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A TEST ON LEASING: The Biden administration faces a big test in the coming weeks and months in how it moves forward with the federal oil and gas leasing program in light of the Inflation Reduction Act’s leasing instructions and recent leasing-related court decisions.

Competing environmental and industry interest groups are lying in wait to see if Interior meets the first on a list of new leasing deadlines this week provided for in the IRA.

They are also watching to see how much onshore acreage — if any — it makes available for new leasing in the coming quarters now that separate judges have ruled on the merits of President Joe Biden’s January 2021 executive action ordering a pause on all new leasing.

Breaking it down: The IRA provides some new requirements for the Interior Department on offshore leasing, while recent court rulings establish new, and in some ways competing, guidance for the agency to consider as to its measure of discretion to carry out or not carry out new lease sales.

Where the IRA is concerned, the most immediately relevant date is Sept. 15. The law requires Interior to accept bids for Lease Sale 257, the lone offshore oil and gas lease sale carried out last year that was subsequently invalidated by a federal judge, no later than 30 days after the law’s enactment. That would be this Thursday.

Oil and gas interests view the provision covering 257, and the language requiring three other offshore lease sales to be carried out, as the final word.

“At this point, Congress has directed [Interior Secretary Deb Haaland] to offer those leases,” one oil and gas industry-aligned source told Jeremy, referring to 257 in particular. “So, the discretion has been removed from the secretary on whether or not to offer those leases. Congress has directed her to do that.”

Environmentalists, who notched their initial victory against the sale in January and have repeatedly challenged the administration for being too weak on restricting leasing, have already indicated that they’re prepared to challenge 257 again if Interior reinstates the sale and awards bids.

The implications: The administration faces competing pressures here with 257. The IRA’s directive is plain, and where Interior carried out lease sales in the past 12 months, it maintained that its hand was forced by U.S. District Judge Terry Doughty’s preliminary injunction from last summer, which put Biden’s leasing moratorium on hold.

Republicans have also battered Biden for overseeing a restriction of the leasing program at a time of high prices, attacks that could be emboldened if 257’s leases aren’t issued. Some Democrats, too, have encouraged the administration to lease more land in response to high prices, including Sen. Joe Manchin, who ensured that 257 and the IRA’s other leasing provisions made it into the final deal.

At the same time, the administration is disposed to further restricting, and ultimately ending, leasing federal land for oil and gas, in accordance with Biden’s campaign promises. Remember, too, that the Biden Interior Department wasn’t especially keen on seeing 257 all the way through: It declined to participate in the appeal of Judge Rudolph Contreras’s January ruling invalidating the sale.

The litigation: The IRA’s directives on the offshore sales, and its linking renewable energy development on federal lands to regular oil and gas leasing, are not the only developments for Interior to consider as it carries out its leasing duties.

Doughty last month returned a permanent injunction against Biden’s leasing pause, although he limited its scope to the 13 states that originally sued over the executive order in question.

The Mineral Leasing Act requires quarterly leasing onshore, Doughty ruled, and federal agencies “are in effect amending two Congressional statutes” by stopping the process, the second statute being the Outer Continental Shelf Lands Act.

Days later, though, in a separate case, Judge Scott Skavdahl in the U.S. District Court of Wyoming upheld the leasing pause, ruling in favor of the government and writing that the secretary “enjoys wide discretion when it comes to determining which federal lands will be offered for oil and gas development.”

Discretion: Industry groups have made clear they see in Doughty’s ruling a clear directive against anything but consistent, quarterly leasing onshore going forward.

However, green interests expect Interior to exercise the discretion charted out in Skavdahl’s ruling and restrict leasing.

“What I do think is clear going forward, including with implementation of the IRA, is that [the Bureau of Land Management] continues to retain that discretion that it's had, and that courts, including the Supreme Court, have recognized for decades to choose which lands to lease and in which lands to make available for lease,” said Tom Delehanty, an attorney for Earthjustice who represented intervenor-respondent environmental groups in the Wyoming case.

Delehanty said he and others hope the administration “won't shy away from exercising its authority to limit oil and gas leasing in order to protect the climate in the environment.”

Welcome to Daily on Energy, written by Washington Examiner Energy and Environment Writers Jeremy Beaman (@jeremywbeaman) and Breanne Deppisch (@breanne_dep). Email [email protected] or [email protected] for tips, suggestions, calendar items, and anything else. If a friend sent this to you and you’d like to sign up, click here. If signing up doesn’t work, shoot us an email, and we’ll add you to our list.

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RUSSIAN SHELLING SHUTS DOWN ZAPORIZHZHIA NUCLEAR POWER PLANT: Ukraine’s largest nuclear power plant has powered down its last operational reactor, state operators said yesterday, a step it described as a “safety measure” to help avert nuclear catastrophe amid heavy Russian shelling in the area. "Preparations are underway for its cooling and transfer to a cold state," the operators said in a statement.

Ukraine’s state-run power agency Energoatom announced the temporary measure after Zaporizhzhia’s power lines were knocked offline by nearby shelling twice in recent weeks, forcing it to rely on emergency diesel generators to keep the reactors cool. Last week, Energoatom said the plant only has enough diesel supply left for 10 days.

The shutdown comes after a team of inspectors from the International Atomic Energy Agency visited the site for a safety and security assessment. After their return, IAEA Director-General Rafael Grossi called on Ukraine and Russia to establish a “demilitarized perimeter” around the facility, warning: "We are playing with fire, and something very, very catastrophic could take place.”

EU TO RELEASE PLANS TO LOWER ENERGY PRICES: The European Union is planning to publish a package of emergency measures this week aimed at curbing sky-high energy prices, including a windfall profit levy on power companies, a reduction in bloc-wide power consumption, and expanding emergency intervention rules to help bail out energy producers if needed.

“Ministers agreed that the current levels of electricity and gas prices put pressure on the inflation and the EU economy, threatening the competitiveness of European companies and creating social tensions,” the Czech Republic, which holds the rotating European Council presidency, said in a statement following last week’s emergency meeting.

But countries remain split on a gas price cap proposal. Leaders have not reached consensus on whether such a cap would apply to all imported gas, or just imports from Moscow. (Russian President Vladimir Putin vowed last week to halt all gas imports to Europe if they were to implement a gas price cap, posing an outsized threat to countries like Germany, which relies more heavily on Russian piped gas.)

Germany, the Netherlands, and Denmark have objected to the gas price cap, citing fears of a supply cut-off, while others, including Italy, expressed support for the move.

Meanwhile, EU Energy Minister Kadri Simson warned that the price cap could threaten supply and risk diverting its supply to other regions: “There is very strong competition in the [liquefied natural gas] market and now it is very important that we can replace the decreasing Russian volumes with alternative suppliers,” she said.

And Norway said today it is “skeptical” of the gas price cap. Speaking after a call with von der Leyen, Norwegian Prime Minister Jonas Gahr Stoere said that a “maximum price would not solve the fundamental problem, which is that there is too little gas in Europe.”

The European Commission is scheduled to release its planned measures on Wednesday, and member states will convene later this month to advance them.

GAS PRICES COULD SPIKE AGAIN THIS WINTER, YELLEN SAYS: U.S. Treasury Secretary Janet Yellen said yesterday there is a “risk” gas prices could spike again this winter, as the EU will largely halt purchase of Russian oil and impose its ban on seaborne imports of Russian crude.

Asked on CNN’s “State of the Union” whether Americans should be concerned about another increase in gas prices later this year, Yellen acknowledged: "It's a risk, and it's a risk that we're working on the price cap to try to address.”

"This winter, the European Union will cease, for the most part, buying Russian oil. And, in addition, they will ban the provision of services that enable Russia to ship oil by tanker,” Yellen told host Dana Bash. “And it is possible that that could cause a spike in oil prices.”

Still, she added of the price cap plan: “[Our proposal] is designed to both lower Russian revenues that they use to support their economy and fight this illegal war, while also maintaining Russian oil supplies that will help to hold down global oil prices. So I believe this is something that can be essential, and it's something that we're trying to put in place to avoid a future spike in oil prices.”

G-7 LOOKS TO EXPAND GLOBAL BUY-IN FOR RUSSIAN OIL PRICE CAP: Leaders from G-7 countries are seeking to recruit more countries to join their global coalition to cap the price of Russian oil exports before they begin the next phase of discussions about the specifics of the plan. “The coalition has to be broader, and this is the diplomatic phase [negotiators] are entering into,” one European official told CNBC of the effort.

Key importers of Russian crude, including China, India, and Turkey, have not said yet whether they plan to join the price cap coalition—and whether or not they participate could determine where G-7 leaders set the cap.

WILDFIRES IN CALIFORNIA SCORCH THOUSANDS OF ACRES: More than 8,300 firefighters raced to contain major wildfires across California this weekend, including the Mosquito Fire in Northern California and the Fairview Fire in Southern California.

California’s wildfire authority said today that the Mosquito Fire has burned through some 46,587 acres, and is 10% contained, while the Fairview fire has burned more than 28,300 acres and is roughly 53% contained. More than 5,800 structures were at risk Sunday evening due to the fires.

Both the Fairview and Mosquito Fires began burning last week during a historic heatwave that sent temperatures soaring into the triple digits in many parts of the state.

The Rundown

E&E News Climate law: What to watch at Interior, FERC and DOE

Wall Street Journal European manufacturers reel from Russian gas shutoff

Bloomberg Shipowners rush for tankers to move Russian oil this winter

Financial Times French left puts pressure on Emmanuel Macron over energy crisis

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Calendar

MONDAY | SEPTEMBER 26

The 6th annual, five-day National Clean Energy Week kicks off in Washington, D.C.