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13 ELR 20618 | Environmental Law Reporter | copyright © 1983 | All rights reserved Kean v. WattNo. Civil 82-2420 (D.N.J. September 7, 1982)The court enjoins the Secretary of the Interior from offering oil and gas lease sales for tracts off the New Jersey coast, ruling that the Secretary must consider the effects on the coastal zone of all stages of the leasing, not just the pre-leasing activities, and therefore a consistency determination is required by § 307 of the Coastal Zone Management Act (CZMA). The court first rules that questions concerning the meaning of § 307(c)(1) of the CZMA are not moot although the Department of the Interior received no bids on the disputed tracts, because the controversy is sufficiently concrete and adversarial to be justiciable. However, the challenge to the Secretary's rejection of the state's recommendation under § 19 of the Outer Continental Shelf Lands Act (OCSLA) is moot because new recommendations may be made when new offers are made to lease. After tracing the history of litigation over § 307(c), the court concludes that the Interior Department must consider all stages of the oil leasing program, not just the pre-leasing activities, in deciding if a consistency determination under § 307 must be made. Moreover, where all stages are considered, the leasing activities "directly affect" the coastal zone within the meaning of $307 and therefore a consistency determination must be made in this case. The court next rules that economic impacts on a state's fishing industry of lease exploration or development outside the coastal zone need not be considered when making a consistency determination. The CZMA is designed to protect natural resources and wildlife habitat, not economic interests. The legislative history of the Act does not require a different result and extending the scope of the CZMA to economic impacts caused by activities outside the zone would unreasonably extend the Act's reach. Activities outside the coastal zone that do not affect the natural environment within the coastal zone do not directly affect the coastal zone within the meaning of § 307(c)(1) of the CZMA. The court also rules that where a threatened injury to the natural environment is outside the coastal zone § 19 of the OCSLA applies. Counsel for Plaintiffs Counsel for Defendants Mules E. Flint, Rebecca A. Donnelan Counsel for Amici Curiae Atlantic Richfield Co. et al. Counsel for Amici Curiae Natural Resources Defense Council, Inc. et al. Counsel for State Amici Curiae James E. Tierney, Attorney General; Elizabeth R. Butler William I. Condon, Attorney General; Lauri J. Adams Debevoise, J.: Plaintiffs are Thomas Kean, Governor of New Jersey, and the New Jersey Department of Environmental Protection. Defendants are James G. Watt, U.S. Secretary of the Interior, the United States Department of the Interior, Harold E. Doley, Jr., Director of the Minerals Management Service of the Department of the Interior and the Minerals Management Service. Plaintiffs charge that the reoffer for lease by the United States of 23 of 155 tracts in the outer continental shelf area off the New Jersey coast violated the Coastal Zone Management Act, 16 U.S.C. § 1451, et seq., and the Outer Continental Shelf Lands Act, 43 U.S.C. § 1331, et seq. Plaintiffs originally sought declaratory and injunctive relief. I shall refer to the offer from time to time as "Resale No. 2." The complaint was filed on July 27, 1982. On the same day I signed an order to show cause returnable on August 3, 1982, why preliminary injunctive relief should not be granted. Before the return date application to appear amicus curiae for the purpose of submitting briefs and arguing were filed on behalf of National Resources Defense Council, Inc. [sic] and the American Littoral Society, who urge plaintiffs' position and on behalf of Atlantic Richfield Company, Chevron, USA, Inc., Exxon Corporation, Mobil Oil Corporation, Shell Oil Company, Tenneco Oil Company and Texaco, Inc., who urge defendants' position. I granted both motions for a leave to appear amicus curiae. The matter was heard August 3, 1982 on the verified complaint, affidavits and extensive exhibits filed by the parties. It was agreed at the outset of the hearing that if injunctive relief were to be granted, it would not forbid receipt of bids; it would instead be directed to acceptance of bids which in any event could not take place immediately. At the conclusion of oral argument, I recessed the hearings until 2:00 P.M. Thursday, August 5, at which time I expected to rule on the application for a preliminary injunction. The lease sale was held the morning of August 5. No bids were received on any of the 23 tracts contested by New Jersey, and consequently the application for injunctive relief became moot. The parties cross-moved for summary judgment on the demand for a declaratory judgment. I asked that they brief the question of mootness of any relief requested and adjourned the hearing until, ultimately, September 7, 1982. Prior to the adjournment date, the States of Alaska, Maine and Massachusetts moved for leave to file briefs as amicus curiae. These states assert that they have each adopted a coastal zone management program, that the Department of the Interior plans in the near future to conduct outer continental shelf lease sales off their shores and that, therefore, they have a vital interest in the question whether the Department of the Interior must file a consistency statement with respect to Section 307(c)(1) of the Coastal Zone Management Act. The motion of the three states was granted. The essential facts are not in dispute. On July 2, 1982, the Secretary of the Interior gave notice of his intention to reoffer for lease 155 tracts on the outer continental shelf. These tracts lie 64 to 113 miles off the coast of the State of New Jersey. Twenty-three of these 155 tracts are the subject of this suit. The initial decision to hold this specific OCS reoffering lease sale was made by then-Secretary of the Interior Andrus when he prepared the original five-year program for lease sales during the period 1980-1985. While, after earlier litigation, that program was remanded to present-Secretary Watt for revision, the Court left the timing of Resale No. 2 unchanged pending revision of the five-year plan. State of California by and through Brown v. Watt, 668 F.2d 1290 [12 ELR 20001] (D.C. Cir. 1981). The 155 tracts off New Jersey offered for sale in Resale No. 2 were previously offered for sale in Sale 59, held on December 8, 1981. In connection with Sale 59, on May 29, 1979, the Bureau of Land Management issued a request for resource reports for the area. Requests were submitted to Federal and state agencies and interested individuals. Information was sought regarding other [13 ELR 20619] valuable resources and uses of the area and the possible impacts of mineral operations on these resources. Recommendations concerning the resolution of any conflicts between the activities of these agencies and oil and gas leasing and development in the outer continental shelf area were also requested. On July12, 1979, the Bureau pursuant to the authority prescribed in 43 CFR 3313.1, issued a call for nominations and comments for a call area consisting of 3,421 blocks, each 5,693 acres. The area was enlarged on September 5, 1979, by the addition of 92 deeper water tracts. Potential bidders were asked to designate specific tracts on which they would like to bid if a sale were held. Federal, state and local governments and other industries, universities, research institutes, environmental organizations and the public were asked to identify specific tracts they believed should be excluded from oil and gas leasing, or leased under certain restrictions because of conflicting resource values or environmental factors. In response to the call for nominations and comment, 14 oil companies nominated 785 blocks totaling approximately 4.5 million acres. In addition, eight sets of comments were received from Federal and state agencies, environmental groups and a private citizen expressing either concern about offshore leasing in general or recommending that specific tracts be deleted. On December 31, 1979, the Department of the Interior announced selection of 253 blocks comprising 1,440,376 acres for intensive environmental study for proposed Sale 59. Pursuant to the Council on Environmental Quality's regulations implementing the National Environmental Protection Act [sic], the Department of the Interior conducted a series of three environmental impact statement scoping meetings in New Jersey, Maryland and Virginia to identify issues that should be discussed in its environmental impact statement. Present at each meeting were Federal, state and local governmental agencies and representatives, special interest groups and concerned citizens. Thereafter, a draft environmental impact statement was written and circulated for public comment. Public hearings on the environmental impact statement were held in New Jersey and Virginia in January 1981. Comments on the draft were considered and a final environmental impact statement was written, noticed and circulated. Various Federal agencies commented on the final environmental impact statement, including the Fish and Wildlife Service and the National Oceanic and Atmospheric Administration. Representatives from the State of New Jersey participated at the public hearings and commented on the draft environmental impact statement. Before proceeding with the chronological summary of the events leading to the present litigation, it is necessary to describe the two principal vehicles for state participation in evaluation of the environmental effects of proposed offshore drilling — one established under the Coastal Zone Management Act and one established under the Outer Continental Shelf Lands Act. The Coastal Zone Management Act, 16 U.S.C. § 1451, et seq., was designed to provide comprehensive planning for the protection and beneficial use of the natural resources of the coastal zone of the state. The coastal zone in New Jersey extends seaward to the outer limit of the United States territorial sea, that is to say three miles. 16 U.S.C. § 1453(1). With Federal financial support, each coastal state is encouraged to develop a coastal management program designed to achieve appropriate use of the land and water resources of its coastal zone. New Jersey developed such a program which Federal authorities have approved. Section 307(c)(1) of that Act, 16 U.S.C. § 1456(c)(1) provides that: Each federal agency conducting or supporting activities directly affecting the coastal zone shall conduct or support those activities in a manner which is, to the maximum extent practicable, consistent with approved state management programs. Federal regulations have been adopted to insure all Federal activities directly affecting the coastal zone are undertaken in a manner consistent to the maximum extent practicable with approved state coastal management programs. 15 Code of Federal Regulations § 930, et seq. The regulations provide that Federal agencies shall determine which of their activities directly affect the coastal zone of the state with approved management programs. In particular 15 CFR § 930.33(c) provides that: "Federal activities outside of the coastal zone (e.g., on excluded Federal lands, on the Outer Continental Shelf, or land within the coastal zone) are subject to Federal agency review to determine whether they directly affect the coastal zone." Federal agencies are directed to provide state agencies with a consistency determination for all Federal activities directly affecting the coastal zone, 15 CFR § 930.34, and under certain circumstances if the Federal agency decides a consistency determination is not required, it must notify the state agency of the activity and set forth its reasons for a negative determination. The Outer Continental Shelf Lands Act, 43 U.S.C. § 1331, et sew., also contains provisions for participation by state and local governments in decisions relating to the exploration and development of the outer continental shelf. Section 19 of that Act, 43 U.S.C. § 1345, provides that the Governor of any affected state may submit recommendations to the Secretary "regarding the size, timing or location of a proposed lease sale." The Section further provides that: (c) The Secretary shall accept recommendation of the governor . . . if he determines, after having provided the opportunity for consultation, that they provide for a reasonable balance between the national interest and the well-being of the citizens of the affected State. For purposes of this subsection, a determination of the national interest shall be based on the desirability of obtaining oil and gas supplies in a balanced manner and on the findings, purposes, and policies of this subchapter. The Secretary shall communicate to the Governor, in writing, the reasons for his determination to accept or reject such Governor's recommendations, or to implement any alternative means identified in consultation with the Governor to provide for a reasonable balance between the national interest and the well-being of the citizens of the affected state. (d) The Secretary's determination that recommendations provide, or do not provide, for a reasonable balance between the national interest and the well-being of the citizens of the affected State shall be final and shall not, alone, be a basis for invalidation of a proposed lease sale or a proposed development and production plan in any suit or judicial review pursuant to Section 1349 of this title, unless found to be arbitrary or capricious. On August 7, 1981, acting pursuant to Section 307(c)(1) of the Coastal Zone Management Act, the Department of the Interior informed the State of New Jersey that it had concluded that none of the possible effects of the prelease activities directly affected the New Jersey coastal zone and that, therefore, a consistency determination was unnecessary. The reasons for the conclusion were: We have determined, after a careful review of the Proposed Notice of Sale (Attachment 1), that no lessee will be required, without further approval of the Department, to undertake an activity with coastal effects. In all cases, the Deputy Conservation Manager of the Department's U.S. Geological Survey must first exercise discretion by making subsequent decisions to approve specific action proposals before the coastal zone could be affected. However, a California District Court has held that a consistency statement was required in circumstances where the prelease activities themselves did not directly affect a State's coastal zone but where the prelease activities were the first in a chain of events culminating in exploration, development and production which would have a direct effect on the coastal zone. State of California by and through Brown v. Watt, 520 F. Supp. 1359 [11 ELR 20870] (C.D. Cal. 1981). The Department's August 7, 1981 letter noted that decision and made an alternative conclusion, namely: However, in view of litigation regarding the meaning of [13 ELR 20620] the Section 307(c)(1) requirement and in view of the listing of "OCS leases and preleasing activities" in the New Jersey Coastal Management Plan, we have examined all relevant enforceable provisions of the New Jersey Coastal Management Plan and found none that applies to the Outer Continental Shelf oil and gas preleasing activities, Outer Continental Shelf lease sales or lease award. Consequently we find nothing in the New Jersey Coastal Management Plan with which OCS Sale 59 could be inconsistent. The Provisions of the New Jersey Coastal Management Plan which are relevant to OCS oil and gas activities for purposes of Federal consistency deal only with operational activities and their potential effects on the coastal zone. Consistency is required only for Federal activities which directly affect the coastal zone. The effects on coastal land and water uses which may arise from post-lease operational activities (which are subject to Section 307(c)(3) consistency procedures) are not, for Sale No. 59, direct effects of preleasing and leasing decisions but rather the effects of activities which cannot be initiated without subsequent approval of the Department. Thus, these postlease operational activities are not subject to a consistency determination under Section 307(c)(1). Section 307(c)(3) includes provisions to assure that no OCS operational activity will be inconsistent with your Coastal Zone Management Program. Through your authority under this section, your agency can, barring the exceptional case of an override by the Secretary of Commerce under Section 307(c)(3)(B)(iii), prevent or require the modification of any the federally permitted Outer Continental Shelf operational activities, and their associated facilities, which affect any land use or water use in the coastal zone and are found by your agency to be inconsistent with your program. Through this statutory framework, New Jersey is assured that, by exercise of its own authority, only consistent activities will occur after lease award. In addition to finding that a consistency determination was unnecessary under the Coastal Zone Management Act, the Department acting pursuant to the Outer Continental Shelf Lands Act, invited comments upon the proposed Lease Sale. By letters dated October 23 and November 30, 1981, New Jersey communicated its disagreement with the Department's conclusion that the prelease activities would not directly affect New Jersey's coastal zone, and it offered certain recommendations for revisions of the proposed leases. The principal recommendations were, first, that five tracts located at or near the heads of the Carteret and Spencer Canyons be deleted from the sale, and, second, that with respect to 18 other tracts a stipulation should be incorporated as an advance requirement under each lease. The stipulation would require a lessee to identify and implement measures to mitigate any potential effects on New Jersey's fisheries resources before beginning exploratory drilling. New Jersey noted, as appears to be the fact, that the V-shaped canyon heads are the sole area inhabited by the tilefish which live in pueblo-like burrows or holes made in the bottom. These fish do not migrate, and destruction of their abodes would destroy the species off the New Jersey coast. Other fish and crustaceans live in the same area. New Jersey asserted that implementation of the lase proposal would directly affect New Jersey's coastal zone and that unless its recommendations were adopted, the lease proposal would be inconsistent with its Coastal Zone Management Program. New Jersey referred to two of its administrative code provisions implementing its program with which the unexpurgated lease proposal would conflict: N.J.A.C. 7:7E-7.4(c) provides that: Rapid exploration of the Mid-atlantic, North Atlantic, and other offshore areas with potential reserves of oil and natural gas is encouraged, as long as no long-term adverse impact will result, onshore or offshore, and such activities are conducted in accordance with the policy of the program. N.J.A.C. 7:7E-8.2 provides that: (a) Coastal actions are conditionally acceptable to the extent that minimal feasible interference is caused to the natural functioning of marine fish and fisheries, including the reproductive and migratory patterns of estuarine and marine estuarine dependent species of finfish and shellfish. New Jersey's letter set forth the importance of New Jersey's commercial and recreational fishing industries. In 1979 New Jersey as a state ranked ninth in terms of pounds harvested and twelfth in terms of dollar value. There were an estimated 3,100 commercial fishermen earning annually $40 million. There were 417 companies in New Jersey with more than 6,700 employees dealing with fish. The letter noted that offshore fishing beyond New Jersey's coastal zone and in the area of the proposed leases was becoming increasingly important to both the commercial and recreational fishing industry, particularly to the tilefishing industry. Not only did the leasing as proposed, according to New Jersey, pose a threat to the fish and lobster population on the Outer Continental Shelf, but in addition oil and gas exploration and perhaps later production activities threatened trawling or dragging equipment and drifting long lines used by fishermen, which often extend many miles in length. New Jersey urged that in light of these potential economic effects of leasing activity in the Outer Continental Shelf "it is inconceivable that a decision to lease these areas for exploration does not directly affect New Jersey's coastal zone." In sum, in late 1981 New Jersey submitted recommendations to the Department of the Interior under Section 19 of the Outer Continental Shelf Lands Act, and itobjected to the Department's conclusion that a consistency determination under Section 307(c)(1) of the Coastal Zone Management Act was unnecessary. The Department of the Interior did not accept these two recommended changes in its leasing proposal, and it persisted in its view that there was no direct effect on New Jersey's coastal zone requiring a consistency statement. New Jersey did not move to block Sale 59. The Department of Interior offered 253 tracts for leasing at Sale 59 in December 1981. Bids were received on 98 tracts and high bids totaling $321,981,000.00 on 50 tracts were accepted. High bids totaling $102,946,000.00 on 48 tracts were rejected. No bids were received on the remaining 155 tracts. No bids on any of the tracts contested by the State in this litigation or which were the subject of the letter just referred to. Following the completion of Sale 59, the Department of the Interior determined that the unleased tracts should be reoffered for sale. N environmental assessment on the proposed resale was prepared to the affected states for comment. On March 26, 1982, the Department of the Interior Undersecretary Donald P. Hodel informed Governor Kean of the Department's intention to reoffer the tracts off New Jersey which were offered in Sale 59 and requested the Governor's comments on size, timing and location under Section 19 of the Outer Continental Shelf Lands Act. A notice of proposed resale was published in the Federal Register on April 1, 1982. Governor Kean responded by letter dated May 20, 1982, reiterating New Jersey's earlier concerns and recommending that seven tracts rather than five be deleted from the Resale, five because they were located at or near the heads of Spencer and Carteret Canyons and two because they, along with the original five, produced a significant percentage of New Jersey's tilefish catch. In addition, the Governor requested that 16 additional tracts be made subject to additional biological resource and well and pipeline stipulations because of New Jersey's fisheries concern. The 16 tracts are proposed for lease with biological resource and well and pipeline stipulations by the Government, but the language in those stipulations differs from that proposed by the State. Also on March 26, 1982 Interior Assistant Secretary for Policy, Budget and Administration, J. Robinson West, sent the [13 ELR 20621] State a determination that the proposed resale preleasing activities did not directly affect the coastal zone. This letter explained Interior's reasons for that finding and invited the State to review future activities at the exploration and development stage of the proposed leasing and submit recommendations on the consistency of those activities with New Jersey's Coastal Management Program to the Department. This March 26 letter referred to the August 7, 1981 letter of the Department of the Interior described previously, which was prepared prior to December 1981 Lease Sale No. 59. On May 25, 1982, New Jersey wrote the Department of the Interior expressing its disagreement with the Department's conclusions that under Section 307(c)(1) of the Federal Coastal Zone Management Act Resale No. 2 need not directly affect New Jersey's coastal zone. The same contentions previously made were advanced and in addition the letter stated: . . . the Marine Fisheries Management and Commercial Fisheries Development Act, authorized by the New Jersey Legislature in 1979, established State Policy to conserve, maintain, enhance, and manage New Jersey's fisheries resources and habitat. My request for tract deletions is based on the mandate contained in this statute. On June 28, 1982 the Department wrote to Governor Kean explaining why it did not accept the Governor's recommendations in its final decision on Resale No. 2. The letter rejected New Jersey's recommendation that seven tracts be removed from the sale in order to eliminate a threat to the tilefish and other species. The letter also rejected New Jersey's recommendations that a specified stipulation be invoked in advance as to the 16 tracts. The June 28 letter also addressed certain other recommendations which the Governor had made in his May 20, 1982 letter. The final notice of lease sale was published in the Federal Register on July 2, 1982. Bids were to be received on August 5, 1982. As noted previously, no bids were received on the contested tracts. However, in June 1982 the New Jersey Department of Environmental Protection received a copy of the Draft Environmental Impact Statement for Outer Continental Shelf Lease Sale 76, which discloses that as many as 4,325 tracts off the Mid-Atlantic coast will be offered for leasing in April 1983. Among those tracts are the 23 tracts in question in this case which were offered previously in lease Sale 59 and Reoffer Sale 2. Thus it can be reasonably expected that these tracts will continue to be the subject of offers, and it can also be expected that on each such occasion the same controversy will arise between New Jersey and the Secretary of the Interior. The Court has jurisdiction by virtue of 28 U.S.C. § 1331, 28 U.S.C. §§ 2201-2202, and 43 U.S.C. § 1349. All parties to this litigation urge that notwithstanding the absence of bids on the contested tracts, the case has not become moot. Both for constitutional and policy reasons a court may hear a case only if there exists a genuine dispute between the parties. As stated by the Third Circuit: We have interpreted Supreme Court pronouncements on the subject to require (1) a legal controversy that is real and not hypothetical, (2) a legal controversy that affects an individual in a concrete manner so as to provide the factual predicate for reasoned adjudication, and (3) a legal controversy with sufficiently adverse parties to sharpen the issues for judicial resolution. Dow Chemical Co. v. U.S.E.P.A., 605 F.2d 673, 678 [9 ELR 20640] (3d Cir. 1979). Such a controversy exists in the present case as to the question whether in determining if § 307(c)(1) requires a consistency statement the Secretary need consider only the effects of preleasing activities or whether he must also consider the likely effects upon the coastal zone of the exploration, development and production activities which may flow from any leases which are granted. A justiciable controversy also exists in the present case as to the question whether the activities on the Outer Continental Shelf which have no physical impact upon the coastal zone but which affect commercial enterprise conducted within the coastal zone are "activities directly affecting the coastal zone" within the meaning of Section 307(c)(1) of the Coastal Zone Management Act. As to these questions, there is a clearcut disagreement between the Federaland State authorities as to the meaning of the Coastal Zone Management Act. This disagreement has a significant bearing upon the actions each side will take in connection with offers to lease which will take place in April 1983, preparations for which are now underway. It may well be that the present case could be saved from dismissal for mootness on the ground that there is alleged an injury which is capable of, and indeed likely of, repetition, but which may continue to evade review, e.g., Nebraska Press Association v. Stuart, 427 U.S. 539, 546 (1976); Ammens v. McGahn, 532 F.2d 325 328 (3d Cir. 1976). However, I believe resort to that doctrine is unnecessary, as the controversy concerning these two questions is sufficiently concrete and immediate to constitute this a case or controversy which is subject of adjudication now. On the other hand, I conclude that the question where the Secretary's rejection of Governor Kean's recommendation under Section 19 of the Outer Continental Shelf Lands Act was arbitrary and capricious is moot. New recommendations will be submitted in connection with the new offers to lease. New responses will have to be made. It is possible that the recommendations and responses will be identical to those made in connection with Resale No. 2. However, that seems unlikely. Conditions may change; new studies may be made; the extensive litigation conducted during the internal [sic] may shape the recommendations and responses. I cannot assume the future recommendations and responses under Section 19 will be the same in the future as they were in the past. The Section 19 questions do not present a legal controversy which meet the requirements of Dow Chemical Co., supra. C. Appropriateness of Summary Judgment Two substantive issues remain to be resolved: First, when the Secretary of the Interior determines under Section 307(c)(1) of the Coastal Zone Management Act whether a proposed lease sale on the Outer Continental Shelf directly affects a state's coastal zone should he consider only the effects of the preleasing activities, or is he required also to consider the likely effects upon the coastal zone of exploration, development and production activities which may flow from any leases which are granted? Second, if the Secretary is required to consider the likely effects of exploration, development and production activities flowing from any leases, does the potential destruction of the tilefish and other fish habitats on the Outer Continental Shelf, the potential interference with fishing nets and lines on the Outer Continental Shelf, and the consequent financial injury inflicted on commercial activities conducted within the coastal zone directly affect New Jersey's coastal zone within the meaning of Section 307(c)(1)? Both sides have moved for summary judgment. There are no material issues of fact in dispute, and the two issues can be resolved as a matter of law. Consequently, summary judgment is appropriate under Federal Rules of Civil Procedure 56. D. Requirement of a Consistency Statement It is the Government's contention, and it is the contention of the amicus oil companies, that in determining whether the Department's proposed Resale No. 2 directly affected New Jersey's coastal zone, there should have been considered only those effects which occur at the leasing stage and not those effects which occur later during the exploration, development and production stage. This was the Department's position prior to Lease Sale No. 59 and Resale No. 2 when it found that there was no direct effect of its prelease activities on the New Jersey coastal zone. It did not explore the effects anticipated at future stages for Section 307(c)(1) purposes. It is the Department's intent to follow the same procedure with respect to Lease Sale 76 scheduled for April 1983. The United States urges that the basic structure of both the [13 ELR 20622] Coastal Zone Management Act and the Outer Continental Shelf Lands Act demonstrate that the review of environmental effects should be on a staged basis and the review undertaken at an early stage should not seek to measure the uncertain and speculative events which may take place at a future stage. Those are to be evaluated at the time plans for the future stage have been definitely formulated. Examining the Outer Continental Shelf Lands Act and the Coastal Zone Management Act, it would be note that leasing, exploration, development and production process is divided into four phases: (1) scheduling of lease sales in a five-year plan issued by the Secretary; (2) tract selection, sale and leasing; (3) exploration; and (4) development and production. The second phase, tract selection, sale and leasing, is actually involved in this litigation. While a lease, once awarded, generally entitles the lessee to explore, develop and produce oil and gas, only certain limited activity may be undertaken without further specific permission by the Government. In particular, a lessee may only conduct "preliminary activities" prior to submission and approval of an exploration plan. These are defined as geophysical and other serveys necessary to develop a comprehensive exploration plan. Such preliminary activities are those which do not result in any physical penetration of the seabed of greater than 300 feet of unconsolidated formations or 50 feet of consolidated formations, and which do not result in any significant adverse impact on the natural resources of the Outer Continental Shelf. The information necessary to guide the later exploration and development is gained, in part, through these preliminary activities. The lease stage provides the lessee and the Secretary with a chance to amass data which will inform future proposals and decisions. For example, . . . testing as well as . . . sampling might be absolutely essential for the lessees' decision regarding the appropriate commitment of their resources in light of the areas' development potential. Similarly the data generated by testing activity will also permit the Secretary to exercise and form judgment in balancing the dual public interest of protecting the environment and enhancing well production capacity. North Slops Borough v. Andrus, 642 F.2d 589, 594 [10 ELR 20832] (D.C. Cir. 1980). All decisions affecting the life of an oil and gas filed are not and need not be made prior to offering of the area for sale. Prior to beginning exploration activities a lessee is required to submit an exploration plan to the Secretary for approval. 43 U.S.C. 1340(c). The Coastal Zone Management Act requires any person submitting such an exploration plan affecting any land use or water use in the coastal zone of a state to certify that activities described in the plan comply with the State's coastal zone management plan. 16 U.S.C. 1456(c)(3)(B). The Secretary may not grant any license or permit for activity described in an exploration plan until the state concurs, or is presumed to concur, with the certification of compliance, or a determination of consistency or necessity is made by the Secretary of Commerce. 16 U.S.C. 1456(c)(3)(B), 43 U.S.C. 1340(c). After an exploration plan is approved, drilling permits and other necessary licenses for activities described in the plan must still be issued to the lessee. The final stage under the Outer Continental Shelf Lands Act is development and production. This stage is only reached if exploration reveals the presence of marketable quantities of oil or gas. Prior to development and production, the lessee must submit development and production plans to the Secretary for approval. 43 U.S.C. 1351(a)(1). Under the Outer Continental Shelf Lands Act, the Governor of any effected state may make recommendations with respect to development and production plans. 43 U.S.C. 1345(a). These recommendations are to be accepted by the Secretary if he determines that they provide for a reasonable balance between the national interest and the well-being of the citizens of the affected state. 43 U.S.C. 1345(c). In addition, the Coastal Zone Management Act requires a person submitting the development or production plan to certify that the activities described in such plans affecting land or water use in the coastal zone are consistent with the approved coastal zone management plan of any affected state. 16 U.S.C. 1436(c)(3)(B). As with exploration plans, approval of development and production plans depends upon concurrence in the consistency certification by the state or override of the state's objections by the Secretary of Commerce. 43 U.S.C. 1351(h)(1)(B). The plan must also comply with the Outer Continental Shelf Lands Act and regulations. 43 U.S.C. 1351(h)(1). The Secretary is required to disapprove a development and production plan if operations threaten national security or defense, 43 U.S.C. 1351(h)(1)(C), or exceptional geological conditions, exceptional marine or coastal resource values, or other exceptional circumstances dictate disapproval despite compliance with the Act and regulations. 43 U.S.C. 1351(h)(1)(D). Prior to approval of such plans the Department of the Interior must either prepare an Environmental Impact Statement on the plan or notify the governor of any affected state in advance that such statement will not be prepared. 43 U.S.C. 1351(f) and (g). Any action of the Secretary to approve, require modification of, or disapprove a development or production plan is subject to judicial review in the appropriate court of appeals. 43 U.S.C. 1349(c)(2). It is the Government's contention that the State is protected from the impact of the prelease sale activities by the provisions of Section 307(c)(1) under which the Secretary must make his consistency determination and that insofar as impacts resulting from the later stages of exploration, development and production are concerned, the State is protected by the certification of the lessee provided for in Section 307(c)(3)(B), which reads in part: After the management program of any coastal state has been approved by the Secretary under Section 1455 of this title, any person who submits to the Secretary of the Interior any plan for the exploration or development of, or production from, any area which has been leased under the Outer Continental Shelf Lands Act (43 U.S.C. 1331, et seq.) and regulations under such Act shall, with respect to any exploration, development, or production described in such plan and affecting any land use or water use in the coastal zone of such state, attach to such plan a certification that each activity which is described in detail in such plan complies with such state's approved management program and will be carried out in a manner consistent with such program. No Federal official or agency shall grant such person any license or permit for any activity described in detail in such plan until such state or its designated agency receives a copy of such certification and plan, together with any other necessary data and information, and until — (i) such state or its designated agency, in accordance with the procedures required to be established by such state pursuant to subparagraph (A), concurs with such persons' certification and notifies the Secretary [of Commerce] and the Secretary of the Interior of such concurrence. There follow provisions of actions taken if there is disagreements as to the validity of a certification. The position of the Government and the oil company amici was rejected in two Califonia District Court cases, State of California by and Through Brown v. Watt, supra, and an unreported case which followed Brown v. Watt in this regard, State of California v. Watt and Sierra Club v. Watt, Docket Nos. CV. 82-2284 and CV 82-2665 [12 ELR 21045] (C.D. Cal. 1982). Both cases were appealed and during the interval between the August 3 and September 7 hearings in this case, the Court of Appeals for the Ninth Circuit decided the appeals. In Brown v. Watt, the Department of the Interior issued a negative determination to the effect that the preleasing activities associated with Lease Sale No. 53 had no direct effects on California's coastal zone and therefore no consistency review was required. The Department also balance the various factors involved and determined under Section 19 of the Outer Continental [13 ELR 20623] Shelf Lands Act to request the California Governor's recommendation to delete certain tracts. The tracts subject to the lease sale ranged from three to 24 miles from the shore. The Court stated the issue before it to be whether the notice of lease sale directly affected the coastal zone. The Court found the language of the statute was ambiguous and turned to other tools of statutory interpretation. If found the key to the scheme of the Coastal Zone Management Act to be to encourage states to exercise their full authority over the lands and waters in the coastal zone, to preserve the natural resources in those areas and to exercise their authority in cooperation with the Federal Government and other vitally affected interests, at 1369. This objective, the Court reasoned, would be furthered by giving the terms "directly affect" an expansive reading, to involve the states at "every stage of the planning from drawing board to execution." At 1370. The Court adopted a broad interpretation of "directly affect," contrary to the Government's, and the oil company amici's position here. I shall quote at some length that portion of the opinion in this regard: Pre-leasing activities, including the call for nominations, the publication and circulation ofan environmental impact statement, and the publication of a final notice of lease sale, define and establish the basic parameters for subsequent development and production. During the pre-leasing stage, which culminates in the final notice of lease sale, critical decisions are made as to the size and location of the tracts, the timing of the sale and the stipulations to which the leases are subject. Each of these are key Outer Continental Shelf planning decisions. The selection of tracts to be let determines where the lessee can explore and produce oil and gas. He decision to offer or delete various tracts also determines which estuaries, reefs, wetlands, beaches or barrier islands are exposed to the risk of oil spills and which are not. The particular stipulations imposed on the lessors, along with the designated location of the tracts, influence the flow of vessel traffic, the placement of platforms and drilling structures, as well as the siting of onshore construction. Stipulations included in the lease determine what equipment is to be used and what training is to be provided by lessees to those working on the tract.In addition, decisions made during the pre-leasing stage establish the timing of Outer Continental Shelf development and production. Thus, the leasing sets in motion the entire chain of events which culminates in oil and gas development. The purpose of the Act would not be furthered by excluding the states from the critical decision-making relating to oil and gas resources in the Outer Continental Shelf. If the state is consulted only after the plans are drawn and the parameters for exploration and development are set, as a practical matter, it will be relegated to the defensive role of objecting to the proposals of individual lessees as they are presented. Thus, the comprehensive planning in accordance with the management plan cannot occur and there will be no opportunity for the orderly decisionmaking envisioned by the draftsmen of the Coastal Zone Management Act. The Court in Brown v. Watt then proceeded to make a detailed analysis of the legislative history of the Coastal Zone Management Act, related statistics, including the Outer Continental Shelf Lands Act, the administrative agency's interpretation, dictionary definitions, and an opinion letter of the Department of Justice. The Court found in such analysis support for its view of the meaning of "directly affecting" as used in Section 307(c)(1). Although the Court is convinced that a final notice of lease sale would invariably directly affect the coastal zone in all but the most unusual case — a case which probably could only be posed as a hypothetical — it declines to hold that the final notice of lease sale is a generic category of federal activity which directly affects the coastal zone within the meaning of 307(c)(1). The Court agrees with the Justice Department that the determination as to whether the final notice of lease sale directly affects the coastal zone must be made on a case-by-case basis. The Court concluded that the proposed leases directly affected the coastal zone and enjoined the defendants in that case from taking any action pursuant to the leases until a consistency determination was made. It further ordered that all activities on the tract be conducted in a manner consistent with California's Coastal Management Plan. It voided the bids for the tracts at issue and ordered the deposits returned to the bidders. On appeal the Ninth Circuit agreed with the District Court's broad construction of the words "directly affect" as used in Section 307(c)(1) of the Coastal Zone Management Act and thus rejected the narrow construction urged by the defendants and oil company amici in the instant case. Its reasoning paralleled that of the District Court. At the same time the Ninth Circuit rejected the apparent view of the District Court that the Federal activity must conform to the State's program in the manner deemed appropriate by the State. That is an issue which need not be resolved at this time in this case. In conformity with its opinion, the Ninth Circuit affirmed the District Court's order insofar as it required a consistency statement. It stayed the District Court's order insofar as it voided the leases and required return of the moneys posted and insofar as it required Federal lease sale activities to be conducted consistently with California's Coastal Zone Management Plan. It vacated the District Court's order insofar as it applied beyond the lease sale stage. The oil company amici urge that in State of California by and through Brown v. Watt, 668 F.2d 1290 [12 ELR 20001] (D.C. Cir. 1981), the D.C. Circuit rejected the two California District Courts' and the Ninth Circuit's analysis. In that case the Court was required to determine whether the Secretary of the Interior complied with leasing program review procedures provided for in Section 18 of the Outer Continental Shelf Lands Act. Section 18(a)(2)(F) of the Act required the Secretary to consider the lease, goals and policies of affected states identified by the governors of those states as relevant. The Secretary postponed consideration of some matters which California raised which would be felt at later exploration and development stages on the grounds that those matters could be better evaluated at later points in the decisionmaking process. Deciding against California on this point, the Court stated: Petitioners argue that the Secretary failed to comply with Section 18(a)(2)(F) by declining to delete from the program areas seaward of Northern and Central California which, they have alleged, cannot be developed in a manner consistent with state law. Development in these areas, they say, is inconsistent with California's approved Coastal Management Plan and with California policy that development occur only where there are sufficient resources to justify the construction of pipelines, which California requires to preserve air quality and to minimize the risk of oil spills. The Secretary responds that California's specific charges on this issue are best addressed at later points in the Outer Continental Shelf decision-making process, in conjunction with specific proposed activities. The Secretary notes further that in the event of an actual conflict between a state and a Federal licensee, the state has no veto; rather, the final decision on whether the licensee can proceed is made by the Secretary of Commerce. We are satisfied that the Secretary adequately considered the potential impediments to exploration and development posed by state laws and policies. Although the Secretary did not deliver a result satisfactory to petitioners, it cannot be doubted that he assembled and analyzed data addressed to their concerns. The oil company amici urge that this ruling constitutes a rejection of the California District Courts' ruling that in a Section [13 ELR 20624] 307(c)(1) review the Secretary must look to future likely effects of the leasing program rather than concentrating exclusively on the preleasing effects. These amici urge that the D.C. Circuit opinion compels the conclusion that a Section 307(c)(1) review of a proposed lease sale is limited to consideration of the preleasing activities. I cannot agree with this argument. It overlooks the fact that the District Courts and the Ninth Circuit on the one hand and the D.C. Court of Appeals on the other were dealing with different statutes having different purposes. As the California District Court noted: Although both the Coastal Zone Management Act and the Outer Continental Shelf Lands Act focus on offshore oil and gas leases, there is a marked difference in the central focus of each statute. Under the Outer Continental Shelf Lands Act, the emphasis is upon development of oil, gas and other minerals. In contrast, the Coastal Zone Management Act is a statute directed to, and solicitous of, environmental concerns. Due to this significant difference in objectives between Coastal Zone Management Act and the other statutes, it is doubtful that it would be proper to interpret the Coastal Zone Management Act in light of other statutes. For the same reason I do not believe that the other cases cited by the Government and the oil company amici control the question, e.g. County of Suffolk v. Secretary of the Interior, 562 F.2d 1368 [7 ELR 20637], cert. den. 434 U.S. 1068 (1978). I do not believe the D.C. Circuit opinion bears upon the first issue presented in the present case. I think the California District Court and the Ninth Circuit correctly concluded for the reasons they set forth that when the Secretary of the Interior determines under Section 307(c)(1) of the Coastal Zone Management Act whether a proposed lease sale directly affects the state's coastal zone, he must consider all the likely effects upon the coastal zone of leasing, exploration, development and production activities. To do otherwise would render a Section 307(c)(1) review a nullity. The only likely environmental effects of preleasing activities is the destruction of the forests required to produce the vast quantities of paper generated by such activities. It is no answer to say that the state will be protected by the lessors' consistency certification at various stages of the program. The states are entitled under the statute to both forms of protection — the Secretary's review and determination of the consistency of the entire program under Section 307(c)(1) and the lessors' certification of consistency under Section 307(c)(3)(B) at the various stages of the program as it progresses. Therefore, I conclude that the Department of the Interior was in error in failing to take into account the likely effect of all stages of the oil leasing program when it determined whether the proposed lease sale directly affected New Jersey's coastal zone. When all stages of the program are considered, it closely affects the coastal zone and a consistency determination must be made. E. Economic Effects of Outer Continental Shelf Leases There are two kind of effects upon which New Jersey relies to support its contention that the lease of the 23 tracts at issue would be inconsistent with itsCoastal Zone Management Program. The principal effects upon which it relies are economic in nature and do not have a physical impact upon the natural order within the coastal zone. The tilefish habitat is in the two canyons, far beyond New Jersey's coastal zone. Similarly the areas in which fishing might be interfered with are outside the coastal zone. The fishing industry which would be affected by loss of the tilefish and interference with nets is headquartered within the coastal zone. New Jersey argues that actions affecting that industry are subject to the consistency requirements of Section 307(c)(1). The other kind of effects of the leasing upon which New Jersey relies to establish inconsistency do take place in the coastal waters. Relying on the affidavit of Bruce L. Freeman, the State noted that summer flounder, black sea bass and scup migrate in summer periods from the Outer Continental Shelf area to waters within the coastal zone. According to the State, these fish are not denizens just of the seven tracts which the State sought to remove from the leasing program or the 16 tracts where special lease stipulations were sought. Rather, they inhabit the entire inshore edge of the warm bank of water at the upper edge of the Continental Shelf. The Freeman affidavit (paragraph 17) conceded "It is not presently known what direct biological impact the drilling operation will have upon these species." Thus the data developed to date would hardly support a finding of inconsistency based on the effect of the leasing on summer flounder, black sea bass and scup. Thus the only significant effect upon which the State relies to establish inconsistency and which would be felt within the New Jersey coastal zone is the financial impact which a destruction of Outer Continental Shelf fish and impediments to fishing in the Outer Continental Shelf would have upon New Jersey's fishing industry. I conclude that this is not the kind of injury to which the Coastal Zone Management Act is directed. Section 307(c)(1) of the Coastal Zone Management Act, 16 U.S.C. § 1456(c)(1), the provision of the Act upon which New Jersey here relies, states that: Each Federal agency conducting or supporting activities directly affecting the coastal zone shall conduct or support those activities in a manner which is, to the maximum extent practicable, consistent with approved State management programs. Section 304(a) and (b) of the Coastal Zone Management Act, 16 U.S.C. § 1453(a) and (b) limit the "coastal zone" to the "coastal waters within the territorial jurisdiction of the United States," i.e., for New Jersey those waters within three miles of the New Jersey coast. See 15 CFR § 920.2(b), part of the interpretative regulations published by the United States Department of Commerce to implement the Coastal Zone Management Act: "The [coastal] zone extends . . . seawards to the three-mile limit of the U.S. territorial sea." See also N.J.A.C. 7:7E-4.3(a) defining the "ocean" segment of the New Jersey coastal zone as extending to "three nautical miles from the shoreline." In expressing concern as to a fishery more than 60 miles offshore, New Jersey does not allege any physical impact on its coastal zone other than the possible effect (as yet not established) upon the summer flounder, black sea bass and scup. It would be in clear conflict with the Federal Government's exercise of its jurisdiction over the Outer Continental Shelf to extend the reach of the State's Coastal Management Program to actions and effects felt exclusively in the Outer Continental Shelf area. I need not go into the question whether, as the Government contends, the subject of the protection of the tilefish and other fish which the State seeks to protect is preempted by the Fisheries Conservation and Management Act of 1976. 16 U.S.C. § 1801, et seq. A reading of the Act suggests most strongly that the protection which it is designed to afford is protection of the coastal zone's natural resources such as wetlands, flood plains, estuaries, beaches, dunes, barrier islands, coral reefs and fish and wildlife and their habitat within the coastal zone, e.g., 16 U.S.C. § 1453(2). There are, of course, numerous references to the fishing industry and other commercial ventures in the Act. It is clear that these references are made in two contexts. First, these ventures are often dependent upon the success of preserving the natural resources of the coastal zone. Second, these ventures, if not properly conducted, may themselves pose a threat to the natural resources of the coastal zone. There is nothing in the Act that suggests to me that it is concerned with the economic health of a particular industry located within the coastal zone except as its economic health may be affected by management of the physical resources of the coastal zone itself. New Jersey and the amici supporting New Jersey's position refer to certain isolated statements constituting part of the legislative history of the Coastal Zone Management Act to support their contention that the economic impact within the coastal zone should be considered in a Section 307(c)(1) determination, even though no natural conditions in the coastal zone are affected at all. The legislative history of the 1980 reauthorization of the Coastal Zone Management Act, Coastal Zone Management Improvement Act of 1980, Public Law 96-464, 94 Stat. 2060 (1980) [13 ELR 20625] includes a House Report, HR REP. NO. 96-1012, 96 Congress, Second Session 34-35 (1980). There the Committee spoke in terms of a requirement of a consistency determination where a program had an "economic, geographical or social" relationship to a state coastal program. If this was intended to refer to such a relationship which did not arise out of an impact on the coastal environment, it is inconsistent with the sense of the Act itself and with the sense of other legislative history. I do not think it is controlling. The consequence of adopting New Jersey's construction of the Act would be an extraordinary extension of the Act's reach. If each Federal action affecting an industry conducted within the coastal zone were to be subjected to a consistency determination and had to be accomplished in a way which is, to the maximum extent practicable, consistent with the state management programs, all manner of Federal actions, not just those on the Outer Continental Shelf, would be subjected to the Act's rather severe inhibitions on Federal activities. That cannot have been the intent of Congress, and I conclude that a state cannot cite an adverse effect upon a coastal industry as an inconsistency with its coastal management program unless the effect arises from some interference with the natural order within the coastal zone. To the extent that a threatened injury to the natural environment is totally outside the coastal zone, New Jersey's objections must be made not through the mechanism of the Coastal Zone Management Act but through the procedures established by Section 19 of the Outer Continental Shelf Lands Act, 43 U.S.C. 1345(a). As described earlier in this opinion, under Section 19(a) of the Outer Continental Shelf Lands Act, the Governor of a state may submit recommendations to the Secretary regarding the size, timing or location of a proposed lease sale. Section 19(c) provides that: "[t]he Secretary shall accept recommendations of the Governor . . . if he determines . . . that they provide for a reasonable balance between the national interest and the well-being of the citizens of the affected state." This is a much broader inquiry than is provided in the Coastal Zone Management Act. It is not enough for the Secretary to consider effects upon the natural order and to the economic well-being of persons within and without the coastal zone. However, the weight to be given to the state and national interest is very different under the two acts. Under the Coastal Zone Management Act, the state interests are given great weight, and Federal officials must conduct their activities directly affecting the coastal zone to the maximum extent practicable consistently with state management programs. Under the Outer Continental Shelf Lands Act, on the other hand, the Federal authorities are given great weight. The Secretary is given the authority to balance the Federal and state interest, and under Section 19(d) of the Act, his determination in this regard shall be final and shall not be the basis for invalidation of a proposed lease sale in any suit, unless found to be arbitrary and capricious. Section 19 will be available to the Governor of New Jersey prior to the lease sales scheduled for April 1983. I cannot anticipate whether additional data will be available to him before he makes his recommendations. Nor can I anticipate whether the response of the Department of the Interior will be the same as it was with respect to recommendations addressed to Lease Sale No. 59 and Resale No. 2. That will have to abide the event. Summary judgment will be entered as follows: Judgment will be entered declaring that when the Secretary of the Interior determines under Section 307(c)(1) of the Coastal Zone Management Act whether a proposed lease sale on the Outer Continental Shelf directly affects New Jersey's coastal zone, he is required to consider the effects upon the coastal zone environment of the preleasing exploration and development and production activities which are likely to flow from the lease sale program. Judgment will be entered declaring that activities of the Federal agencies outside of New Jersey's coastal zone which affect commercial activities within the State's coastal zone but which do not affect the natural environment within such coastal zone do not directly affect the coastal zone within the meaning of Section 307(c)(1) of the Coastal Zone Management Act. Judgment will be entered enjoining defendants from offering lease sales or awarding or offering bids for lease sales for any of the tracts at issue in this case until such time as defendants comply with the requirements of the Coastal Zone Management Act and regulations adopted pursuant thereto by conducting a consistency determination on the tracts at issue. No costs will be allowed any party. 13 ELR 20618 | Environmental Law Reporter | copyright © 1983 | All rights reserved |