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Ninth Circuit Finds Federal Agencies Violated National Environmental Policy Act and Endangered Species Act in Approving Offshore Oil Facility

Ninth Circuit Finds Federal Agencies Violated National Environmental Policy Act and Endangered Species Act in Approving Offshore Oil Facility
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By James Purvis

Various conservation groups brought suit challenging the U.S. Department of the Interior’s Bureau of Ocean Energy Management’s (BOEM) approval of an offshore oil drilling and production facility, claiming that the approval failed to comply with the National Environmental Policy Act (NEPA), the federal Endangered Species Act (ESA), and the Marine Mammal Protection Act (MMPA). After holding that it had original jurisdiction over the claims, the Ninth Circuit Court of Appeals found that BOEM acted arbitrarily and capriciously by failing to quantify the emissions resulting from foreign oil consumption in its Environmental Impact Statement (EIS). The Ninth Circuit also held the U.S. Fish and Wildlife Service (FWS) violated the ESA by relying on uncertain, nonbinding mitigation measures and failing to estimate the project’s amount of nonlethal take of polar bears. In all other respects, the Ninth Circuit denied the petition. [Center for Biological Diversity v. Bernhardt, 982 F.3d 723 (9th Cir. 2020).]

Factual and Procedural Background

Hilcorp Alaska, LLC sought to produce crude oil from Foggy Island Bay, which is located along the coast of Alaska in the Beaufort Sea. To extract the oil, Hilcorp would need to construct an offshore drilling and production facility. That facility—referred to as “the Liberty project,” or “the Liberty prospect”—would be the first oil development project fully submerged in federal waters. Hilcorp estimates that the site contains about 120 million barrels of recoverable oil, which it would plan to extract over the course of 15 to 20 years.

The site is located within the outer Continental Shelf of the United States and thus governed by the Outer Continental Shelf Lands Act (Act). Under that Act, BOEM oversees the mineral exploration and development of the Outer Continental Shelf. This may include, among other things, leasing federal land for oil and gas production. The Act requires BOEM to manage the outer Shelf in “a manner which considers [the] economic, social, and environmental values” of the Shelf’s natural resources. Relying on a Biological Opinion prepared by the Service, BOEM approved the project. Various environmental groups then sued, alleging that the BOEM failed to comply with NEPA, the ESA, and the MMPA. Under the Outer Continental Shelf Lands Act, the Ninth Circuit had original jurisdiction over the challenge.

The Ninth Circuit’s Decision

The NEPA Claims

The Ninth Circuit first addressed petitioners’ claims that BOEM’s EIS was arbitrary and capricious because it: 1) improperly relied on different methodologies in calculating the lifecycle greenhouse gas emissions produced by the “no action” alternative and the other project alternatives, thus making the options incomparable; and 2) failed to include a key variable (foreign oil consumption) in its analysis of the “no action” alternative.

First, with respect to the methodologies used, the Ninth Circuit disagreed and found that BOEM had not applied a different methodology in estimating emissions among the alternatives. While the EIS used a “market simulation model” in connection with its analysis of the “no action” alternative, the “lifecycle” analysis conducted for other alternatives implicitly took this analysis into account. This analysis, the Ninth Circuit concluded, was a relative comparison, sufficient for making a reasoned choice among alternatives.

Second, with respect to the omission of emissions associated with foreign oil consumption, the Ninth Circuit agreed that such omission violated NEPA. This issue, as the court framed it, was essentially one of economics—if oil is produced at the project site, the total supply of oil in the world will increase; increasing global supply will reduce prices; once prices drop, foreign consumers will buy and consume more oil. The model used in the EIS, however, assumed that foreign oil consumption would remain static, whether or not oil is produced at the project site. The EIS, the Ninth Circuit concluded, should have either given a quantitative estimate of the downstream greenhouse gas emissions that would result from consuming oil abroad, or explained more specifically why it could not have done so, and provided a more thorough discussion of how foreign oil consumption might change the carbon dioxide equivalents analysis. Having failed to do so, the court found that the alternatives analysis was arbitrary and capricious.

The Endangered Species Act Claims

The Ninth Circuit next addressed petitioners’ claims that the FWS violated the ESA by: 1) relying on uncertain mitigation measures in reaching its conclusions in the Biological Opinion; and 2) failing to specify the amount and extent of “take” in the incidental take statement included within the Biological Opinion.

First, while the Ninth Circuit acknowledged that the record reflected a “general desire” to impose mitigation, it agreed that any mitigation proposed by the FWS was too vague to enforce. The generality of the measures also made it difficult to determine the point at which the agency may renege on its promise to implement the measures. The Ninth Circuit also found that, while the FWS did not appear to have relied on any of these measures in its “no jeopardy” conclusion, it had relied on such measures in its “no adverse modification” finding (in which it concluded that the polar bear’s critical habitat would not be adversely affected by the project). Accordingly, it found that the FWS’ reliance on these uncertain mitigations measures was arbitrary and capricious, and that the FWS’ Biological Opinion therefore violated the ESA.

Second, the Ninth Circuit agreed that, while the FWS contemplated that the harassment and disturbances polar bears would suffer could trigger re-consultation, the Biological Opinion failed to quantify the project’s amount of nonlethal take to the polar bear (or explain why it could not do so). “Take” under the ESA, the court explained, can occur via injury or death, as the Biological Opinion recognized, but it can also occur via nonlethal harassment. On this basis, the Ninth Circuit found that the FWS’ incidental take statement violated the ESA.

Conclusion and Implications

The case is significant because it contains a substantive discussion of both NEPA and the ESA, particularly as they relate to the analysis of alternatives under NEPA and reliance on mitigation measures under the ESA. The decision is available online at: https://cdn.ca9.uscourts.gov/datastore/opinions/2020/12/07/18-73400.pdf