On February 11, 2022, the Biden Administration’s climate change agenda sustained a major blow as Judge James D. Cain of the Western District of Louisiana enjoined a Biden administration executive order that charged federal agencies with considering the “social cost of carbon” in their decision making.  The injunction could have far reaching impacts on the administration’s ability to consider climate change impacts in its rulemaking.

A. Background

When an agency is evaluating a certain action, such as issuing a lease or rulemaking, the agency is required to perform a cost/benefit analysis to inform the pros and cons of its decision.  In 2009, the Obama administration established estimates of the social cost of carbon (“SCC Estimate”) that all agencies were required to use in their regulatory cost/benefit analysis.  The SCC Estimate assigned a dollar value on estimated global damages caused by every additional ton of greenhouse gas emitted into the atmosphere by using economic models that capture the impacts of climate change, including rising sea levels, changes to agricultural productivity, water shortages, property damages from increased flood risk, etc.  Using a higher SCC Estimate would weigh heavily against proposed actions or rules that could increase planet-warming emissions.

Under the Obama administration, the SCC Estimate was about $51 per ton of carbon dioxide emissions, adjusted for inflation.  The Trump administration slashed the SCC Estimate to about $7 per ton by limiting the scope of the SCC Estimate evaluation to only the climate change costs expected to be experienced within the United States, instead of the expected global cost.  On President Biden’s first day of office, the new administration issued Executive Order 13990, which restored the SCC Estimate to about $51 per ton of carbon dioxide emissions and reestablished consideration of the global climate change costs rather than only the national costs.  On April 22, 2021, the plaintiffs—Texas, Louisiana, and eight other energy producing states (the “Plaintiff States”)—filed suit to challenge Executive Order 13990, seeking declaratory and injunctive relief.

B. The Court Had Standing

As a preliminary matter, the Biden administration argued that the Plaintiff States did not have standing to contest Executive Order 13990 because the Plaintiff States could not establish an injury in fact.  The Court found that the Plaintiff States were injured in three ways: (1) Executive Order 13990 would negatively impact energy exploration and production, which would ultimately reduce significantly the state taxes and royalties derived therefrom; (2) the SCC Estimate would impose additional duties upon Plaintiff States when they implement cooperative federalism programs; and (3) the increased price of energy would harm the Plaintiff States’ ability to purchase affordable energy to carry out their sovereign functions.

C. The Court Granted the Plaintiff States’ Motion for Preliminary Injunction

In evaluating the preliminary injunction elements, the Court primarily focused on addressing whether the Plaintiff States had a substantial likelihood of success on the merits and were subject to a substantial threat of irreparable injury.

The Biden administration argued that a preliminary injunction was unwarranted because the Plaintiff States did not have a substantial likelihood of success on the merits.  The Court disagreed for several reasons.  First, the Court explained that Executive Order 13990 directly conflicts with current law which only allows agencies to consider the national negative impacts when conducting the cost/benefit analysis, not the negative impacts on other countries.  Second, the Court held that, under the major questions doctrine, the Biden administration lacked authority to require agencies to consider the global effects of climate change.  The Court explained that imposing a duty upon all agencies to consider the global impacts would be a substantial change to the current regulatory scheme that would result in a cost to the economy of approximately $500 billion.  Finally, the Court found that the Biden administration could not require agencies to consider the global impacts of climate change because the administration did not appropriately follow the notice and comment rulemaking process, which is required when making such a substantial change to the regulatory scheme.

The Biden administration also argued that the Plaintiff States could not establish that they were at risk of irreparable injury.  The Court held that the Plaintiff States were subject to a substantial threat of irreparable injury largely on the same basis for which the Court found the Plaintiff States were injured in fact under the standing analysis.  In short, the Plaintiff States would suffer increased energy costs, additional regulatory burdens, violation of their procedural rights, and reduced revenue from taxes and royalties as energy production and exploration slowed.  Judge Cain also noted that using the SCC Estimate in oil and gas lease reviews would “artificially increase the cost estimates of lease sales.”

D. Conclusion

Because the Court found that the Plaintiff States had a substantial likelihood of success on the merits and were irreparably injured, the Court granted the Plaintiff States’ motion for preliminary injunction.  Nevertheless, on February 19, 2022, the Biden administration filed a notice of appeal and a motion to stay the preliminary injunction order.  Accordingly, whether the preliminary injunction order will be enforced is still a hotly contested issue.

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Photo of Jana Grauberger Jana Grauberger

Jana Grauberger is an oil and gas lawyer with more than 20 years experience. Clients turn to her as a trusted advisor in connection with their contract negotiations, regulatory advice and appeals, litigation, and arbitration related to onshore and federal offshore upstream and…

Jana Grauberger is an oil and gas lawyer with more than 20 years experience. Clients turn to her as a trusted advisor in connection with their contract negotiations, regulatory advice and appeals, litigation, and arbitration related to onshore and federal offshore upstream and midstream projects and facilities. Jana has represented clients in negotiating a wide variety of onshore and offshore contracts, including purchase and sale agreements, farmouts, participation agreements, joint operating agreements, production handling agreements, platform use agreements, gathering agreements, connection agreements, construction contracts, transportation contracts, and decommissioning agreements. She also represents clients in connection with regulatory matters involving Department of Interior agencies, including the Bureau of Ocean Energy Management (BOEM), the Bureau of Safety and Environmental Enforcement (BSEE), and the Office of Natural Resources Revenue (ONRR).

Photo of Stephen Wiegand Stephen Wiegand

Steve Wiegand’s practice focuses on complex regulatory issues impacting onshore and offshore energy and industrial operations.

In the offshore arena (including the Gulf of Mexico and the Pacific), he advises clients on a wide range of regulatory matters, including compliance with operational and…

Steve Wiegand’s practice focuses on complex regulatory issues impacting onshore and offshore energy and industrial operations.

In the offshore arena (including the Gulf of Mexico and the Pacific), he advises clients on a wide range of regulatory matters, including compliance with operational and safety requirements, appeals of Incidents of Non-Compliance and civil penalty assessments, incident response and associated agency investigations, lease suspensions, and National Pollutant Discharge Elimination System permit compliance.

Photo of Daniel E. Rodriguez Daniel E. Rodriguez

Daniel is an oil and gas litigator practicing in the firm’s Houston office.

Prior to joining the firm, Daniel served as a federal judicial law clerk to the Honorable Judge Andrew Edison of the United States District Court.  Having researched and drafted numerous…

Daniel is an oil and gas litigator practicing in the firm’s Houston office.

Prior to joining the firm, Daniel served as a federal judicial law clerk to the Honorable Judge Andrew Edison of the United States District Court.  Having researched and drafted numerous opinions for Judge Edison, Daniel has developed excellent legal research and writing skills, which are imperative in developing strong legal arguments and communicating them effectively.  Daniel also held several prestigious internships with well-known organizations including Halliburton Energy Services, the Texas Supreme Court, the Elliot Law Firm, and the Lanier Law Firm.  Daniel received his Juris Doctor, cum laude, from Baylor Law School and was recognized as the number one student in his area of study.