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Vol. 14, No. 30 Week of July 26, 2009
Providing coverage of Alaska and northern Canada's oil and gas industry

State intervenes in case

AG: Appeal against Chukchi Sea lease sale could have major impact in Alaska

Alan Bailey

Petroleum News

A judge in the U.S. District Court for the District of Alaska has allowed the State of Alaska to intervene in an appeal by the Native village of Point Hope, the Inupiat Community of the Arctic Slope and 12 environmental organizations against the February 2008 Chukchi Sea outer continental shelf oil and gas lease sale.

The plaintiffs originally filed the case on Jan. 31, 2008, against the U.S. Department of the Interior, prior to the U.S. Minerals Management Service conducting the lease sale: The plaintiffs asked the court to rescind any leases issued from the sale, saying that the lease sale would violate both the National Environmental Policy Act and the Endangered Species Act.

$2.6 billion

The lease sale went ahead, attracting $2.6 billion in bonus bids, with Shell establishing a major Chukchi Sea lease position and ConocoPhillips also obtaining substantial Chukchi acreage. Subsequently, Shell and ConocoPhillips, both of whom have also intervened in the appeal against the lease sale, have announced plans to drill in some of their Chukchi Sea leases.

With the plaintiffs in the case still wanting the Chukchi Sea leases rescinded, the appeal is in the process of receiving briefs, and oral arguments have not yet been heard, Assistant Attorney General Steve DeVries told Petroleum News July 16.

However, on April 17, in a parallel appeal by Point Hope and several environmental organizations against the entire MMS U.S. outer continental shelf 2007 to 2012 lease sale program, a program that includes the 2008 Chukchi Sea sale, the U.S. Court of Appeals for the District of Columbia told Interior to withdraw the sale program because, the court said, the department had not done an adequate analysis of the environmental sensitivity of areas impacted by the planned sales. Subsequently, Interior has asked the court for clarification regarding the status of leases issued as a consequence of lease sales already held within the sale program, while the American Petroleum Institute has requested a rehearing of the case by the entire court, rather than by the panel of three judges that issued the April 17 court order.

Not represented

In requesting to intervene in the Alaska district court appeal against the Chukchi Sea lease sale, Attorney General Dan Sullivan told the court that the state’s interests cannot be represented by other parties in the case, the State of Alaska Department of Law said July 14.

And the state told the court that the oil and gas industry is the largest private employer in Alaska and provides 90 percent of the state’s general fund revenues.

“If these activities are curtailed, Alaska will be harmed by the loss of property tax revenues, employment and income to local communities,” the state added.

The state also commented that Kevin Banks, director of Alaska’s Division of Oil and Gas, has said that cancellation of the Chukchi Sea leases would curtail oil industry outer continental shelf exploration expenditure and discourage the oil industry from participating in future offshore Alaska lease sales. Oil from the Chukchi Sea could also reduce the future unit cost of transporting oil through the trans-Alaska oil pipeline, thus increasing royalties from oil produced from northern Alaska state land, Banks said.

NEPA violated?

The plaintiffs in the appeal against the Chukchi Sea lease sale claim that in preparing an environmental impact statement for the sale MMS violated NEPA by acknowledging that the lease sale would impact wildlife such as polar bears and walrus, while not adequately considering how the oil and gas activities would add to the impact of climate change on wildlife and subsistence hunting activities.

The plaintiffs also said that, in the EIS, MMS limited the scope of potential Chukchi Sea oil developments to 1 billion barrels of oil, despite also saying that at an oil price of $60 per barrel as much as 8.4 billion barrels of oil might viably be discovered and developed. MMS also limited its Chukchi development scenario assessment to the possibility of shipping Chukchi Sea oil to market through a new overland pipeline connecting with the trans-Alaska oil pipeline, thus failing to consider the possibility of shipping the oil to market by tanker and failing to consider the potential for Chukchi Sea natural gas production, including the possibility of developing LNG export facilities, the plaintiffs said.

Limiting potential development to 1 billion barrels of oil or less also impacts the analysis of oil spill risks, the plaintiffs said. And, in reviewing these risks, the EIS assumes dependence on in-situ burning and chemical dispersal as spill response techniques without considering the impacts of these techniques on the environment, the plaintiffs said. And, although the EIS acknowledges that oil spills may adversely impact wildlife, the EIS does not adequately analyze those potential impacts on species such as gray whales and their prey, they said.

Seismic impacts

The plaintiffs also questioned the impact of seismic surveying on wildlife, saying that the effectiveness of mitigation measures stipulated for seismic operations was not analyzed in the EIS and that the effects of the surveys on wildlife and subsistence hunting were not adequately discussed.

And, specifically, the EIS did not analyze the cumulative impact of regional oil and gas development on threatened eider ducks, the plaintiffs said.

Steller’s and spectacled eider are listed as threatened under the Endangered Species Act and, although the U.S. Fish and Wildlife Service provided a required opinion on the possible impact of Chukchi oil and gas development on these species, that opinion did not take into account the parallel impact on the species of oil and gas activities in the neighboring National Petroleum Reserve-Alaska and in the Beaufort Sea, the plaintiffs said.

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