NRDC V. Hodel – The Five-Year Program After Chevron

*/ A scenic view Akmagolik Creek in northern Alaska. Courtesy of USGS.
The ruling on the next five-year program further demonstrated how successful the Environment and Natural Resources Division(“ENRD”) litigators had been in establishing parameters under the Outer Continental Shelf Lands Act Amendments of 1978(“OCSLAA”) that insulated the Secretary’s decision, for the Court upheld Secretary Hodel’s Five Year Plan against all OCSLAA challenges, finding only that it violated the National Environmental Policy Act in only one respect.  Natural Resources Defense Council v. Hodel, 865 F.2d 288 (D.C. Cir. 1988).   With respect to the OCSLAA challenges, the Federal Government now had the added benefit of the Supreme Court’s ruling in Chevron U.S.A. v. Natural Resources Defense Council, 467 U.S. 837 (1984) requiring deference to the implementing agency’s reasonable construction of a statute in the absence of explicit congressional expression on the issue. See Hodel, 865 F.2d at 300. 

Planning Areas Revisited

Chevron analysis was used to dispose of petitioners’ first OCSLAA claim, the third challenge to the Secretary’s use of broadly drawn administrative planning areas for comparative analysis pursuant to the obligation to schedule leasing “among the oil-and gas-bearing physiographic regions of the outer Continental Shelf” based upon consideration of factors set out in the statute. 43 U.S.C. § 1344(a)(2).   In the new attack, petitioners alleged that the reference to “oil-and gas-bearing physiographic regions” required the Secretary to define areas strictly according to the oil and gas potential of undersea geologic formations.  Failure to do so, they alleged, resulted in planning areas which combined high oil and gas potential areas with environmentally sensitive areas of little or no such potential, a distortion which, they alleged, could not be remedied in subsequent sale-specific refinement.  See Hodel, 865 F.2d at 300-02.

Relying on Chevron, the Court noted the absence of any assigned congressional meaning to the phrase, and pointed out that petitioners’ proffered interpretation was inconsistent with other provisions requiring that area-to-area comparison be based on onshore considerations.

Several of the statutory considerations have little or no apparent relation to undersea geologic formations: for example, the equitable sharing of benefits of development and the proximity and relative needs of energy markets have far more to do with on-shore considerations.

Id. at 301.  Thus, recognizing that Congress “appear[ed]Â…to have coined the phrase,” the Secretary’s interpretation was found “eminently reasonable,” and deserving of Chevron deference.  Id.

Cost Benefit Analysis Revisited

As they had done in State of Cal. By and Through Brown v. Watt, 712 F.2d 584, 591-94 (D. C. Cir. 1983) (“Watt II”), petitioners sought to utilize validation of the Secretary’s “net social value” formula by the panel in State of Cal. By and Through Brown v. Watt, 668 F.2d 1290 (D.C. Cir. 1981) (“Watt I”), to pin the Secretary to precise transparent calculations which could be impeached by a showing of errors in the numbers.  This time petitioners focused on the price of oil, alleging that if the Secretary had used the current price of oil to project oil and gas benefits, many of the planning areas would have zero net economic value and hence ( because they could never be shown to exceed social and economic costs) a net social value of zero.  See Id. at 306-07.  The Court rebuffed petitioners, holding, among other reasons, that the OCSLAA directed the Secretary to weigh qualitative factors in determining whether to include an area, such that “the inclusion of areas with a calculated net social value of zero may nonetheless be compatible” with the statute. Id. at 307.

Turning to whether it was reasonable for the Secretary to rely on such qualitative factors as the volatility of oil prices and the flexibility to be gained by inclusion of areas at the program stage, the Court turned back to the principles it had evolved in Watt I in addressing the standard of review, noting that issues of future oil prices did not involve “findings of ascertainable fact,” but rather matters “largely predictive in nature,” where the Secretary was owed “great deference.’  Id. at  307, citing, 712 F.2d at 600, 602. The Court, however, subjected the Secretary’s assumptions to careful review, and found, given the uncertainty surrounding such predictions, that he had offered a reasonable rationale for assuming the possibility of higher prices.  It concluded:  “The statute permits him, in these circumstances, to act on the basis of plausible-albeit high-price [sic] projections and thereby implement a policy that favors inclusion at the program stage.”  Id. at 309.  The Court dealt similarly with petitioners’ detailed challenges alleging the undervaluation of social costs.  Id. at 309-12.

NEPA and the “Conservation Alternative”

Perhaps in response to the shutting of the door on OCSLAA claims that they had experienced in Watt II, petitioners focused their energy on a number of National Environmental  Policy Act (“NEPA”) claims in Hodel.  For their most significant claim from a legal policy perspective, petitioners asserted that NEPA’s requirement for the consideration of reasonable alternatives mandated, in the case of Outer Continental Shelf(“OCS”) leasing, that government regulatory measures which mandated or encouraged conservation be considered as at least a partial alternative to OCS leasing, through reducing the demand for oil. See Id. at 295.  The Secretary took an “all or nothing” approach to the issue, contending that the “no action” alternative, where no further oil and gas leasing would occur,  addressed the complete substitution of energy conservation for leasing, at least to the extent that market forces furthered conservation, and further that “partial” substitution of conservation for oil production made for an infeasible alternative because the nation’s energy needs outstripped the combined results of conservation and oil and gas production. Id.

The Court’s response was instructive on the meaning of NEPA in this context. Given the informational purposes of NEPA, which were co-equal with the “action forcing” purposes, the Secretary was required to consider partial substitution of energy conservation for oil notwithstanding that it would not address the nation’s energy demands.

Congress contemplated that the Impact Statement would constitute the environmental source material for the information of Congress as well as the executive, in connection with the making of relevant decisions, and would be available to enhance enlightenment of-and by-the public.

Id. at 296, citing NRDC v. Morton, 458 F.2d 827, 833 (D.C. Cir. 1972).1

What the Court gave petitioners with one hand, however, it took away with the other, for in the same breath it held that given the continuing need for development of the OCS mandated by the OCSLAA, a less searching examination of such alternatives was appropriate, and that the EIS, in various particulars, satisfied that standard.  Id. at 296-97.

The Court, however, did fault the Secretary on the issue of cumulative impacts, holding that the EIS had failed to consider the cumulative impacts on migratory marine mammal and fish species of simultaneous oil and gas development in adjacent planning areas through which the species migrated.  Id. at 297-300.  The Court’s holding indicates the importance in administrative processes of the Environmental Protection Agency’s (“EPA”) review of Environmental Impact Statements.  Here the EPA had faulted the draft EIS on the grounds ultimately relied on by the Court, and the Court found the Secretary’s response to EPA’s criticism to consist of perfunctory and conclusory boilerplate, lacking in the “real analysis” necessary to address the concerns.  Id.

The Hodel decision marked the end of legal challenges to the timing and scheduling of leasing in the five-year programs for the next two decades.  Congressional moratoria on oil and gas leasing in certain areas of the OCS coupled with Presidential withdrawal of certain areas from consideration under Section 12 of the Outer Continental Shelf Lands Act, 43 U.S.C. § 1341, resulted in five-year plans which generally limited leasing to areas which had traditionally been developed, such as the Gulf of Mexico, and/or were appurtenant to states which favored development, such as Alaska.

1The notion that agencies are required to consider alternatives outside of their own jurisdiction, see 40 CFR 1502.14(c), is properly limited under recent precedent to those programs of national scope where there is at least the possibility of government-wide action. See City of Alexandria, Va. v. Slater, 198 F.3d 862, 868-69 (D.C. Cir. 1999) (discussing the limits of Morton both analytically and in light of later Supreme Court precedent).

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Updated April 13, 2015

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