The Rush for Offshore Oil and Gas: Where Things Stand on the Outer Continental Shelf

The Rush for Offshore Oil and Gas: Where Things Stand on the Outer Continental Shelf¹

It is now more than a year since then President Nixon announced that the Outer Continental Shelf would be called upon to play a crucial role in implementing the newly formulated national policy of energy self-sufficiency. The Ford Administration, while warmly endorsing Project Independence, has tacitly conceded that the original target date of 1980 was unrealistic and replaced it with 1985. In keeping with this tempering of initial high hopes, the original intention of doubling the OCS acreage under lease for oil and gas exploration by leasing 10 million acres in 1975, much of it in hitherto unexploited areas off the Atlantic and Alaskan coasts, has also benn quietly dropped.

Although no figure has been set to replace the original 10 million acre goal, the Interior Department apparently hopes to lease as much acreage as can now be exploited, given the present shortage of drilling rigs, tubular steel, and skilled drilling labor. The numerical leasing target may have diminished, but the Department's ardor for immediate OCS exploitation has not. The question is no longer whether drilling in virgin OCS areas will be allowed; such an eventuality is at this point all but a foregone conclusion. The real questions now are when and where drilling will be permitted, the kind of institutional and legal framework within which such drilling will take place, and the specific means by which the risks of environmental harm connected with such activity can be mitigated.

The Council on Environmental Quality's year long OCS study,² completed in April 1974, recommended that as a general principle development should be allowed at a particular site when and if it can be determined that the benefits to be obtained outweigh the environmental risks involved.³ The paucity of data regarding the nature and extent of the possible environmental effects of OCS oil and gas exploration, however, has seriously hampered attempts to make such determinations. The CEQ study concluded that existing data concerning the behavior and toxicity of oil spills, the risks of such spills occurring in conjunction with OCS drilling, and the nature of marine and coastal ecology was inadequate, and recommended that further studies be conducted before leasing of virgin areas is begun. Similar complaints as to the lack of an adequate data base upon which to build a definitive analysis of probable ecological effects of drilling in new areas has been a constant refrain at recent OCS conferences and symposia.⁴ Several additional studies have been undertaken since CEQ made its recommendation, most notably by the Ford Energy Policy Project⁵ and the congressional Office of Technology Assessment, but these investigations are only the opening rounds of what is necessarily a major scientific endeavor, requiring a large scale research effort over a period of three to four years. The intense political pressure for short term results in increasing domestic energy supplies thus practically assures that in spite of CEQ's recommendations and proposed general principle regarding benefit/risk analysis, OCS development will go ahead concurrently with more detailed research into its biological and ecological effects. To a large extent, therefore, specific measures for mitigating harm to marine and coastal ecosystems will have to be developed and adopted while the leasing program is in mid-stride, a circumstance which is understandable, but nonetheless lamentable.

The most serious environmental impacts of drilling in virgin OCS areas, however, promise to come from the ancillary development of onshore industrial facilities to receive, process, and store the oil and gas. Here again, the lack of an adequate data base for projective analysis is a problem; estimates by CEQ, the RAND Corporaton, and the Gulf South Research Institute reach strikingly different conclusions as to the impact of an assumed level of oil production at a particular OCS site on the adjacent coastal zone.⁶ The OTA study now getting underway is intended to focus on this problem, and although limited in scope to the Delaware/New Jersey coastal zone, will, it is to be hoped, serve to refine the methodology for predicting and quantifying primary and secondary onshore impacts in the form of dredging and wetlands destruction, cultural dislocation, increased water and air pollution, industrialization of recreational areas, and expanded demand for public services. Further research and data gathering will undoubtedly be needed, however.

The real key to controlling these prospective impacts once they are identified is the federal-state coastal zone management system set up by the Coastal Zone Management [5 ELR 10027] Act of 1972,⁷ an integral part of the legal and institutional framework which will govern OCS development. Under the Outer Continental Shelf Lands Act⁸ and the Convention on the Continental Shelf, the federal government, through the Secretary of Interior, has jurisdiction over the exploitation of seabed resources beyond the three mile limit of territorial waters out to a depth of 200 meters, or to whatever depth beyond that at which they can be exploited.⁹ All prospective drilling sites off the coasts of the Atlantic states and Alaska lie within this zone of exclusive federal jurisdiction. But because a certain amount of ancillary onshore industrial development is absolutely necessary to large-scale production from hitherto unexploited OCS areas, coastal states hostile to OCS drilling off their shores, such as Massachusetts, Delaware and New Jersey, can and have attempted to thwart such an eventuality by prohibiting the construction of ancillary facilities through restricted zoning, strict emission and effluent standards, and direct statutory prohibition. Without some institutional mechanism through which these divergent federal-state interests can be reconciled, this disruptive conflict between the federal attitude of "full speed ahead" and state efforts at obstructionism will undoubtedly continue. The CZM Act, however, provides one such federal-state framework in its Coastal Zone Management Program.

Under the Act, coastal states are encouraged, though not required, to develop management programs which specify the boundaries of the coastal zone, identify the permissible land and water uses within the zone and preclude uses having an adverse impact, and specify methods for exerting such control. To insure coastal state participation, the statute offers the incentive of federal funding; the Secretary of Commerce is authorized to make grants of up to two-thirds of the cost of developing such programs, and once a program has been developed and received his approval, two-thirds of the cost of administering it. Thus far 31 of the 34 coastal states have received federal funding assistance for the development of management programs.

On January 9, 1975, the National Oceanic and Atmospheric Administration of the Department of Commerce prepared for the next step in the process by issuing regulations¹⁰ which set forth the criteria and procedures to be utilized in reviewing and approving state coastal zone management programs. The rules also establish the procedures by which coastal states may apply for administrative grants. Once a state adopts a management program and has it approved under these regulations, federal activities, or those licensed by the federal government that affect the state's coastal zone must, "to the maximum extent practicable," be consistent with the approved management program. This gives the coastal state considerable leverage in dealing with the federal government where differences of opinion exist over proposed federal actions regarding OCS development.

The Coastal Zone Management Program provides the only existing mechanism for comprehensive national coastal protection. Its arrival as a functioning system is therefore a crucial prerequisite to OCS development. As was concluded by the National Academy of Sciences Critique of the CEQ's OCS study, no leasing should occur until after the development and approval of adequate state coastal zone management plans. The Act does not specify a date by which all state programs must be developed and adopted; the only deadline set by the statute is the expiration on June 30, 1977, of authority to make development grants.Even though most coastal states have already received some development funding, adoption of state programs is thus likely to stretch out over the next two and a half years.

Secretary of the Interior Rogers Morton has contended that the leasing program should proceed in 1975 because ancillary onshore development will not begin for several years after leasing, an adequate interval for the development and adoption of state management programs, but this argument misses the point. Leasing particular areas can to a large extent precommit the adjacent coastal zone to the construction of certain ancillary industrial facilities. In fact, quite the reverse of Secretary Morton's contention is true; approved state management programs governing coastal zone uses should be given prime consideration by the Interior Department in deciding whether adjacent OCS areas should be leased. The federal government should therefore voluntarily assist the coastal states by providing the necessary data, expertise, and consultation in order to assure prompt adoption and approval of state CZM programs. Final decisions on leasing particular OCS areas should be deferred until the programs of adjacent coastal states have been approved. To make hasty OCS leasing decisions, which will have momentous and in some cases irreversible impacts on the coastal zone over the next twenty-five years, before the Coastal Zone Management Program is completed is to vitiate the CZM Act's far-sighted goals and intentions.

NEPA, which is extended to cover OCS development activities by the Outer Continental Shelf Lands Act,¹¹ [5 ELR 10028] will also play a significant role in identifying and controlling onshore impacts. The Interior Department has announced that it will prepare both a programmatic EIS for its entire accelerated leasing policy and individual impact statements for lease sales at each particular OCS site. The draft programmatic EIS was made public on October 21, 1974, and was subjected to public review and comment at hearings in Alaska, California and New Jersey earlier this month. While the insufficiency of data regarding environmental effects mentioned above will hamper preparation of impact statements for OCS activities, the NEPA process is an indispensable adjunct to the CZM Program, in that it provides a mechanism by which to balance the benefits of resource development against the costs involved. For the NEPA process to be effective in performing this analysis for OCS development, the costs considered must include not only possible or expected environmental harms, but also probable social and economic impacts on the coastal zone, such as increased population, cultural disruption, loss of aesthetic amenities, and need for expanded public services.

The magnitude of such socio-economic impacts cannot be determined, however, in the absence of fairly hard estimates of the level of adjacent offshore oil and gas production, and these estimates must be available prior to lease sales since that is when the EIS must be prepared. At present almost all detailed geological and geophysical data regarding the characteristics of OCS sites, including hydrocarbon "shows" from which reserves may be estimated and geological hazards which indicate a risk of blow-outs, is gathered by the oil industry, and made public by the Interior Department only after leases for the sites have been sold. The CEQ OCS study was but one of an increasing number of recommendations that this system be modified, and on May 16, 1974, the Interior Department proposed new rules¹² governing the submission and public disclosure of such data.

Under the proposed regulations, a permit from the Secretary would be necessary for geological or geophysical exploration of OCS lands, and the permittee would be required to submit data and processed information to the Geological Survey's Area Supervisor 30 days after the data is collected. Data obtained prior to January 1, 1975 would not be made available for public inspection without the lessee or permittee's consent or until the Supervisor determines that its release is required and necessary for proper development of a field or area. Data obtained after that date is to be made public 60 days after its collection if it relates to lands already leased, and if it relates to lands not yet leased, either ten years after it is obtained or after issuance of a lease, whichever is sooner. Data relating to unleased OCS lands which depicts hydrocarbon shows may be made public immediately when judged to be significant by the Director of the Geological Survey. Data depicting environmental hazards is to be made public immediately, whether it relates to leased or unleased lands and no matter when obtained. In order to qualify as a bidder in any OCS lease sale held subsequent to January 1, 1975, a person would be required to submit to the Supervisor within 120 days after the call for nominations all data obtained within the sale area at any time since passage of the OCS Lands Act on August 7, 1973.

These proposed rules represent a significant change toward a more sensible and functional regime governing data submission and public disclosure. The Department has also proposed rules which would prohibit joint bidding by the nation's largest oil companies, in order to foster greater competition in OCS lease sales.Neither of the proposed regulations has yet been made final, and while the delay is becoming inordinate given the huge lease sales planned for this year, the proposals evidence a positive development in the Interior Department's attitude.

The political pressure for quick results in increasing energy supplies is intense, however, and the Department remains wholeheartedly committed to the policy of accelerated OCS leasing. After making the draft programmatic EIS public on October 21, 1974, the Department announced that the public hearings would be held during the first two weeks of December. Los Angeles led a coalition of southern California cities and the states of Massachusetts, Washington and Oregon in seeking a postponement on the ground that the schedule allowed insufficient time in which to examine and thoroughly analyze the 1,300 page EIS. Only when threatened with a court suit did Secretary Morton give in and postpone the hearings until February. Despite this reprieve, some coastal states are convinced the Administration has already made all the major decisions concerning OCS leasing,¹³ and is only going through the motions of NEPA compliance, so a legal challenge to the final EIS as being a post hoc rationalization is a good possibility.

The present chaotic state of affairs clearly demonstrates the immediate need for federal legislation establishing a comprehensive national policy toward OCS leasing, and integrating the CZM Program, a NEPA process expanded to include social and economic impacts, and more stringent requirements for data submission and public disclosure into a coherent institutional framework for planning and managing OCS development.The Energy Supply Act of 1974,¹⁴ a bill designed to accomplish both these goals, was passed by the Senate in the last session of the 93rd Congress, but was not acted upon by the House.

The bill sets forth a declaration of national policy [5 ELR 10029] regarding the Outer Continental Shelf and would require the Secretary of the Interior to prepare a 10-year leasing program for OCS areas and revise it at yearly intervals. The Secretary is directed to conduct both a survey of OCS oil and gas resources, and with respect to areas not previously leased, studies establishing baseline environmental data prior to any lease sales. The bill would impose strict liability for damages from oil spills up to a limit of $100 million for any one incident. The lessee would be responsible for the first $7 million of such claims, and the remainder would be paid out of a revolving Offshore Oil Pollution Settlements Fund to be financed by a fee of 2.5 cents per barrel.

The bill also establishes a Coastal State Fund from which the Secretary of the Interior is authorized to make grants to assist coastal states impacted by anticipated or actual oil and gas production to ameliorate adverse environmental effects and control secondary social and economic impacts. All grants from the Fund are to be coordinated with state management programs adopted under the CZM Act.

The bill specifically provides that the most likely rate of exploration and development in each area if leasing occurs and consideration of commercial and recreational uses of nearby land and water resources must be included in the NEPA impact statement for the leasing program. Citizens' suits are permitted against any person for a violation of the bill's provisions, although 60 days' notice must be given prior to filing an action.

A particularly interesting feature of the bill is a provision authorizing the governor of an adjacent state to request postponement of an OCS lease sale for a period of up to three years upon a determination that the sale will result in adverse environmental or economic impact to the state. The Secretary of the Interior may grant the request, provide for a shorter postponement than requested, or deny the request as being inconsistent with the national OCS policy enunciated in an earlier section of the bill. The Governor can appeal the Secretary's decision to the National Coastal Resources Appeals Board, which would consist of the Vice President, Secretary of the Interior, Administrators of EPAand NOAA, and the Chairman of CEQ. The Board must overrule the Secretary's decision if it finds that (a) the state is not adequately protected from adverse environmental, economic and other impacts, or (b) the Governor's request for postponement is consistent with the national policy toward OCS development.

On October 7, 1974, a group of twenty Senators wrote the President to express their dismay that the Interior Department is continuing efforts toward effectuating its accelerated 1975 leasing program when environmental baseline studies and state coastal zone management efforts are at a very early stage.¹⁵ Noting that the House had not acted on S.3221 and that congressional deliberation on new OCS legislation would therefore continue into the 94th Congress, the Senators stated their belief that OCS leasing in new areas should await the outcome of that legislative process. Given the promise for a cooperative and reasoned approach to OCS development which this legislation holds out, the request for a one year delay in the present leasing schedule seems eminently sensible.

The Administration's record thus far on the OCS leasing question mirrors some of the worst features of its response to the energy problem as a whole.Just as there is no coherent, comprehensive national energy policy, there has emerged no workable long-range policy toward OCS development which takes into account the diversity of interests that will necessarily be affected. The Administration's response in both areas smells strongly of panic, and seems oriented almost exclusively toward the hasty exploitation of energy resources at the expense of both the environment and the ability to manage these resources more deliberately in the long run. Under these circumstances, further actions toward the immediate leasing of new OCS areas can only be condemned.

1. See also Comment, CEQ's Report on Outer Continental Shelf Oil and Gas Development: Recommendations for Institutional and Legal Modifications, 4 ELR 10070 (June 1974).

2. Council on Environmental Quality, OCS Oil and Gas — An Environmental Assessment (Apr. 1974).

3. For a more detailed analysis of the CEQ study, see Comment, CEQ's Report on Outer Continental Shelf Oil and Gas Development: Recommendations for Institutional and Legal Modifications, 4 ELR 10070 (June 1974).

4. Washington Post, Dec. 12, 1974, § F at 1.

5. Boesch, Hershner & Milgram, Oil Spills and the Marine Environment (1974).

6. Senate Committee on Commerce, Outer Continental Shelf Oil and Gas Development and the Coastal Zone, 93d Cong., 2d Sess. at 10, 11.

7. 16 U.S.C. §§ 1451 et seq., ELR 41701.

8. 43 U.S.C. §§ 1331 et seq.

9. This jurisdiction is being challenged by the Atlantic states and Alaska, however, in litigation presently before the U.S. Supreme Court (U.S. v. Maine and Alaska v. U.S.). The Court is expected to uphold the federal government's claim to jurisdiction over seabed resources beyond the three mile limit, but the Administration has pledged not to begin OCS leasing in those areas until the cases have been decided, presumably before the Court adjourns next summer.

10. 40 Fed. Reg. 1683 (Jan. 9, 1975).

11. Supra, n. 8.

12. 39 Fed. Reg. 17446 (May 16, 1974).

13. N.Y. Times, Nov. 15, 1974, at 11.

14. S. 3221, 93d Cong., 2d Sess. (1974).

15. Letter from Senator Ernest Hollings, et al. to the President, Oct. 7, 1974.

The Rush for Offshore Oil and Gas: Where Things Stand on the Outer Continental Shelf1

The Rush for Offshore Oil and Gas: Where Things Stand on the Outer Continental Shelf¹