Properly Valuing a No Action Alternative

The D.C. Circuit doubles down on a questionable interpretation of NEPA in the context of phased agency action.

In a decision last week, the D.C. Circuit rejected the claims of the “Center for Sustainable Economy” against the Bureau of Ocean Energy Management (BOEM) and its offshore oil/gas leasing program.  At issue was a completed EIS done in connection with BOEM’s decision to open new areas of the “outer continental shelf” (OCS) to leasing pursuant to its enabling statute, the Outer Continental Shelf Lands Act (OCSLA).  Two of CSE’s claims were brought under NEPA: (1) that the release of the agency’s economic analysis supporting its EIS came after finalization, effectively precluding any public review or comment thereon, and (2) that BOEM had prepared a defective analysis of the “no-action” alternative in the EIS by failing to quantify and then weigh the “option value” of the OCS leases being considered.

The panel of Pillard, Garland, and Sentelle held that the NEPA claims weren’t “ripe” and thus were not properly adjudicated at this stage of the agency’s administration.

As the court observed,

[a]t issue here is the 2012-2017 Program, the eighth five year program Interior has prepared pursuant to the 1978 Amendment. That Program includes 15 potential lease sales in six OCS planning areas: the Western and Central Gulf of Mexico, the portion of the Eastern Gulf of Mexico not currently under congressional moratorium, and the Chukchi Sea, Beaufort Sea, and Cook Inlet planning areas off the coast of Alaska. Twelve of the sales are planned for the Gulf of Mexico, and one sale each is planned for the three Alaskan areas.

As many have noted, the current five year program represents a newly expanded OCS open to drilling.  This is a significant swerve for the agency—one that most assuredly represented a real decision—and, thus (one hopes) a real balancing of the pros and cons.  What might those pros and cons have been?  For starters, the value of the fossil fuels to the American economy, both economically and geopolitically.  As the opinion opened by noting,

[b]illions of barrels of oil and trillions of cubic feet of natural gas lie beneath the OCS. There is enough oil beneath the OCS to replace America’s oil imports for 30 years and enough natural gas to supply all of America’s households for more than 80 years.

Of course these are just estimates.  And rough estimates of the cons should be obvious, too.  The risk of catastrophic well failure and the ensuing oiling of an entire ecosystem is no longer hypothetical fear mongering.  But there is at least one con that isn’t so obvious: accessing the oil now, while oil is cheap, doesn’t maximize the return on its asset to which the American people are entitled.  Or at least it might not.  To know better, we’d have to get some pretty spiffy calculations going.shutterstock_191978009

Represented by Professor Michael Livermore of the University of Virginia law school, CSE argued that the EIS didn’t properly quantify the value of these fossil fuels for being left in place.  The future option of tapping this resource if/when real shortages globally increased the monetary returns thereon must have some economic value.  Valuing options is, in fact, something financial people do all the time.  It’s just not something federal agencies have (yet) done much.

If BOEM is going to quantify and consider the monetary value of potential oil/gas production, shouldn’t it have also quantified the monetary value of leaving the resource in place longer?  The court’s answer was, importantly: maybe.  But it wasn’t for judicial decision now because OCSLA structures BLM’s program to be a phased, one-step-at-a-time approach to leasing, exploring and producing.  This is where the questionable NEPA interpretation comes in.


Phased Action Can Still be “Major Federal Action”

OCSLA, like many statutes, creates a phased approach to the agency’s administration of the program.  And, it is true, each of the stages entail some kind of NEPA review.  Each of those entails hard choices.  Each inevitably ends up balancing environmental risks against (economic) benefits.  But each does so at its own scale and scope.  As the Presidential Commission on the BP Gulf oil disaster lamented after the fact, most of OCSLA’s site-specific NEPA analyses are so abbreviated that if you blink you’ll miss them.  And they will only consider the pros and cons of leasing at one site.

So to say that the preparation of a five year schedule of proposed leases isn’t a step worthy of a balanced and careful quantitative assessment, especially when BOEM itself monetized some of its analysis (favoring expansion), is surely to miss the point.

A Reading of Precedent or of Logic?

The court’s (unconvincing) argument is this:

As we recognized in [Center for Bio. Div. v. Dept. of Interior, 563 F.3d 466 (D.C. Cir. 2009)]  “[i]n the context of multiple stage leasing programs . . . [the] obligation to fully comply with NEPA do[es] not mature until leases are issued,” because only at that point has there been an “irreversible and irretrievable commitment of resources.” . . . . Here, as in CBD, we confront a challenge to a multiple-stage program under which no lease sale has yet occurred and no irreversible and irretrievable commitment of resources has been made. As we reasoned in CBD, allowing NEPA challenges to be brought at this early stage, “when no rights have yet been implicated, or actions taken, would essentially create an additional procedural requirement for all agencies adopting any segmented program,” that “would impose too onerous an obligation, and would require an agency to divert too many of its resources at too early a stage in the decision-making process.”

This ignores the real reason for CSE’s suit: it’s not their “rights” they’re defending (which Judge Pillard links to ripeness doctrine).  CSE has no right to keep parts of the OCS closed.  (Interestingly, Judge Sentelle’s dissent arguing CSE lacked standing on similar grounds makes a fair point.)  It’s the integrity of the agency’s analysis and, presumably, better decisions that could stem from that better analysis.  BOEM may even agree on this one.  They recently began implying options analysis into the required elements of OCSLA’s staged decision-making. {See their New draft proposal for 2017-2022 here.}

Options analysis may or may not eventually convince future Department of Interior officials that leaving OCS fossil fuels in place—in some given region, lease tract, exploratory well bore, or finished well—makes more sense, economically, geopolitically, and environmentally, than emptying it.  But that is something totally apart from the agency’s decision at this planning stage to open whole regions up to leasing which hadn’t previously been possible.  As the D.C. Circuit sees it,

[p]etitioners suffer little by having to wait until the leasing stage has commenced in order to receive the information it requires. In the meantime, as Interior points out, no drilling will have occurred, and consequently, no harm will yet have occurred to the animals or their environment.

CBD, 563 F.3d at 481.  That’s like arguing that planners don’t confront trade-offs at wholesale because operations personnel confront them at retail.  Unfortunately, the D.C. Circuit has further cemented that marginalizing, dismissive interpretation of NEPA into the law of its circuit.

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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