Last month, a federal appeals court threw out the 2007-2012 offshore leasing program prepared by the Bush administration because the administration failed to properly consider the environmental sensitivity of areas of the OCS beyond the Alaskan coastline.
The plaintiffs challenged leasing offshore Alaska, nowhere else. And the ruling doesn't mention the Gulf of Mexico. However, the court made no distinction, vacating the "Leasing Program," and remanding it to the Interior Department to consider the effects of development on "areas of the OCS in addition to the shoreline."
But what do Alaska lease sales have to do with the Gulf of Mexico sales? And if the entire program is tossed, what is the fate of six GOM sales that have already been held under the plan - and the $7.3 billion lessees paid to acquire 1,908 leases? What do you do about the 487 leases that were sold in a Chukchi Sea sale last fall? And what of future GOM sales and offshore Alaska sales?
"As presently formulated, the court's judgment creates significant uncertainties for Interior and for the oil and gas industry," the Interior Department said in a petition to the court for rehearing and/or clarification filed earlier this week.
The plaintiffs asked the court to review the 5-year plan "to the extent it affects the coast of Alaska," the department noted. "But the court did not explicitly limit its remedy to Alaska," it said. "Further, the opinion does not explicitly address the status of leases already issued under the challenged Five-Year Program. Absent further clarification, these uncertainties could have serious disruptive consequences."
In a rare meeting of the minds, the American Petroleum Institute and the Interior Department each asked the court for a rehearing and to lift the "vacatur."
Vacating the leasing program "would wipe out many billions of dollars of investments in bonus bids and exploratory efforts [and] undermine the trust and certainty parties should expect when they participate in government sponsored lease sales and in contracting in the US," among other adverse consequences, API said.
API and Interior asked the court to allow the previous sales to stand while department corrects the defects cited by the court. API would limit that remand "to the six scheduled future Alaska lease sales." In its brief, Interior said it plans to re-evaluate the environmental sensitivity of all areas listed in the 2007-2012 program, not just the Alaska sales.
Interior Secretary Ken Salazar blamed the Bush administration. He said its "failure to apply the law has resulted in widespread uncertainty in the oil and gas industry and put reliable conventional energy production from offshore areas at risk." (For its part, industry contends it is Obama administration policies that are putting conventional energy production at risk).
Although the court dismissed all but one of the challenges to the leasing program, a single fumble by the Bush administration while preparing the 2007-2012 plan was enough to call the entire program into doubt (pending a rehearing).
Interior said it takes from 24 to 30 months to develop a new 5-year leasing program. Enough time, one would think, to get it right and withstand most legal challenges Which brings us to the proposed new five year plan the Bush administration cobbled together in about six months as a parting gift to the incoming Obama administration.
The proposed plan was released on the last full business day the Bush administration was in office. It would supersede the current plan and run from 2010 to 2015, and include sales in the Atlantic and Pacific - areas off-limits to leasing under now-lifted congressional and executive branch moratoria - and virtually terra incognita regarding the potential impact of oil and gas development.
Salazar criticized the "enormous sweep" of the Bush proposal and extended the comment period by six months in order to establish "an orderly process that allows us the make wise decisions based on sound science."
Salazar's decision drew fierce fire from the oil industry. The delay "does a disservice to all Americans," said Jack Gerard, president of the American Petroleum Institute. "We should be moving as quickly as possible to develop more of our own oil and gas resources to benefit all Americans."
But perhaps a deliberate processes and carefully considered decision-making will lessen the liklihood of future court rulings that result in even longer delays, threaten to derail lease sales, create uncertainties for the oil and gas industry and disrupt expeditious and orderly development. A rush job on a leasing program may be the real disservice.
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