A recent ruling by a U.S. District Court judge in Maryland could potentially disrupt oil and gas operations in the Gulf of Mexico before the year concludes. The judge reversed a 2020 environmental decision that had been the basis for oil and gas activities in the region, which could result in an indefinite suspension of offshore operations until further regulatory review is conducted. In a case brought by the Sierra Club and other environmental groups, a federal court in Maryland ruled that a 2020 decision by the National Marine Fisheries Service violates the Endangered Species Act—that the agency issued a flawed “biological opinion” for exploration and production in the Gulf, “which underestimated the risks of harm to protected species and took inadequate measures to mitigate those risks.” Without a favorable biological opinion, oil and gas operations cannot proceed, as it is a prerequisite for the U.S. Interior Department to issue new drilling permits. The decision comes just weeks after the district court ruled in favor of a number of environmental groups that filed a lawsuit after the National Marine Fisheries Service issued its 2020 Biological Opinion on offshore oil and natural gas production in the Gulf of Mexico.
Last month, District Court Judge Deborah L. Boardman, appointed by the Biden-Harris administration, determined that the biological opinion should be invalidated as of December 20, 2024. The challenge was initiated nearly four years ago, with a summary judgment motion filed over two years ago. Judge Boardman deemed the biological opinion unlawful but chose not to immediately vacate it. Instead, she remanded it, allowing the NMFS approximately four months to develop an acceptable replacement. She said that this approach was intended to prevent disruption in the Gulf’s oil and gas operations.
The Gulf of Mexico is crucial to U.S. energy production, accounting for 14 percent of the nation’s oil output and 5 percent of its dry gas production. If the Gulf were a separate nation, it would rank among the top 12 oil producers globally. Additionally, the region supports over 400,000 jobs and contributes more than $6 billion in federal revenue, so the potential impact of this decision could be substantial.
The National Marine Fisheries Service (NMFS) is required to produce a new, legally compliant evaluation of the risks posed by oil and gas activities to endangered wildlife, particularly the “critically endangered” Rice’s whale, which is found exclusively in the Gulf of Mexico. The court noted that the NMFS had incorrectly assumed that a catastrophic oil spill, akin to the 2010 Deepwater Horizon disaster, was improbable, despite its own analysis suggesting otherwise. The 2010 oil rig blowout and explosion released millions of barrels of oil into the Gulf, she said, several hundred times more than the amount the agency anticipated for a worst-case scenario oil spill. According to the court, NMFS improperly relied on the Interior Department’s Bureau of Ocean Energy Management’s assessment, which underestimated the likelihood of a spill exceeding one million barrels, rather than conducting its own independent evaluation.
Judge Boardman noted that the relevant Interior Department offshore bureaus had requested NMFS to reassess the biological opinion in October 2022. Boardman said that the National Marine Fisheries Service originally agreed to conclude that consultation by September 1, 2024. It later indicated that it would issue a new or revised biological opinion in December 2024. Now it says completion has slipped to ‘at least until the end of 2024,’ if not ‘until late winter or early spring 2025.’” The American Petroleum Institute warned that if a resolution is not reached by the end of this year, when the current opinion becomes invalid, NMFS could face a flood of consultation requests, which would likely further delay the development of a new opinion.
Background
The opponents of the biological opinion filed their case in October 2020. On January 19, 2021, the defendants moved to transfer the case to the U.S. District Court for the Southern District of Texas or the U.S. District Court for the Eastern District of Louisiana. The federal court in Maryland denied the change of venue petition in May 2021, despite its distance from the area affected by its ruling.
On September 6, the American Petroleum Institute (API) sent a letter to Commerce Secretary Gina Raimondo expressing concern that a recent federal court ruling invalidating the Fisheries’ assessment of offshore oil and gas impacts on marine mammals might lead to a “bureaucratic bottleneck.” API warned that reduced production in this region could result in a shift towards higher carbon-intensity oil from other parts of the world. They emphasized that this region is crucial for economic growth, contributing over $34.3 billion to the U.S. GDP, supporting more than 412,000 jobs nationwide, and generating $6.1 billion in federal revenue. API’s letter stressed the importance of collaboration between U.S. consumers, the federal government, and the oil and gas industry to address the issue, cautioning that the court’s decision could jeopardize the country’s “economic security.”
Revenue from offshore energy production, especially in the Gulf of Mexico, goes toward funding the Land and Water Conservation Fund and 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.
Conclusion
A Maryland court has ruled that the Biological Opinion for the U.S. Gulf of Mexico issued in 2020 is unlawful and will lapse effective December 20, threatening to disrupt new and existing oil and natural gas production and activity in the region. By vacating the biological opinion without allowing enough time for the National Marine Fisheries Service to issue a revised opinion, the court decision threatens to significantly slow down or halt all permits for routine and daily oil and gas operations. The Gulf of Mexico is a vital part of the nation’s energy security and a resolution of the problems presented by the court’s ruling is essential to maintaining that security. The national security implications could be severe.
