Federal Court Dismisses Challenge to Key ESA Decision for Oil and Gas Activities in Gulf of America

A federal court on June 25, 2026, threw out a legal challenge to key Endangered Species Act (ESA) analyses governing oil and gas operations in the Gulf of America (the Gulf) in light of the ESA Committee's ("the God Squad") decision to exempt oil and gas activities in the Gulf from ESA requirements entirely. The ruling makes clear that a decision by the ESA Committee supersedes all other authority under the ESA, yet uncertainty for offshore oil and gas operators remains while litigation challenging the ESA Committee's decision is pending.

Background

Section 7 of the ESA requires federal agencies to consult with the National Marine Fisheries Service (NMFS) and/or the U.S. Fish and Wildlife Service (FWS) to ensure that their actions are "not likely to jeopardize the continued existence of any endangered or threatened species." The consultation results in a Biological Opinion (BiOp), which may include an Incidental Take Statement (ITS) authorizing limited incidental "take" of protected species provided certain conditions are met, with "take" broadly defined by the ESA to include harassing, harming, wounding, killing or capturing listed species.

In 2020, following years of consultation, NMFS issued a programmatic BiOp for all federally regulated oil and gas activities in the Gulf, along with an accompanying Incidental Take Statement (2020 BiOp). Specifically, the 2020 BiOp covered all oil and gas activities overseen by the Bureau of Ocean Energy Management (BOEM) and Bureau of Safety and Environmental Enforcement (BSEE) under the Outer Continental Shelf Lands Act. The 2020 BiOp concluded that the activities would jeopardize the endangered Rice's whale, as well as imposed various mitigating conditions and operational limitations and requirements to prevent loss of the species.

A coalition of environmental groups filed a lawsuit in the U.S. District Court for the District of Maryland challenging the 2020 BiOp, alleging that the decision was arbitrary and capricious under the Administrative Procedure Act. In August 2024, the court agreed with the environmental groups and vacated the 2020 BiOp. The court found, among other deficiencies, that NMFS had:

1. underestimated oil spill risks such as the 2010 Deepwater Horizon disaster
2. improperly relied on pre-Deepwater Horizon population assumptions for the Rice's whale and Gulf sturgeon
3. crafted a Reasonable and Prudent Alternative that addressed only two stressors
4. issued an ITS that failed to properly account for oil spill take and vessel strikes

Acknowledging the impacts that a gap in ESA coverage would have on the industry, the court specifically delayed the effect of the vacatur for several months to allow time for NMFS to issue a new BiOp and ITS. For more information about this decision, see Holland & Knight's previous alert, "Court Strikes Down Key Endangered Species Act Opinion," August 29, 2024.

On May 20, 2025, NMFS issued a new BiOp superseding the vacated 2020 BiOp (2025 BiOp). Among other things, the 2025 BiOp aimed to address the flaws identified by the court in the 2020 BiOp. Yet, environmental groups remained dissatisfied and filed a lawsuit challenging the 2025 BiOp on the same day it was issued, making similar arguments as were made when challenging the 2020 BiOp. This litigation had been advancing through the summary judgment stage until the court's decision last week.

The Endangered Species Committee Exemption

Meanwhile, in a rare and significant action, the federal government invoked the Endangered Species Committee – colloquially known as "the God Squad" – to consider wholesale exemption of Gulf oil and gas activities from ESA requirements. (See Holland & Knight's previous alert, "Invoking the 'God Squad' in a National Energy Emergency," March 30, 2026.) The God Squad convened on March 31, 2026, and invoked Section 7(j) of the ESA for the first time in history, voting unanimously to exempt all oil and gas activities in the Gulf from ESA requirements based on national security grounds (the ESA Exemption). This includes exemption from the prohibition of jeopardy, consultation requirements and take prohibitions under the ESA but, importantly, does not include exemption from any requirements under the ESA's sister statute, the Marine Mammal Protection Act (MMPA), which protects marine mammal species such as the Rice's whale and governs Gulf operations outside of the ESA context.

The ESA Exemption became effective immediately and covers Gulf oil and gas activities "associated with" BOEM's and BSEE's Outer Continental Shelf Oil and Gas Program. Though this is quite broad, the scope should not be assumed. It is possible that there may be future litigation over the extent of the activities that are covered as environmental groups seek to limit its application as much as possible. In fact, there are numerous pending lawsuits challenging the ESA Exemption that raise arguments challenging the arbitrary nature of the national security findings, statutory violation and unlawful imperilment of protected species, among other legal challenges.

The Court's Mootness Decision

Following issuance of the ESA Exemption, the U.S. filed a motion to dismiss in the case challenging the 2025 BiOp, arguing that the ESA Exemption rendered the plaintiffs' claims moot. Specifically, the U.S. argued that the ESA Exemption removed the underlying federal action from ESA requirements, the challenged BiOp and incidental take statement no longer retained legal force, and there was no live or justiciable controversy and, therefore, no effective relief that the court could grant and urged the court to dismiss the legal challenge of the 2025 BiOp.

On June 25, 2026, the court issued a bench decision, dismissing the case as moot for lack of subject matter jurisdiction. The court has not yet issued a written opinion publicly explaining its rationale.

Implications for Offshore Oil and Gas Operators in the Gulf

The court's decision makes clear that the ESA Exemption eclipses all other authority under the ESA. If the ESA Exemption withstands legal challenge, federal agencies will no longer need to satisfy ESA Section 7 consultation requirements for covered oil and gas activities in the Gulf. This will streamline agency decision-making and potentially reduce processing times for permits and other agency approvals. Additionally, the ESA's take prohibitions will no longer apply to covered activities, meaning that the previously required mitigation measures in place to prevent a take under the ESA will be moot and no longer legally enforceable or relevant. This is particularly noteworthy for the Rice's whale mitigation measures, which some operators found onerous. Lastly, there may be opportunities for operators to seek reconsideration of species-related conditions that were imposed pursuant to ESA obligations in existing permits and agency approvals.

Notwithstanding these potential benefits, operators in the Gulf should be cognizant of significant ongoing uncertainty due to the multiple pending lawsuits challenging the ESA Exemption. If the ESA Exemption is struck down, ESA requirements could be reinstated, which could potentially have retroactive effects on the decisions made in reliance on the ESA Exemption. Moreover, the ESA Exemption does not address MMPA requirements. The MMPA has no mechanism similar to the ESA's God Squad in which a wholesale exemption could be adopted. The MMPA therefore remains applicable to all offshore oil and gas activities. Operators that do not apply any species protection measures or abide by MMPA authorizations may run afoul of the MMPA, exposing operators to risk of enforcement actions or litigation challenges by environmental groups. Operators should therefore carefully evaluate the risk of taking actions in reliance on the ESA Exemption, including confirming that their specific activities fall within scope before presuming that the ESA Exemption applies.

How Holland & Knight Can Help

Oil and gas operators should work closely with environmental counsel to review their activities in the Gulf and develop a plan of action to navigate this uncertain legal landscape. Holland & Knight has an extensive group of attorneys with experience in offshore energy, environmental and maritime law who can assist operators with conducting such an analysis. For more information, please contact the authors.

Information contained in this alert is for the general education and knowledge of our readers. It is not designed to be, and should not be used as, the sole source of information when analyzing and resolving a legal problem, and it should not be substituted for legal advice, which relies on a specific factual analysis. Moreover, the laws of each jurisdiction are different and are constantly changing. This information is not intended to create, and receipt of it does not constitute, an attorney-client relationship. If you have specific questions regarding a particular fact situation, we urge you to consult the authors of this publication, your Holland & Knight representative or other competent legal counsel.