US judge declines to block Biden-era oil well decommissioning rule

By Nate Raymond

March 11 (Reuters) - A federal judge in Louisiana has rejected a bid by three Republican-led states to block a rule adopted during Democratic President Joe Biden's administration that requires the offshore oil and gas industry to provide nearly $7 billion in financial assurances to cover the costs of dismantling old infrastructure.

U.S. District Judge James Cain in Lake Charles on Monday declined to issue a preliminary injunction sought by Republican state attorneys general from Louisiana, Mississippi and Texas and four oil and gas industry groups blocking the policy.

The 2024 rule was issued by the U.S. Bureau of Ocean Energy Management (BOEM) and required oil and gas lessees in the body of water known internationally as the Gulf of Mexico that was recently renamed the Gulf of America by Republican President Donald Trump to obtain financial assurance bonds.

The Republican-led states and industry groups in a lawsuit filed in June say the rule if enforced would expose small- and mid-sized companies to "potentially existential consequences" as they would be unable to obtain such bonds.

But Cain, who was appointed by Trump during his first term in office, said that potential harm was mitigated by the fact that the rule's requirements were being phased in over three years.

He said companies were not expected to receive demands to post supplemental financial assurance until mid-2025 at the earliest and only needed to post a third of the required amount at that time. The rest would be due over three years, he said.

"While these harms may be likely, a preliminary injunction can only be issued if the threatened harm is also imminent," Cain said.

Lawyers for the plaintiffs did not respond to requests for comment.

The plaintiffs argue that the Biden administration lacked authority to adopt the rule under the Outer Continental Shelf Lands Act, a 1953 law that gave the U.S. Department of Interior, which oversees BOEM, the authority to lease areas of the outer continental shelf for oil and gas development.

While the judge on Monday declined to issue an injunction at this time, he said he would expedite the case so he could reach a final decision on the merits before companies receive letters demanding they post financial assurance.

The case is State of Louisiana v. Haaland, U.S. District Court for the Western District of Louisiana, No. 2:24-cv-00820.

For the plaintiffs: Tyler Green of Consovoy & McCarthy and Zachary Faircloth of the Louisiana Department of Justice

For the United States: Paul Turcke of the U.S. Department of Justice

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States sue US to block rule that oil firms guarantee payment to dismantle old wells