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Producer, Offshore Groups Applaud Court Ruling on OCS

The appellate court in Washington, DC, last Tuesday ruled that Interior Department's Minerals Management Service (MMS) can move forward uninterrupted with oil and natural gas sales under the contested five-year (2007-2012) leasing plan in the Gulf of Mexico (GOM).

The court's action takes the sting out of the U.S. Court of Appeals for the District of Columbia Circuit's decision in April, which vacated and remanded the five-year Outer Continental Shelf (OCS) leasing plan, throwing into doubt future lease sales and the results of past sales (see NGI, April 20). The decision cited Interior'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, particularly offshore Alaska.

In Tuesday's ruling, the appellate court clarified that its April decision only applied to areas offshore Alaska (the Chukchi, Beaufort and Bering Seas), and that its order to vacate and remand is delayed until Interior reassesses its environmental sensitivity rankings and the leasing schedule for Alaska.

The court in effect upheld the five-year leasing plan for offshore areas outside of Alaska, which provides "welcomed certainty" for operations and leases sales in the GOM, said the National Ocean Industries Association, which represents offshore interests. NOIA President Tom Fry called on Interior to promptly complete its environmental analysis of the Alaska OCS so that the "same certainty" can be granted to that offshore region.

"The court made the right decision by allowing the continued production of oil and natural gas from Gulf of Mexico leases already issued in the Outer Continental Shelf and to future leases in the Gulf under the 2007-2012 five-year program," said the American Petroleum Institute (API), which represents major oil and natural gas producers.

"We encourage the Department of Interior to move quickly to redo the environmental sensitivity analysis and maintain all scheduled past and future leasing in Alaska so that exploration and production activity and future lease sales under the 2007-2012 plan can take place in that state, home of vast oil and natural gas resources."

Interior last month said it planned to move forward with a GOM lease sale in August while it awaited word from the appellate court on the legality of the existing five-year leasing plan for 2007-2012 (see NGI, July 20).

Lease Sale 210, which includes 3,400 blocks covering about 18 million acres in the Western GOM Planning Area offshore Texas, is scheduled for Aug. 19. MMS estimates that the proposed lease sale could result in the production of 242-423 million bbl of oil and 1.64-2.64 Tcf of natural gas.

Within weeks of the April court decision, the Department of Justice (DOJ) petitioned the court for clarification (see NGI, May 18). The API also sought rehearing in May, asking the court to change its ruling from "vacate and remand" to simply "remand."

The DOJ asked the appellate court to confirm that the court's 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.

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 its 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 [offshore Alaska] and 1,854 more issued in the Gulf of Mexico."

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