State seeks to intervene in OCS litigation

By Kristen Nelson

Petroleum News

Newly appointed Alaska Attorney General Dan Sullivan has moved to intervene in a federal case in which the Native Village of Point Hope is asking the courts to rescind leases issued by the U.S. Minerals Management Service in the Chukchi Sea.

“One of my highest priorities as Alaska’s attorney general is to vigilantly safeguard and defend Alaska’s interests, particularly as they relate to economic opportunities for Alaskans and the balance of state and federal rights and responsibilities. This case entails both such interests,” Sullivan said in a June 17 statement.

“The ultimate outcome of this case will likely have enormous economic consequences — either positive or negative — for the State of Alaska and our citizens,” said Gov. Sarah Palin. The United States Court of Appeals for the District of Columbia upheld an appeal against the MMS 2007 to 2017 outer continental shelf lease sales by the Native Village of Point Hope and several environmental organizations on April 17.

On May 11 Secretary of the Interior Ken Salazar asked the U.S. Department of Justice to seek clarification from the court regarding the status of leases already issued under the lease sale program.

Sales already held under the 2007-12 program include the February 2008 Chukchi Sea lease sale and three lease sales in the Gulf of Mexico.

Focus on Alaska

Plaintiffs said they would not oppose a clarification of the court’s authority to vacate lease sales which applied to only the Beaufort, Chukchi and Bering seas program areas, removing scheduled lease sales from the program and voiding leases from sale 193 in the Chukchi.

Plaintiffs told the court that vacating the existing program ensures that the Department of Interior starts with a clean slate in upholding the public interest in the environment and removes the danger that the agency is so committed to a particular result that it resists genuine reconsideration of the issues.

“Here, once companies have bid on and paid Interior for leases, Interior will be much less likely to reverse course and cancel the Alaska lease sales than it would if it were starting on a level playing field,” plaintiffs told the court.

State’s interests

Although proposed OCS leasing and activities would take place in federal waters, staging activities likely would take place in Alaska, the state said, and if those activities were curtailed the state would be “harmed by the loss of property tax revenues, employment and income to local communities.”

The state also can benefit indirectly because successful development on federal lands can make development on adjacent state lands more economic because of infrastructure investments made for development on federal lands. “Any potential development of hydrocarbon bearing state lands adjacent or near to Sale 193 leases become increasingly uneconomic should Sale 193 leases be rescinded.”

Oil from the Chukchi would be sent to market through the trans-Alaska oil pipeline, the state said, and would increase throughput in that line, lowering the unit cost for all Alaska oil. Because state royalties and taxes are based on the value of oil in Alaska, less the transportation cost, reduction of the unit cost to ship that oil would increase state revenues.

The state said its significant interests “are not adequately protected by other parties,” and said it did not attempt to intervene earlier because when the case was initiated the state had confidence its claims would be represented by federal defendants. It told the court it hopes its interests will continue to be aligned with federal interests, but said “in an abundance of caution, the state must act to ensure its interests are protected until such time that the new federal administration’s policy positions are fully articulated.”