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ANWR lease sale lawsuit
State claims that Interior's SEIS and the resulting lease sale were illegal
Alan Bailey for Petroleum News
On Jan. 6 the state of Alaska filed a lawsuit in the federal District Court in Alaska challenging the U.S. Department of Interior's actions relating to the holding of lease sales in the Arctic National Wildlife Refuge. The state claims, among other things, that in the conduct and findings of the special environmental impact statement for the ANWR lease sale that was scheduled for early January, the federal government violated in various ways several federal statutes: the Administrative Procedures Act, the National Environmental Policy Act, the Alaska National Interest Lands Conservation Act and the Tax Cuts and Jobs Act of 2017.
The state has asked the court to rule that the SEIS for the lease sale was illegal and to prohibit the issuance of oil and gas leases resulting from the sale. In the event no one actually bid for leases.
The Alaska National Interest Lands Conservation Act, ANILCA, passed by Congress in 1980 established ANWR. The act recognized the oil and gas potential of the 1.56 million acre ANWR Coastal Plain and hence excluded this area from the wilderness designation of the rest of ANWR, the state told the court in its Jan. 6 filing. As directed by Congress, in 1987 the Department of the Interior completed a study of the resources on the Coastal Plain, with oil and gas activities in the area being prohibited meantime. The study recommended that Congress should enact legislation authorizing an oil and gas leasing program across the entire coastal plain, the state wrote.
The Tax Cuts and Jobs Act However, oil and gas leasing remained banned until the passage of the Tax Cuts and Jobs Act in December 2017 modified the terms of ANILCA by adding to the purpose of ANWR the provision of an oil and gas program on the Coastal Plain. In addition, the act required DOI to conduct at least two areawide oil and gas lease sales for the Coastal Plain, with the first sale to be conducted by Dec. 22, 2021, and the second by Dec. 22, 2024. Congress also directed that DOI offer at least 400,000 acres within the Coastal Plain for leasing, with a requirement to offer for leasing areas that have the highest potential for the discovery of hydrocarbons, the state wrote. Moreover, the statute required DOI to issue rights of way or easements on the Coastal Plain for oil and gas exploration, development or transportation, as necessary, the state wrote.
The Tax Act also directed DOI to authorize up to 2,000 acres of surface land that could be used for surface facilities such as production facilities, support facilities and airstrips.
The state emphasized the potential economic benefits to Alaska from oil and gas development on the Coastal Plain, given the 16.67% royalty rate for production from any Coastal Plain leases, and the state's entitlement to 50% of bonus, rental and royalty receipts.
Subsequent to the passage of the Tax Act the Bureau of Land Management developed an environmental impact statement for oil and gas leasing on the Coastal Plain, as required by the National Environmental Policy Act.
In August 2020 the secretary of the Interior issued a record of decision from the EIS, making almost the entire Coastal Plain available for oil and gas leasing. However, there was a no surface occupancy designation for approximately 359,400 acres of the region and there were operational timing limitations for about 721,200 acres.
The first Coastal Plain lease sale BLM scheduled the first Coastal Plain lease sale for Jan. 6, 2021. The Alaska Industrial Development and Export Authority, Knik Arm Services LLC and Regenerate Alaska Inc. purchased leases in the sale.
However, shortly after taking office on Jan. 20, 2021, President Biden issued an executive order placing a moratorium on all lease related activities pending the development of a supplemental environmental impact statement for the lease sale program. Subsequently in June 2021 the secretary of the Interior, claiming that there were multiple deficiencies in the lease sale EIS, issued an order "which purported to temporarily halt" all activities in ANWR related to the leasing program, the state told the court.
Lease sale SEIS initiated BLM proceeded to develop an SEIS for the lease sale program, with the agency agreeing that the state would be a cooperating agency during the SEIS development. As part of this agreement BLM undertook to engage in open and timely communications regarding the development of the SEIS, the state told the court. However, BLM did not provide the state with the preliminary alternatives determined for the SEIS before distributing the draft SEIS to all cooperators in the SEIS development. And, when the preliminary draft SEIS was provided to the various cooperators, comments on the draft were required within just 10 days, the state told the court.
Then, in September 2023 the secretary of the Interior cancelled all the leases that had been issued in the 2021 lease sale.
A dramatically different approach At the same time as canceling the leases, BLM published a draft SEIS with "a dramatically different approach to management of the Coastal Plain," the state wrote. The alternative that BLM now favored would close more than half of the lease program area to leasing while also mandating no surface operations on nearly all the land available for leasing, the state told the court.
During the public comment period for the draft SEIS the state submitted comments, objecting to the preferred alternative that BLM presented. However, BLM and the U.S. Fish and Wildlife Service never met, nor offered to meet, the state. Nor did BLM provide cooperators with a preliminary final SEIS for review before publication of this document, the state wrote.
A new alternative Then, when the final SEIS was published it included a new alternative that had not been considered in the draft SEIS nor been subject to public comment. This alternative, which was ultimately selected as the preferred alternative, proposed more limitations on leasing than any of the other alternatives, with only about 400,000 acres made available for leasing, the state told the court. Other stipulations in this preferred alternative included controlled surface use stipulations and timing limitations for surface activities, together with the elimination of the possibility of using reclaimed land from previous surface activities for future surface activities.
The compound effect of various surface limitations in the final SEIS and record of decision "will prevent efficient use of, and may entirely preclude development of the Coastal Plain," the state told the court. And the record of decision represents new legal interpretations of ANILCA and the Tax Act, by including lease stipulations that address all of the purposes of the entire ANWR area, the state wrote.
And, although the Tax Act required the authorization of up to 2,000 acres of surface disturbance, BLM has estimated that the preferred alternative would only result in up to 995 acres of disturbance, the state wrote.
"Notably, even in a best case scenario under the 2024 ROD's assumptions, a maximum of 400 million barrels of oil will be recovered from the Coastal Plain -- just 5% of the total estimated amount of technically recoverable oil on the Coastal Plain," the state wrote. Moreover, BLM itself has recognized that the limitations posed by the ROD could even prevent development, if there are no viable oil accumulations in proximity to locations where surface facilities and drilling pads can be located, the state told the court.
And the limitations will cause "significant and substantial harms to the state," given the loss of potential income from oil and gas development, the state argued.
Statutes violated, state claims Essentially, the DOI's actions have violated the Administrative Procedures Act and the Tax Act by failing to offer a minimum of 400,000 acres in each of two leases sales by December 2024, the state told the court. "Given BLM's purported cancellations," the initial lease sale, in effect, never occurred -- the Tax Act had required a total of at least 800,000 acres to be offered for leasing across two lease sales, the state argued. In addition, by closing nearly 1.2 million acres of the Coastal Plain to future leasing, the ROD in effect re-instates the original ANILCA prohibition on oil and gas development for nearly three quarters of the Coastal Plain, the state wrote.
Moreover, by closing most of the Coastal Plain to development and deterring development in the remaining portion, BLM "has exceeded its congressional grant," the state told the court. By, in effect, preventing a competitive oil and gas program for the Coastal Plain, the recent lease sale notice and associated ROD violate the Tax Act. And the various stipulations for surface use and timing constraints limit the amount of oil that could be produced and hence limit the state's share of any royalties from the production. The surface use stipulations also assumed unrealistic possibilities for use of horizontal drilling, the state argued.
Other alleged violations The state also argued that the SEIS incorrectly found that land used for oil and gas development and subsequently reclaimed could not be used for further development within the 2,000-acre limit for surface development. In addition, the SEIS incorrectly assumes that necessary rights-of-way easements authorized under one section of the Tax Act infringe on the 2,000-acre limit of another section of the act. Moreover, by limiting seismic activity to the 400,000 acres of the Coastal Plain that can be leased, the record of decision for the lease sale also violates the Tax Act, the state wrote.
The introduction of the significant new alternative in the final SEIS without first preparing a revised draft SEIS for review infringes both the National Environmental Policy Act and the Administrative Procedures Act, the state argued. And, finally, by only evaluating alternatives that consider all the purposes of the entire ANWR, the final SEIS is inconsistent with the terms of the Tax Act, the state told the court.
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