|
The OCS pyramid: Is there a better way?
The process that the Department of the Interior uses for managing oil and gas leases on the U.S. outer continental shelf has been likened to a pyramid: The leasing process starts at the very broad level of a five-year lease sale program, becomes more specific and focused as it homes in on specific lease sales, and then narrows down on specific tracts of land as companies submit exploration and development plans for leased acreage.
Interior conducts an environmental review at each stage of the process, assessing environmental risks and determining what mitigation measures may be necessary for the environmental protection of areas where industrial activities will take place. And the theory behind the process assumes that, as those impacted areas become increasingly tightly specified, the environmental issues will become increasingly clear, thus enabling increasingly specific environmental protection measures to be mandated as the process moved down the pyramid from the lease sale program to eventual development drilling.
Lengthy delays But, as Shell has discovered to its cost, this apparently simple process can lead to delays of multiple years in progressing towards oil field discovery and development, after a company has sunk substantial sums of money in purchasing leases and taking steps to explore those leases. Not only does Interior’s process itself take several years to navigate, but each step in the process can be subject to legal challenge, thus directing the process through the multiple layers and lengthy convolutions of the U.S. appeals system.
Two speakers at Law Seminars Internationals’ Energy in Alaska conference in December commented on the issues that Interior’s OCS leasing process raises.
Bradford Keithley, partner in the oil and gas practice of Perkins Coie LLP, told the conference that Interior’s process creates substantial risk and uncertainty for companies wanting to find and develop offshore oil and gas.
Norway comparison
Saying that companies from overseas sometimes find the U.S. OCS leasing process “strange and cumbersome,” Keithley compared Interior’s process with the process that Norway uses for offshore leasing. Norway does most of the environmental analysis up front, so that by the time a company obtains a lease to work on the continental shelf, there is substantial confidence that exploration and development activities can proceed quickly, with little risk of significant delay.
“In Norway it takes a long time to get to leasing, because there is a process of consultation with local communities, to ensure that there is consistency between the desires of the local communities and the development of oil resources,” Keithley said. “All of that is done before leasing.”
Environmental perspective Peter Van Tuyn, an attorney with Bessenyey and Van Tuyn who has represented conservation groups, Native Alaska groups and others in court cases relating to the regulation of the Alaska oil and gas industry, told the conference that the uncertainties inherent in Interior’s process cause problems for environmental groups, triggering a need for legal challenges to Interior decisions.
Using a double entendre referencing the company at center of controversies over Arctic OCS drilling, Van Tuyn said that Interior’s process encourages a “shell game,” in which the ball of difficult environmental decisions tends to be punted from one process stage to the next without resolution.
“This system sets up a punt process, a shell game if you will, where you are hiding the ball until later stages, and that does create opportunity … and urgency to challenge decisions, because we’re flying blind,” Van Tuyn said. “We’re making decisions without understanding their potential environmental impacts, and that’s why you see that kind of controversy that happens here in the U.S.”
Van Tuyn said that Interior’s intentions of holding focused OCS leases sales in specific parts of a planning area, to impose seasonal restrictions on Arctic operations and to develop Arctic-specific standards will help address concerns with the current leasing process.
—Alan Bailey
| 