January 23, 2019

Deep Sea Drilling Showdown May Be on State Turf

Kristina Alexander

The Department of the Interior (DOI) proposed opening 98 percent of the United States’ offshore resources available for oil and gas production during the five-year lease period of 2019–2024; this will allow industry to “collect data in areas that have not been explored in decades.” 83 Fed. Reg. 829, 830 (Jan. 8, 2018). A closer look at the January 4, 2018, announcement and subsequent Federal Register notice shows that for the next five-year leasing program, DOI will offer 47 leases in almost all US coastal waters from Alaska to Maine. According to DOI, it is “the largest number of lease sales ever proposed” for a five-year lease schedule. Press Release, Dep’t of Interior, Unleashing America's Offshore Oil and Gas Potential (Jan. 4, 2018). Less than a week later, via Twitter, the Secretary of the Interior stated that Florida would be withdrawn from the lease sales. @SecretaryZinke, Twitter (Jan. 9, 2018, 3:48 pm). Subsequent statements by the administration suggest that DOI will review any state’s request to be excluded from the lease period.

Thus, the upcoming five-year leasing program mandated by the Outer Continental Shelf Lands Act (OCSLA) (43 U.S.C. §§ 1331–1356(b)) may come down to a state-by-state fight for the right to dictate oil exploration off state coasts. States may wage a direct fight by seeking to limit the scope of the five-year lease plan, or may fight indirectly by drawing upon state authorities to control what happens on state lands. Many states have indicated they do not want oil exploration or development off their coasts, and the lease sales may be tempered by the states flexing their legal powers to limit offshore oil production.

OCSLA established a process by which DOI authorizes exploration and drilling of outer continental shelf (OCS) lands through competitive bidding. The first step is for DOI to identify the areas for eventual lease sales. DOI discloses the “size, timing, and location of the leasing activity” for the planning areas for a five-year period based on the “oil- and gas-bearing physiographic regions of the outer Continental Shelf.” 43 U.S.C. § 1344(a). Then, DOI offers lease sales via competitive bidding, which typically includes many lease sales within a planning area. The final two steps are exploration and production. To provide context, the Draft 2017–2022 Leasing Program initially proposed 14 lease sales: 10 in the Gulf of Mexico region, 3 in the Alaska region, and 1 in the Mid- and South Atlantic. 80 Fed. Reg. 4941, 4942 (Jan. 29, 2015) (stating that the purpose was “tailored so the dual goals of promoting prompt development of the Nation's oil and gas resources with the necessary protections for the marine, coastal, and human environments can be best achieved”). The final proposal offered just 11 lease areas. 81 Fed. Reg. 84,612 (Nov. 23, 2016). The Draft 2019–2024 Proposed Leasing Program proposes 19 sites in the Alaska Region, 7 in the Pacific, 12 in the Gulf of Mexico, and 9 in the Atlantic, including the Straits of Florida. 83 Fed. Reg. at 830.

Despite OCSLA’s dividing the nation’s waters into regions for the purposes of selling leases for oil production, OCS oil development frequently is a state-by-state affair and has been for most of OCSLA’s history. The January 2018 announcement was the first time since 1982 that almost all OCS waters have been open for exploration. Typically, there are withdrawals and drilling moratoria in place. According to DOI, the eastern and central Gulf has been closed to oil production since 1988. The Pacific region has been blocked from lease sales since 1984, and the Atlantic since 1983.

OCSLA authorizes the president to withdraw “from time to time” offshore areas from leasing. 43 U.S.C. § 1343(a). President Dwight D. Eisenhower first used withdrawal authority under OCSLA in 1960 to protect marine sanctuaries. 60 Fed. Reg. 2544 (Mar. 15, 1960). Beginning in 1982, either Congress or the president has withdrawn certain waters consistently from the leasing programs, in response to state concerns. Presidents George H.W. Bush, William J. Clinton, Barack H. Obama, and at some points, George W. Bush, each withdrew some or most federal OCS lands from oil leasing programs. Portions of the eastern and central Gulf of Mexico are under a congressional moratorium for leasing until 2022. Pub. L. No. 109-432, § 103, 120 Stat. 3000. DOI will offer two leases in that area when the moratorium expires.

The announcement that drilling off the coast of Florida had been taken off the table was made via Twitter. @SecretaryZinke, Twitter (Jan. 9, 2018, 3:48 pm). According to the Secretary of the Interior, the lands were removed from the five-year lease program because of Florida’s heavy reliance on its coasts for tourism dollars. California has requested its offshore lands be removed from the program, as it also relies on coastal tourism for its economy. States have requested exclusion from OCS drilling out of concern for environmental and economic damages from tanker spills and offshore rig or pipeline failure. Even as the congressional withdrawals expire, it does not appear that those states have changed their minds regarding OCS development.

OCSLA instructs DOI to consider the views of governors and heads of local governments in making lease sales. 43 U.S.C. § 1345. Accordingly, the DOI secretary “shall accept recommendations” of a governor if the secretary determines the recommendations “provide for a reasonable balance between the national interest and the well-being of the citizens of the affected state.” Rather than leaving it to agencies or courts to define, Congress described what it meant by “national interest”: “the desirability of obtaining oil and gas supplies in a balanced manner.” 43 U.S.C. § 1345(c). Thus, the two tempering phrases steering DOI’s determination regarding the state recommendations are that (1) there must be a reasonable balance between what the state wants and what the national interest is, and (2) the national interest must be considered in a balanced manner. A court may have to consider whether DOI’s stated goal within the Notice of Draft 2019–2024 Leasing Program of “attaining energy dominance” is consistent with the statutory requirements of a balanced national interest.

While the federal government can declare that an offshore property is open for business, the oil has to come to land at some point. States objecting to oil production may make that part tricky for developers. Federal and state laws could allow states that have requested withdrawal of their OCS lands to slow down the necessary permission to begin development, making the lease sales an unattractive business opportunity. Therefore, state objections to offshore leasing could be raised early in the leasing process under OCSLA, and if its efforts to get its offshore waters removed from a leasing program fail, the state still has legal tools to achieve similar ends, including the Coastal Zone Management Act (CZMA).

Some states took action in the months that followed the lease-sale announcement. Most notably, in September 2018, California enacted a law to prohibit authorization of new oil and gas related infrastructure on the tidelands or submerged lands of state waters. 2018 Cal. Stats. ch. 310 (Sept. 8, 2018). The moratorium applies to any infrastructure associated with the Pacific Outer Continental Shelf leases, defined to include those lying seaward of Hawai’i, Oregon, and Washington, not just California. Additionally, lease renewals or modifications will undergo additional scrutiny.

Other states’ actions were not as strong, but still targeted offshore oil and gas development. For example, voters in Florida passed a constitutional amendment restricting oil and gas development on lands beneath state waters, but still allowing transport of oil and gas products produced outside of state waters. Fla. Const. art. X, § 7(c). The Massachusetts Senate passed a resolution asking the Department of the Interior to exempt areas from oil exploration. See Mary C. Serreze, Massachusetts Senate Declares Opposition to New England Offshore Oil and Gas Drilling, MassLive (Feb. 23, 2018). According to another report, six municipalities in coastal North Carolina passed resolutions opposing offshore drilling and exploration.

Before offshore exploration can begin, the CZMA must be followed. The CZMA requires that a federal agency taking an action that “directly affects” a state’s coastal area prepare a document showing that the action is consistent with that state’s coastal management plan. The so-called consistency determination must be approved by the state before the project may advance. The Supreme Court held that such a determination is not required for offshore leasing until the exploration stage because any adverse environmental effects “will flow, if at all, only from the latter stages of OCS exploration and production.” Watt v. California, 464 U.S. 312, 341 (1984). More particularly, the Supreme Court held that lease sales do not directly affect a coast. Id. Despite the authority to make a consistency determination, a state does not have an “irreversible state veto.” California v. Watt, 683 F.2d 1253, 1265 (9th Cir. 1982), rev’d sub nom. Watt v. California, 464 U.S. 312 (1984). If the federal agency and the state do not come to an agreement regarding consistency, the action will be reviewed by the Secretary of Commerce. Mediation may be required if the secretary and the state do not come to terms at that stage. But the secretary gets the last word. Thus, the state role may be more disruptive than permanent as the Secretary of Commerce has the final say in a consistency determination. With lease sales historically linked to congressional and presidential politics, however, a successful stall could equal a win for a state seeking to halt offshore drilling.

Thus, the inclusion of a state’s coastal waters within a five-year lease program does not necessarily mean oil development is green-lighted. Required consideration under OCSCLA, a state review of effects under the CZMA, and available challenges to environmental planning documents give a state the ability to resist such development. In light of the limited available infrastructure for so many of the lease areas after decades of moratoria or withdrawals, state resistance could be such that an oil company may seek more welcoming shores. 

Kristina Alexander

Published: January 23, 2019

Kristina Alexander is a senior Research Counsel with the Mississippi-Alabama Sea Grant Legal Program at the University of Mississippi School of Law. Formerly, she was a legislative attorney with the Congressional Research Service.