Fossil Fuels’ Third Century: NEPA’s Feature Role in a Geopolitical Endgame?

Another NEPA suit in the continuing war over drilling in the Arctic seas.

Coal was probably burned in England by the Roman Empire when it was there.  But it wasn’t until the 19th century that England’s ‘industrial revolution’ made coal its fuel of choice and English-speaking peoples started “civilization” down a path we have only recently begun to understand at a planetary scale.

Fast-forward to today: fossil fuels have entered an age of retreat, being forced there in part by dissidents armed with adaptive techniques and the resolve needed for a long campaign.  Those working to end fossil fuels’ third century as it dawns look to NEPA more than any other single legal tool.  As fuel supplies tighten, once-inaccessible deposits of coal, oil and natural gas begin to look more inviting, especially as technology and innovation make plausible their profitable recovery.  Price volatility and other uncertainties, however, perhaps necessitate that the firms involved be enormously capitalized, that they become the veritable partners of whole governments, and/or that they play a “long game” where payoffs might take decades.  And that means massive uncertainty in any environmental impact analysis.

A generation ago, this envelope reached places like Prudhoe Bay.  Today, even after the Deepwater Horizon catastrophe and unprecedented liability for BP, it reaches tentatively into places like the Chukchi and Beaufort Seas—places unimaginably remote only a few decades ago.

So Royal Dutch Shell’s development plans for that slice of the Arctic have become a proxy tug-of-war between one of the few remaining oil majors, the federal agencies facilitating continued fossil fuel development, and the public’s knowledge and perception of energy geopolitics in the 21st century.

Evacuating the Kulluk, Dec. 2013

Evacuating the Kulluk, Dec. 2013

Shell’s exploratory work in 2012 was fraught with troubles, including the grounding of its drill ship, the Kulluk. (It was so badly damaged that it will not be put back into service in Alaska.)  Indeed, by 2014 Shell had dropped its plans to operate in the Beaufort Sea, choosing to focus efforts in the Chukchi sea.

The Department of Interior’s Bureau of Safety and Environmental Enforcement approved Shell’s spill response plans in early 2012.  {See this report from Offshore Energy Today}  They had this to say:

After an exhaustive review, we have confidence that Shell’s plan includes the necessary equipment and personnel pre-staging, training, logistics and communications to act quickly and mount an effective response should a spill occur. . . .  Our staff will maintain vigilant oversight over Shell to ensure that they adhere to this plan, and that all future drilling operations are conducted safely with a focus toward spill prevention.

But does anyone really believe that if well control became a problem 70 miles from shore in the Chukchi Sea in winter that Shell (or anyone else) would actually be able to do anything about it.  The Interior Department (or the White House) shouldn’t mistake diffidence for confidence: the general public, however it is represented—whether in polling data, consumption behavior, or politician-speak intended to capture public opinion—may have more pressing problems on which to focus its attention.  After all, even after the Deepwater Horizon tragedy, well blowouts of the kind are extremely low probability events.  And this one would take place, if it did, a long way away from the vast bulk of the electorate.

As OPEC, the oil majors and many others descend on Vienna this week to make annual plans, Brent crude is trading at $65 a barrel and US domestic production is projected to keep expanding through 2016.  That’s a significantly rosier picture than when oil hit its six-year low this January (somewhere around $45).  And there’ll be no agreement between Europe’s majors and the US’s to support anything more binding than their own “shadow” price on carbon later this year in Paris.  {See this letter to the Financial Times by the European CEOs pledging support for a globalized “social cost of carbon.”}.

But it seems appropriate to bring attention back to the latest NEPA complaint—filed earlier this week.  It alleges multiple failures in the Department of the Interior’s Bureau of Ocean Energy Management’s guiding NEPA analysis for Shell’s lease sales in the Chukchi Sea.  Lawsuits like this one are putting some added cost into every barrel of oil sold today.  The question is whether that increment is or will be sufficient.

NEPA Battles in an Increasingly Globalized Theatre

Recall these were the leases for which Shell was so keen to clear a path to production that it took the unusual step in 2012 of suing several environmental NGOs seeking a declaratory judgment that drilling could proceed.  Not surprisingly, that move yielded nothing.

Like the Gulf’s deep waters before April 2010, the Arctic to an oil major like Shell represents a frontier, an untapped asset in a time of dwindling assets.  As this paper by David Hults argued, being a frontier might have a particular allure for them in this context: the lack of comparable experience means no benchmarks against which to measure precautions in present efforts and little data by which the gage the risks one’s actions represent.  Some estimates put Shell’s investment in this venture already north of $7B.

As recoverable asset estimates fluctuate, the entire footprint of “development” in the Arctic does too, making legitimate impact assessments impossibly hard.  Even more difficult: how to assess the environmental impact of the greenhouse gas emissions those assets represent.  As the Lab has noted repeatedly and at length, CEQ is struggling to provide guidance along this front—to little good effect.  quoteFirst, the assessor would need a baseline scenario against which to measure expected future production (and emissions).  Next, the assessor would need to know how high and for how long oil/gas prices will be—to be able to predict how much of the reservoir(s) will be recoverable economically.  Third, the assessor would need to know the emissions picture in that expected future more broadly, i.e., the Chukchi Sea production’s additivity to the larger portfolio of GHG emissions into the coming century.  Finally, because NEPA is about effects on the environment and not just calculations, the assessor would need to know how to translate the quantity of emissions (and their additivity) into global climate forcing.  Any one of those four steps, given present knowledge and analytical techniques, would make the analysis ‘arbitrary’ enough to make federal court review into a real gamble.

The litigants in this one will likely be visiting the Ninth Circuit again soon.

UPDATE: AP reports in late September 2015 that Shell has decided to shelf its Arctic plans for “the foreseeable future.”

{Image: Shell’s leases in the Arctic}

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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