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A federal judge of the U.S. District Court for the District of Columbia has cancelled oil and gas leases of 80.8 million acres in the Gulf of Mexico, citing inadequate environmental assessments of the impact of GHG emissions on climate change. The judge determined that the Interior Department “acted arbitrarily and capriciously in excluding foreign consumption from their [GHG] emissions calculations” contrary to requirements under the National Environmental Policy Act (NEPA).  Environmental groups claimed the NEPA analysis performed by the Bureau of Ocean Energy Management was irrational and inconsistent with available data in determining that the GHG emissions associated with the lease sale would be lower and not contribute to climate change compared to a no-action scenario. The Interior Department must now conduct new analysis taking into account GHG emissions resulting from the development and production of the leases, including the associated emissions from foreign consumption. The Interior Department must then consider the new analysis in determining whether to hold a new auction for the cancelled leases.  President Biden, during his campaign for office, had stated that there would be no new drilling for oil and gas on federal lands and signed an Executive Order to that effect early last year. However, Attorneys General from 13 states successfully sued to have previously planned auctions from the Trump Administration go forward, with major oil companies including Shell, BP, Chevron and Exxon Mobile bidding $192M for the now cancelled drilling rights.  For further information or to discuss the contents of this bulletin, please contact Lisa DeMarco at lisa@resilientllp.com.

U.S. Senator Chris Coons and House Representative Scott Peters, both Democrats, earlier this week unveiled the “Fair, Affordable, Innovative, and Resilient (FAIR) Transition and Competition Act” (the Act), which, if enacted, would establish a border carbon adjustment (BCA) to be imposed as a fee on imports, starting on January 1, 2024. This follows the recent release of climate and emissions reduction proposals by the European Commission which also include BCAs for imports into the European Union. This bulletin briefly outlines the key provisions of the Act. Sectors. The Act would apply to industrial facilities that produce the following products: Steel; Aluminum; Cement; Iron; and Any product which is composed of over 50 percent of any of the above products. Determination of domestic environmental cost incurred. The Act would empower the Secretary of the Treasury (the Secretary) to annually determine the domestic environmental cost incurred for each sector or the average cost to produce a covered fuel (natural gas, petroleum, and coal), to comply with federal, state, regional, or local law, regulation, policy or program which, inter alia, is designed to limit or reduce greenhouse gas (GHG) emissions, including cap-and-trade systems, carbon taxes, and fees. Border carbon adjustment. The Secretary would administer the BCA through regulation and guidance. The Secretary of State and the United Stated Trade Representative would engage with other countries to reduce global GHG emissions and ensure fairness in the application of the emissions-based tariffs. A fee would be applied to any covered good (either a covered fuel or product produced within a sector) to be determined based on the domestic environmental cost incurred multiplied by the production of GHG emissions of the product or the upstream GHG emissions of the covered fuel. The BCA would not apply to (i) countries on the Least Developed Countries list of the OECD and (ii) countries that…