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Climate change legal impacts heat up U.S. legislation, regulation and litigation will all have far-reaching impacts on the Alaska oil and gas industry in coming years Alan Bailey Petroleum News
In one sense it makes no difference who is right and who is wrong in the debate over the effect of carbon dioxide and other greenhouse gases on the Earth’s climate: The legal fallout from a broad view that human activity is impacting global temperatures is creating a series of issues for the oil and gas industry. And those issues are set to challenge the industry for a long time to come.
On Nov. 18 at the Resource Development Council annual conference Jeff Leppo, senior attorney with Stoel Rives LLP, overviewed the numerous legal issues that are currently emerging, as the federal government proceeds down a route toward tightening controls over greenhouse gas emissions, while environmental organizations push their climate-change agendas through the courts.
“My overall advice is … adapt to the changing regulatory environment, mitigate the uncertainties and engage in the legislative, regulatory and litigation process, because if you don’t I assure you that the Center for Biological Diversity and others are … putting more energy into it than you are and there are definite consequences for that,” Leppo said.
No immediate legislation From the perspective of legislation, climate change remains a high priority for the Obama administration and for the Democrat majority in Congress. But there’s no immediate possibility of climate change legislation heading for the president’s signature, and the final form of any legislation that does reach the White House is as yet unclear, Leppo said.
“Nothing is going to pass in 2009 and 2010 is uncertain,” he said.
Congress has been debating two bills, each broadly similar in intent and each about 1,500 pages in length, Leppo said.
Each bill proposes some form of U.S. cap-and-trade system that would place limits on emissions of greenhouse gases — organizations with emissions under the limits could sell emission credits to entities with emissions over the cap.
The bills also include some emissions performance standards for some industries. But the proposed legislation does not include the introduction of a carbon tax, a method adopted by some countries as a means of driving down carbon emissions but thought politically unpalatable in the United States.
The objective of the legislation is to push U.S. greenhouse gas emissions to 97 percent of their 2005 level by 2012, with an eventual target of 17 percent of 2005 levels by 2050, Leppo said.
“It’s pretty clear that there are very serious, adverse, potential economic consequences for Alaska and its economy, because of the effects on the oil and gas industry, because of the effects on the Alaska natural gas pipeline,” Leppo said.
Federal regulation Meantime, some federal agencies want to address greenhouse gas emissions through government regulation.
For example, the Environmental Protection Agency has moved to regulate the emissions of greenhouse gases, including carbon dioxide, under the terms of the Clean Air Act. Amid great controversy, the agency has issued draft regulations for its planned greenhouse gas actions.
“The Clean Air Act is not generally believed to be comprehensive, effective or flexible, or adaptive in terms of an approach that might be appropriate for comprehensive regulation of greenhouse gas emissions,” Leppo said. “To this point it has served … more as a threat, in the absence of comprehensive legislation.”
EPA plans to implement mandatory reporting of greenhouse gas emissions in 2010, with various permitting requirements subsequently falling into place as part of the new regulations. But the use of the Clean Air Act is likely to prove litigious, and regulation under the act is likely to be superseded, or at least modified, once greenhouse gas legislation becomes enacted, Leppo said.
The U.S. Fish and Wildlife Service has been moving ahead on a different tack: the implementation of a climate change strategic plan. However, it is hard to tell what this plan will translate to in terms of industrial regulation.
“They’ve taken a position that climate change is the conservation challenge of our time,” Leppo said. “… It’s very difficult to tell exactly what the Fish and Wildlife Service intends to do about this. They’ve established some climate change principles and some very broad strategies which they have defined as adaptation, mitigation and engagement.”
NEPA process On the other hand, the consideration of climate change has already been established within the application of the National Environmental Policy Act, the legislation that triggers a process closely related to much permitting and often resulting in the preparation of environmental assessments and environmental impact statements for activities involving the federal government.
“It’s clear that you must consider as a part of the NEPA process how climate change will affect your proposed project and how your proposed project will affect climate change,” Leppo said.
One of the more high-profile climate-change regulatory trends of recent years has been a push to list under the Endangered Species Act those animals, such as the polar bear, that depend on Arctic sea ice.
“There has been a drive, primarily driven by an environmental advocacy group known as the Center for Biological Diversity, to list species and designate critical habitat as a way of forcing the federal government to engage in the regulation of greenhouse gas emissions, species by species and project by project,” Leppo said.
This is a painful and litigious way of addressing a global problem and is an approach that has not been endorsed by the Obama administration, Leppo said. Nevertheless, the use of the Endangered Species Act in this way has become a contentious fight involving environmental advocacy groups, industry and the government.
Litigation Litigation, another aspect of the legal fallout from climate change, falls either within the framework of common law or happens in the form of a statutory claim, Leppo said. A common law case involves a claim against a concept such as nuisance or negligence, while a statutory claim involves an accusation that some entity has violated a federal statute.
Common law cases can result in huge legal costs and huge legal recoveries, but people have tended to view these cases as being pushed by aggressive attorneys in situations where cases are unlikely to prevail because of the difficulty of proving the cause of the claimed harm, Leppo said.
In one common law case, the village of Kivalina on the Bering Sea coast has claimed $95 million to $400 million in damages from ExxonMobil because, the village says, greenhouse gas emissions caused by ExxonMobil have resulted in global warming that has diminished sea ice and resulted in storm damage to the village; coastal erosion is forcing the village to relocate.
The California district court has recently dismissed this claim on the grounds that dealing with global warming is a political issue and also because the court found that Kivalina had not demonstrated a causal connection between ExxonMobil’s activities and damage to the village. The court’s decision is now on appeal with the U.S. Court of Appeals for the 9th Circuit.
But in a similar case in which landowners and residents of the Mississippi Gulf Coast sued Murphy Oil over damages from hurricane Katrina, a federal district court decision rejecting the claim was subsequently overturned by the 2nd Circuit appeals court. That case has been re-instated in district court.
And in Connecticut vs. American Electric Power, the first climate-change common law case of this type, the case has also been re-instated by the 2nd Circuit appeals court, following initial dismissal in district court.
“It remains to be seen what the 9th Circuit will do, but the trend is not to eliminate these cases at such an early stage,” Leppo said. “That’s bound to encourage more of these kinds of cases. … I have grave doubts that any of these cases will ever actually result in a plaintiff’s verdict. But the fact of the matter is they’re expensive and they’re threatening, and … they would pose enormous costs on resource-based industries.”
Lawsuits brought against the U.S. Minerals Management Service, challenging lease sales and exploration plan approval on the Alaska outer continental shelf, typify the statutory claim type of litigation that can have a climate change connection. Greenhouse gas emissions related cases variously target the application of the Clean Air Act, the Endangered Species Act, the Clean Water Act and the Marine Mammals Protection Act, Leppo said.
“There are now literally hundreds of these cases,” Leppo said, adding that some lawsuits of this type have already gone to the Supreme Court. Claims typically set out to block government actions, although there have been some claims involving the regulation of private actions, Leppo said.
Statutory claims are going to continue and some have been successful.
“They raise various serious issues that require companies and project developers to think ahead,” Leppo said. “The key is to think ahead.”
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