Safeguarding the Environment

The adequacy of the existing regulatory regime to assure the environmental safety of offshore drilling (as distinct from worker or occupational safety) has come under a great deal of scrutiny since the Deepwater Horizon incident. In its work on this question, the Commission focused on two issues: (1) the application of NEPA requirements to the offshore leasing process and (2) the need for better science and greater interagency consultation to improve decision-making concerning the management of offshore resources.

The Need to Revise and Strengthen NEPA Policies and Practices in the Offshore Drilling Context The Commission has reviewed the leasing and permitting processes that MMS followed in the Gulf of Mexico before the Deepwater Horizon incident. The results lead the Commission to conclude that the breakdown of the environmental review process for OCS activities was systemic and that Interior's approach to the application of NEPA requirements in the offshore oil and gas context needs significant revision. In particular, the application of tiering, the use of categorical exclusions, the practice of area-wide leasing, and the failure to develop formal NEPA guidance for the agency all contributed to this breakdown.

Tiering. Under MMS, the NEPA process for offshore oil and gas leasing relied heavily on "tiering"—a practice under which a broad environmental impact statement was used to cover "general matters" across a large area, while issues specific to a particular site or smaller area were addressed through "subsequent narrower statements of environmental analyses."3 Tiering was meant to encourage more thorough reviews at each subsequent stage of the offshore leasing process, and to avoid the duplication of general information that would have been covered in previous environmental reviews. As applied by MMS, however, tiering was not always consistent with its original purpose: instead, it created a system where deeper environmental analysis at more geographically targeted and advanced planning stages did not always take place.

Categorical Exclusions. The Council on Environmental Quality's implementing regulations for NEPA define "categorical exclusions" as "a category of actions which do not individually or cumulatively have a significant effect on the human environment . . . and for which, therefore, neither an environmental assessment nor an environmental impact statement is required."4 MMS has historically applied categorical exclusions to both Exploration Plans and Development Operations Coordination Documents5 in the Gulf of Mexico. Although there are legitimate differences between the Gulf and other regions of the OCS, the basis for such a wide

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¶disparity in the use of categorical exclusions is questionable. And in the aftermath of the BP Deepwater Horizon spill, it is difficult to argue that deepwater drilling is an activity that does not present at least some potentially significant risk of harm to the environment of the Gulf. That is no doubt why, prompted by a comprehensive review of MMS's use of categorical exclusions by the Council on Environmental Quality, Interior announced in August 2010 that it would restrict its use of categorical exclusions for offshore oil and gas development "to activities involving limited environmental risk," while it undertakes a comprehensive review of its NEPA process.6

¶Area-Wide Leasing. OCS lease sales cover such large geographic areas that meaningful NEPA review is difficult. A decision to dramatically increase the size of lease sales— known as area-wide leasing—was made over 20 years ago at the request of industry; it has necessitated environmental analyses of very large areas at the lease sale stage. For example, the Final Environmental Impact Statement for the 2007–2012 multi-lease sales in the Gulf of Mexico covered more than 87 million acres,7 while the Final Environmental Impact Statement for Chukchi Sea Lease Sale 193 covered about 34 million acres.8 Given that 2008 lease sales in the Central Gulf of Mexico and the Chukchi Sea attracted almost $3.7 billion and almost $2.7 billion in high bids, respectively, it is appropriate to conduct environmental reviews on a finer geographic scale before private-sector commitments of this magnitude are made to purchase leases.

¶NEPA Guidance. Though expected to prepare a handbook on NEPA requirements,9 MMS never developed formal NEPA guidance. As the Government Accountability Office noted in a review of the MMS Alaska Region Office: "The lack of a comprehensive NEPA guidance handbook, combined with high staff turnover, leaves the process for meeting NEPA requirements ill-defined for the analysts charged with developing NEPA documents."10 BOEMRE is currently in the process of developing an internal NEPA guidance document—a step that should ensure a higher level of NEPA consistency and transparency across regions.

¶Recommendation B1: The Council on Environmental Quality and the Department of the Interior should revise and strengthen the NEPA policies, practices, and procedures to improve the level of environmental analysis, transparency, and consistency at all stages of the OCS planning, leasing, exploration, and development process.

¶Interior should take the following steps to strengthen NEPA review of the offshore leasing process:

The new office of leasing and environmental science should, in consultation with the Council on Environmental Quality, develop and make public a formal NEPA handbook within one year. The handbook should address the issue of tiering and provide guidelines for applying NEPA in a consistent, transparent, and appropriate manner to decisions affecting OCS oil and gas activities.

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Interior should require, through this formal NEPA handbook, environmental impact statements for both the Five-Year Plan and for specific lease sales before plans for exploration, development, and production are approved in areas with complex geology, in ultra-deepwater, and in the Arctic and other frontier areas. Exploration plans and development and production plans in all other areas should be subject to NEPA review consistent with the Council on Environmental Quality's implementing regulations.

In less well-explored areas, Interior should reduce the size of lease sales so their geographic scope allows for a meaningful analysis of potential environmental impacts and identification of areas of ecological significance. A bidder on tracts in these areas and all other areas should be able to demonstrate, in addition to financial prequalification and ability to contain a maximum-size spill, experience operating in similar environments and a record of safe, environmentally responsible operation— either in the United States or as verified by a peer regulator for another country. The distinction between the OCS and less well-explored areas in the Gulf should be defined by the new entity in charge of leasing and environmental science.

Congress should amend the Outer Continental Shelf Lands Act to extend the 30-day deadline for approving exploration plans to 60 days. In addition, MMS should not consider such plans officially "submitted" until all of the required content, necessary environmental reviews, and other analyses are complete and adequate to provide a sound basis for decision-making. Exploration and development plans would be considered higher-level plans for purposes of agency review and approval under a reorganized regulatory structure. The office of safety and environment, separate from the office (or division) of leasing, would be responsible for permitting and approving well designs, drilling plans, and any structures.