Thursday, July 12, 2012

Offshore Oil Drilling in the U.S. Arctic, Part One: Legal Context




This article is the first of three in a series on Offshore Oil Drilling in the U.S. Arctic. 

By Nicholas Cunningham The Arctic region represents the next frontier for oil and gas development. The U.S. Geological Survey (USGS) predicts that the Arctic region surrounding Alaska has huge deposits of technically recoverable crude oil. Estimates of crude oil reach as high as 29.96 billion barrels near Alaska compared to a total estimate of 89.98 billion barrels for the entire Arctic region as a whole.[i] This means the waters surrounding Alaska hold about 33% of all technically recoverable oil in the Arctic, the largest of any other Arctic country. The technically recoverable reserves in Alaska also represent about one-third of the total of technically recoverable reserves on the U.S. outer continental shelf.[ii] 

The governance of offshore oil drilling is built on numerous legal precedents established over the course of several decades:           

Proclamation 2667
Before President Harry Truman, there were few international norms on the governance of the coastal waters extending from a nation’s shores. In 1945, President Truman issued an executive order, Proclamation 2667, stating, “the Government of the United States regards the natural resources of the subsoil and sea bed of the continental shelf beneath the high seas but contiguous to the coasts of the United States as appertaining to the United States, subject to its jurisdiction and control.”[iii] Other nations followed suit, claiming rights to the waters adjacent to their shores.

Submerged Lands Act (SLA)
While President Truman’s executive order established a claim for the United States in an international context, it did not distinguish which level of the U.S. government controlled those waters, meaning it was still unclear whether the federal government or coastal states controlled the continental shelf. In one particular case, United States v. California (1947), the court ruled in favor of federal control for the waters extending three miles from California.[iv] Fearing an encroachment of federal powers on the sovereignty of states, as well as the expropriation of the potential benefits of mineral exploitation, states lobbied Congress for action.[v] In response, the U.S. Congress passed the Submerged Lands Act of 1953, which granted exclusive rights of coastal states to the waters extending three miles from their shores.[vi] Within the three-mile boundary, states had the right to exploit the mineral resources in the sea bed, which included oil and gas.

Outer Continental Shelf Lands Act (OCSLA)
In order to codify federal control of the mineral resources beyond the three-mile limit, the U.S. Congress passed the Outer Continental Shelf Lands Act of 1953.[vii] OCSLA also granted the Department of the Interior the responsibility for administering the exploration and exploitation of natural resources on the outer continental shelf (OCS). The Secretary of Interior would grant leases to the highest qualified responsible bidder, according to sealed bids.[viii] Today, DOI has divided the OCS into four regions: the Atlantic, the Gulf of Mexico, the Pacific, and Alaska. OCSLA was amended in 1978 to give states a greater participatory role in the leasing process.[ix] The reforms also required the Secretary of Interior to establish a five-year plan for the leasing program, which best meets “national energy needs” for that period.[x] Additionally, OCSLA grants the President the power of issuing moratoria on offshore oil drilling in the OCS.[xi]

United Nations Law of the Sea (UNCLOS)
The United Nations Law of the Sea, which was signed in 1982 and came into force in 1994, provides the international legal context for individual nations to claim sovereign control over their coastal waters. According to Article 57 of UNCLOS, nations have control over their exclusive economic zones (EEZs), extending 200 miles from their shores.[xii] Under Article 56, coastal states have “sovereign rights for the purposes of exploring and exploiting, conserving and managing the natural resources,” within their EEZs.[xiii] According to these two articles, mineral deposits within the EEZ of a nation legally belong to that nation. Since the U.S. moved unilaterally to stake claims on its waters before UNCLOS was written, as it pertained to jurisdictional boundaries, UNCLOS simply reaffirmed a fait accompli; the U.S. already claimed its EEZ and issued laws governing the exploitation of the mineral resources within its EEZ. Additionally, despite the U.S. never ratifying UNCLOS, its tenets are largely accepted as customary international law.

National Environmental Policy Act (NEPA)
On January 28, 1969, an oil well blowout occurred off the coast of Santa Barbara, California, spilling approximately three million gallons of oil into the ocean, much of it washing ashore.[xiv] The scene galvanized the nascent environmental movement, contributing to a wave of environmental legislation in the subsequent years. One law, in particular, is relevant to offshore oil development. The National Environmental Policy Act was passed on January 1, 1970, requiring federal agencies to consider the environmental effects of major government actions, as well as the impacts of alternatives to them.[xv] Specifically, NEPA requires major government actions undergo environmental impact statements (EISs) to assess the environmental effects of such decisions. Under this law, the five-year plans implemented by the Secretary of Interior under OCSLA are subject to EISs.

Oil Pollution Act (OPA)
On March 24, 1989, the Exxon Valdez oil tanker collided with Bligh Reef in Prince William Sound and spilled more than 11 million gallons of oil into the surrounding waters.[xvi] The heavy crude fouled the shoreline and endangered countless birds, whales, porpoises, sea otters, and fish. It was the largest oil spill in U.S. history at that point, and it shocked the nation. In response, Congress passed the Oil Pollution Control Act in 1990. The OPA established liabilities for owners and operators of offshore facilities and vessels. Liability can be established if the owner or operator discharged oil into “navigable waters” that resulted in “damages.”[xvii] However, unless the operator could be proved to be “grossly negligent,” in which case liability costs were unlimited, operators’ liability was capped at $75 million for an offshore oil spill.[xviii]

Endangered Species Act (ESA)
The Endangered Species Act of 1973 authorized the Secretary of the Interior, and specifically the Fish and Wildlife Service, to make the determination if certain species qualify as “endangered” or “threatened.”[xix] Once the determination is made, any unauthorized “taking, possession, or sale” of the species is prohibited. The U.S. Fish and Wildlife Service can levy fines upon violators. Also, ESA requires federal agencies to insure that any action funded or carried out by them does not jeopardize the continued existence of an endangered species or its habitat.

Part 2 of this series will be published on Tuesday, July 17.

References:
[i] U.S. Geological Survey. (2008). Circum-Arctic Resource Appraisal: Estimates of Undiscovered Oil and Gas North of the Arctic Circle. Washington DC: USGS.
[ii] Minerals Management Service. (2006). Assessment of Undiscovered Technically Recoverable Oil and Gas Resources of the Nation’s Outer Continental Shelf, 2006. Washington DC: MMS, U.S. Department of Interior. http://www.boemre.gov/revaldiv/PDFs/2006NationalAssessmentBrochure.pdf
[iii] President Harry Truman. (1945, September 28). The American Presidency Project. Retrieved March 21, 2012, from The American Presidency Project web site: http://www.presidency.ucsb.edu/ws/index.php?pid=12332#axzz1pl6JwOdV
[iv] United States v. California, 332 US 19 (The Supreme Court June 23, 1947).
[v] Lester, C. (1994). Contemporary Federalism and New Regimes of Ocean Governance: Lessons from the Case of Outer Continental Shelf Oil Development. Ocean & Coastal Management, 10.
[vi] Submerged Lands Act, 43 U.S.C. §§1301-1315. (1953). Retrieved March 21, 2012, from BOEMRE web site: http://www.boemre.gov/aboutboemre/pdffiles/submerged.pdf
[vii] Outer Continental Shelf Lands Act of 1953. (1953). 43 U.S.C. 1301 . Retrieved March 21, 2012, from Senate Environment and Public Works web site: http://epw.senate.gov/ocsla.pdf
[viii] Bureau of Ocean Energy Management, Regulation and Enforcement. (2010, September 29). Outer Continental Shelf Lands Act. Retrieved March 21, 2012, from BOEMRE web site: http://www.gomr.boemre.gov/homepg/regulate/regs/laws/ocslasht.html
[ix] Congressional Research Service. (2011). Offshore Oil and Gas Development: Legal Framework. Washington DC: CRS. 5.
[x] Outer Continental Shelf Leasing Program (1978). 43 U.S.C. 1344.
[xi] Congressional Research Service. (2011). Offshore Oil and Gas Development: Legal Framework. Washington DC: CRS. 6.
[xii] United Nations. (1982). United Nations Convention on the Law of the Sea. Retrieved March 20, 2012, from http://www.un.org/Depts/los/convention_agreements/texts/unclos/closindx.htm
[xiii] Ibid.
[xiv] Clarke, K. (2002). The Santa Barbara Oil Spill: A Retrospective. Yearbook of the Association of Pacific Coast Geographers, 157-162.
[xv] Environmental Protection Agency. (2011, October 11). NEPA. Retrieved March 21, 2012, from EPA web site: http://www.epa.gov/compliance/basics/nepa.html
[xvi] Environmental Protection Agency. (2011, January 27). Exxon Valdez. Retrieved March 28, 2012, from EPA web site: http://www.epa.gov/osweroe1/content/learning/exxon.htm
[xvii] Schnapf, L. (n.d.). Oil Pollution Control Act: An Overview for the Business Lawyer. Retrieved March 28, 2012, from Environmental-Law.net web site: http://www.environmental-law.net/wp-content/uploads/2011/08/OPA-Overview-for-Business-Lawyersapr2010.pdf
[xviii] Oil Pollution Act of 1990 (1990). P.L. 101-380. Retrieved from: http://epw.senate.gov/opa90.pdf
[xix] Endangered Species Act of 1973 (1973). 16 U.S.C. 1531-1544. Retrieved from: http://epw.senate.gov/esa73.pdf