Scholars argue that the Interior Secretary has authority to terminate fossil fuel leases on public lands.
During President Joseph R. Biden’s first week in office, he signed an executive order directing the U.S. Department of the Interior to “pause new oil and natural gas leases on public lands” and to conduct “a comprehensive review and reconsideration of federal oil and gas permitting and leasing practices.” Newly confirmed U.S. Secretary of the Interior Deb Haaland—who has opposed fossil fuel development on public lands in the past—now leads the Biden Administration’s review efforts.
But President Biden and Secretary Haaland face a major barrier to reform. Energy companies already hold leases that entitle them to extract oil and gas on nearly 21 million acres of public lands. Leaseholders currently are only drilling on about half of those leases, giving the fossil fuel industry a generous cushion to continue development even if the Biden Administration implements permanent limits on new leases.
The Biden Administration may, however, have the power to terminate existing leases, according to Eric Biber and Jordan Diamond of the University of California, Berkeley, School of Law. Biber and Diamon argue that the Interior Department—which sells resource extraction leases to private parties as part of its public lands management strategy—has two main sources of authority “to end, cancel, or forfeit” oil and gas leases.
Biber and Diamond first contend that this power is grounded in the executive branch’s “inherent discretionary authority.”
Congress long ago authorized the Interior Secretary to manage public lands. Federal courts have held that the Secretary, like other executive officers, can use her discretion when implementing her power. That discretion extends to management decisions that concern government contracts and “day-to-day government operations.”
Biber and Diamond suggest that the Interior Secretary’s discretionary authority logically and lawfully extends to managing—and even canceling—fossil fuel leases and contracts. They warn, however, that opponents challenging that interpretation in court will have “strong counterarguments” rooted in the “legislative history,” “caselaw,” and legal “structure” of energy leasing.
In addition, Biber and Diamond emphasize that even if the courts agree that the Secretary has discretionary termination authority, cancelation will breach the lease contracts. Although contract breach is lawful, Biber and Diamond caution that the government will need to compensate leaseholders for their losses. The courts will likely measure damages using some combination of the leaseholders’ payments to the government and lost profits, Biber and Diamond explain.
But in addition to the Interior Secretary’s discretionary authority, Biber and Diamond also identify a second, “less debatable,” source of authority to terminate fossil fuel leases: the terms of the lease. Federal oil and gas leases alert leaseholders that, under federal law, restrictions in “specific, nondiscretionary statutes” limit their rights. These limits empower the Interior Secretary to cancel fossil fuel leases without breaching the lease contract when specific and nondiscretionary statutes prohibit the lease.
Two specific and nondiscretionary statutes may justify restrictions on oil and gas leases “because of the negative environmental impacts of the greenhouse-gas emissions from fossil-fuel combustion,” according to Biber and Diamond.
The Endangered Species Act prohibits the federal government from harming or jeopardizing endangered species. Because climate change adversely affects endangered species, the Interior Department can determine that greenhouse gas emissions from fossil fuel production violate the statute, Biber and Diamond claim. That conclusion would then justify canceling oil and gas leases.
Biber and Diamond concede, however, that the causal link between fossil fuel leases and harms to endangered species may prove too tenuous in court. In addition, they caution that action under the Endangered Species Act might “implicate a wide range of other federal actions, including environmental permitting of oil and gas refineries.”
Alternatively, the Federal Land Policy and Management Act requires the Interior Department to “prevent unnecessary or undue degradation” of public lands. Biber and Diamond suggest that the agency could conclude that the greenhouse gas emissions from fossil fuels implicate this provision “by contributing to climate change.” If the Interior Department reaches this conclusion, the statute will “trigger a nondiscretionary duty to stop that degradation by canceling the leases” that produce greenhouse gas emissions, according to Biber and Diamond.
Leaseholders will not be entitled to compensation for leases canceled because of the Interior Department’s duties under the Endangered Species Act or the Federal Land Policy and Management Act, Biber and Diamond argue. Because these terminations would conform with the agreement between the leaseholder and the agency, cancelation would not breach the contract.
Biber and Diamond emphasize that the Biden Administration will have to weigh the plentiful litigation and economic risks and environmental rewards associated with adopting a termination policy. Should President Biden and Secretary Haaland proceed along the lines suggested by Biber and Diamond, however, they may be able to overhaul the federal fossil fuel leasing program completely.