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Vol. 14, No. 17 Week of April 26, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

Think again on OCS

Court tells DOI to reconsider lease sale program environmental analysis

Alan Bailey

Petroleum News

On April 17, like a bolt from the blue descending on an oil industry already engaged in a vigorous debate about Secretary of the Interior Ken Salazar’s recent road trip, gathering input on what to do about the proposed program of oil and gas lease sales on the outer continental shelf from 2010 to 2015, a panel of three judges in the United States Court of Appeals for the District of Columbia issued an opinion upholding an appeal against the U.S. Minerals Management Service’s previous OCS lease sale program, the program covering the years 2007 to 2012. The court requires that the Department of the Interior withdraw and reconsider the lease sale program because of what the court says are deficiencies in the associated environmental analysis.

The 2007 to 2012 program includes the February 2008 Chukchi Sea lease sale that attracted $2.6 billion in high bonus bids. Shell and ConocoPhillips, leaseholders from that sale, have conducted seismic surveys and have been doing site surveys, in preparation for Chukchi Sea drilling. Other Alaska lease sales under the program, in the Beaufort Sea, the North Aleutian basin and the lower Cook Inlet, have not yet been held.

Economic value

The oil industry and many Alaska elected officials say that offshore oil and gas development will help reduce U.S. dependence on foreign oil, that it is critical to Alaska’s economic future and that offshore development and production can be done in a way that protects the environment.

“Alaska’s OCS is America’s energy storehouse and it needs to be developed with sensitivity to climate change and marine life, but I am troubled that the groups behind this litigation are engaging in the too-familiar tactic of suing on every possible issue, no matter the legal merits,” said Sen. Lisa Murkowski. “… Whether this case is appealed again or if the Department of Interior restructures the five year plan, I am hopeful that a good faith effort to advance a responsible and efficient program for our OCS resources in Alaska and elsewhere will be a priority for all three branches of government. The world’s environment, as well as our nation’s security and economy, depend on our leadership on this issue.”

Caroline Cannon, president of the Native Village of Point Hope Tribal Council, the federally recognized tribal government for the Chukchi coast village of Point Hope, expressed a different perspective. Many North Slope residents are concerned about the potential impact of an offshore oil and gas industry on subsistence hunting.

“This is a historical event for our tribe and tribal members,” Cannon said in a statement following the court decision. “Drilling would cause irreversible damage to our ocean and sea animals and would severely impact our cultural traditions. We look forward to working with Secretary Salazar to protect our waters. We hope our children do not have to fight the same issue. This comes at a right time because our community is preparing for whaling and it means a lot to our people.”

5-year cycle

MMS schedules lease sales in five-year cycles for the various OCS planning areas open to oil and gas leasing around the U.S. In doing this, the Secretary of the Interior is required to consider a variety of factors raised by the prospect of oil and gas exploration and development, including economic, environmental and social issues.

The publication of a five-year lease sale program involves two public review periods, requires the development of an environmental impact statement under the terms of the National Environmental Policy Act and requires a review of the program by the President and Congress before final approval by the Secretary of the Interior.

In 2007, not long after final publication of the 2007 to 2012 lease sale program, the Native Village of Point Hope, the Center for Biological Diversity, the Alaska Wilderness League and Pacific Environment appealed the DOI approval of the program, on the grounds that the program did not take into account the impact of oil and gas leasing on climate change; was approved without adequate baseline biological research and without adequate Endangered Species Act consultation; and was irrational in relying on an insufficient environmental sensitivity assessment by the National Oceanographic and Atmospheric Administration.


And, following oral arguments held in October 2008, the court has now upheld the claim that the environmental sensitivity rankings in the lease sale program are irrational, and has thus required that the lease sale program be vacated for reconsideration. However, the court has dismissed the other grounds for appeal.

In the court’s written opinion, Chief Judge David Sentelle said that, whereas the Outer Continental Shelf Lands Act requires agencies to consider the relative environmental sensitivity of different areas of the OCS, DOI had only used a NOAA analysis of the environmental sensitivity of shoreline areas to oil spills to satisfy this requirement for lease sale program approval.

“Interior’s use of the NOAA study runs afoul of this provision because it assesses only the effects of oil spills on shorelines,” Sentelle said. “Interior provides no explanation for how the environmental sensitivity of coastal shoreline areas can serve as a substitute for the environmental sensitivity of OCS areas, when the coastline and proposed leasing areas are so distant from each other.”

The Secretary of the Interior must conduct a more complete comparative analysis of the environmental sensitivity of different areas of the OCS and then determine whether the results of this analysis warrant the exclusion of any proposed leasing areas from the lease sale program. Then the Secretary must reassess the timing and location of the lease sale program “so as to obtain a proper balance between the potential for environmental damage, the potential for the discovery of oil and gas, and the potential for adverse impact on the coastal zone,” Sentelle said.

Determining implications

The U.S. Department of Justice, on behalf of DOI, is now determining the full implications of the court decision.

“We’re working with the Department of Justice to review it and decide how to respond,” DOI spokesman Frank Quimby told Petroleum News April 22.

The DOJ investigation needs to take into consideration such questions as the status of the leases issued in the 2008 Chukchi Sea lease sale and what might be involved in salvaging the remainder of the sales in the 2007 to 2012 program. It is not clear how long this investigation will take.

“We are reviewing the Court’s decision and no determination has been made as to the government’s next step in this matter,” Andrew Ames from the DOJ Office of Public Affairs told Petroleum News April 22.

The court decision does not affect current outer continental shelf leases in the Beaufort Sea — MMS issued those leases as part of an earlier five-year lease sale program.

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