Climate Change and the Future of Oil/Gas Leasing Offshore

A new draft programmatic EIS from the Bureau of Ocean Energy Management ignores the hardest issues raised in weighing future oil/gas production offshore. That’s not good.

The U.S. Bureau of Ocean Energy Management (BOEM) has braved rough seas since its creation in the wake of the Deepwater Horizon disaster.  The immediate past commitment to develop the plays off the coast of Alaska ended with, well, what can only be described as a gigantic mess for Royal Dutch Shell.  If their numbers are to be believed, the effort to find producible oil in the Beaufort and Chukchi seas cost them about $7B—and resulted in nothing but a public relations nightmare.

Now comes the Outer Continental Shelf Oil and Gas Leasing Program, 2017-2022 Programmatic Environmental Impact Statement (PEIS).

When BOEM’s draft plan and draft PEIS dropped earlier this month, media headlines were bigger than life: Obama Administration cancels drilling in the Atlantic!  A victory for climate hawks!  {See, e.g., this write-up at World Oil or this one at Slate.}

And one part is true: the draft 2017-22 plan just released proposes to offer off-shore leases in a small subset of possible “planning areas.”  Those areas reduce to waters off the coast of just three states: Alaska, Louisiana and Texas.  But this is less of a “victory” for climate hawks than seems to have been assumed.

The “undiscovered, technically recoverable resources” estimated to be in place put the decisions entailed in this proposal in stark relief:shutterstock_191978009

Alaska:       26.58 BBO and 131.38 TCFNG
Gulf:           48.46 BBO and 141.76 TCFNG

Atlantic       4.59 BBO and 38.17 TCFNG

Pacific          10.2 BBO and 16.19 TCFNG

* BBO = billion barrels of oil; TCFNG = trillion cubic feet of natural gas

While these estimates are obviously subject to some severe uncertainties, they give a sense what BOEM and the development community thinks is out there.  The largest plays are in Alaska and the Gulf (by orders of magnitude).  Moreover, assuming those resources in Alaska and the Gulf are ultimately “recovered” and combusted, this study by Christophe McGlade and Paul Ekins suggests that they would both exhaust our “burnable” carbon many times over between now and 2050 if we are serious about our commitment in Paris to help hold global warming to 2°C.

Indeed, given the fact that BOEM currently manages about 5,000 active offshore leases—covering more than 26 million acres and accounting for about 16% of domestic oil production and 5% of domestic gas production—the proposal and its Draft PEIS is hardly good news for climate hawks at all.

And then there’s the issue of political scales, which we’ve discussed here before.  As we narrow the places benefited by continued fossil fuel production, we concentrate the opposition to transitioning away from business-as-usual.  This post argues that that narrowing presents a tragic choice: the benefits of continuing business-as-usual are slimming to a smaller and smaller fraction of the country while the costs of continuing are increasing as more time is lost to delays and deleterious inaction.  To be sure, the state treasuries and local economies of Texas, Louisiana and Alaska have adapted fully to the revenue that oil and gas development bring.  But for how much longer?  The political factors involved cannot be ignored completely: does creating a hyper-concentrated opposition to change make sense politically?

The imbalance of costs and benefits pits these local and regional economic considerations against longer-term national interests, at least to a first approximation.  And that means more polarization ahead.

OCSLA: the Key Statute

As the Draft PEIS notes, the Outer Continental Shelf Lands Act (OCSLA) § 18 requires BOEM to prepare and offer off-shore leases that “best meet national energy needs for the 5-year period following its approval or reapproval.”  43 U.S.C. § 1334.  This might, interpreted strictly, mean that BOEM has no discretion to forego scheduling leases completely—unless and until BOEM makes a finding that doing so is consistent with our “energy needs” projected for 2017-22.  Of course, § 18 also grants BOEM no fewer than eight factors to balance in deciding the timing and location of leasing:

  • geographical, geological, and ecological factors of the region in question;
  • the equitable sharing of developmental benefits and environmental risks;
  • regional and national energy markets and demands;
  • other off-shore and seabed uses in the vicinity of potential lease sites;
  • producer interest;
  • affected states’ laws, goals and policies;
  • marine productivity and sensitivity;
  • the availability and quality of the predictive information;

That is a long, disjunctive list of factors to be weighed in this decision-making process.  And it would be hard to argue that the Nation’s “energy needs” looking out to 2022 aren’t even possibly best served by foregoing further leasing altogether.  In other words, if the possibility is that the Nation’s “energy needs” require a decisive retirement of domestic offshore oil/gas production (16% and 5%, respectively), then the statutory factors above take on a very different relevance.

“Undiscovered, Technically Recoverable Resources”

The draft PEIS is certainly deficient in one key respect and it is a potentially ruinous defect.  In but one brief passage, the draft PEIS acknowledges that going ahead with further fossil fuel development raises a climate change concern.  This is what they say:

The Proposed Action will increase global emissions of GHGs CO2 and N2O, along with black carbon, as a result of vessels, drilling equipment, and other activities that burn fossil fuels.

Draft PEIS at § 4.2.1 (pp.4-3).

This is all that the draft PEIS has to say about the causal effects further leasing in Alaskan or Gulf waters will exert on climate change.  An appendix offers painstaking details on the phenomena of climate change—both globally and broken out by the affected leasing regions (to the extent such forecasts are possible).  But this passage is the sum total of the PEIS’s attention to the causal importance of further leasing in the Gulf or new leases in Alaska.  And that is simply shocking.

As has long been the case with fossil fuel developments and environmental impact assessment, a decision document’s concern with the emissions from the extraction operation—to the exclusion of the emissions from the product being produced—borders on dishonesty.  {We went down this road with the KXL pipeline’s EIS before—as did EPA.}  The former is always, in every fossil fuel play of any scale, the tiniest fraction of the latter.  EPA’s role by law is to decide whether an EIS contains sufficient information or not.  Without even attempting to gauge the “additional” emissions further, future offshore leasing will induce, this PEIS should be judged inadequate.

Emissions from Future Fossil Fuel Development: Vital to a Complete (P)EIS

The whole point of a programmatic look at this decision is to specify, organize and compare the most relevant decision factors.  A document that narrows future offshore leasing to just two regions—Alaska and the Gulf—narrows the immediate environmental risks from development to one place where development has etched a practically permanent footprint on the landscape (the Gulf) and one where society has yet fully to decide to do so (Alaska).  Both offer resources of potentially vast significance to our carbon constraint(s) looking ahead.  Neither is weighed in those terms, though.

Of course, this program isn’t just a decision for the most-immediately-affected regions or affected states.  It is a national decision, too.  And what good is the document on that front if it foregoes any discussion of the GHG choices afoot?

An economist might tell you some empirical-sounding tale about how the production operation is irrelevant to future emissions because fossil fuels will be burned in the future whether any single play proceeds or not.  But in this context especially (if not in most of the state-sponsored fossil fuel developmental decisions), that’s just a bunch of hot air.  This PEIS considers all future offshore oil and gas production in the U.S.  How important might a signal of keeping that much in the ground be were the U.S. to send it?  Obviously, it could be transformative—to other nations, to futures traders, to capital, etc.

No one at BOEM (or their contractor) had to weigh the relative probabilities of a future where the U.S. was not issuing more leases in the Gulf (or new leases in Alaska’s rapidly warming waters).  They would understandably want to avoid doing so: with oil and gas prices as volatile as they’ve been over the last 5 years, there’s no telling what that diminishing supply would do to consumption trends, here at home or abroad.  (After the ending of the decades-long export ban last year, export of produced resources must be factored in now, of course.)  Still, this analysis was at least sketched by BOEM’s contractor in 2012 (see here) and should’ve factored into the PEIS for 2017-22.

A review of this kind that quite literally ignores the GHG implications of future development is a document that ignores the single most critical decision factor in the national calculus.

BOEM noted that it is “preparing a study to research the contribution of fugitives [like CH4 and N2O] to overall emissions,” Draft PEIS at §4.2.1. (pg. 4-4), and that is a good sign.  Recent research suggests that these gases are produced in oil and gas development operations at much greater rates than had long been assumed—and that a small minority of wells is responsible for the majority of the emissions.  {See this literature review by Cornell Professor Bob Howarth.}

What Future for Oil/Gas Offshore?

With coal’s precipitous decline, however, the big question now is how far/fast liquids will decline?  Carbon Tracker and others suggest that the bottom falling out of these markets is as much about capital looking for a new home as it is anything else.  Yet with oil prices now clawing back some of what they lost over the last 18 months, future development and new leases don’t seem so fanciful any longer.

Over 2,600 parties commented on the scoping of this program proposal and draft PEIS according to BOEM’s “scoping report.”  Apparently none of it was sufficient to convince BOEM to consider seriously not offering any leases for sale, whether out of climate change mitigation concerns or anything else.

Much more attention is being paid to fossil fuel leasing than ever before.  BOEM cited local opposition to leasing in the Atlantic and Pacific regions as key factors in their decision not to propose any such sales.  And the Department of Interior, BOEM’s parent agency, has even committed to developing its next generation of lease sales online—avoiding the security, civil disobedience, and other eventualities live auctions have entailed in the past.

BOEM NEPA DiagramStill, U.S. EPA would be fully within its authority under NEPA to grade this PEIS from BOEM “unsatisfactory” for conveying insufficient information to decision makers.  As BOEM’s nifty process diagram shows, the point at which a draft PEIS and program proposal are announced is about midway to finalization.  And OCSLA’s timeline is, by law, longer than NEPA’s.  But this window open right now, according to BOEM, is the last chance for “public input” into the program’s development and consideration as a whole in light of NEPA’s purposes and goals.  A future with a radically curtailed production profile in the Gulf and essentially no growth in Alaska is one that ought to be weighed in this PEIS in keeping with NEPA.

{Image: Drillship Kulluk in Arctic Waters}

I teach environmental, natural resources, and administrative law at Penn State Law. Before teaching I was an enforcement lawyer at U.S. EPA. Along the way I've done work for environmental nonprofits and written a fair bit about NEPA.
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