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Federal permitting situation moves on Lawyer reviews status of the regulatory schemes impacting AK resource development; appeals & litigation remain significant challenges Alan Bailey Petroleum News
With ConocoPhillips having finally received permission to build a Colville River bridge into the National Petroleum Reserve-Alaska, and with Shell poised to make a decision about drilling on the Arctic outer continental shelf in 2012, federal permitting remains at the forefront of the various issues surrounding Alaska oil and gas development.
On Jan. 19 at the Seminar Group’s annual Permitting Strategies in Alaska seminar Jeffrey Leppo, an attorney with Stoel Rives LLP, reviewed the status of permitting under what he characterized as the “big four” federal regulatory schemes: the Clean Air Act, the Clean Water Act, the National Environmental Policy Act and the Endangered Species Act.
Clean Air Act Under the Clean Air Act companies require air quality permits for industrial operations. The Environmental Protection Agency, or EPA, has had authority for air permitting on the Alaska outer continental shelf, but on Dec. 23 the U.S. Congress passed an act transferring the authority over outer continental shelf air permitting for the Arctic to the Bureau of Ocean Energy Management, or BOEM. The act, written by Sen. Lisa Murkowski, came as a rider to an appropriations bill, Leppo said.
Originally the Outer Continental Shelf Lands Act gave the Minerals Management Service, the predecessor agency to BOEM, authority over all outer continental shelf air permitting. However, a 1990 amendment to the act transferred that authority to EPA, except for certain parts of the Gulf of Mexico. The new act restoring authority to BOEM now creates parity between Arctic Alaska and the Gulf of Mexico, Leppo said.
Onerous interpretation The EPA has been interpreting the Clean Air Act in an onerous manner and in a different way from BOEM, Leppo said. Every permit has been appealed to the Environmental Appeals Board, the panel of judges with final authority over EPA decisions. And an appeal to the board automatically prevents a permit from going into effect.
This situation has created particular problems in Alaska, where permits are especially time sensitive, Leppo said.
The transfer of authority, while not applying to permits already before EPA, should prove beneficial to the permitting process, Leppo said. But there are concerns about possible unintended consequence from the transfer, especially given the speed with which Congress made such a major statute change, he said.
NPDES permitting The National Pollutant Discharge Elimination System, or NPDES, for the permitting of waste water discharges into U.S. waters, is one of two major permitting schemes under the Clean Water Act. The administration of NPDES is in the process of being transferred from the federal government to the state, although the transfer of authority over oil and gas permitting has been delayed until Oct. 31, 2012.
Meantime, new NPDES general permits relating to oil and gas operations in Cook Inlet, on the North Slope and on the Arctic outer continental shelf are either out or pending, Leppo said. All of these general permits have either been challenged or are likely to be challenged, he said.
A general permit allows an operation to proceed, provided that operation remains within the scope and stipulations of the permit.
The possibility of appeals against new general permits raises the question of whether a company should apply for an individual permit for a planned project, rather than depend on a general permit. But the limited availability agency staff raises questions over the length of time required to process a permit application, Leppo said. And, in the longer term general permits tend to be more stable to deal with than individual permits, he said.
404 permitting The other major permitting scheme within the Clean Water Act is the so-called 404 permitting done by the U.S. Army Corps of Engineers, to regulate the discharge of materials into U.S. waters. Problems over a 404 permit were behind the multi-year delay to ConocoPhillips’ NPR-A project, the project generally referred to as CD5. The Corps of Engineers declined to allow the construction of a bridge over the Nigliq channel of the Colville River, requiring instead roadless access to the project site and a pipeline that would pass under rather than over the river.
Leppo said that, in his opinion, the EPA and the U.S. Fish and Wildlife Service, seeing the bridge as a gateway to expanding NPR-A oil and gas development, had wanted to impede bridge construction.
In December ConocoPhillips prevailed in its appeal against the original Corps of Engineers’ permit decision. Success in this appeal demonstrates the value of a company collaborating with the state and with Native landowners when dealing with permitting issues, Leppo said. Lessons learned from the Gulf of Mexico oil spill disaster also played into the permit decision, with the agencies seeing the value of being able to inspect an above-ground pipeline, he said.
However, the EPA advocated an especially high level of mitigation, in compensation for environmental disturbance caused by the bridge, he said.
The Army Corps of Engineers is gaining substantial experience as the lead agency for large projects in Alaska and appears to be embracing its increasingly important federal permitting role, given the large amount of federally regulated wetland in Alaska, Leppo said.
NEPA The National Environmental Policy Act, or NEPA, remains the main legal stumbling block for companies pursuing resource development projects in Alaska, Leppo said. A federal review of a project under NEPA can trigger an environmental assessment or a much more complex and time consuming environmental impact statement, or EIS. However, with the U.S. Court of Appeals for the 9th Circuit strongly disliking environmental assessments, much preferring the full-blown EIS, companies proceed at their peril if they avoid having an EIS to support a project, Leppo said.
In Alaska there seems to be a trend to prepare an EIS at an increasingly early stage of a project. Early EIS preparation can help in driving project decisions, but suffers from the potential risk of not having sufficient information about the project for an adequate analysis, Leppo said.
Litigation over the EIS for the 2008 Chukchi Sea outer continental shelf lease sale has still not been resolved in the U.S. District Court in Alaska. In response to a court ruling, the Department of the Interior released a supplementary EIS in August. But a subsequent challenge to that document is now before the judge in the case. An appeal to the 9th Circuit against the pending District Court decision is inevitable, Leppo said.
Endangered Species Act
There have been no new trends or developments in the past year in the operation of the Endangered Species Act in Alaska, Leppo said. There is a continuing succession of listings and proposed listings of abundant and healthy Arctic marine mammals, with the now-listed polar bear as the icon. It is likely that all of the animals targeted for listing will end up listed, each with some form of critical habitat designation, Leppo said.
The recent trend to list animals, such as the polar bear, perceived as threatened by global warming was originally conceived as a lever to drive national climate change policies, Leppo said. A secondary purpose was to force action over major greenhouse gas emitters such as coal-fired power plants, he said. But with no policy action forthcoming on either of these fronts, the push for Endangered Species Act listings in Alaska has become entirely focused on a third purpose: the obstruction of oil and gas projects, Leppo said. And, while the operation of the Endangered Species Act leads to continuing significant issues of project change and uncertainty, litigation over the application of the act continues. Litigation over the designation of critical habitat for the polar bear will in particular set a precedent for future critical habitat designations, Leppo said.
Migratory birds Leppo also cautioned about a new emergence of interest in the Migratory Bird Treaty Act, a 1918 federal statute that criminalizes the disturbance of any migratory bird. With no provision for the authorization of the unintentional disturbance of birds, the act has traditionally been implemented through discretionary prosecution, Leppo said. And, with countless millions of accidental “takes” every year, it would be impossible to push the act to its logical extreme. However, environmental groups have been starting to take an interest in the act. The U.S. Department of Fish and Wildlife has been considering establishing a permitting program and has proposed a permit under the act for a fishery in Hawaii, Leppo said.
However, when dealing with permitting appeals and litigation in Alaska, it is important to recognize the power of science that has been published in peer reviewed articles, and to make sure that scientific research is published, Leppo said. And, following people’s persistence in pursuing permits, 2012 will likely see some success in having major oil and gas permits issued, he said.
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