Providing coverage of Alaska and northern Canada's oil and gas industry
September 2010

Vol. 15, No. 38 Week of September 19, 2010

State takes DOI to court

Parnell says Arctic OCS drilling moratorium is illegal and unjustified

Alan Bailey

Petroleum News

Alaska Gov. Sean Parnell said Sept. 9 that the State of Alaska has filed a lawsuit against Secretary of the Interior Ken Salazar to overturn a federal moratorium on offshore drilling on the Alaska outer continental shelf.

This is a question of the federal government illegally shutting down Alaska OCS development and Alaska jobs, Parnell said.

“Development of Alaska’s OCS resources is of critical importance to Alaska’s future and the economic and security interests of the United States,” he said. “We are taking this action to ensure that the federal government abides by applicable federal law, including its legal responsibility to make the OCS available for expeditious and orderly development.”


Interior imposed a six-month deepwater OCS drilling moratorium on the Gulf of Mexico in the wake of the Deepwater Horizon disaster, but there has been considerable confusion regarding whether that moratorium applies to the Alaska OCS, especially since Interior had refused to allow Shell to proceed with a planned 2010 drilling program in the Beaufort and Chukchi seas.

Parnell said that, because of this confusion, the state had not taken legal action previously. However, in a Sept. 3 press conference, at the end of a 48-hour Alaska visit, Salazar confirmed that he had imposed a drilling moratorium on the Arctic OCS, a clear statement that gave the state reason to file its lawsuit, Parnell said.

The basis of the state’s legal claim is that Interior has illegally imposed a moratorium on Alaska by failing to consult with state officials over the drilling ban, by neglecting to consider the economic impacts of such a ban and by failing to issue a written decision explaining the basis for the moratorium. Parnell said that he had requested a meeting with Salazar to discuss the Arctic OCS during the secretary’s recent Alaska visit, but that Salazar had declined the meeting invitation.

OCSLA violation

State Attorney General Dan Sullivan said that the Department of the Interior had violated the Outer Continental Shelf Lands Act by not consulting with the state or notifying the state governor when imposing the moratorium. Interior was also in violation of the Administrative Procedures Act, Sullivan said.

“The APA requires agency actions like a moratorium to be supported by a record, a reasoned written opinion that has findings, that has analysis and that has a rational connection between the facts that the agency found and the actions and decisions the agency is making,” Sullivan said. “The Department of the Interior didn’t do this at all with regard to the Arctic moratorium.”

Parnell said that a major objective of filing the lawsuit now was to allow exploration drilling to proceed in the outer continental shelf of the Chukchi and Beaufort seas in 2011 — Interior has not specified any time limit for its Arctic drilling moratorium, he said.

The drilling moratorium in the Gulf of Mexico is set to expire in November and it would be a “very cruel irony” for Alaska to be illegally bootstrapped into the Gulf moratorium and then have the Alaska moratorium extended beyond the end date for the moratorium in the Gulf, Sullivan said.

Exploration plans approved

Even after the Deepwater Horizon disaster occurred in April, DOI was arguing alongside the state in the Court of Appeals for the 9th Circuit, successfully defending Shell’s Beaufort Sea and Chukchi Sea exploration plans in the face of appeals against DOI approval of those plans, Sullivan said. And now, with a Louisiana court having placed an injunction against the Gulf moratorium, the state has a strong case in claiming that a moratorium imposed in the Arctic has no rational connection with events in the Gulf, he said.

“We believe the State of Alaska is fully justified in filing this lawsuit, given the actions of the Department of Interior and the importance of offshore development to Alaska,” said Shell spokesman Curtis Smith in response to Parnell’s announcement. “Unfortunately, our progress in Alaska has been severely compromised by unforeseen events that are not related to our specific program in the Alaska offshore. Our inability to drill is not only costly to Shell, but also to a state that is working hard to create jobs and find new oil supplies for the trans-Alaska pipeline by promoting responsible offshore development.”

Murkowski: federal overreach

“The Obama administration has repeatedly ignored not only the wishes of Alaska in wanting to develop its offshore resources, but also the law,” said U.S. Sen. Lisa Murkowski, R-Alaska. “It’s time for such federal overreach to end and allow responsible development of our resources to move forward.”

“I agree with the governor’s message that an overreaching ban does not reflect Alaska’s unique conditions and fails to consider the impact on Alaska jobs and the Alaska economy,” said U.S. Sen. Mark Begich, D-Alaska. “I will continue to work with the governor, the state and affected Alaskans to ensure a future for Alaska’s oil and gas. … The lack of consultation with Alaska in this process is an obvious oversight.”

Imposed at end of May

The OCS drilling moratorium saga began at the end of May, when following a safety review in response to the unfolding situation in the Gulf of Mexico, Interior announced through public memoranda and a notice to lessees that it was suspending OCS drilling in the Gulf and Pacific regions for a period of six months in water depths greater than 500 feet.

The DOI announcements did not mention the Arctic. However, in a May 27 press release Salazar said that the federal administration was taking a cautious approach to oil and gas development in the Arctic and that it was postponing consideration of Shell’s proposal to drill in the Arctic in the summer of 2010. Salazar has since confirmed that Interior notified Shell that it would not approve Shell’s drilling permits for the 2010 drilling season.

The water depths where Shell plans to drill are substantially less than 500 feet.

A group of oil service companies appealed the Gulf of Mexico drilling moratorium in Louisiana District Court, and on June 22 the court imposed an injunction against the moratorium, saying that the court would likely find the moratorium to be “arbitrary and capricious.” Interior appealed the injunction in the Court of Appeals for the 5th Circuit.

And during a June 23 hearing of the U.S. Senate Appropriations Subcommittee on Interior, Environment and Related Agencies, Salazar told Murkowski that “the moratorium that is in place does in fact apply to the Alaska wells.”

New moratorium

On July 12 Interior announced that it was issuing a new drilling moratorium that would last at most until Nov. 30 and would apply to all drilling on the U.S. outer continental shelf involving the use of a floating drilling facility in conjunction with a subsea blowout preventer. Again, the moratorium made no mention of the Arctic, although the planned Shell drilling, to be carried out from a drilling vessel, would presumably have come within its scope.

In parallel with issuing the new moratorium, Interior filed a claim with the 5th Circuit court, saying that because the second moratorium replaced the initial moratorium, the appeal and injunction against the moratorium should now be ruled moot. The 5th Circuit court referred this claim back to Louisiana District Court and on Sept. 1 the district court judge found against Interior, saying that Interior cannot sidestep the injunction by issuing a new moratorium that “arguably fashions no substantial changes from the first moratorium.”

The 5th Circuit court has yet to respond to the district court ruling.

Questions apply to Arctic

At his Sept. 3 press conference in Alaska Salazar said that the OCS drilling moratorium applies in Alaska because questions that the Deepwater Horizon disaster raised about workplace safety, oil spill containment capabilities and the feasibility of oil spill response plans apply as much to the Arctic as to the Gulf of Mexico. Drilling cannot take place in the Chukchi and Beaufort seas until the safety of that drilling can be assured, he said.

But Interior did not communicate with the state about this, Parnell said.

Interior’s views need to be articulated in a written final decision that rationally connects those views with facts on the ground, Sullivan said.

“That is an undeniable legal requirement,” he said. “It’s Administrative Procedures Act 101 and they didn’t do it.”

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