1

CATEGORICAL EXCLUSION ON DEEPWATER OFFSHORE DRILLING:

BEFORE AND AFTER THE BP BLOWOUT

835084

217847

375649

2

“It was as if God had decided to put to the test every capacity for surprise and was keeping the inhabitants of Macondo in a permanent alternation between excitement and disappointment, doubt and revelation, to such an extreme that no one knew for certain where the limits of reality lay. It was an intricate stew of truths and mirages that convulsed the ghost of José Arcadio Buendía with impatience and made him wander all through the house even in broad daylight.”

-Gabriel Garcia Marquez One Hundred Years of Solitude

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CONTENTS CHAPTER I- INTRODUCTION ................................................................................................................ 4

CHAPTER II – THE National Environmental Protection Act of 1969 (NEPA) .................................. 6

Purpose of an Environmental Review Requirement ......................................................................... 6

Permissible levels of NEPA Analysis .................................................................................................. 7

Council for Environmental Quality (CEQ) ........................................................................................... 8

MMS NEPA Process .............................................................................................................................. 9

CHAPTER III - CATEGORICAL EXCLUSION ..................................................................................... 12

Department of Interior Guidelines ...................................................................................................... 12

MMS Department Manual ................................................................................................................... 14

Categorical Exclusion for BP‘s Exploration Plan in the Central Gulf of Mexico.......................... 15

Offshore lease, exploration, development/production plan cannot be categorically excluded

if the facility uses new or unusual technology .............................................................................. 18

Offshore lease, exploration, development/production plan cannot be categorically excluded

if there endangered species in the area ....................................................................................... 20

CHAPTER IV - CEQ Memorandum on Establishing and Applying Categorical Exclusions under

the NEPA ................................................................................................................................................... 22

Establishing New Categorical Exclusions ........................................................................................ 23

Procedure for establishing New Categorical Exclusion .................................................................. 25

Public involvement in Establishing New Categorical Exclusion .................................................... 26

Applying an Established Categorical Exclusion .............................................................................. 27

Public Engagement and Disclosure .................................................................................................. 28

BP‘s Comments on the Proposed Guidelines .................................................................................. 29

CHAPTER V - CONCLUSION................................................................................................................ 34

GENERAL BIBLIOGRAPHY ................................................................................................................... 36

Appendix A ................................................................................................................................................ 39

Appendix B ................................................................................................................................................ 40

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CHAPTER I- INTRODUCTION

On April 20, 2010 the Deepwater Horizon, a semi-submersible offshore drilling rig

exploded and sunk in 4,992 feet of water in the Gulf of Mexico. The oil rig was owned by

Transocean, chartered and operated by BP. The catastrophe took place at the

Mississippi Canyon Block 252, which is one block obtained by The British Petroleum

Company (BP) under Lease Sale 206. The oil rig was located in the so called Macondo

Prospect, and was in process of a cementation job for the temporary abandonment of

an exploratory well when the explosion occurred. This resulted in the death of eleven

(11) crew members and caused the largest oil spill in US history estimated at

approximately 4.9 million barrels. The oil leak was first discovered on April 24, 2010,1

even though after the explosion BP and the United States Coast Guard claimed there

was no oil leak. After numerous attempts, the well was successfully capped on July 15,

2010. The oil leak caused damage to an already vulnerable ecosystem of the Gulf

Coast States and consequences are still to be measured. The oil itself and the use of

dispersants threaten gulf wildlife, national parks, islands, and marshlands, and it also

present a big economic consequence and impact on human health.

1 Heide Avery, The Ongoing Administration-Wide Response to the Deepwater BP Oil Spill, The Whitehouse Blog, (November 11, 2010, 4:47 PM), http://www.whitehouse.gov/blog/2010/05/05/ongoing-administration-wide-response-deepwater-bp-oil-spill

5

All offshore oil and gas exploration and production activities, located in the Outer

Continental Shelf2 (OCS), such as the BP exploration on the Central Gulf of Mexico, are

under authority of the Federal Government. BP, as an entity engaged in deepwater

exploration activity is required to comply with environmental obligations imposed

through federal legislation, which ensures that exploratory activities are conducted in a

safe and environmentally friendly manner. Under the National Environmental Protection

Act of 1969 (NEPA), the Minerals Management Service (MMS) is mandated to conduct

a review of the environmental impacts of offshore activities, which results in the

preparation of an environmental impact statement, environmental assessment or an

issuance of a Categorical Exclusion (CE). BP‘s exploration plan for the Central Gulf of

Mexico was categorically excluded by MMS from such environmental review.

On February 18, 2010, the Council for Environmental Quality (CEQ), through its

Chair, Nancy H. Sutley, released a memorandum on the draft guidelines for the

establishment and application of CEs under NEPA. On April 9, 2010, BP, through its

Senior Federal Affairs Director, Margaret D. Laney, sent a letter to the CEQ containing

its comments on the draft guidelines.

This paper will review the CE that covered BP‘s exploration plan in the Central

Gulf of Mexico. Further, Chapter IV of this paper seeks to provide a brief analysis on the

content of BP‘s comments on CEQ‘s proposed guidelines for the establishment and

application of CEs.

2 Outer Continental Shelf Lands Act, 43 U.S.C. § 1331 (West 2010): (a) ‗‗Outer Continental Shelf‘‘ means all submerged lands lying seaward and outside of the area of lands beneath navigable waters as defined in section 2 of the Submerged Lands Act, and of which the subsoil and seabed appertain to the United States and are subject to its jurisdiction and control

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CHAPTER II – THE National Environmental Protection Act of 1969

(NEPA)

The National Environmental Protection Act of 19693 is a novel piece of legislation

which was drafted and passed to require and direct all Federal agencies to consider the

environmental effects of their proposed actions during all stages of its decisionmaking.

NEPA requires that all federal agencies include in every recommendation or report on

proposals for legislation and other major Federal actions significantly affecting the

quality of the human environment, a detailed statement by the responsible official on: (i)

the environmental impact of the proposed action; (ii) any adverse environmental effects

which cannot be avoided should the proposal be implemented; (iii) alternatives to the

proposed action; (iv) the relationship between local short-term uses of man's

environment and the maintenance and enhancement of long-term productivity; and (v)

any irreversible and irretrievable commitments of resources which would be involved in

the proposed action should it be implemented.4

Purpose of an Environmental Review Requirement

The environmental review requirement under NEPA has twin functions: to require

the agencies to take a ―hard look‖‖ at the consequences of the proposed action and to

provide important information to other groups and individuals.5 It is meant to serve as an

―action-forcing device‖ to ensure that all federal agencies provide ―full and fair

discussion of significant environmental impacts‖ of their proposed action and to consider

3 National Environmental Protection Act, 42 U.S.C. § 4321 (2006). 4 See, id. § 4332 (c). 5 Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 334 (1989).

7

the same in all levels of its decisionmaking. Moreover, it intends to ensure that the

―decisionmakers consider reasonable alternatives which would avoid or minimize

adverse impacts or enhance the quality of the human environment‖6 in determining

whether the proposed action should be approved or adopted.

Permissible levels of NEPA Analysis

There are a number of permissible levels of environmental review or analysis,

which calls for different levels of scrutiny into the environmental impacts of a federal

agency‘s actions.

1. Preparation of an Environmental Impact Statement (EIS)

The EIS includes the most comprehensive review of the environmental

effects of the proposed action. 7 It is prepared when the agency determines that

the proposed action has the potential for significant environmental impacts.8

Consequently, this level of NEPA analysis requires the agency to thoroughly

discuss and consider a reasonable range of alternatives. NEPA furthermore

requires the agency to allow extensive public involvement that includes

consideration of public comments in the final EIS.

2. Preparation of an Environmental Assessment (EA)

An EA is prepared when the proposed action may not have significant

environmental effects or when the agency is unsure of the degree that the

6 Council for Environmental Quality Regulations for Implementing NEPA, 40 C.F.R. §1502.1 (West 2010). 7 Congressional Research Service, The 2010 Oil Spill: MMS/BOEMRE and NEPA, (August 19, 2010) [hereinafter Congressional Research Service Report], available at http://www.fas.org/sgp/crs/misc/R41265.pdf. 8 40 C.F.R. § 1501.4 (West 2010)

8

proposed action may have significant effects. It is conducted to determine

whether the agency can make a Finding of No Significant Impact (FONSI) or

proceed to prepare an EIS. 9 Compared to an EIS, an EA also includes a

discussion on the alternatives but is ―intended to be an abbreviated review‖. 10

3. Application of a Categorical Exclusion (CE)

A CE is prepared when the agency determines that a proposed action

does not individually or cumulatively have a significant effect on the human

environment and which has been found to have no such effect in the procedures

adopted by a federal agency in implementation of NEPA and for which, neither

an EA nor an EIS is required.11 Additionally, extraordinary circumstances must be

considered in order for a CE to apply.12

Council for Environmental Quality (CEQ)

NEPA conferred to CEQ the oversight function over the implementation of NEPA.

Under the law, CEQ is empowered to review the agencies‗ NEPA-implementing

regulations and procedures and its overall program implementation. By virtue thereof,

the CEQ in 1978 promulgated its rules on the implementation of the procedural

9 40 C.F.R. § 1501.4 (West 2010) 10 See Congressional Research Service Report, supra note 7, at 2. 11 40 C.F.R. § 1501.4. (West 2010) 12 40 C.F.R. § 1501.4. See Council for Environmental Quality, Report Regarding the Minerals Management Service‘s National Environmental Policy Act Policies, Practices, and Procedures as They Relate to Outer Continental Shelf Oil and Gas Exploration and Development, (August 16, 2010), [hereinafter CEQ Report], available at http://www.whitehouse.gov/sites/default/files/microsites/ceq/20100816-ceq-mms-ocs-nepa.pdf

9

provisions of NEPA for compliance of all Federal agencies and establishing the basic

framework for all NEPA analyses.13 Under the CEQ regulations, all Federal agencies

shall establish their own NEPA implementing procedures 14 and authorized the agencies

to designate actions that normally require an EIS, EA, and actions that are normally

categorically excluded.

MMS NEPA Process

The MMS followed the Department of the Interior (DOI)‗s NEPA regulations and

the NEPA implementing procedures found in DOI‗s Departmental Manual. Accordingly,

MMS used the tiering strategy sanctioned by CEQ regulations,15 i.e. applied different

levels of NEPA analysis during each of the stages of OCS beginning with the initial

planning of nationwide OCS leasing.

13 40 C.F.R. § 1500 et seq. 14 See, id., § 1507.3. 15 40 C.F.R. §. 1502.20: Agencies are encouraged to tier their environmental impact statements to eliminate repetitive discussions of the same issues and to focus on the actual issues ripe for decision at each level of environmental review (§ 1508.28). Whenever a broad environmental impact statement has been prepared (such as a program or policy statement) and a subsequent statement or environmental assessment is then prepared on an action included within the entire program or policy (such as a site specific action) the subsequent statement or environmental assessment need only summarize the issues discussed in the broader statement and incorporate discussions from the broader statement by reference and shall concentrate on the issues specific to the subsequent action. The subsequent document shall state where the earlier document is available. Tiering may also be appropriate for different stages of actions. (§1508.28).

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MMS NEPA Compliance

Case law16 has identified three stages for offshore oil and gas activities, to wit:

lease sales17, exploration18 and development and production19. The Ninth Circuit held

that for each stage of offshore and gas activity, there is distinct NEPA requirement. 20

In compliance thereto, MMS prepared two environmental impact statements, an

environmental assessment and issued a CE, to wit:

Pre-lease

1. Programmatic Environmental Impact Statement (Outer Continental Shelf Oil &

Gas Leasing Program: 2007-2012, Final Environmental Impact Statement (April

2007)

2. Multi-Sale Environmental Impact Statement (Gulf of Mexico OCS Oil and Gas

Lease Sales: 2007-2012 Western Planning Area Sales 204, 207, 210, 215, and

218 Central Planning Area Sales 205, 206, 208, 213, 216, and 222, Final

Environmental Impact Statement (April 2007)

3. Lease Sale 206 Environmental Assessment (Proposed Gulf of Mexico OCS Oil

and Gas Lease Sale 206 Central Planning Area Environmental Assessment with

enclosed Finding of No New Significant Impact (FONNSI), (October 22, 2007)

16 Secretary of Interior v. California, 464 U.S. 312 (1984) 17 43 U.S.C. §1337 (a) (West 2010) 18 43 U.S.C. § 1340 (b) (West 2010) 19 43 U.S.C. 1351 (a) (West 2010) 20 Village of False Pass v. William C. Clark, 733 F2.d 605 (1984)

11

Post-lease

4. Categorical Exclusion Reviews (CERs) for BP‗s Initial and Revised Exploration

Plans and amendments for the Macondo well.

12

CHAPTER III - CATEGORICAL EXCLUSION

A CE corresponds to an action that is considered not to have any significant

environmental impact on the human environment either individually or cumulatively.21

Under CEQ regulations, if an agency has determined that a certain action has no

significant impact, an in-depth environmental review is not required. The CE is defined

in Section 1508.4 of the Code of Federal Regulations as

“a category of actions which do not individually or cumulatively have a significant effect on the human environment and which have been found to have no such effect in procedures adopted by a Federal agency in implementation of these regulations and for which, therefore, neither an environmental assessment nor an environmental impact statement is required”.

Once an agency determines that an action has the characteristics of a

categorically excluded activity, its main effect is to exempt such action from the

procedures established in NEPA and the CEQ regulations as to require an EIS or EA.

Section 1508.4 of the CEQ regulations, however, further provides that an agency

may decide in its procedures or otherwise, to prepare environmental assessments even

though it is not required to do so.

Department of Interior Guidelines

The Department of Interior (DOI) has established general NEPA guidelines that

are applicable to MMS.22

The DOI guidelines, contain the same concept of CE as the CEQ regulations, as it

establishes in its section Section 46.205 that a CE is a category or kind of action that

21 40 C.F.R. § 1508.4 (West 2010) 22 43 C.F.R. § 46 (West 2010)

13

has no significant individual or cumulative effect on the quality of the human

environment.

The DOI Guidelines provide a list of department-wide CEs as well as the

possibility for the agencies to prepare its own list of CEs. The department-wide CEs are

set forth in Section 46.210 of the DOI Guidelines.

Although, an agency may determine that a specific action falls within the general

criteria of a CE, under Section 1508.4 of the CEQ regulations, an agency must

determine extraordinary circumstances in which a normally excluded action may have a

significant environmental effect and thus would require further analysis under NEPA.

The DOI Guidelines lists the following extraordinary circumstances in Section

46.215:

(a) Have significant impacts on public health or safety. (b) Have significant impacts on such natural resources and unique geographic characteristics as historic or cultural resources; park, recreation or refuge lands; wilderness areas; wild or scenic rivers; national natural landmarks; sole or principal drinking water aquifers; prime farmlands; wetlands; floodplains; national monuments; migratory birds; and other ecologically significant or critical areas. (c) Have highly controversial environmental effects or involve unresolved conflicts concerning alternative uses of available resources. (d) Have highly uncertain and potentially significant environmental effects or involve unique or unknown environmental risks. (e) Establish a precedent for future action or represent a decision in principle about future actions with potentially significant environmental effects. (f) Have a direct relationship to other actions with individually insignificant but cumulatively significant environmental effects. (g) Have significant impacts on properties listed, or eligible for listing, on the National Register of Historic Places as determined by the bureau. (h) Have significant impacts on species listed, or proposed to be listed, on the List of Endangered or Threatened Species or have significant impacts on designated Critical Habitat for these species.

14

(i) Violate a Federal law, or a State, local, or tribal law or requirement imposed for the protection of the environment. (j) Have a disproportionately high and adverse effect on low income or minority populations. (k) Limit access to and ceremonial use of Indian sacred sites on Federal lands by Indian religious practitioners or significantly adversely affect the physical integrity of such sacred sites. (l) Contribute to the introduction, continued existence, or spread of noxious weeds or non-native invasive species known to occur in the area or actions that may promote the introduction, growth, or expansion of the range of such species.

MMS Department Manual

In addition to the CEQ regulations and the DOI Guidelines, the MMS

Departmental Manual contains specific provisions in relation to the application of NEPA

procedures.23

Section 15.4 of the Departmental Manual includes the actions that normally

require an EIS, to wit:

―Major Actions Normally Requiring an EIS. A. The following proposals will normally require the preparation of an EIS:

i. Approval of a 5-year offshore oil and gas leasing program. ii. Approval of offshore lease sales. iii. Approval of an offshore oil and gas development and production

plan in any area or region of the offshore, other than the central or western Gulf of Mexico, when the plan is declared to be a major Federal action in accordance with section 25(e)(1) of the OCS Lands Act Amendments of 1978.‖

The above section of the MMS Departmental Manual also determines a list of

CEs. Among the activities that could be categorically excluded from an environmental

23 Department of Interior, Departmental Manual on Managing the NEPA Process – Minerals Management Service, (2004), [hereinafter MMS Manual], available at http://elips.doi.gov/app_dm/act_getfiles.cfm?relnum=3625

15

review is the approval of an offshore lease or unit exploration development/production

plan in the Central Gulf of Mexico.

Categorical Exclusion for BP’s Exploration Plan in the Central Gulf of Mexico

On April 6, 2009, BP received a letter from MMS stating that its Exploration Plan

for the Central Gulf of Mexico had been approved. However, the approval did not

contain any explanation why the Exploration Plan was categorically excluded from the

NEPA review.

The CE that would possibly apply to the matter at issue is established in the

following terms:

(…) C. Permit and Regulatory Functions (10) Approval of an offshore lease or unit exploration development/production plan or a Development Orientation Coordination Document in the central or western Gulf of Mexico (30 CFR 250.2) except those proposing facilities: (1) In areas of high seismic risk or seismicity, relatively untested deep water or remote areas, or (2) within the boundary of a proposed or established marine sanctuary, and/or within or near the boundary of a proposed or established wildlife refuge or areas of high biological sensitivity; or (3) on areas of hazardous natural bottom conditions; or (4) utilizing new or unusual technology.‖ (Emphasis supplied)

This CE established in the Departmental Manual effectively excluded a NEPA

review for exploration, development and production plans in the central and western

Gulf of Mexico. The origin of this CE seems to be the Outer Continental Shelf Lands Act

Amendments (OCSLA) of 1978, which provided guidelines for implementing the

offshore natural gas and oil exploration and development programs. These

amendments established the development of a 5-year leasing plan including all

16

proposed lease sales during a 5-year period and exempted certain activities in the Gulf

of Mexico.24

Section 25(e) (1) of the OCSLA establishes that ―at least once the Secretary shall

declare the approval of a development and production plan in any area or region (as

defined by the Secretary) of the outer continental shelf, other than the Gulf of Mexico, to

be a major federal action.

Under Section 102 (c) NEPA, a major federal action affecting the environmental

quality of the human development would require a detailed EIS. However, the effect of

excluding the activities in the Gulf of Mexico from being a major federal action,

preempts the application of NEPA.

The textual understanding of the CE granted to BP may lead to a reasonable

belief that Lease 206 would in fact be covered by this exemption. However, under the

process of approval of an exploration plan, MMS must analyze whether a CE or an

exception to a CE applies, and consider whether an environmental assessment would

be issued and review any extraordinary circumstances that may be attendant.

This obligation of MMS was analyzed in California v. Norton, where the Ninth

Circuit held that when deciding the suspension of certain leases, ―MMS should have

provided some explanation for its reliance on the CE and its view that the extraordinary

circumstances do not apply‖. 25

Therefore, we should examine not only if the CE did indeed exist and was

properly applied but also if in its application the MMS took due consideration general

NEPA requirements.

24 43 U.S.C. § 1331 et seq. (West 2010) 25 California v. Norton, 150 F. Supp. 2d 1046, 1057 (9th Cir. 2002).

17

It is important to point out that NEPA has a strong language that implies a high

standard of application to agencies in its procedures.

In Jones v. Gordon this was the analysis applied as the Ninth Circuit Court

stated that ―We begin our analysis with the important congressional mandate to have

NEPA apply to the fullest extent possible. These are strong words directing our statutory

interpretation. The language was added by the Senate and House conferees who stated

in explanation: The purpose of each agency of the Federal Government shall comply

with the directives set out in …[Section 102(2)] unless the existing law applicable to

such agency‘s operations expressly prohibits or makes full compliance with one of the

directives impossible… Thus, it is the intent of the conferees that the provision ―to the

fullest extent possible‖ shall not be used by any federal agency as a means of avoiding

compliance with the directives set out in section 102…No agency shall utilize an

excessively narrow construction of its existing statutory authorizations to avoid

compliance‖.26

In Alaska Wilderness League v. Kempthorne, MMS‘s approval of a multiple

offshore exploratory plan over a three year period in the Alaskan Beaufort Sea was

challenged under NEPA and the OCSLA. In this case, MMS issued an EA and a FONSI

concluding that the proposed activities would not significantly affect the quality of human

environment or cause undue or serious harm or damage to human, marine, or coastal

environment. The Ninth Circuit Court considered that the MMS failed to take a ―hard

look‖ at the environmental impact of the project. The main impacts considered in this

26 Jones v. Gordon, 792 F.2d 821, 826 (1986). The 115 Cong.Rec 39703 (1969) is also quoted in Calvert Cliffs Coordinating Committee, Inc. v. United States Atomic Energy Commission 449 F.2d 1109, 1114-15 (D.C. Cir.1971)

18

case were the alleged effects of this project on bowhead whales and Inupiat

subsistence activities. The court thus held, that after reviewing the multi-sale EIS and

the EA, the agency failed to take a ―hard look‖ as required under NEPA because it did

not provide a well-reasoned analysis of site-specific impacts to the endangered

bowhead whale population. It further considered that the tiered OCSLA process allows

general analysis at the lease-sale stage, but the agency must then consider site-specific

impacts before approving an individual exploration plan.27

In sum, the questions that arise in the analysis of the CE invoked by the MMS are

many, however a cursory reading of the CE category itself and the extraordinary

circumstances established in the MMS Departmental Manual would show MMS‘ clear

violation of its own rules. Not only is the MMS‘s compliance of NEPA in question but

also its compliance with its own guidelines seems to be an issue at hand.

Offshore lease, exploration, development/production plan cannot be categorically

excluded if the facility uses new or unusual technology

The approval of an offshore lease or unit exploration, development/production

plan or a Development Orientation Coordination Document in the central or western

Gulf of Mexico is categorically excluded unless those proposing facilities that utilizes

―new or unusual technology‖.28

The issue here is whether drilling at such depths can be considered to employ

new or unusual technology that may not be categorically excluded from an

27 Alaska Wilderness League v. Kempthorne, 548 F.3d 815, (2008) 28 See MMS Manual, supra note 23, at Chapter 15.4 (C) (10)

19

environmental review. The Union of Concerned Scientists29 suggests in an article that

the draft version of the EA provided that the industry‘s experience in deepwater well

control was limited and there was a possibility of a blowout.30 However, this concern

was ultimately eliminated from a later version of the EA31 in which it was stated that

most deepwater operations and activities are substantially the same as those

associated with conventional operations and activities on the continental shelf.

In our view, it could be argued that a project that proposes drilling at a depth that

was considerably different from the majority of exploration wells should require an

environmental review because such depth clearly employs if not new, at least unusual

technology. According to a CEQ Report, the definition of deepwater drilling has changed

through time, but has been assumed to refer to more than 1,000 feet.32 With this in

mind, it is appalling that the MMS considers all deepwater drilling operations regardless

of their depth, equally.

29 Union of Concerned Scientists, The Minerals Management Service: Bad Science in the Name of Private Interests,(November 11, 2010, 6:00 p.m.) available at http://www.ucsusa.org/scientific_integrity/abuses_of_science/mms-badscience.html 30 U.S. Department of the Interior Minerals Management Service New Orleans Gulf of Mexico OCS Regional Office, “Deepwater Development: A Reference Document for the Deepwater Environmental Assessment Gulf of Mexico OCS (1998 through 2007)” available at ://www.gomr.boemre.gov/PDFs/2000/2000-015.pdf 31U.S. Department of the Interior Minerals Management Service New Orleans Gulf of Mexico OCS Regional Office, “Gulf of Mexico Deepwater Operations and Activities Environmental Assessment” available at http://www.gomr.boemre.gov/PDFs/2000/2000-001.pdf 32 See CEQ Report, supra note 12, at 14, FN36.

20

Offshore lease, exploration, development/production plan cannot be categorically

excluded if the area is relatively untested deepwater

Following the discussion above, BP‘s Exploration Plan for the Central Gulf of

Mexico was categorically excluded when it should not have been because the MMS

Department Manual clearly provides that such exclusion would not apply if the area to

be explored is to be done in ―relatively untested deepwater‖.33

Offshore lease, exploration, development/production plan cannot be categorically

excluded if there endangered species in the area

MMS further violated its own regulations due to the presence of endangered

species in the area. Such is an extraordinary circumstance that would otherwise have

led to the non-application of the CE. The MMS Department Manual provides that a

proposed activity cannot be categorically excluded from an environmental review if such

activity will be located within an established marine sanctuary, wildlife refuse or areas of

highly biological sensitivity.34 The EA states that potential impacts on Gulf Sturgeon and

the designated critical habitat may occur from drilling and produced-water discharges,

degradation of estuarine and marine water quality by nonpoint runoff from estuarine

OCS-related facilities, vessel traffic, explosive removal of structures, and pipeline

installation.35 In the same manner as referring to the consequences of an oil spill, the

EA acknowledges that the activity could lead to deaths of other animals36. However,

33 See MMS Manual, supra note 23 at Chapter 15.4 (C) (10) (1) 34 See MMS Manual, supra note 23 at Chapter 15.4 (C) (10) (2) 35 U.S. Department of the Interior Minerals Management Service New Orleans Gulf of Mexico OCS Regional Office, ―Proposed Gulf of Mexico OCS Oil and Gas Lease Sale 206‖, available at http://www.gomr.boemre.gov/PDFs/2007/2007-059.pdf 36 Id. at 39

21

MMS relied on an opinion issued by the National Marine Fisheries Service (NMFS), in

July 3, 2007 in which it considered reasonable and prudent measures to mitigate these

impacts, without fully accounting for them.

22

CHAPTER IV - CEQ Memorandum on Establishing and Applying Categorical

Exclusions under the NEPA

On February 18, 2010, prior to the BP blowout, CEQ released a Memorandum

directed to the heads of Federal Departments and Agencies, in which it proposed new

guidance for establishing, applying and revising CEs under NEPA (―proposed

guidance‖), according to 40 C.F.R. § 1507.3.

Once a CE is properly established, Agency need not follow further NEPA

requirements and prepare an EIS or EA. There has been no official guidance for federal

agencies on how to establish and use CEs, and this proposed guidance seeks to

provide concise rules and steps for the establishment and use of such. The CEQ

memorandum tries to balance and provide flexibility to agencies in the process of

establishment of CEs, while ensuring that CEs serve the purposes of NEPA and CEQ

implementing regulations.

The reason for this new CEQ guidance is CEQ‘s concern that inappropriate use

of CEs is threatening the purposes of NEPA. The fact is that the CEs have been

extensively used and its use as an exceptional method for Agencies to fulfill NEPA

requirements has been greatly expanded. In this new guidance, CEQ tries to clarify the

rules for the establishment of CEs and to maintain concise public record, as well as to

require periodical review of CEs to assure their appropriateness. The CEQ proposes

that CEs become an integral part of agencies‘ NEPA requirements.

The guideline seeks to address how to: (1) establish CEs by outlining the

process required to establish a CE; (2) use public involvement and documentation to

help define and substantiate a proposed CE; (3) apply an established CE, and

23

determine when to prepare documentation and involve the public; and (4) conduct

periodic reviews of CEs to assure their continued appropriate use and usefulness.37

Establishing New Categorical Exclusions

The prior CEQ guidance only provides for a broad authority for the creation of

CEs.38 The new guidance mainly addresses the agencies‘ creation of new and revision

of CEs. The CEQ provides that by establishing new CEs and using them appropriately,

agencies can focus more on the review of proposals that require preparation of other

NEPA requirements, EIS and EA,39 and eliminate unnecessary paperwork and delay

with NEPA compliance.

Generally, federal agencies should propose CEs when a certain category of

activity, under normal circumstances does not have any individual or cumulative impact

on the environment. Activities that fall under the CE categories are either: (1) Identified

as activities that are expected to have no significant environmental effect (administrative

activities); or (2) Identified after conducting other NEPA reviews, mission changes and

adding new responsibilities.

The CEQ encourages the agencies to consider broadly defined criteria, which

characterizes types of actions that, based on the agency's experience, do not cause

significant environmental effects. In this situation, agencies should provide an example

of activities that an agency frequently performs which falls in this category. Agencies

37 Establishing and Applying Categorical Exclusions under the National Environmental Policy Act, [hereinafter Proposed Guidance], 75 Fed. Reg. 35, (proposed February 18, 2010). A copy thereof is attached herein at Appendix A. 38 40 C.F.R. § 1508.4. (West 2010) 39 40 C.F.R. §§ 1500.4(p) and 1500.5(k) (West 2010)

24

need to consider if cumulative effects of several small actions would cause sufficient

environmental impact to take the actions out of CEs.

Every proposed CE should define a category of activities and contain any

possible physical factors (spatial limits – distance or area), temporal factors (seasons or

nesting period) or environmental factors that would constrain its use. This way,

agencies can better ensure that the new CE is not too broadly or too narrowly defined.

In a case of a broad CE, agencies should provide examples of types of activities that fall

into a category of CE and at the same time provide for more clarity. An agency must be

sure that the entire proposed activity can be categorically excluded because the CE

should not be used to divide proposed activity into smaller elements that do not have

independent utility to the agency.

Moreover, the CEQ provides that prior to proposing a new CE, an agency should

check whether there are any extraordinary circumstances that identify an atypical

situation or environmental setting, which would require further EIS and EA analysis of

actions that are excludable under normal circumstances. Extraordinary circumstances

are usually presented as a list of factors40 which an agency must consider in order to

determine whether a CE is appropriate. The guidelines provide that the presence and

nature of a protected resource and the proposed action‘s impact on the resource is an

appropriate extraordinary circumstance. For example, if there are protected endangered

species present on a certain area, and proposed action has impact on that species, it is

an appropriate extraordinary circumstance, and CE would be inappropriate. The agency

40 Such list may include: effect on historic properties, on endangered species, wetlands, coastal zones

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shall also identify additional extraordinary circumstances specifically tailored to new

CEs.

The proposed guidance further provide that when substantiating a new CE,

federal agencies should: gather information, evaluate the information and explain how

the agency determined that the proposed action have no individual of cumulative

environmental impact. 41

Procedure for establishing New Categorical Exclusion42

The proposed guidance provides that each agency shall consult with CEQ while

developing its procedures and before publishing them in the Federal Register for

comment. Moreover, agencies with similar programs shall consult with each other and

CEQ to coordinate their procedures, especially for programs requesting similar

information from applicants. The procedures shall be adopted only after an opportunity

for public review43 and after review by the CEQ for conformity with NEPA and CEQ

regulations. And after the public comment period, the agency must consider public

comments and consult the CEQ to discuss substantive comments and how they will be

addressed.

The CEQ in this new guidance provides the following summary of steps in

establishing a CE:

41 See Proposed Guidance, at 5. 42 See 40 C.F.R. §1507.3(a) on regulatory process of establishing or revising NEPA procedures. 43 See Heartwood, Inc. v. U.S. Forest Service, 73 F. Supp. 2d 962, 972-73 (S.D. Ill. 1999), aff‘d, 230 F.3d 947, 954-56: EA or EIS is not required for establishing or revising CE, but engaging the public is a key aspect of NEPA, and therefore every Federal agency should consider other methods of public involvement beyond publication in Federal Register.

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Draft the proposed CE based on the agency‘s experience and supporting information

Consult with CEQ on the proposed CE

Consult with other Federal agencies that have similar procedures to coordinate their procedures

Publish a notice of CE in the Federal Register for public review and comment

Consider public comments

Consult with CEQ on the final CE to obtain CEQ‘s written statement of conformity with NEPA and CEQ Regulations

Publish CE in the Federal Register

File the CE with CEQ (publication in Federal Register and on agency‘s web site)

Make CE readily available to the public44

Public involvement in Establishing New Categorical Exclusion

An EA or an EIS is not required for establishing or revising CEs,45 but engaging

the public is a key aspect of NEPA, and therefore every Federal agency should consider

other methods of public involvement beyond publication in Federal Register.46 During

the establishment of a CE category, the agency should decide about the type and

length of public involvement in relation to the nature of the proposed action and its

environmental effect. Agencies should engage interested parties such as public interest

groups, Federal NEPA contacts at other agencies, as well as Tribal, local and state

government agencies to share data and relevant information.47

44 See Proposed Guidance, supra note 37, at 9. 45 Heartwood, Inc. v. U.S. Forest Service, 73 F. Supp. 2d 962, 972-73 (S.D. Ill. 1999), aff‘d, 230 F.3d 947, 954-56 (7th Cir. 2000). 46 40 C.F.R. § 1506.6 (West 2010) 47 Techniques of involvement, beside methods included in 40 C.F.R. § 1506.6. should include focus groups, e mail exchange, conference call and web forums

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Applying an Established Categorical Exclusion

When agencies want to use established CEs, they face two main issues: whether

to prepare documentation supporting the CE determination; and whether external

outreach may be useful to inform determinations about categorically excluded actions.

Documentation

The CEQ believes that sufficient information will usually be available during the

course of normal project development to determine the need for an EIS and further that

the agency‘s administrative record will clearly document the basis for its decision.48

CEQ therefore discourages procedures that would require preparation of additional

paperwork to document an activity that has been categorically excluded and it left to the

discretion of the agency if a CE determination warrants the preparation of a separate

documentation. For those activities that have little significant impact on environment

(such as purchase of office supplies), there is no practical need for preparing additional

documentation. In this case administrative records for establishing CE may be sufficient

documentation for applying CE to future actions. In other cases where documentation is

appropriate, the extent of the documentation depends on the type of action involved,

potential existence of extraordinary circumstances, and compliance requirements for

other laws, regulations and policies. The documentation should be brief, concise and to

the point. And if a record is prepared it should cite the CE and show that the agency has

determined that the activity fits within actions described in the CE and that there are no

extraordinary circumstances present. When using CEs, agencies still have to comply

48 See Proposed Guidance, supra note 37 at 10.

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with the requirements of other laws, regulation and policies and they need documents to

comply with these requirements (such as Endangered Species Act). Moreover, all

resource analysis and the results of any consultations or coordination should be

included or incorporated by reference in the administrative record developed for the

proposed action.

Public Engagement and Disclosure

Many agencies today do not involve and notify the public when they propose

CEs, so the CEQ in this proposed guidance encourages agencies to engage the public

in some way. For example, the agencies shall allow the public to participate in scoping,

particularly in a case where the proposed action involves an extraordinary

circumstance. The agencies should also use current technologies and provide

information on how they comply with NEPA, especially where the proposed action has

high public interest.

Periodic Review of Established Categorical Exclusion

Under the 40 C.F.R. § 1507.3, agencies should periodically review their NEPA

policies and procedures, but there is no rule on how this review should be conducted.

What CEQ proposes is that periodical reviews can serve as impetus for clarifying

actions covered by existing CEs. Periodic reviews can also help agencies to find

additional extraordinary circumstances and consider appropriate documentation when

using certain CE. As a part of its role and responsibilities under NEPA, the CEQ will

begin regular review of the agencies‘ CEs, particularly those agencies that had

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difficulties in implementing CEs and those that are facing litigation challenging their CE

categories.

BP’s Comments on the Proposed Guidelines

On April 9, 2010, Ms. Margaret D. Laney, Senior Federal Affairs Director sent a

letter to CEQ in comment to the proposed guidance. The following section provides a

brief analysis on the content of BP‘s comments and their implications49.

CEs should be used to avoid unnecessary paperwork and time delays

BP asserts that it is important that CEQ‘s guidance continues to reinforce the use

of CEs as an integral part of an agency‘s NEPA toolbox to avoid unnecessary

paperwork and time delays. It is true that the issuance of CEs is intended to eliminate

unnecessary paperwork and time delays and to promote efficiency in the NEPA review

process.50 However, the purposes of NEPA cannot be frustrated at the expense of

expediency and convenience. Based on the recommendations and findings of the CEQ

NEPA Task Force,51 which the CEQ subsequently adopted, NEPA‘s overarching

purpose is being frustrated. The CEQ stated that the clarifying guidance is needed

because ―an inappropriate reliance on CEs may thwart the purposes of NEPA,

compromising the quality and transparency of agency decision making as well as the

49 Letter from Margaret D. Laney, Senior Federal Affairs Director, BP America Inc., (April 9, 2010) [hereinafter BP Letter]. A copy of this letter is enclosed in the present document as Appendix B. 50 40 C.F.R. § 1500.4 (West 2010) 51 Council on Environmental Quality, The NEPA Task Force Report to the Council on Environmental Quality- Modernizing NEPA Implementation, (September 2003) [hereinafter Task Force Report], available at http://ceq.hss.doe.gov/ntf/report/chapter5.pdf.

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opportunity for meaningful public participation and review‖.52 The proposed guidance is

a result of the advent of the proliferation of the ―expansion of the number and range of

activities categorically excluded combined with the extensive use of CEs‖. 53

A clear illustration of how agencies are using the CE system casually is MMS‘

designation of an approval of an offshore lease or unit of exploration,

development/production plan in the central Gulf of Mexico as one the agency‘s action

that is categorically excluded from NEPA review. 54

CEs supposedly apply only to actions that are ―readily identifiable based on

considered determination that activities are expected to have no significant

environmental effects‖.55 These actions normally include routine, financial, legal, and

operational actions, which have no significant environmental impact.56 In an action filed

by the Defenders of Wildlife against MMS, it was argued that the latter‘s designation of

the approval of lease, exploration and/or production plan as an activity that can be

categorically excluded is ―outside the scope of categorical exclusions authorized‖ by the

Department of Interior‘s regulation.57

Indeed, there is a stark discrepancy between the nature of the activity that is

usually and normally excluded from a NEPA review and offshore leasing, exploration

and production of oil. Exploration, drilling and production involves ―sea-bed disturbing

52 See Proposed Guidance, supra note 37, at 2. 53 Id. at 2. 54See MMS Manual, supra note 23, at Chapter 15.4 (C)(10) 55 See Proposed Guidance, supra note 37, at 3. 56 43 C.F.R. § 46.210 (West 2010) 57 Amended Complaint at 17, Defenders of Wildlife v. Mineral Management Services, 2010 WL 3236503 (S.D. Ala.) (No. 10-254).

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activities in deepwater areas‖,58 as opposed to routine activities such as personnel

actions, internal organization changes, routine financial transactions, and legal activities

sanctioned to be categorically excluded from NEPA review under the Interior

Department‘s Manual. 59 Moreover, the CE granted for the Central Gulf of Mexico

Exploration Plan glaringly differs from the nature of the other activities that were

categorically excluded by MMS itself, an example of which is the approval of unitization

agreements, pooling, or communitization agreements.60

In line with this, the CEQ Report provided that Bureau of Ocean Energy

Management, Regulation and Enforcement‘s CEs for OCS oil and gas exploration and

development should be reviewed in light of the increasing levels of complexity and

risk—and the consequent potential environmental impacts—associated with deepwater

drilling.61

Presence of a protected resource and a determination that the proposed action has

impact on such resource should not automatically be deemed an “extraordinary

circumstance”

The CEQ proposes that the mere presence and nature of a protected resource

and the proposed action‘s impact on that resource is an extraordinary circumstance that

would exclude the application of a CE. What BP proposes in its response is that this

language needs some clarification and that the determination of a CE should depend on

nature of the possible impact on that protected resource and that the proposed action

58 See CEQ Report, supra note at 12, at 29. 59 43 C.F.R. § 46.210 (West 2010) 60 See MMS Manual, supra note 23, at Chapter 15.4 (C) (4) 61 See CEQ Report, supra note at 12,at 29

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will have non-beneficial and non-negligible impact on that protected resource.

According to BP, what is missing is the consideration of some mitigating factors that

could minimize or eliminate possible impacts to an acceptable degree, in which case CE

would then be appropriate.

This proposal runs counter to the very nature of a CE. The mere presence of a

protected resource on one area should immediately require conducting further steps in

NEPA compliance – EIS or EA. Also, this guideline is an enforcement mechanism tool

in accordance to the Endangered Species Act, which is many times overlooked.

Categorical Exclusions are to be favored and CEQ should avoid language or creation of

decision and review process that suggest that CEs are unusual or exceptional agency

actions under NEPA

By its nature, a CE is the exception rather than the rule. It is only sanctioned

when an agency concludes that the proposed action will have ―no significant effect on

the human environment‖.62 In fact, case law provides that an agency must provide an

explanation for its reliance on CE and its conclusion that there is no extraordinary

circumstance that will preclude such designation.63 The Ninth Circuit in the case of

Jones v. Gordon, stated that an agency cannot avoid its statutory responsibilities under

NEPA by merely asserting that an activity it wishes to pursue will have an insignificant

effect on the environment. Instead, an agency must provide a reasoned explanation of

62 40 C.F.R §1508.4 (West 2010) 63 Jones v. Gordon, 792 F.2d 821 (9th Cir. 1986)

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its decision to issue a CE from an environmental review. 64 Therefore, BP cannot be

allowed to make an exception the rule, i.e. categorical exclusion as the rule.

64 Id. at 828.

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CHAPTER V - CONCLUSION

The CEQ‘s proposed guidance for the establishment, application and revision of

CEs must be finalized and approved the soonest for its necessity cannot be overstated.

By drafting the proposed guidance, the CEQ appears to be making a more

rigorous stance in reviewing CE rules and seeks to away from past appearances of

providing nothing more than a rubber stamp agency approval thereon.

The issues related to the issuance of CEs may only have come into focus

recently, but the need for a clarifying guideline relating thereto had been recognized

long before the BP blowout. In September 2003, the NEPA Task Force tasked by the

CEQ to study the NEPA implementation recommended that the CEQ expeditiously

issue a clarifying guidance to promote the consistent and appropriate development, and

use of categorical exclusions.65 However, it was not until February 18, 2010 that the

CEQ took action and released the proposed guidance.

Moreover, it is alarming that even after the BP blowout, MMS has continued to

grant CEs for exploratory wells and drilling operations in the Gulf of Mexico. MMS

granted a CE to BP‘s Exploration Plan for the drilling of three exploratory wells in the

Green Canyon Area and it granted the same exclusion to Kerr-McGee Oil & Gas

Corporation for exploratory wells in almost seven thousand feet of water, among others.

As elucidated above, it is imperative therefore that the CEQ proposed guidance

be finalized and approved expeditiously. Not without amendments however.

65 See Task Force Report, supra note 51, at 7.

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Part VI of the proposed guidance on documentation of applying an established

CE sanctions the practice of agencies not to prepare a separate documentation in the

issuance thereof. In light with the decisions of the Ninth Court however in Jones v.

Gordon66 and California v. Norton67 however, a documentation or an explanation that

the proposed activity is covered by the the category relied upon in the agency‘s NEPA

procedures and that there are no extraordinary circumstances in which such a normally

excluded action may have a significant environmental effect must be prepared.

The overriding standard for a CE application should be that the proposed action

will have no significant effect on the human or where such action or activity is expected

to have no significant environmental effect, such as those activities enumerated by

CEQ, e.g. administrative activities, conducting surveys and data collection, and routine

procurement of goods and services.

In every analysis of the validity of an application of a CE, there is only one test

that must be applied: Whether or not the purposes of NEPA will be defeated by the

application of such CE.

66 792 F. 2d 821 (9th Cir. 1986) 67 150 F. Supp. 2d 1046 (N.D. Cal. 2001)

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GENERAL BIBLIOGRAPHY

1. Articles, reports and other documents. Congressional Research Service, The 2010 Oil Spill: MMS/BOEMRE and NEPA, (August 19, 2010) [Congressional Research Service Report], available at http://www.fas.org/sgp/crs/misc/R41265.pdf. Council for Environmental Quality, Report Regarding the Minerals Management Service‘s National Environmental Policy Act Policies, Practices, and Procedures as They Relate to Outer Continental Shelf Oil and Gas Exploration and Development, (August 16, 2010), [CEQ Report], available at http://www.whitehouse.gov/sites/default/files/microsites/ceq/20100816-ceq-mms-ocs-nepa.pdf Union of Concerned Scientists, The Minerals Management Service: Bad Science in the Name of Private Interests, http://www.ucsusa.org/scientific_integrity/abuses_of_science/mms-badscience.html (visited on November 11, 2010, 6:00 p.m.) U.S. Department of the Interior Minerals Management Service New Orleans Gulf of Mexico OCS Regional Office, “Deepwater Development: A Reference Document for the Deepwater Environmental Assessment Gulf of Mexico OCS (1998 through 2007)” available at ://www.gomr.boemre.gov/PDFs/2000/2000-015.pdf U.S. Department of the Interior Minerals Management Service New Orleans Gulf of Mexico OCS Regional Office, “Gulf of Mexico Deepwater Operations and Activities Environmental Assessment” available at http://www.gomr.boemre.gov/PDFs/2000/2000-001.pdf U.S. Department of the Interior Minerals Management Service New Orleans Gulf of Mexico OCS Regional Office, ―Proposed Gulf of Mexico OCS Oil and Gas Lease Sale 206‖, available at http://www.gomr.boemre.gov/PDFs/2007/2007-059.pdf ―Establishing and Applying Categorical Exclusions under the National Environmental Policy Act‖, [Proposed Guidance], 75 Fed. Reg. 35, (proposed February 18, 2010). A copy thereof is attached herein at Appendix A. 1 Council on Environmental Quality, The NEPA Task Force Report to the Council on Environmental Quality- Modernizing NEPA Implementation, (September 2003) [hereinafter Task Force Report], available at http://ceq.hss.doe.gov/ntf/report/chapter5.pdf.

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2. Case Law Robertson v. Methow Valley Citizens Council, 490 U.S. 332, 334 (1989). Secretary of Interior v. California, 464 U.S. 312 (1984) Village of False Pass v. William C. Clark, 733 F2.d 605 (1984) Alaska Wilderness League v. Kempthorne, 548 F.3d 815, (2008) California v. Norton, 150 F. Supp. 2d 1046, 1057 (9th Cir. 2002).

Jones v. Gordon, 792 F.2d 821, 826 (1986). Calvert Cliffs Coordinating Committee, Inc. v. United States Atomic Energy Commission 449 F.2d 1109, 1114-15 (D.C. Cir.1971) Heartwood, Inc. v. U.S. Forest Service, 73 F. Supp. 2d 962, 972-73 (S.D. Ill. 1999), aff‘d, 230 F.3d 947 3. Law, statutes, and regulations. Outer Continental Shelf Lands Act, 43 U.S.C. § 1331 (West 2010) National Environmental Protection Act, 42 U.S.C. § 4321 (2006). Council for Environmental Quality Regulations for Implementing NEPA, 40 C.F.R. §1502.1 (West 2010). 4. Other Sources Congressional Research Service, The 2010 Oil Spill: MMS/BOEMRE and NEPA, (August 19, 2010) [hereinafter Congressional Research Service Report], available at http://www.fas.org/sgp/crs/misc/R41265.pdf. See Council for Environmental Quality, Report Regarding the Minerals Management Service‘s National Environmental Policy Act Policies, Practices, and Procedures as They Relate to Outer Continental Shelf Oil and Gas Exploration and Development, (August 16, 2010), [hereinafter CEQ Report], available at http://www.whitehouse.gov/sites/default/files/microsites/ceq/20100816-ceq-mms-ocs-nepa.pdf

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Letter from Margaret D. Laney, Senior Federal Affairs Director, BP America Inc., (April 9, 2010) [BP Letter]. A copy of this letter is enclosed in the present document as Appendix B.

39

Appendix A

CEQ Memorandum on Establishing and Applying Categorical

Exclusions under NEPA

40

Appendix B

BP’s Letter Comment to the Draft Guidance

for Categorical Exclusions

41

42

43

44