Nearly a year after it heard oral arguments in the appeals against the U.S. Minerals Management Service approval of Shell’s Beaufort Sea exploration plan, the U.S. Court of Appeals for the 9th Circuit has finally issued its decision in the case. On Nov. 20 the court issued a 57-page opinion in which a majority of a panel of three judges from the court upheld the appeals, saying that MMS had not conducted an adequate environmental evaluation of Shell’s plan. One judge dissented from the opinion.
The 9th Circuit lawsuit merged three different appeals involving the North Slope Borough, the Alaska Eskimo Whaling Commission and several environmental organizations.
The court requires that MMS prepare a revised environmental assessment for Shell’s exploration plan and, if necessary, prepare an environmental impact statement before the plan can be approved. The court also denied a request by Shell to lift the injunction that the court has placed on the company’s planned Beaufort Sea drilling since August 2007. Shell wants to drill some exploration wells in its Sivulliq prospect on the western side of Camden Bay offshore the eastern North Slope.
However, the court did uphold the MMS analysis of the potential impact of oil spills that might result from Shell’s drilling.
“Despite any other insufficiencies, MMS’s environmental analysis does adequately examine the impacts of a potential crude oil spill,” said Judge Dorothy Nelson in the court’s majority opinion. “…The agency’s assessment makes the proper inquiry into the risk of an oil spill, and no further analysis is required in relationship to this exploration plan.”
MMS disappointed
MMS has expressed its disappointment at the court’s decision. The agency said that it had completed an extensive environmental assessment of Shell’s exploration proposals, supported by a 1,596-page environmental impact assessment.
“Over the past 30 years MMS has funded nearly $300 million for environmental studies concerning Alaska waters,” MMS said. “… Alaska and its adjacent offshore areas have great potential for increasing our energy security.”
On the other hand, Mayor Edward Itta of the North Slope Borough welcomed the court ruling.
“The court has confirmed the legitimacy of our argument,” Itta said. “It agreed that MMS did a woefully inadequate job in its assessment of the potential impacts to the bowhead whale and other marine life, as well as to our traditional bowhead subsistence harvest. I don’t think MMS took their job seriously enough. Maybe now they will.”
Shell spokeswoman Darci Sinclair expressed her company’s disappointment.
“We believe the MMS did a thorough job and that Shell has met or exceeded requirements for responsible Arctic exploration,” Sinclair said. “Shell is committed to operating safely and responsibly and will continue to comply with all regulatory requirements.”
The court decision will extend the time that it takes to bring much-needed U.S. oil production on line, she said.
“While we assess our options, it’s important to remember that we hope to make Alaska a long-term commitment for Shell,” Sinclair said. “We believe developing offshore Alaska is the right decision for the citizens of Alaska and the state’s economy and will help provide a secure energy future for the United States.”
Another EIS?
At the core of the appeals against approval of Shell’s exploration plan lay the question of whether the EIS that MMS conducted for its Beaufort Sea lease sale program analyzed in sufficient detail the types of activity that Shell proposed in its plan, or whether the exploration plan should have triggered a new EIS.
Under the terms of the National Environmental Policy Act, MMS uses a tiered approach to environmental permitting, in which a broad EIS prior to the start of an offshore lease sale program determines whether lease sales should proceed. Further EISs may be done subsequently, targeting specific exploration or development activities that might have a significant environmental impact not fully considered in the earlier, broader EIS. A proposal to develop an offshore oil field, for example, would almost certainly trigger the need for a new EIS specific to that development.
The development of an EIS is a complex process that typically takes several years to complete.
MMS had published a comprehensive multi-sale EIS for its Beaufort Sea oil and gas leasing program. Then, when Shell submitted its Beaufort Sea exploration plan, MMS conducted an environmental assessment that concluded that the company’s planned operations came within the scope of the multi-sale EIS and could proceed.
But during oral arguments in the 9th Circuit case the appellants vehemently disagreed with the MMS position.
“Here you have a cursory EA (environmental assessment) that fails to assess the actual drilling proposals’ effects on whales and completely refuses to analyze the potential for a crude oil spill and its effects on that environment,” Dierdre McDonnell, the attorney representing the Alaska Wilderness League and environmental organization REDOIL, told the judges.
“The Minerals Management Service simply does not know enough about the potential impact on the Arctic environment to approve a three-year exploration plan and environmental assessment,” said Christopher Winter, attorney for the North Slope Borough and Alaska Eskimo Whaling Commission. The noise from drill ships and icebreakers would deflect bowhead whales from their normal migration routes, thus creating a major safety risk to whaling captains and crews and threatening a key source of food for North Slope communities, Winter said.
MMS for its part said that it had adequately taken account of the potential impacts of Shell’s planned Beaufort Sea drilling activities.
MMS has imposed very specific mitigation measures through the terms of its leases, said David Shilton, attorney for MMS. One of those measures is the requirement for a conflict avoidance agreement with the subsistence hunters, he said.
“Shell must sit down with the subsistence whalers and hammer out an agreement to protect their subsistence hunting, and that is something that has been done over the years successfully,” Shilton said. “… This year there was a conflict avoidance agreement which would have had Shell pull all of their assets off of the drilling for the time that whale hunters were out there.”
Court agreed
The majority of the judges on the 9th Circuit panel agreed with the petitioners’ concerns about the potential impact on wildlife of noise originating from specific Beaufort Sea drilling activities.
“MMS has not provided a convincing statement of reasons explaining why Shell’s exploratory drilling plans at these specific sites would have an insignificant impact on bowhead whales and Inupiat subsistence activities,” Nelson said. “As a result, we are unpersuaded that MMS took the requisite ‘hard look’ at the environmental impact of this project. There remain substantial questions as to whether Shell’s plan may cause significant harm to the people and wildlife of the Beaufort Sea region.”
The court accepted the MMS tiered approach to environmental permitting under the National Environmental Policy Act, and said that the agency could conclude that a new environmental impact statement would not be needed for Shell’s exploration plan if the agency could make a finding of no significant impact, or FONSI, for Shell’s exploration activities.
But the judges quoted case law that says “An EIS must be prepared if ‘substantial questions are raised as to whether a project ... may cause significant degradation of some human environmental factor.’ … If an agency finds an EIS is not required and issues a FONSI, it must provide a ‘convincing statement of reasons’ to explain its decision.” And the judges said that the MMS environmental assessment of Shell’s Beaufort Sea exploration plan had failed to adequately consider several potential impacts of Shell’s drilling activities.
Impact of noise
In particular, there is insufficient analysis of the impact of drilling-associated noise on bowhead whales’ migration routes — Shell’s exploration plan envisages the use of two drilling vessels and two associated icebreakers for the Beaufort Sea drilling, Nelson said.
“The multi-sale EIS discusses, in a general sense, the impact of noise on bowhead whales, citing a number of studies that have been conducted on the topic,” Nelson said. “However, that document contains no studies that analyze the effects of noise from a project with two drillships and two icebreakers. … Moreover, studies cited in the multisale EIS use varying methodologies and come to inconclusive results.”
The environmental assessment for Shell’s exploration plan “gives only a brief description of the level of noise the individual drillships in Shell’s proposal could make, but does not examine the combined effect of all vessels operating simultaneously,” Nelson said. And there is no evidence that a National Marine Fisheries Services biological opinion cited by MMS “relies on studies involving two drillships and two icebreakers,” she said.
The court majority opinion also says that MMS has recognized that even a single operating drillship can deflect migrating bowhead whales.
And the judges discounted the use of a whale monitoring program as a means of mitigating the impacts of drilling noise. The monitoring program proposed to accompany the Shell drilling “could detect impacts after they occur” rather than providing a buffer against the impacts, Nelson said.
“In sum, MMS abrogated its NEPA duties because neither the environmental assessment nor the documents it tiers to consider the specific parameters and potential dangers of Shell’s project,” Nelson said. “There is substantial uncertainty about how various levels of noise would affect whales and their migratory patterns.”
Subsistence hunting
MMS has also failed to take a “hard look” at the impact of Shell’s project on subsistence hunting, Nelson said. And relying on annual conflict agreements between Shell and the whale hunters does not meet the required legal standard, she said.
“The conflict avoidance agreement process is too vague and uncertain as a mitigation measure to justify the agency’s decision not to engage in further analysis,” Nelson said. “Conflict avoidance agreements come about through a voluntary process and are renegotiated every year. The agency is not party to the process, and any agreement made is not legally binding.”
And neither the EIS for the lease sale nor the environmental assessment for Shell’s exploration plan adequately considered potential impacts on the subsistence hunting of mammals other than bowhead whales, or on subsistence fishing, Nelson said.
“The EA ultimately concludes that Inupiat communities may suffer cultural consequences from drilling activities, but does not state whether these effects will be ‘significant,’” Nelson said. “Instead the EA relies on mitigation measures in the hopes that they would ameliorate any harm done. … These mitigation measures do not go far enough to rectify the potential that Shell’s project will cause substantial harm to Inupiat communities on Alaska’s northern shore.”
The court also said that, by approving Shell’s exploration plan without the company specifying exactly which wells it would drill in each year of the plan, MMS had violated the Outer Continental Shelf Lands Act.
Dissenting opinion
Judge Carlos Bea dissented from the majority decision, saying that the court could not overturn the MMS exploration plan approval on the grounds that the approval was arbitrary or capricious.
For its Beaufort Sea lease sale program MMS had prepared a 1,500-page multi-sale environmental impact statement that “discussed potential environmental effects from the development of each of Shell’s lease-sale sites,” Bea said. And, for Shell’s exploration plan, the agency had prepared an additional 100-page environmental assessment “that supplemented the multi-sale EIS for two of Shell’s lease plots about which MMS decided additional information was needed,” he said.
The petitioners and the majority on the panel of judges do not want MMS to “use its extensive prior work to inform its decisions on individual leases,” but instead they want the agency to prepare a new EIS for each lease, Bea said.
“This is worse than re-inventing the wheel: this is re-inventing the wheel for each wheel of the car,” he said.
The process will be expensive, time-consuming and largely duplicative, thus defeating the purpose of National Environmental Policy Act regulations that encourage tiering of NEPA documents, he said.
MMS Expertise
And Bea said that it was not appropriate for the court to overrule the MMS expertise regarding the interpretation of research results relating to the impacts of exploration activities on bowhead whales. Instead, the court’s role is to verify that the agency has taken the appropriate factors into consideration, considered all important aspects of the problem and offered a plausible explanation for its decision, he said.
“MMS gave a ‘hard look,’ by any stretch of the term, to whether Shell’s plans would disrupt the bowhead whale’s migratory habits,” Bea said. “The expert agency (MMS) to which Congress delegated its authority concluded Shell’s plan would not disrupt the bowhead whales to an extent necessary to require an additional costly EIS (or ‘revised’ EA).”
Bea said that the multi-sale EIS had also taken into consideration the cumulative impacts of multiple operations that might result from Beaufort Sea lease sales.
And Beau dismissed the majority argument that Shell should have precisely specified the location of each well to be drilled in each year of the exploration plan. The Outer Continental Shelf Lands Act allows MMS some discretion in the amount of detail that an exploration plan need contain, while the type of well location information that Shell had provided was sufficient to satisfy MMS regulations, he said.
“The majority’s demand (that) Shell provide exact locations of wells before approval of its exploration plan, when those exact locations depend on what happens with the earlier wells which must be explored pursuant to the exploration plan, is a catch-22,” Bea said.
Bea also said that the appeals should be dismissed because three of the petitioners had filed their appeals more than 60 days after MMS approval of Shell’s exploration plan, thus exceeding the time allowed under the applicable statute of limitations. The petitioners did file appeals with Interior Board of Land Appeals within the required 60 days. However, under federal law, administrative appeals relating to Beaufort Sea outer continental shelf exploration have to be filed with the 9th Circuit court — the appeals were eventually filed in the court 96 days after the MMS decision.
The majority of the 9th Circuit panel of judges took an alternative view that during the period that the appeals were being considered by the Interior Board of Land Appeals the appeals were in effect “tolled,” or placed on hold. As a consequence, the statutory 60-day period for appeal of the MMS decision was not exceeded, the majority said.
