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Court ruling on social cost of carbon upends Biden’s climate plans

The Interior Department has paused oil and gas lease sales on public lands after a federal judge barred the government from considering climate damages in major decisions.

A natural gas flare on an oil well pad burns as the sun sets outside Watford City, N.D., in 2016. (Andrew Cullen/Reuters)
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A recent court ruling that bars the Biden administration from accounting for the real-world costs of climate change has created temporary chaos at federal agencies, upending everything from planned oil and gas lease sales to infrastructure spending.

The Feb. 11 decision by a Louisiana federal judge blocked the Biden administration from using a higher estimate for the damage that each additional ton of greenhouse gas pollution causes society. This formula, called the social cost of carbon, applies to consequential decisions affecting fossil fuel extraction on public lands, infrastructure projects and even international climate talks.

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The Justice Department said it intends to appeal the Louisiana judge’s preliminary injunction. But in the meantime, the ruling could set off a scramble at federal agencies to redo their analyses of major decisions that relied on the higher social cost of carbon, a top Biden administration official warned in a brief filed Saturday.

“I understand that a significant number of agency rules and actions would need to be postponed or reworked as a result of the Preliminary Injunction,” wrote Dominic J. Mancini, deputy administrator of the Office of Information and Regulatory Affairs of the Office of Management and Budget.

“The cumulative burden of the Preliminary Injunction is quite significant,” he added. “Regulatory impact analyses and analyses in support of other agency actions are often very complex and time-intensive studies that agencies can spend months developing and refining.”

Mancini noted that the Energy Department had identified 21 rulemakings that would be affected by the ruling, while the Environmental Protection Agency had identified five and the Interior Department had pinpointed three. In addition, he said, Transportation Department officials had expressed concern about the potential for months-long delays to a grant program for rail and transit projects.

President Biden last year directed federal agencies to apply an interim social cost of carbon of $51 per ton — the figure used under former president Barack Obama — while his administration weighed whether to raise it to as high as $125 per ton. Under former president Donald Trump, that figure had fallen as low as $1 per ton, as his appointees recalculated the impacts of climate change on present and future generations.

But a coalition of 10 Republican attorneys general sued over the presidential directive, arguing that Biden lacked the authority to raise the climate metric under the Constitution, which gives that power solely to Congress. Judge James D. Cain Jr. of the U.S. District Court for the Western District of Louisiana, a Trump appointee, agreed.

The libertarian Competitive Enterprise Institute, which has consistently opposed limits on greenhouse gas emissions, cited the ruling in calling on the EPA to rescind its new tailpipe standards for cars and light trucks.

One of the ruling’s most controversial — and largely unforeseen — consequences involves the Interior Department’s plans to auction off public lands to oil and gas drilling as required by the Mineral Leasing Act of 1920.

Officials used the higher interim social cost of carbon in the environmental analysis underpinning an auction of 179,001 acres of public lands in Wyoming. As a result, Interior last week missed the statutory deadline to announce the sales in the first quarter of this year, prompting criticism from the oil industry and Republicans on Capitol Hill.

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“Even in the face of a global energy crisis, historic inflation, and skyrocketing gasoline prices, the Biden administration continues to crush U.S. energy production,” Sen. John Barrasso (Wyo.), the top Republican on the Energy and Natural Resources Committee, said in a statement.

Kevin O’Scannlain, vice president of upstream policy at the American Petroleum Institute, said in an email that the Interior Department’s lapse in leasing announcements “not only violates its statutory obligations, but also complicates efforts to address rising energy costs and ensure our European allies have a stable supply of energy.”

Interior spokeswoman Melissa Schwartz said in a statement that “delays are expected in permitting and leasing for the oil and gas programs” as a result of the ruling. She said the agency is “committed to ensuring its programs account for climate impacts.”

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In an ironic twist, Republican-led states had argued in their lawsuit that the higher social cost of carbon would hamper fossil fuel production on federal lands, including in Wyoming.

The lawsuit was spearheaded by Louisiana Attorney General Jeff Landry (R), a vocal advocate for the oil and gas industry who criticized Obama as “anti-oil” in a 2012 interview. Wyoming Attorney General Bridget Hill (R), whose state leads the nation in natural gas production on public lands, joined the complaint.

The ruling could also have unforeseen consequences for international climate diplomacy, according to Mancini, the White House regulatory official.

“The United States has dozens of bilateral agreements on science and technology with key foreign partners, like Germany, and holds regular discussions with countries on the science, technology, and economics of climate change and energy policy,” Mancini wrote. “The Preliminary Injunction threatens to curtail what materials the federal government can rely upon in preparing for such meetings and has the potential to undercut the federal government’s ability to fully engage in international dialogues and to advocate for U.S. interests in discussions of climate economics and related topics.”

Richard Revesz, who directs the Institute for Policy Integrity at the New York University School of Law, said the Louisiana judge’s decision was “one of the most aggressive and ill-founded administrative law opinions” that he has read in recent years.

Revesz called it “unprecedented” for a judge to intervene so early in the rulemaking process to tell the government it cannot study a potential risk.

“I don’t know how a court could tell a president that the executive branch cannot estimate the harm of a pollutant,” he said. “It’s like saying, ‘I’m sorry, the executive branch cannot study whether something is a carcinogen.’ ”

Jesse Prentice-Dunn, policy director at the Center for Western Priorities, an environmental group, said the Louisiana judge’s ruling put Interior in an impossible position when it comes to oil and gas lease sales.

If Interior held a lease sale based on the current environmental analysis, Prentice-Dunn said, it could get struck down in court for relying on the higher interim social cost of carbon. But if the department held a lease sale based on a new environmental analysis without the metric, it could get invalidated for failing to consider the climate impacts of drilling on public lands.

“Right now the Interior Department is facing a legal minefield,” he said. “It’s kind of damned if you do, damned if you don’t.”

Anna Phillips contributed to this report.

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