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Supreme Court upholds phased review Court decides Cook Inlet oil and gas lease sale case in favor of state in first chance it has had to look at 1994 amendments Kristen Nelson PNA News Editor
$a%L$?ka Supreme Court has decided in favor of the state in a challenge to state oil and gas lease sale 85A Cook Inlet exempt, the first case to reach the court after the Legislature amended state statute in 1994 to allow the Alaska Department of Natural Resources do phased reviews of multiphase developments.
Kachemak Bay Conservation Society, Cook Inlet Keeper, Trustees for Alaska, Stacey Marz and Michael O’Meara challenged both the Alaska Department of Natural Resources’ phasing of its review and the substantive basis for decisions made by DNR in a suit against the state, DNR, DNR Commissioner John Shively and Ken Boyd, director of the Division of Oil and Gas. Marathon Oil Co., Union Oil Company of California, Cook Inlet Regional Corp. Inc., Forcenergy Inc., Anadarko Petroleum Corp. and the Alaska Mental Health Trust were intervenors in the suit.
The supreme court, in a decision written by Justice Walter Carpenti, found entirely in the state’s favor.
“Because we find that Kachemak Bay’s challenge fails in all respects,” the court said in a decision issued Aug. 11, “we affirm the decision of the superior court.”
The supreme court concluded the Department of Natural Resources “has not impermissibly phased its review of the proposed lease sale” because the Legislature amended state law in 1994 to allow for phased decisions. The court also found “there is a reasonable basis for both DNR’s best interests finding and conclusive consistency determination,” and affirmed the agency’s actions.
The court also said each party is to bear its own costs and attorney’s fees in the supreme court in this matter.
Phasing amendments have been in litigation “From the state’s perspective, obviously, I think it’s a very good decision,” state Assistant Attorney General Larry Ostrovsky told PNA. Ostrovsky, who argued the case for the state, said: “It answers a lot of questions that have been in litigation about the phasing amendments in 1994 and the proper interpretation of the ACMP particularly the habitat standard.”
When the Legislature amended Title 38 in 1994, he said, “it was in response to a series of supreme court decisions on lease sales — this is the fist time the supreme court has had a chance to look at that legislative response and what it means. For the first time we can see the impact of those amendments on that lease sale process.”
Ostrovsky noted that oil and gas lease sales are different than other types of development. With a mine, for instance, “you know what will look like — none of that exists with an oil and gas lease sale… you don’t know if oil will be found, don’t know where it will be found, the size of development. So lease sales are really different.” The 1994 amendments said DNR is not required to speculate about things that can’t be known at the time of the lease sale — only has to deal with what can be known, Ostrovsky said. Suit grew out of 1996 sale The state offered more than 1 million acres of onshore and offshore land in oil and gas lease sale 85A in 1996. Kachemak Bay challenged the state’s best interest finding and its determination that the sale was consistent with the Alaska Coastal Management Plan. DNR denied a reconsideration request of its determinations in October 1996 and Kachemak Bay took its case to the superior court. In November 1996, Kachemak Bay unsuccessfully moved for an injunction against the lease sale; the sale took place as scheduled in December 1996 and more than 173,000 acres were leased, generating more than $3 million in state revenue. The superior court found in the state’s favor and the suit was appealed to the Alaska Supreme Court.Challenge to phased review In the supreme court decision Carpenti noted that the Legislature’s amendments were enacted “in reaction to a string of decisions by this court concerning what we characterized as DNR’s ‘phasing’ of its review of various mining and gas and oil prospects.” And, while it was clear that the Legislature “was seeking to allow DNR to phase its approval of projects” the Legislature did not explicitly overrule any of those supreme court decisions. Thus, Carpenti said, the court had to determine which principles of the anti-phasing decisions survived the 1994 amendment.
Prior to the amendment, the court had held that phasing was disfavored and not allowed unless specifically authorized by statute. Given the language of the amendment, the court said, phasing is no longer disfavored under Alaska law; “on the contrary, the amendment affirmatively empowered DNR to phase its best interests findings if it meets the criteria.” Thorough review still required The second principle established by the court, that “phasing is prohibited if it can result in disregard of the cumulative potential environmental impacts of a project,” has “been reaffirmed by the 1994 amendment.” In the legislative findings section of the amendment, the Legislature said that considering disposal “as a phase of a development project is not intended to artificially divide or segment a proposed development project to avoid thorough review of the project or to avoid consideration of potential future environmental, sociological or economic effects.” And a finding still must consider “reasonably foreseeable cumulative effects.”
The third principle tested, Carpenti said, did not survive unscathed. The court held that phasing is prohibited if it is “feasible to obtain the information necessary to determine whether environmental standards will be satisfied before granting an initial permit.” The 1994 amendment said DNR may limit the scope of its review to facts known by the director or made available to the director during the review, and also said that “analyses comparable to those generally required by (the federal National Environmental Policy Act) for the preparation of an environmental impact statement … are not required by the state for support of best interest findings.”
And, the court said, amendment also provided that DNR may not be required to “speculate about possible future effects subject to future permitting that cannot reasonably be determined until the project or proposed use for which a best interests finding is required is more specifically defined.”
The court then reviewed DNR’s actions in light of the amended statutes and found its decision to phase was proper: DNR met statutory requirements “and phasing review of Sale 85A does not allow DNR to avoid thorough review of the project or avoid consideration of future environmental, sociological or economic effects.”
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