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Salazar: Court Ruling Calls into Question GOM, Alaska Leases

The recent appellate court ruling declaring the existing five-year Outer Continental Shelf (OCS) leasing plan for 2007-2012 to be "legally defective" has called into question the Interior Department leases issued for oil and natural gas development in the Gulf of Mexico and Alaska under the plan, said Interior Secretary Ken Salazar last Wednesday.

"It's put into question the full issue of what we can do with all those...leases that have been issued in the Gulf of Mexico" and in Alaska, Salazar said in a speech to the U.S. Chamber of Commerce's Institute for 21st Century Energy in Washington, DC.

The U.S. Court of Appeals for the District of Columbia Circuit in April vacated and remanded the 2007-2012 OCS leasing plan (see NGI, April 20). "It said that there was not [an] adequate environmental review" of the plan, Salazar said.

At the request of Salazar, the Department of Justice (DOJ) filed a petition last Tuesday seeking clarification of the appellate court decision. It has asked the court to clarify that its ruling does not require the retroactive invalidation of prior leases and allows the agency to move forward and fix the shortcomings in the environmental analysis for the existing five-year offshore leasing plan without developing and approving an entirely new five-year plan.

Pending a response from the appellate court, Interior's Minerals Management Service (MMS) is proceeding with its plans to hold a lease sale in the western Gulf of Mexico in August, an agency source said. But the MMS office in Alaska is in a state of flux, seeking direction about whether it should even approve exploration plans.

"Failure [by the court] to reinstate the lease plan could force the federal government to refund [more than] $10 billion and threaten oil and gas production in the Gulf of Mexico that has already come online under this program. The government will also have to forego billions of more dollars expected from upcoming lease sales," wrote Rep. Doc Hastings of Washington, the ranking Republican on the House Natural Resources Committee, and either other Republicans in a letter to Salazar last week.

"If left unaddressed, the court decision becomes a de facto ban on any new offshore drilling," they said.

"The previous administration's failure to apply the law has resulted in widespread uncertainty in the oil and gas industry and put reliable conventional energy production from offshore areas at risk," Salazar said. "We must fix the problems the court identified and put oil and gas leasing decision back on firm scientific footing."

Interior "has already begun addressing the court's remand instructions," but the "government submits...that vacating the entire 2007-2012 program pending reconsideration will cause broader disruptions that would be both severe and unnecessary," the DOJ said in the petition for review. "In particular, vacatur might require interruption of exploration and production activity in the Gulf of Mexico and could call into question the validity of 487 leases already issued in the Chukchi Sea and 1,854 more issued in the Gulf of Mexico."

The federal government called on the court to clarify the intended scope of its ruling and/or to amend the order to remand the OCS leasing program without vacating it. It also asked the court to specify whether Interior may conduct any lease sales under the 2007-2012 plan during the remand proceedings. "While delaying or canceling planned leases sales is less immediately problematic than halting activity on existing leases or canceling them, it presents the same potential for long-term disruption."

In vacating the current OCS leasing plan, the court cited the agency's failure to "properly consider" the environmental sensitivity and marine productivity of the different areas of the OCS that are included in the leasing plan.

Three environmental groups -- Center for Biological Diversity, Alaska Wilderness League and Pacific Environment -- and the Native Village of Point Hope (NVPH) challenged Interior's 2007-2012 OCS leasing program, which includes 21 planned lease sales in the Gulf of Mexico, offshore Alaska and offshore Virginia during the five-year period. The petitioners claimed that Interior violated the Outer Continental Shelf Lands Act (OCSLA), National Environmental Policy Act and the Endangered Species Act when drafting the leasing plan.

The court ruled that most of the issues raised by the petitioners were "not yet ripe for review," but it found one claim to have merit -- that the leasing program violated the OCSLA because it relied on an "insufficient" study by the National Oceanographic and Atmospheric Administration (NOAA) in assessing the environmental sensitivity of the OCS planning areas. The issue was raised by the NVPH and was limited primarily to the OCS program's impact on the Alaska coast.

Interior's rankings of the environmental sensitivity of various leasing program areas were based on only one factor: the "physical characteristics" of the shoreline of the areas, according to the appellate court. Interior used the Environmental Sensitivity Index, developed by NOAA, to rank the sensitivity of different shoreline areas to oil spills. The ranking of an area was on a scale of one to 10, with 10 being a rating for an area to be most likely damaged long term by oil spills.

"Interior provides no explanation for how the environmental sensitivity of coastal shoreline areas can serve as a substitute for the environmental sensitivity of OCS areas, when the coastline and proposed leasing areas are so distant from each other. This interpretation runs directly counter to the statutory language," the court said.

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