The New Bureau of Ocean Energy Management: Business as Usual for Offshore Oil and Gas Leasing

Transcription

1 The New Bureau of Ocean Energy Management: Business as Usual for Offshore Oil and Gas Leasing

2 I. INTRODUCTION On April 20, 2010, British Petroleum s Deepwater Horizon rig exploded, resulting in a daily release of up to 53,000 gallons of crude oil into the Gulf of Mexico. 1 As days turned into weeks, people watched in horror as live video feeds continued to reveal oil billowing out from the Macondo well on the ocean floor. Pursuit for those responsible for this monumental environmental disaster began shortly following the blowout. Federal reports addressing the lack of oversight and lackadaisical regulation led some to believe that the Minerals Management Service (MMS) was one of the primary culprits that contributed to the largest oil spill in history. 2 The National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling (National Commission), a bipartisan commission that President Barack Obama created to investigate the disaster and suggest improvements for offshore oil and gas practices, found that the MMS suffered from serious deficiencies of organization and management. 3 In addition, following the blowout, the federal government and the media scrutinized and criticized the federal agency for its alleged lack of oversight and regulation of oil and gas production companies. 4 In response, President Obama took steps to rebrand and reorganize the agency to address some of the inherent conflicts and to create a new agency that will be better suited to regulate, lease, and permit the oil and gas companies that seek to explore and develop offshore oil and 1 Robertson, Campbell; Krauss, Clifford ( ), Gulf Spill Is the Largest of Its Kind, Scientists Say, N.Y. Times, retrieved Id. 3 Nat'l Comm'n on the BP Deepwater Horizon Oil Spill & Offshore Drilling, Deep Water: The Gulf Oil Disaster and the Future of Offshore Drilling, 78 (2011), available at (hereinafter Nat l Commission). 4 Urbina, Ian, Inspector General s Inquiry Faults Regulators, N.Y. Times, retrieved ; Eilperin, Juliet; Higham, Scott, How the Mineral Management Service s Partnership with Industry Led to Failure, The Washington Post, retrieved

3 gas. 5 The Obama Administration created two new agencies, the Bureau of Ocean Energy Management (BOEM) and the Bureau of Safety and Environmental Enforcement (BSEE), to replace MMS and theoretically resolve some of MMS s problems. 6 This paper will evaluate how the BOEM has been regulating offshore oil and gas leasing and development in its first few years of existence. This analysis of oil and gas leasing will be confined in geographic area primarily in the Gulf of Mexico, but also in some respects to the offshore areas of Alaska. Historically, the reach of offshore drilling has been only in one place, the Gulf of Mexico, because Congress singled out the Gulf for offshore drilling. Specifically, in a series of recurring one-year moratoriums imposed on the interior Department s annual budgets, the House Appropriations Committee effectively prohibited everything from new leasing activities to exploration and development on existing leases in areas all over the outer continental shelf outside the Gulf of Mexico and a few sub-regions off of Alaska. 7 From 1982 to 1993, the area covered by these moratoriums expanded from 0.7 million acres of federally owned submerged lands to 266 million acres. 8 Indeed, President George H. W. Bush underscored the persistent unpopularity of offshore drilling outside the Gulf: despite his background as a former Gulf state (Texan) oil-industry executive, he issued a memorandum in June 1990 that canceled all scheduled sales off the California, southern Florida, North Atlantic, Washington, and Oregon coasts and withdrew those area from leasing until after 2000 (Alaska was not mentioned). 9 Part II of this Note begins with an overview of the MMS and discusses some of the problems regarding the structure of that agency. An overview of the Outer Continental Shelf 5 Reorganization of Title 30: Bureaus of Safety and Environmental Enforcement and Ocean Energy Management, 76 Fed. Reg. 64, (Oct. 18, 2011) (to be recodified at 30 C.F.R. pt. II and V respectively). 6 Reorganization of Title 30: Bureaus of Safety and Environmental Enforcement and Ocean Energy Management, 76 FR Nat l Commission at Nat l Commission at Nat l Commission at

4 Lands Act follows because it is the primary statute that the MMS and now BOEM must follow when regulating and leasing offshore oil and gas leases. Next, this Note will briefly discuss the National Environmental Policy Act (NEPA), because this statute is central to the leasing of outer continental shelf lands and informs the public, the government, and the industry of the environmental risks involved in offshore drilling. In Part III, this Note explains how the MMS eroded regulatory oversight in the offshore leasing process. Finally, in Part IV, it assesses how the recent cases decided since BOEM began overseeing offshore oil and gas development after the Macondo blowout demonstrate that the new agency is different only in name from the MMS. Specifically, leasing of offshore oil and gas facilities has continued essentially as business as usual, providing no greater analysis of possible environmental effects of offshore development and exploration. II. THE MINERALS MANAGEMENT SERVICE AND ITS REGULATORY RESPONSIBILITIES A. The Minerals Management Service (MMS) In 1982, Secretary of Interior James Watt created the MMS to carry out the functions formerly assigned to the Conservation Division of the Geological Survey. 10 Specifically, the MMS s purpose was to improve the management of and provide greater management oversight and accountability for the minerals related activities previously carried out by the Conservation Division of the Geological Survey. 11 Guided by the 1978 Outer Continental Shelf Lands Act (OCSLA), 12 discussed in greater detail in the next section, the MMS had four distinct and often conflicting responsibilities: to manage offshore leasing, to collect revenue and conduct 10 Secretarial Order No Id U.S.C (a) (2006).

5 auditing, to ensure appropriate permitting and operational safety, and to protect the natural resources on the OCS [outer continental shelf]. 13 To understand the pressures on the MMS to lease and why there are conflicting pressures, it is important to look at what is at stake. Offshore leasing activities generate substantial income for the federal government through bonus and royalty payments, 14 and over its lifespan the MMS grew to become the federal government s second largest revenue collector. 15 For example, BP paid approximately $34 million dollars as a bonus payment to the MMS for the exclusive lease to drill in Mississippi Canyon Block 252, a nine-square-mile plot in the Gulf of Mexico, where the Macondo well was located. 16 Because the MMS s duties combined regulatory oversight with the responsibility for collecting billions of dollars for the U.S. Treasury through leasing and royalty payments, the MMS from its creation had a built-in incentive to promote offshore drilling, in sharp tension with its mandate to ensure safe drilling and environmental protection. 17 The agency formed a close partnership with the offshore oil and gas industry as a result of the pressures to maintain revenues from leasing and a mandate to meet the nation s energy needs. 18 Problems arose because the MMS s simultaneous responsibility to regulate resource management, safety, and environmental protection slowed this leasing process down, or in some cases prevented leases from being granted. 19 Faced with issuing up to 1,000 drilling permits each year, and environmental impact statements [that] can take up to two years, some agency officials examined the safety and environmental issues in wholesale fashion, before conducting 13 Monroe, Leila, Restructure and Reform: Post-BP Deepwater Horizon Proposals to Improve Oversight of Offshore Oil and Gas Activities, 5 Golden Gate U. Envtl. L.J. 61, 73 (2011). 14 Eilperin, supra note Id. 16 Nat l Commission at Nat l Commission at Eilperin, supra note Eilperin, supra note 4.

6 the annual lease sales. 20 Additionally, the MMS waived hundreds of environmental reviews, did not aggressively pursue companies for equipment failures, and abandoned safety proposals because they would have increased costs for the industry. 21 Besides costing the U.S. government royalty fees and bonus payments, delaying or denying a lease put thousands of jobs at risk in the states that supplied employees to the oil companies that conducted offshore drilling operations. 22 Seldom do regulators work in a place so dependent on the industry they oversee, 23 and this pressure from the industry and the government to lease quickly led to the eventual downfall of the MMS. Although the MMS was being investigated for problems of corruption and lack of oversight prior to the Deepwater Horizon explosion, 24 in the light of the Macondo well blowout, these problems were recast as some of the main factors contributing to the massive spill. 25 Over the next several months, President Obama took steps to try and solve these problems. First, he immediately banned new drilling in the Gulf of Mexico. 26 This ban was lifted on October 12, In an effort to resolve some of these inherent conflicts and problems of corruption, in May 2010 President Obama proposed that the MMS be broken up. Subsequently, on May 19, 2010, Secretary of the Interior Ken Salazar issued Order No. 3299, replacing the beleaguered MMS with the Bureau of Ocean Energy Management (BOEM), the Bureau of Safety and 20 DeParle, Jason, Minerals Service Had a Mandate to Produce Results, N.Y. Times, Aug. 7, 2010, 21 Eilperin supra note Id. 23 Id. 24 Savage, Charlie, Sex, Drug Use and Graft Cited in Interior Department, N.Y. Times, September 10, 2008, 25 Brittan J. Bush, Addressing the Regulatory Collapse Behind the Deepwater Horizon Oil Spill: Implementing A "Best Available Technology" Regulatory Regime for Deepwater Oil Exploration Safety and Cleanup Technology, 26 J. Envtl. L. & Litig. 535, 538 (2011). 26 Gabbatt, Adam; McGreal, Chris; Macalister, Terry, Deepwater Horizon: US bans new drilling in Gulf of Mexico, Guardian, April 30, 2010, 27 Associated Press, Gulf Oil Spill Timeline and the Ensuing Legal Cases Against BP,

7 Environmental Enforcement (BSEE), and the Office of Natural Resources Revenue (ONRR). 28 By June 19, 2011, the MMS name had been discarded altogether, theoretically setting the stage for renewed attention on offshore leasing by the BOEM. 29 B. The Outer Continental Shelf Lands Act (OCSLA) The principal statute that governs the offshore oil and gas leasing process for the former MMS, now the BOEM, is the Outer Continental Shelf Lands Act (OCSLA). 30 Congress passed OCSLA in and significantly amended it in Congress enacted the 1978 amendments primarily in response to the 1969 Santa Barbara oil spill in 1969 and designed them to remedy the 1953 Act s inattention to the government s obligations to protect these public lands from environmental harm. 33 A brief overview of the scope and nature of this Act is necessary to understand how OCSLA guides the BOEM making its decisions. OCSLA gives responsibility to the Secretary of the Interior for the administration of mineral exploration and development of the outer continental shelf (OCS). 34 OCSLA defines the OCS to be all submerged lands lying seaward and outside of the area of lands beneath navigable waters as defined in section 1301 of this title, and of which the subsoil and seabed appertain to the United States and are subject to its 28 U.S. Dep't of the Interior, Secretarial Order No. 3299, Establishment of the Bureau of Ocean Energy Management, the Bureau of Safety and Environmental Enforcement, and the Office of Natural Resources Revenue (May 19, 2010), available at (revoking the MMS's duties and assigning them to two new bureaus and an office). 29 U.S. Dep't of the Interior, Secretarial Order No. 3302, Change of the Name of the Minerals Management Service to the Bureau of Ocean Energy Management, Regulation and Enforcement (June 18, 2010), available at (renaming the MMS as the Bureau of Ocean Energy Management, Regulation and Enforcement). 30 Secretarial Order No U.S.C U.S.C.C.A.N. 1450, Costonis, John, The Macondo Well Blowout: Taking the Outer Continental Shelf Lands Act Seriously, 42 J. Mar. L. & Com. 511, 541 (2010) U.S.C

8 jurisdiction and control. 35 This definition references the federal Submerged Lands Act 36 and as a practical matter means the states control three nautical miles out from the shoreline (9 nautical miles for Texas and western Florida because of historic claims), 37 while the OCS, the area seaward of state submerged lands, is under the federal government s leasing authority (subject to certain restrictions as discussed below). 38 Perhaps most significantly, OCSLA authorizes the Secretary of the Interior to grant oil and gas leases on submerged lands of the OCS. 39 Specifically, Congress secured the OCS against foreign and state territorial claims, authorizing the Executive Branch to lease the lands, because it recognized early on the value of these submerged lands for oil and gas exploration. 40 Estimates of the value of federal land offshore range from $40 billion to $250 billion The Phases of OCSLA Leasing of OCS Lands There are four distinct stages in the OCSLA leasing process for the OCS lands: (1) the Secretary of the Interior issues a five-year lease plan for the area; (2) individual lease sales occur according to the plan; (3) successful bidders explore for oil and gas pursuant to approved exploration plans; and (4) if oil or gas is discovered, the company begins development and production. 42 In implementing the leasing program, the BOEM (formerly the MMS) must consider environmental risks by managing the OCS in a manner which considers economic, social, and environmental values of the renewable and nonrenewable resources contained in the U.S.C U.S.C United States v. States of La., Tex., Miss., Ala. & Fla., 363 U.S. 1 (1960). 38 Nat l Commission at U.S.C Nat l Commission at Id. 42 Sec'y of the Interior v. California, 464 U.S. 312, 337 (1984).

9 outer Continental Shelf, and the potential impact of oil and gas exploration on the other resource values of the outer Continental Shelf and the marine, coastal, and human environments. 43 The first step OCS development is the creation of a five-year leasing plan, which is developed in several phases. In phase one, the MMS (now BOEM) publishes a request for comments and information regarding the preparation of a five-year plan, announces the start of the scoping for the Environmental Impact Statement (EIS) (see discussion of NEPA below), and notifies governors of affected states to request their input. 44 The EIS assesses the range of possible environmental impacts of the proposed action, but at this stage in the leasing process, the range of possible impacts is extremely broad because there has been no specific action taken. 45 As a result, these early stage EISs are a preliminary and relatively self-contained stage within an overall oil and gas development program, 46 and lack the greater detail of later stage EISs. Later EISs can be tiered to the first EIS so they do not address the same broad issues, and can be more specific to the area addressed. 47 This expedites the EIS process. In phase two, the MMS (now BOEM) announces the Draft Proposed Program (DPP) selected by the Secretary and the Notice of Intent (NOI) to prepare an EIS in the Federal Register. 48 The MMS (now BOEM) distributes the DPP to the governors of affected states and interested parties for comments. 49 In phase three, the MMS (now BOEM) considers comments on the DPP and publishes a Proposed Program (PP) in the Federal Register as well as distributes it again for comments to the governors of affected states and other interested parties. 50 Finally, in phase four, the MMS (now BOEM) prepares a Proposed Final Plan (PFP) based on comments U.S.C. 1344(a)(1) U.S.C. 1344(c)(1) C.F.R North Slope Borough v. Andrus, 643 F. 2d 589, 593 (D.C. Cir. 1980) (emphasis in original) C.F.R U.S.C 1344(c)(2). 49 Id U.S.C. 1344(c)(3).

10 received on the PP, publishes the PFP in the Federal Register, and submits it to the President and Congress. 51 The MMS (now BOEM) also issues the final EIS with the PFP and after the President and Congress have sixty days to review the PFP and comment, the Secretary may issue final approval the five-year program. 52 Once this five-year plan is approved, the second stage in the leasing process begins: the competitive lease sales of specific tracts of land by solicitation of bids and the issuance of offshore leases Again, within 60 days of the proposed lease sale, governors of affected states and local governments have the opportunity to submit recommendations to the Secretary regarding the size, timing, or location of the proposed lease sale. 55 After the federal agency coordinates and consults with the affected states, the lease sales begin. 56 Leases of specific tracts of submerged lands are awarded to the highest responsible qualified bidder by competitive bidding. 57 At the auction, companies bid to purchase OCS leases, and the specific OCS leases may contain stipulations on development that mitigate adverse environmental impacts. 58 An oil and gas lease entitle[s] the lessee to explore, develop, and produce the oil and gas contained within the lease area, conditioned upon due diligence requirements and the approval of the development and production plan The third stage is the exploration phase, which requires the lessee to submit an exploration plan (EP) to the Secretary and the affected states for approval. 60 The EP may apply U.S.C. 1344(d)(2). 52 Id U.S.C. 1337(a). 54 Hartsig, Andrew, Shortcomings and Solutions: Reforming the Outer Continental Shelf Oil and Gas Framework in the Wake of the Deepwater Horizon Disaster, 16 Ocean & Coastal L.J. 269, 275 (2011) U.S.C U.S.C U.S.C Hartsig, supra note 54, at U.S.C. 1337(b)(4) 60 Hartsig, supra note 54, at 276.

11 to more than one lease that the lessee holds in a region 61 and must include a schedule of anticipated exploration activities to be understaken [sic]; a description of equipment to be used for such activities; the general location of each well to be drilled; and such other information deemed pertinent by the Secretary. 62 In addition to OCSLA requirements, BOEM regulations instruct the lessee on more specific additional information the EP must include. 63 After the EP is submitted, the Secretary will review and evaluate the impacts of the exploration activities and prepare environmental documentation under the National Environmental Policy Act (NEPA). 64 The Secretary must approve the plan within thirty days of its submission unless the Secretary determines that the plan would probably cause serious harm or damage to life, to property... to the marine, coastal, or human environment; the threat... will not disappear or decrease to an acceptable extent; and the advantages of cancellation outweigh the advantages of continuing such lease or permit, 65 in which case the Secretary can require modification of the plan or disapprove the plan. 66 If a state objects to the EP because the state deems the EP to be inconsistent with the state s Coastal Zone Management Act (CZMA), 67 the lessee may appeal and will either have to modify the EP, be found consistent with the CZMA, or withdraw the EP. 68 British Petroleum had completed this phase of the leasing process for Macondo and was in the process of drilling the exploratory well when it blew out U.S.C. 1340(c)(1) U.S.C. 1340(c)(3)(A)-(D). 63 See, e.g., 30 C.F.R (providing additional information on what exploration plans must include with respect to, inter alia, biological physical, and socioeconomic information ( ); solid and liquid waste discharges and cooling intake ( ); environmental monitoring information ( ); lease stipulations ( ); mitigation measures ( ); information on support vessels, offshore vehicles, and aircraft ( ); and environmental impact analysis ( ) C.F.R (c) & (b) (2012) U.S.C (a)(2)(a)(i) U.S.C U.S.C (2012) C.F.R Nat l Commission at vi.

12 The final stage of the leasing process is development and production. If exploratory activities demonstrate that the leased area will produce economically recoverable oil or gas, the lessee may initiate development and production activities. 70 The operator must submit yet another plan, the development and production plan (DPP), to the Secretary that details all the facilities and operations... which will be constructed or utilized in the development and production... including the location and site of such facilities and operations... and all environmental and safety safeguards to be implemented. 71 The BOEM has promulgated regulations that detail the information that the DPP and development operations coordination document (DOCD) (discussed below) must contain, much like the EP regulations The Gulf of Mexico Exception. In the OCS areas in the Western Gulf of Mexico (the waters off of Texas, Louisiana, and Mississippi 73 ), operators are exempt from the DPP, but must submit a development operations coordination document (DOCD) before conducting development and production activities. 74 OCSLA specifically exempts the Western Gulf of Mexico from the requirement of a DPP. 75 This political compromise was designed to exempt the leases in this area from at least one NEPA EIS, which delays development. 76 OCSLA specifies that a DPP must set forth the environmental safeguards to be implemented and the Secretary must at least once declare the approval of a development and production plan in any area to be a major Federal action 70 Hartsig, supra note 54, at U.S.C. 1351(a)(2). 72 See, e.g., 30 C.F.R (providing additional information on what DPPs and DOCDs must include with respect to, inter alia, biological physical, and socioeconomic information ( ); solid and liquid waste discharges and cooling intake ( ); environmental monitoring information ( ); lease stipulations ( ); mitigation measures ( ); information on support vessels, offshore vehicles, and aircraft ( ); CZMA information ( ); and environmental impact analysis ( ) C.F.R C.F.R U.S.C Nat l Commission at 62.

13 language which triggers NEPA s requirement of an impact statement Accordingly, by exempting the leases in the Gulf from the DPP, OCSLA also exempts them from the NEPA analysis at that stage. 78 A NEPA analysis is important for reasons discussed below. Once BOEM approves the DPP or DOCD, the operator may begin development and production operations. 79 C. The National Environmental Policy Act (NEPA) 1. Overview of NEPA Passed in 1970, NEPA requires federal agencies to prepare environmental impact statements (EIS) for all major federal actions significantly affecting the quality of the human environment. 80 The goal of NEPA is to insure that environmental information is available to public officials and citizens before decisions are made and before actions are taken. 81 The NEPA analysis is triggered by proposals for legislation, and any other major federal action significantly affecting the quality of the human environment. 82 The typical first step in the NEPA process is the environmental assessment (EA), which gauges the potential effects of the government action. 83 Based on the environmental assessment, the Federal agency will determine whether to prepare an environmental impact statement (EIS), or issue a finding of no significant impact (FONSI). 84 A finding of no significant impact typically ends the NEPA process whereas a determination to prepare an environmental impact statement is a considerable undertaking. The EIS shall provide full and fair discussion of significant environmental impacts and shall inform decisionmakers and the public of the reasonable alternatives which would avoid or 77 Id. 78 Id. 79 Id U.S.C C.F.R C.F.R C.F.R Id.

14 minimize adverse impacts or enhance the quality of the human environment. 85 The EIS process begins with a draft environmental impact statement based on the scope of the project determined during the scoping process. 86 This draft EIS is then made available for public comments, which may address either the adequacy of the statement or the merits of the alternatives discussed or both. 87 After interested parties have had a chance to comment on the draft EIS, the agency shall prepare a final EIS, which shall respond to the comments made and shall discuss any responsible opposing view which was not adequately discussed in the draft statement and shall indicate the agency's response to the issues raised. 88 If there are ever significant new circumstances or information relevant to environmental concerns and bearing on the proposed action or its impacts that arise after the conclusion of a draft or final EIS, a supplemental EIS must be prepared. 89 As it applies to offshore oil and gas leasing, absent this careful NEPA review, there are no assurances that these potential consequences of a decision to lease, explore, develop, or drill in any given location will be carefully considered by the governmental decisionmaker before the decision is made. 90 Also, as demonstrated in the cases that follow, despite the new information from the Deepwater Horizon spill about the size and nature of a potential oil spill in the Gulf of Mexico, the BOEM has not prepared a supplemental EIS on oil and gas leases. 2. NEPA and Offshore Oil and Gas Leasing Issuing a permit or granting a lease are examples of government actions that should trigger the NEPA process in the offshore oil and gas leasing. 91 For leasing, exploration, and C.F.R C.F.R C.F.R & C.F.R C.F.R (c). 90 Nat l Commission footnote at C.F.R

15 development and production phases under OCSLA, NEPA applies to each stage of its own force and effect. OCSLA's specific references to NEPA at the leasing and development and production stages, however, provide additional impetus for its application. Those specific references also emphasize the discrete nature of each stage. 92 However, the amount and specificity of information necessary to meet NEPA requirements varies at each of OCSLA s stages, a principle endorses by the U.S. Supreme Court. 93 As the U.S. Court of Appeals for the D.C. Circuit explains, in the initial leasing stage it is important to consider first what has not happened in, around, or affecting [the area], there has been no drilling-not even of an exploratory nature only-for oil, nor is it imminent. Drilling may still be at least two years away and will remain subject both to routine and extraordinary administrative and judicial review. As provided in the Outer Continental Shelf Lands Act (OCSLA), the lease sale itself is only a preliminary and relatively self-contained stage within an overall oil and gas development program which requires substantive approval and review prior to implementation of each of the major stages: leasing, exploring, producing. 94 Thus, as the scope of the offshore oil and gas activities narrows, so should any EISs prepared for those activities. The Council on Environmental Quality is responsible for the administration of NEPA and has promulgated a regulation that permits agencies to create categorical exclusions (CE) from NEPA review for categories of minor activities that can be reasonably assumed in advance not to have significant environmental impacts. 95 If a categorical exclusion applies, it can exempt the government from preparing and EIS and taking a hard look at the range of environmental effects from its action. 96 As discussed below, the MMS used these categorical exclusions to expedite the 92 Vill. of False Pass v. Clark, 733 F. 2d 605, 609 (9th Cir. 1984). 93 Tribal Village of Akutan v. Hodel, 869 F. 2d 1185, (9th Cir. 1988) 94 N. Slope Borough v. Andrus, 642 F. 2d 589, 593 (D.C. Cir. 1980) C.F.R Id.

16 OCSLA leasing process, and, as a result, many wells in the Gulf of Mexico have been exempted from the EIS process. 97 III. REGULATION UNDER THE MINERALS MANAGEMENT SERVICE As explained in Part II, the MMS was under intense pressure to process offshore oil and gas leases as quickly as possible because of the sizable revenue for the federal government generated by the bonus and royalty payments. The NEPA process is one of the hindrances to a swift leasing process, because a properly prepared EIS can take months, even years, to complete. 98 The MMS staff have reported that leasing coordinators and managers discouraged them from reaching conclusions about potential environmental impacts that would increase the burden on lessees, thus causing unnecessary delays for operators. 99 As noted above, OCSLA specifically exempts the Gulf of Mexico from a DPP requirement, thereby allowing the development stage of offshore oil and gas leasing to proceed without an EIS. The Interior Department, however, subsequently took that legislative exemption and unilaterally expanded its scope beyond those original legislative terms. 100 In addition to the development stage being exempt from an EIS, the Department of the Interior promulgated rules in 1981 categorically excluding exploration plans in the central and western Gulf of Mexico from NEPA s EIS requirement. 101 At the same time, the Department also categorically excluded applications to drill wells for exploration or development from NEPA s requirements when said well and appropriate mitigation measures are described in an approved 97 Nat l Commission at DeParle, supra note Nat l Commission at Nat l Commission at Id.

17 exploration plan, development plan, or production plan. 102 By specifically exempting the Gulf of Mexico from the DPP requirement, categorically excluding exploration plans in the central and western Gulf of Mexico, and categorically excluding applications in the Gulf of Mexico for exploration or development from NEPA, the result was that there were only two possible EISs performed on the leases; one at the five-year leasing plan stage, and one at the leasing stage. As discussed above, EISs at these stages are not site specific, and because of their broad nature do not ensure that government decisions were based on full consideration of their environmental consequences. In 1986, MMS scaled back the categorical exclusion to account for the possibility that NEPA review would be needed for these activities in certain narrowly defined extraordinary circumstances. 103 However, the MMS only rarely found that these extraordinary circumstances were present. 104 As a result, as a general rule, most exploration and development of oil and gas in the Gulf was categorically exempted from NEPA s environmental impact review requirements. 105 In addition to congressional decisions to limit NEPA and the MMS s propensity to find that no extraordinary circumstances existed to remove individual projects from the categorical exclusion, the MMS also lacked the personnel and expertise to engage in a meaningful NEPA review because extraordinary expansion of leasing activity in the Gulf. 106 Hundreds of exploration, development, and production plans as well as individual permit drilling applications 102 National Environmental Policy Act; Revised Implementing Procedures, 46 Fed. Reg 7485 (Jan. 23, 1981)(final NEPA rules). 103 Nat l Commission at Nat l Commission at Nat l Commission at Id.

18 had to be processed quickly and efficiently, and the MMS simply did not have the resources to prepare individual assessments concerning whether each of those activities required an EIS. 107 As an example of the general lack of environmental analyses for oil and gas activities in the Gulf of Mexico, the National Commission examined the NEPA analysis (or lack thereof) performed for the Macondo Well. According to the Commission, the MMS (1) performed no meaningful NEPA review of the potentially significant adverse environmental consequences associated with its permitting for the exploratory well; (2) categorically excluded from any NEPA review the multiple applications for drilling permits and modification drilling permits associated with the Macondo well; and (3) conducted only a limited NEPA review, as is typical, for the Five-Year Program and the lease sale that applied to the Macondo well. 108 Moreover, the NEPA analysis done for the Five-Year-Program and lease sale did not adequately address the environmental impact of the well because they did not address site-specific factors (such as the well s deep water location) and neither included a worst case analysis. 109 IV. REGULATION UNDER BOEM A. Separation of Agency Functions into BOEM, the BSEE, and the ONRR Clearly, the MMS s approach to NEPA environmental impact analysis was lacking. BOEM s creation was supposed to solve this problem by separating the pressures to lease for revenue and environmental and safety oversight duties into different agencies, and allowing the BOEM to focus only on the leasing process. For example, the Bureau of Safety and Environmental Enforcement (BSEE) is responsible for safety and environmental enforcement functions including, but not limited to, the authority to permit activities, inspect, investigate, 107 Nat l Commission at Nat l Commission at Id.

19 summon witnesses and produce evidence; levy penalties; cancel or suspend activities; and oversee safety, response and removal preparedness. 110 In contrast, the Office of Natural Resources Revenue (ONRR) is responsible for royalty and revenue management functions including, but not limited to, royalty and revenue collection, distribution, auditing and compliance, investigation and enforcement, and asset management for both onshore and offshore activities. 111 Finally, BOEM is solely responsible for managing development of the nation's offshore resources in an environmentally and economically responsible way. 112 By separating the BOEM s development responsibilities apart from the revenue management responsibilities, the tension and confusion of goals placed on the BOEM should be relieved. As the National Commission pointed out, at its core, the tension for the MMS was between promoting the expeditious and orderly development of offshore resources and ensuring that development proceeded in a manner that protected human health, safety, and environment. 113 Without this tension, theoretically the BOEM could function more effectively. B. Litigation Regarding BOEM s Implementation of OCSLA There have been three cases that have addressed the BOEM s regulatory authority under the new regulations: Native Village of Point Hope v. Salazar, 114 Defenders of Wildlife v. Bureau of Ocean Energy Management, 115 and Gulf Restoration Network v. Salazar. 116 These cases begin to demonstrate, in light of the BP Deepwater Horizon disaster, how the BOEM will be regulating OCS leasing, as well as how courts treat challenges to the BOEM s decisions. Although only 110 Reorganization of Title 30: Bureaus of Safety and Environmental Enforcement and Ocean Energy Management, 76 FR Id. 112 Id. 113 Nat l Commission at Native Village of Point Hope v. Salazar, 680 F. 3d 1123, (2012). 115 Defenders of Wildlife v. Bureau of Ocean Energy Management, 684 F. 3d 1242, (2012). 116 Gulf Restoration Network v. Salazar, 683 F. 3d 158 (2012).

20 two of the suits address the merits of the case, the third contains useful dicta, which is where this discussion begins. 1. Gulf Restoration Network v. Salazar The Gulf Restoration Network (Gulf) is a non-profit organization that, along with the other non-profit environmental groups, sued the Secretary of the Interior in 2010, challenging the Department of the Interior s (DOI s) decision to approve deepwater drilling plans in the Gulf of Mexico. 117 Specifically, Gulf challenged sixteen exploration and development plans that the DOI had approved, alleging they were in violation of OCSLA and NEPA. 118 The case never addressed the merits of Gulf s complaint because the U.S. Court of Appeals for the Fifth Circuit found that, although the non-profit groups had standing to challenge the decisions by the DOI, they did not exhaust their administrative remedies within BOEM. 119 The case was dismissed because the plaintiffs failed to participate in the administrative proceedings. 120 As discussed above, OCSLA governs OCS leasing. Section 1349(c)(3)(A) of OCSLA states that judicial review is available only to those who (A) participated in the administrative proceedings. 121 However, Gulf Restoration found that none of the petitioners participated in any of the proceedings related to the approval of those plans. 122 Exhaustion of administrative remedies is a common rule in administrative law. 123 Gulf sought an exception to this rule because DOI s untimely and difficult-to-find public postings of the plans on the internet were the 117 Gulf Restoration Network v. Salazar, 683 F. 3d 158 (2012). 118 Id. at Id. at Id. at U.S.C.A. 1349(c)(3)(A). 122 Gulf Restoration Network v. Salazar, at Sims v. Apfel, 530 U.S. 103, , (2000) (Breyer, J., dissenting) (citing United States v. L.A. Tucker Truck Lines, Inc., 344 U.S. 33, (1952); Unemployment Compensation Comm'n of Alaska v. Aragon, 329 U.S. 143, 155 (1946); Hormel v. Helvering, 312 U.S. 552, (1941); 2 K. Davis & R. Pierce, Administrative Law Treatise 15.8, pp (3d ed.1994)).

21 cause of its failure to timely object to the leasing plans. 124 The Fifth Circuit did not agree. 125 In determining that the information was reasonably accessible to Gulf, the Fifth Circuit relied on an agency letter from BOEM s Office of Public Information, Chief of the Office of Information Management Services for the Gulf of Mexico Region, which explained the availability of the documents Gulf was seeking. 126 The court found that a reasonably qualified attorney or researcher should have been able to find public versions of plans on the DOI s website. 127 Gulf also argued that a letter sent from Gulf s Ocean Program Director to the Secretary of the Interior, the Director of the MMS, and the Gulf of Mexico Regional Director of the MMS constituted participation in the administrative proceedings. 128 The letter urged the Secretary to stop categorically excluding drilling plans from environmental review under NEPA and to rescind approvals of exploration plans and Development Operations Coordination Documents (DOCS) in the Gulf of Mexico. 129 The letter criticizes the Secretary s decision to approve drilling in the Gulf of Mexico, especially with regard to the categorical exclusions from NEPA analysis in light of the Deepwater Horizon spill, and urges the agency to suspend all Gulf of Mexico drilling activities until there could be a thorough NEPA review of all the proposals. 130 The Fifth Circuit found that this letter did not qualify as an act participating in any individual practice[s]...or proceeding in which a lessee is seeking the DOI s approval of an EP or DOCD. 131 As such, it did not amount to participation in the administrative proceedings so as to fulfill Gulf s duty to exhaust its administrative remedies Gulf Restoration Network v. Salazar at Id. at Id. 127 Gulf Restoration Network v. Salazar at Id. at Id. 130 Gulf Restoration Network v. Salazar at Id. 132 Id. at 180.

22 Although decided on procedural grounds, this case reveals BOEM s intent to continue OCS oil and gas exploration and development in essentially the same manner as the MMS did specifically, to continue the leasing for oil and gas development with limited NEPA environmental review. Although the MMS (not BOEM) approved the exploration and development plans in 2010, it is telling that BOEM chose not to suspend these plans pending a more thorough NEPA review. If BOEM were taking a more cautious approach to offshore drilling, it should have suspended these plans until it had conducted a full EIS, especially given the facts of the Deepwater Horizon spill and that the MMS approved the plans under very dubious circumstances. As the Fifth Circuit recognized in Gulf Restoration, [o]f the twelve plans dealt with in this section, the DOI approved two on the same day that their public versions were posted on the Internet; and in one instance the agency approved the plan before it had been posted. 133 Furthermore, the MMS approved the two plans on April 21 and 23, 2010, a day and two days after the Deepwater Horizon spill. 134 The MMS also approved a plan on April 16, 2010; this approval came prior to the public posting on April 21, 2010, the day after the spill. 135 The Fifth Circuit recognized these flaws, but it was unpersuaded that Gulf would have participated even if there had been appropriate time to comment. 136 Nevertheless, for BOEM to fulfill its mission of managing development of the nation s offshore resources in an environmentally and economically responsible way, 137 it should be conducting a thorough environmental analysis of the impacts of each exploration and development plan, and part of this thorough analysis is allowing public input. The NEPA EIS and public participation ensure the government examines the environmental impacts of the 133 Id. at (emphasis added). 134 Id. at footnote Id. 136 Id. at Fed. Reg at

23 leasing plans, and ensures the public has an opportunity to provide input in the scope of the EIS. BOEM s failure to demand more intensive NEPA analysis even after the MMS s dissolution and the Deepwater Horizon oil spill strongly suggests that little has changed with regard to environmental review of oil and gas leasing, at least in the Gulf. 2. Native Village of Point Hope v. Salazar Native Village of Point Hope addressed the BOEM s regulation of offshore oil and gas leasing off the coast of Alaska, an area subject by statute to more intense environmental review than the Gulf. This area is subject to more intense environmental review because it is dark and hostile; frigid temperatures prevail throughout much of the year. The frozen winter sea opens during the spring ice breakup, setting off powerful floes threatening everything in their path. 138 Pursuant to OCSLA, environmental organizations and Native Alaskans brought suit in 2011, seeking review of BOEM s approval of Shell Oil s plan for exploratory drilling in Beaufort Sea. 139 The case marked the third time that Shell s exploration plan has been challenged; the first two challenges arose in 2009 under the MMS s supervision, and the U.S. Court of Appeals for the Ninth Circuit vacated the first and dismissed the second as moot. 140 Shell submitted its exploration plan during to the third stage in the OCSLA process, and the Native Village of Point Hope (Hope) challenged that plan, which proposed drilling at two locations at sea. 141 After Shell conducted an environmental review pursuant to NEPA of the proposed drilling activities, BOEM issued a Finding of No Significant Impact (FONSI). 142 A FONSI means Shell does not have to prepare an EIS, saving it time and money in the leasing 138 N. Slope Borough v. Andrus, 642 F. 2d 589, 593 (D.C. Cir. 1980). 139 Native Village of Point Hope v. Salazar, 680 F. 3d 1123, 1126 (2012). 140 Id. at Id. at Id.

24 process. 143 The following day, BOEM approved the exploration plan. 144 Hope claimed that BOEM s approval of this plan was arbitrary and capricious because the plan did not include an appropriate oil spill response plan and contained an incomplete discussion of its proposed wellcapping stack and containment system. 145 The Ninth Circuit ruled that the challenge to the oil spill response plan was moot because by the time the case was argued, Shell already received approval of a revised oil spill response plan. 146 Hope also challenged the well-capping stack and containment system as incomplete because it did not meet OCSLA regulations. 147 Specifically, 30 C.F.R (d) requires an exploration plan to include a description and discussion of any new or unusual technology (see definition under ) you will use to carry out your proposed exploration activities. The regulations define new or unusual technology to include equipment...that have not been used previously under the anticipated operating conditions. 148 However, the Ninth Circuit gave BOEM discretion to interpret what a description and discussion is because the term is not defined in OCSLA or the regulations. 149 As a result, the Ninth Circuit found BOEM s conclusion that the description and discussion in the exploration plan were adequate to be neither arbitrary nor capricious. 150 Hope next challenged BOEM s approval of the exploration plan on the grounds that BOEM did not explain how it reconciled inconsistencies in Shell s 2011 plan regarding the feasibility of the proposed well-capping stack and containment system. 151 As part of the pre C.F.R Native Village of Point Hope v. Salazar at Id. at Id. at Id. at Id. at (Internal quotations omitted). 149 Id. at Id. 151 Id.

25 2011 oil spill response plan, Shell stated that proven technology is not available for well capping and well capping would not be an effective option for regaining well control while operating from a moored vessel. 152 However, in Shell s 2011 exploration plan, Shell stated that subsea capping equipment and containment capabilities...would be implemented if all other kick control methods fail. 153 Again, the Ninth Circuit deferred to BOEM s expertise as the regulating agency and found that the failure to address this issue did not violate the OCSLA. 154 BOEM found that Shell s response tools were adequate and would not cause serious harm or damage to the environment. 155 Similarly, even though the exploration plan did not reconcile different estimates regarding the time planned to drill an emergency relief well and the time it took to drill a planned production well, 156 BOEM approved the exploration plan. Hope argued that Shell s estimate regarding the time it took to drill planned production wells was far longer than Shell s estimate regarding the time it would take to drill an emergency relief well and that Shell did not explain why a relief well can be drilled more quickly than a planned well. 157 Again, the Ninth Circuit deferred to BOEM s expertise in the area and would not substitute its judgment for that of the agency. 158 Ultimately, the Ninth Circuit found for BOEM on all points because BOEM was entitled to deference when deciding whether an exploration plan complies with OCSLA requirements. 159 This case is further evidence that, although there is a new name and new agency in charge, the management of offshore drilling will remain essentially the same as it was before the Deepwater 152 Id. at Id. 154 Id. 155 Id. 156 Id. at Id. 158 Id. 159 Id. at 1135.

26 Horizon spill. Hope pointed out several inconsistencies and a lack of discussion regarding the technology that Shell plans to use if another blowout or spill occurs, but BOEM sided with the oil company and permitted the exploration to continue despite these problems. 160 As discussed above, agency deference to industry was one of the problems of the MMS. Shell s pre 2011 oil spill response plan, stated that proven technology is not available for well capping and well capping would not be an effective option for regaining well control while operating from a moored vessel. 161 In the 2011 exploration plan that BOEM approved, Shell stated that subsea capping equipment and containment capabilities...would be implemented if all other kick control methods fail. 162 Shell never explained how capping is now possible, leaving open the question of how to cap a blowout. Thus, even after a disaster like the Deepwater Horizon oil spill, BOEM approved an exploration plan that seemingly has no solution to the same problem. 3. Defenders of Wildlife v. Bureau of Ocean Energy Management Defenders of Wildlife is the most recent case decided, and it reviewed BOEM s decision to approve an exploration plan in the Gulf of Mexico under OCSLA. In 2011, Defenders of Wildlife (Defenders) filed petition for review under OCSLA, 163 and alleged that Shell s exploration was in violation of OCSLA because it violated both NEPA and the federal Endangered Species Act. 164 As such, Defenders argued, BOEM should not have approved the 160 Id. at Id. at Id U.S.C. 1349(c)(2). 164 Defenders of Wildlife v. Bureau of Ocean Energy Management, 684 F. 3d 1242, 1246 (2012).