Shell, the Arctic, and the Classroom

In late January Royal Dutch Shell announced that the company was putting an end to its efforts to drill exploratory wells in the Arctic Ocean off Alaska’s north coast this summer, and intimated that it may never drill there, at all. The announcement was timed with other recent climate news. Just a day or two later the State Department released its Supplemental Environmental Impact Statement for the 2012 Presidential Permit application for the proposed Keystone XL pipeline. Two weeks after that it was revealed that the Arctic archipelago of Svalbard has been experiencing average temperatures 15 degrees C above normal. But I don’t think Shell made its decision because it worried what President Obama will do with Keystone XL, or because of the ever-mounting evidence of climate change impacts in the Arctic. Rather, the company probably made the decision because the Ninth Circuit held the week before, in Village of Point Hope v. Jewell, that the environmental impact statement prepared for the 2008 lease sale in the Chukchi Sea violated the National Environmental Policy Act.

The Ninth Circuit’s decision is important, of course, because of its immediate impact on oil and gas drilling in the U.S. Arctic. It is also notable, though, from a teaching perspective, for at least three reasons:

First, the decision affirms, in one of the most visible environmental battles of the day, that NEPA remains an important, even essential, tool in the environmentalist’s toolkit, capable of stopping major projects from moving forward, or at least stalling them for the time being. This remains as true as ever, even though NEPA is just a “procedural” statute.

Second, the decision provides a nice illustration of how courts treat the “missing information” requirement under Section 1502.22 of the Council on Environmental Quality’s NEPA regulations in the context of a tiered environmental review. Under this provision, an agency must either obtain information that is “essential to a reasoned choice among alternatives” or explain why such information was too costly or difficult to obtain. But the Outer Continental Shelf Lands Act explicitly provides for multiple levels of environmental review as an offshore lease moves from the original lease sale to actual production and development. Here, the court found that the Bureau of Ocean Energy Management’s analysis of the impacts of a major oil spill did not fail even though it lacked specific information about such things as species population numbers, migratory patterns and breeding habits. According to the court, that data would be relevant at a later stage. Increasingly, it seems that knowledge of programmatic EIS’s is essential to understanding how NEPA works today.

Finally, the decision illustrates how far afield an agency has to go in a technical analysis to run afoul of the statute, and what kinds of evidence attorneys use to demonstrate the “arbitrary and capricious” application of agency expertise. In this way, it stands as a contemporary comparable to the Westway litigation and the Second Circuit’s decision in Sierra Club v. U.S. Army Corps of Engineers, with its improperly timed studies and ignored population of winter bass among the piers on the Hudson River. Here, BOEM estimated the amount of recoverable oil in the Chukchi lease area by estimating production from a theoretical first offshore oil field, an amount that totaled the nice round number of one billion barrels. One apparent reason for focusing on the first field, rather than the entire lease area, was that the BOEM analyst wouldn’t have the relevant data for the larger analysis for two months. Not exactly the best reason to take a predictive approach to a five-year lease sale in a frontier region of the Arctic. And according to two of the judges on the panel, at least, an arbitrary one.  

There is, of course, more: A series of emails that do not paint the agency staff in the best light, ultimately whittling down a range of options to a single number. Skeptical comments on the draft analysis from other BOEM staff.  Highly critical comments from EPA and Fish and Wildlife. Public comments that make plain some of the more obvious flaws in the logic of BOEM’s decision. Courts will defer to agency expertise, and that deference reaches its height out here in the predictive realm, but get enough in-house experts, sister agency staff and clear-thinking citizens to disagree and you might just have a winning case.  

At the end of the day, it was probably most damaging that BOEM chose a number that represented “the lowest possible amount of oil that was economical to produce as the basis for its analysis.” This number then factored into all of the environmental impact assessments, including seismic effects, habitat effects, and effects of the sale on global warming, as well as Fish and Wildlife’ determination that the lease sale would not jeopardize listed species. As it turns out, it was a close call on the spectacled and Stellar’s eiders. Even a slightly higher estimate may have resulted in a jeopardy finding.

That, students will see, is a bad fact for the defense, a good one for the plaintiffs.

- Michael Burger