Offshore leasing decisions often are made with little public notice as they proceed through the federal process; however, the recent Bureau of Ocean Energy Management (BOEM) action has generated significant attention in the Gulf.
In what appears to be an unremarkable procedure at first glance, BOEM has recently finalized its decision on two long-stalled lease sales, which may indicate a potential shift in U.S. offshore energy policy.
A routine regulatory step that carries more weight than expected
BOEM issued a Record of Decision (ROD), reaffirming approval of the Gulf of Mexico Lease Sales 259 and 261, thereby clearing a major regulatory hurdle to issuing leases for the areas affected. These lease sales were initially challenged by various parties and then placed on hold when a U.S. Court found that previous environmental reviews conducted under the National Environmental Policy Act (NEPA) were inadequate to support the issuance of the leases.
BOEM states that after preparing a new Final Programmatic Environmental Impact Statement (PEIS) for the specific purpose of addressing stakeholder concerns, including the Court’s concerns over greenhouse gases, Rice’s whale protection, and other environmental issues, the updated analysis will be enough to sustain any additional scrutiny.
In effect, the ROD sent a signal that BOEM is confident in its ability to defend its updated analysis and that it is entering a more stable phase of offshore leasing.
A closer examination of the record of decision and its significance
There has been extensive litigation over Lease Sale 259. A federal court previously held that BOEM’s original NEPA analysis failed to adequately assess the potential impacts of climate change and/or the potential harm to Rice’s whales, leading to BOEM revising and expanding its analyses.
BOEM’s revised analysis concluded that existing lease terms and mitigation measures were adequate to protect against these environmental impacts, thus permitting the sale to proceed without the need for additional restrictions. BOEM emphasized that the PEIS would serve as a regional-wide environmental framework for all future Gulf leases, post-lease activities, and development plans.
This represents a subtle but significant shift
By creating a broad environmental framework, BOEM is not only addressing the environmental shortcomings of its past analysis, but it is also establishing the standards by which all future decisions will be measured. This has significant implications for developers, regulators, and prospective litigants.
Timing is also relevant. The Gulf of America’s Outer Continental Shelf is one of the most resource-rich regions in the country for offshore oil and gas, and contains billions of barrels of technically recoverable oil and trillions of cubic feet of natural gas. Delays in leasing can result in a cascade of negative consequences, including long-term planning, infrastructure investment, and revenue streams for federal and state governments.
What happens next for the Gulf leasing program?
Although BOEM has received a formal Record of Decision, the court still needs to make a ruling on potential remedies in the Lease Sale 259 litigation. The federal defendants are arguing that the updated PEIS eliminates the need for a remedy because the environmental issues that led to the lawsuit have been addressed.
The court has not made a determination yet. With BOEM’s Record of Decision now finalized, the path for both lease sales is largely unimpeded. The affirmation of the lease sales not only ends a long-standing procedural issue.
BOEM’s final decision authorizes not only two pending lease sales, but it also establishes a consistent offshore energy development strategy based upon comprehensive environmental analysis and long-range planning. With the Gulf poised to begin renewed leasing activities, the next challenge is to determine how this environmental analysis framework will impact future development in one of America’s most important offshore regions.