US oil industry wins reprieve to avert Gulf of Mexico shutdown

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The US oil industry won a delay in a high-profile legal clash with
environmental advocates over rules that it claimed could trigger the
complete shutdown of production in the Gulf of Mexico.

A federal court ruled on Monday that agency regulations due to expire in December could remain in place until May, despite a previous finding that they lacked sufficient protections for endangered species.

The industry argued that if the “biological opinion” by the US National Marine Fisheries Service was nullified without a replacement, it would create a vacuum that could halt production and lead to hundreds of thousands of jobs being cut at a cost of $2.8bn a month to national economic output.

Environmentalists accused the industry of “fear mongering” and warned that the five-month delay increased the risk that the Gulf of Mexico Rice’s whale, whose population numbers have fallen close to 50 individuals, could become extinct.

Ryan Meyers, general counsel at the American Petroleum Institute, an industry lobby group, welcomed what he called “the court’s pragmatic decision”. 

“Today’s ruling provides only temporary relief and work still must be done to avoid disruptions to the backbone of our nation’s energy supply.” The fisheries service declined to comment.

The legal battle is the latest in a series of clashes between green groups and the oil and gas industry, which has warned litigation poses a threat to new developments, individual businesses and US energy security.

Monday’s ruling comes after the Sierra Club and Friends of the Earth, among others, won a case in August to vacate the existing “biological opinion” that dictates environmental precautions that need to be taken by companies operating in the Gulf, home to about 16 per cent of US crude output.

The National Marine Fisheries Service said it would not be able to issue a new opinion until May. The agency and the oil industry jointly asked the court for an extension.

“It’s been really frustrating to see the agency delay and then ask for a further delay to protect species,” said Chris Eaton, senior attorney at Earthjustice, which filed the suit on behalf of the groups. “It’s important to get protections in place sooner than later.”

“This case is not about shutting down the oil and gas industry, it’s about getting some common sense measures to prevent the extinction of a whale,” he added. “We find it appalling that the industry is turning around and raising all kinds of fear-mongering about this.”

In a separate case on Monday NextDecade, an LNG developer, filed an appeal against a recent court decision revoking a permit issued by US regulators for the construction of an $18bn plant in Brownsville, Texas.

The case was taken by the environmental organisation Sierra Club, as well as several local groups, which argued the Federal Energy Regulatory Commission failed to adequately consider the project’s greenhouse gas emissions and impact on the community in granting the permit.   

NextDecade, which saw its share price almost halve following the August ruling, has warned the judgment could set a legal precedent that halts future LNG developments and other large construction projects.

“Delay is the killer of infrastructure projects and the opponents of these projects, whether they be LNG facilities or transmission lines crossing state lines, they know this,” Matt Schatzman, chief executive of NextDecade, told the Financial Times.