review and threatened to challenge the executive order rescinding the drilling ban as unlawful. Only days later, on May 3, 2017, a consortium of 10 conservation and Alaska Native groups filed a lawsuit against President Trump in federal district court in Alaska. The suit claims that President Trump’s attempt to undo Obama’s permanent protections of federal lands, using an executive order, is unlawful.
The plaintiffs argue that Section 12(a) of OCSLA authorizes the President to withdraw lands from the leasing but it does not allow the President to reverse or undo the Section 12(a) withdrawal. The group contends that Obama’s drilling ban was not reversible, and by reversing the drilling ban, President Trump exceeded his constitutional and statutory authority and violated federal law. This issue has never been tested in the U.S. courts and it could take years before all the legal proceedings are resolved. In addition to this lawsuit, the Trump administration can also expect opponents of the Antiquities Act executive order to challenge any future changes to monument designations by Secretary Zinke.
Even if the environmental groups are successful in their battle, and the courts reject the Trump administration’s arguments that the reversal was lawful, the President and industry may win the war. The Republican-controlled Congress could step in and push a legislative fix to amend OCSLA to allow a president to undo unfavorable decisions effected by a predecessor and authorize President Trump to reverse any withdrawal of lands with the stroke of a pen.
In any event, the lifting of the ban does not necessarily make offshore drilling in the Arctic Ocean a compelling proposition and it will probably be many years before the U.S. sees any activity in the Arctic again. With oil prices hovering around $50 a barrel and the steep costs of doing business in the Arctic, the oil industry will be hesitant to jump back into exploration efforts there. In the near term, with further changes to the five-year leasing program, it is more likely that industry might be willing and able to take advantage of exploration and development opportunities in the Gulf of Mexico and the Atlantic coast areas due to their proximity to existing infrastructure.
Jill McLeod is a partner at the international law firm Dorsey & Whitney who serves in Dorsey’s Corporate Group. Prior to joining Dorsey, she served for eight years as in-house counsel for ConocoPhillips Company.
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