SandBar 9:3, August, 2010
Recommended citation: Terra Bowling, Controversy Continues to Swirl Around Oil and Gas Drilling in the Arctic , 9:3 SandBar 11 (2010).

Controversy Continues to Swirl Around Oil and Gas Drilling in the Arctic

Terra Bowling, J.D.

A federal district judge has halted the development of oil and gas wells on leases in the Arctic’s Chukchi Sea. The judge found that the federal government failed to analyze the environmental impacts of drilling before offering approximately 29.4 million acres of public lands for lease. The decision follows the massive Gulf of Mexico oil spill and several decisions by President Obama to suspend planned exploration drilling and leases in Alaska.

Background
The Chukchi Sea is northwest of Prudhoe Bay in Alaska. As one would imagine, the Arctic ecosystem, with its remote location and hostile weather conditions, is not ideally situated for drilling infrastructure. Additionally, the area is environmentally sensitive, as it is habitat to polar bears, walrus, and endangered whales, as well as home for native Alaskan subsistence hunters and fishermen. However, in 2008, the Minerals Management Service (since renamed the Bureau of Ocean Energy Management, Regulation, and Enforcement) managed the sale of “Lease Area 193”, the first lease sale in the Arctic since 1991.  
A unit of Shell had planned to drill three exploratory wells this summer, but those plans were halted following the Gulf oil spill when the Obama administration suspended consideration of any applications for exploratory drilling in the Arctic until 2011 and extended a moratorium on permits to drill new deepwater wells for six months. The administration also suspended a planned 2011 lease sale in Bristol Bay and four lease sales in the Chukchi and Beufort seas.

NEPA
Following the 2008 lease sale, the Native Village of Point Hope, the city of Point Hope, and the Inupiat Community of the Arctic Slope, along with several environmental groups filed suit claiming that the lease sale, as well as the Final Environmental Impact Statement (FEIS) for the sale, violated the National Environmental Policy Act (NEPA), the Endangered Species Act (ESA), and the Administrative Procedures Act (APA). The court focused on NEPA claims.
NEPA requires the preparation of an Environmental Impact Statement (EIS) for any major federal action “significantly affecting the quality of the human environment.” NEPA’s objectives are to require the federal agency to “consider every significant aspect of the environmental impact of a proposed action,” and to ensure that the agency “inform[s] the public that it has indeed considered environmental concerns in its decisionmaking process.” NEPA aims to “promote efforts which will prevent or eliminate damage to the environment and biosphere and stimulate the health and welfare of man . . . ” The groups sought an injunction claiming that the final EIS did not adequately analyze the impacts of the lease sale on the environment and human communities; was missing essential information on the Chukchi Sea; failed to adequately analyze the impacts of the lease sale in the context of climate change; understates the risks of an oil spill; fails to fully analyze cumulative impacts on threatened species; and provides a misleading analysis of the effects of seismic surveying.
The court noted that NEPA review occurs as a four-stage process, with “more detailed environmental impact statements at the program’s later, more site-specific stage.” The stages include: 1) a five-year lease plan; 2) lease sales; 3) exploration; and 4) development and production. The reviews as part of the 2008 lease sale constituted the second stage of review. The defendants argued that the plaintiffs were improperly asking for a level of review that was not warranted until later phases. In fact, a previous Ninth Circuit ruling found that NEPA does not require MMS to prepare an EIS that evaluates potential environmental effects on a site-specific level of detail at the initial oil and gas leasing stage. However, the plaintiffs argued that the MMS’s NEPA obligation at the lease sale stage is to analyze the effects of development, “should it occur” and that once leases are issued, the defendants may conduct preliminary industrial activities without further approval.

Ruling
The court first addressed plaintiffs’ claims that MMS failed to take a hard look at the effects of seismic surveying and failed to fully analyze cumulative effects to threatened eiders. The court found that the defendants took a requisite hard look at these areas and acknowledged that necessary mitigation measures can be implemented in stages 3 and 4.
            Next, the court examined plaintiffs’ claims that the EIS omits analysis of natural gas development despite industry interest and specific lease incentives for such development, and the fact that it analyzes only the development of the first field of one billion barrels of oil, despite acknowledging that this is the minimum level of development that could occur on the leases. The court found that the analysis of the first billion gallons of oil satisfies the hard look requirement in NEPA. However, the court agreed that the agency did not take the requisite hard look at the impact of natural gas exploration, “despite industry interest and specific lease incentives for such development.”  
      The court also agreed with the plaintiffs’ claim that the EIS suffers from missing information and data gaps. The court noted that the EIS “reflects dozens if not hundreds of entries indicating a lack of information about species/habitat, as well as a lack of information about effects of various activities on many species.” The court agreed that the failure of the EIS to determine whether missing information was relevant or essential under 40 C.F.R. § 1502.22, and failed to determine whether the cost of obtaining the missing information was exorbitant, or the means of doing so unknown violated Section 1502.22 and is arbitrary.

Conclusion
The court concluded that “although much of the Agency’s extensive investigation was appropriate, the Agency has failed to comply with NEPA in certain circumstances.” The court ruled that all activity under Lease Sale 193 was enjoined pending review by Defendants of these issues. The court remanded the case to the Agency to satisfy its obligations under NEPA. However, on August 2nd, following a motion filed by Shell, the federal judge clarified his ruling. He stated that the injunction does not prevent seismic studies that had already been approved or were pending approval by the federal government.

Endnotes