Instituto Arayara v. ANP, Federal Government and 3R RNCE S.A. on auction of oil exploration blocks in the Sergipe-Alagoas and Potiguar Basins

On December 6, 2023, the NGO Instituto Arayara de Educação e Cultura para a Sustentabilidade, filed a public civil action (environmental class-action) against the National Agency for Petroleum, Natural Gas and Biofuels (ANP) and the Federal Government, with the subsequent inclusion of the company 3R RNCE S.A. as a defendant. This lawsuit is part of a set of 6 environmental class-action filed against the 4th Bid Cycle for oil exploration blocks. The aim is to challenge the auction of oil exploration blocks located in the Sergipe-Alagoas and Potiguar Basins. The plaintiff argues that the inclusion of this set of blocks is illegal as it overlaps with Conservation Units (Brazilian Protected areas), buffer zones, environmental protection areas and extractive reserves. The plaintiff state that the climate emergency scenario requires an energy transition towards clean energies and a reduction in GHG emissions, which is incompatible with the expansion of oil exploration. As a preliminary injunction, it is requested that the offer in the 4th Permanent Offer Cycle of the blocks in the Sergipe-Alagoas and Potiguar Basins be suspended until the technical analysis that demonstrates the socio-environmental viability is carried out. On a definitive basis, they request that the contested blocks be excluded from the Bid Cycle. In June 2024, ANP presented its defense. According to the Agency, the bidding procedure was carried out regularly and judicial discussion of the issue violates the principle of the separation of powers and enters into the discretionary judgment of the executive branch. As for climate protection, it said that the NetZero 2050 scenario still envisages oil and gas as primary energy sources, used with mitigated or neutralized emissions. In June 2024, the Federal Government filed its defense. The government argued that the procedure was regularly structured, that there was no overlap with buffer zones, that the executive branch's discretion could not be subject to judicial control and that there were no environmental obstacles, stressing that the environmental licensing procedure would define any impacts in depth. It requested that the case be dismissed on the grounds of lack of procedural interest or active illegitimacy and, in the alternative, that the claims be recognized as unfounded. In July 2024, company 3R RNCE S.A. also filed a defense requesting that the lawsuit be dismissed. According to the company, the bidding cycle is regular and assessments of environmental impacts at this time are premature and that any impacts will be assessed in the environmental licensing required for any oil exploration and production activity. Furthermore, it argued that there is no impediment to the development of economic activities in buffer zones. With regard to climate, the defendant company argues that the oil and natural gas sector is crucial to Brazil's energy matrix and economy, and plays a central role in the transition to a low-carbon economy. It states that it is a fundamental industry for tackling global climate challenges, including to achieve the commitments of the Paris Agreement. It stresses that the energy transition must be fair, gradual and synchronized with the development of alternative sources, highlighting the continued importance of fossil fuels until 2050. The company states that, contrary to what the plaintiff claims, the offer of oil and gas exploration blocks is aligned with the country's energy security needs and climate goals, following the Federal Government's plans and its energy policy. Thus, it considers that the action seeks to implement public climate policies through the courts, which would be inappropriate and harmful to national sovereignty and development. It preliminarily requested that the case be dismissed without a decision on the merits, considering the lack of procedural interest, the regularity of the 4th Cycle of Permanent Offer of Concessions, the inappropriateness of the chosen avenue for discussing public policy, and the invasion of the competence of environmental agencies. In the alternative, it requested that the initial claims be dismissed in their entirety.