NATIVE VILLAGE OF POINT HOPE; Inupiat Community of the Arctic Slope; Alaska Wilderness League; Center for Biological Diversity; National Audubon Society; Natural Resources Defense Council; Northern Alaska Environmental Center; Oceana; Pacific Environment; Resisting Environmental Destruction on Indigenous Lands, A Project of the Indigenous Environmental Network (Redoil); Sierra Club; The Wilderness Society; World Wildlife Fund; Defenders of Wildlife, Plaintiffs-Appellants,
Sally JEWELL, Secretary of the Interior; Bureau of Ocean Energy Management; Tommy Beaudreau, Director of the Bureau of Ocean Energy Management, Defendants-Appellees, Shell Gulf of Mexico, Inc.; Conocophillips Company; State of Alaska; Statoil USA E & P, Inc., Intervenor-Defendants-Appellees.
Argued and Submitted March 5, 2013.
[Copyrighted Material Omitted]
Erik Clifford Grafe (argued), Earthjustice, Anchorage, AK; Eric Paul Jorgensen, Earthjustice, Juneau, AK, for Plaintiffs-Appellants.
David C. Shilton (argued), United States Department of Justice, Washington, D.C., for Defendants-Appellees.
Kyle W. Parker (argued), Crowell & Moring LLP, Anchorage, AK; Jeffrey Wayne Leppo and Ryan P. Steen, Stoel Rives, LLP, Seattle, WA; Ken Diemer and Rebecca Kruse, Office of Alaska Attorney General, Anchorage, AK; and James Leik, Perkins Coie LLP, Anchorage, AK, for Intervenor-Defendants-Appellees.
Appeal from the United States District Court for the District of Alaska, Ralph R. Beistline, Chief District Judge, Presiding. D.C. No. 1:08-cv-00004-RRB.
Before: FERDINAND F. FERNANDEZ, WILLIAM A. FLETCHER, and JOHNNIE B. RAWLINSON, Circuit Judges.
Opinion by Judge W. FLETCHER; Partial Concurrence and Partial Dissent by Judge RAWLINSON.
W. FLETCHER, Circuit Judge:
The Bureau of Ocean Energy Management (" BOEM" )  of the Department of the Interior has sought to lease " excellent prospects" for oil and gas development in the Chukchi Sea off the northwest coast of Alaska. The parcels available for lease are cumulatively known as Lease Sale 193. Pursuant to the National Environmental Policy Act (" NEPA" ), BOEM prepared a Final Environmental Impact Statement (" FEIS" ) analyzing the environmental effects of the proposed leases. BOEM based its environmental analysis on the assumption that if oil development actually occurs, one billion barrels of oil will be economically recoverable.
Plaintiffs argued in the district court that BOEM abused its discretion by failing to account for essential missing information in the FEIS. Plaintiffs also argued that BOEM's estimate of one billion barrels is arbitrary and capricious. They contended that the potential economically recoverable oil from the lease sale is far higher than one billion barrels, and that BOEM had not given an adequate explanation for using its lower estimate. The district court initially rejected the FEIS for failing to account for the missing information. After remand, BOEM prepared a Supplemental EIS (" SEIS" ) addressing the missing information. Based on the FEIS and SEIS, the district court granted summary judgment to defendants.
We largely agree with the district court that the agency did not abuse its discretion in its analysis of the missing information. However, we agree with plaintiffs that the agency's estimate of one billion barrels was chosen arbitrarily, and that this arbitrary decision meant that the agency based its decision on inadequate information about the amount of oil to be produced pursuant to the lease sale.
The Chukchi Sea is a southern arm of the Arctic Ocean between Alaska and Russia. The Sea contains a wide variety of animals, including bowhead whales, polar bears, pacific walrus, seals, fish, and birds. Some of these animals provide subsistence for native Inupiat communities along the Alaskan coast. Some of the animals are listed under the Endangered Species Act (" ESA" ) as endangered or threatened. Five exploratory wells were drilled in the Sea between 1989 and 1991. They had " positive shows" but did not lead to commercial production.
The Outer Continental Shelf Lands Act (" OCSLA" ) prescribes four steps the federal government must take in order to pursue offshore oil and gas development: " ‘ (1) formulation of a five year leasing plan by the Department of the Interior; (2) lease sales; (3) exploration by the lessees; [and] (4) development and production.’ " Edwardsen v. U.S. Dep't of the Interior, 268 F.3d 781, 784 (9th Cir.2001) (quoting Sec'y of the Interior v. California, 464 U.S. 312, 337, 104 S.Ct. 656, 78 L.Ed.2d 496 (1984)). At the " lease sale" stage, the Secretary of the Interior selects the parcels that will be offered for lease, accepts bids from parties, and collects funds from parties with winning bids. The Department of the Interior must review and approve specific exploration and development plans before winning bidders can " proceed with full exploration, development, or production" of oil or gas. Sec'y of the Interior, 464 U.S. at 339, 104 S.Ct. 656. However, successful bidders have the right to undertake " ancillary activities" in the field such as geological and geophysical surveys and studies that " model potential oil and hazardous substance spills." 30 C.F.R. § 550.207.
NEPA " protect[s] the environment by requiring that federal agencies carefully weigh environmental considerations and consider potential alternatives to the proposed action before the government launches any major federal action." Barnes v. U.S. Dep't of Transp., 655 F.3d 1124, 1131 (9th Cir.2011) (internal quotation marks omitted). " ‘ NEPA imposes procedural requirements designed to force agencies to take a " hard look" at environmental consequences' " of major federal action. Id. (quoting Earth Island Inst. v. U.S. Forest Serv., 351 F.3d 1291, 1300 (9th Cir.2003)). The statute requires federal agencies to " consider every significant aspect of the environmental impact of a proposed action" and to " inform the public that [they] ha[ve] indeed considered environmental concerns in [their] decisionmaking process." Balt. Gas & Elec. Co. v. Natural Res. Def. Council, Inc., 462 U.S. 87, 97, 103 S.Ct. 2246, 76 L.Ed.2d 437 (1983) (internal quotation marks omitted).
NEPA requires that federal agencies prepare an EIS for any " major Federal actions significantly affecting the quality of the human environment." 42 U.S.C. § 4332(2)(C). An agency must consider:
(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.
Id. An agency must take into account all " reasonably foreseeable significant adverse effects" of the proposed action in its analysis of environmental effects. 40 C.F.R. § 1502.22; see also id. § 1508.7. NEPA also requires an agency to analyze missing and incomplete information. As we explain in greater detail below, an agency must either obtain information that is " essential to a reasoned choice among alternatives" or explain why such information was too costly or difficult to obtain. Id. § 1502.22.
An agency is required to comply with NEPA at various stages of the oil and gas development process. An agency is not required at the lease sale stage to
analyze potential environmental effects on a site-specific level of detail. N. Alaska Envtl. Ctr. v. Kempthorne, 457 F.3d 969, 975-76 (9th Cir.2006). To some degree, lease sale analyses may be based on information that is uncertain or missing at the time of the sale when that information can be obtained at a " later stage[ ] of the exploration process." Tribal Vill. of Akutan v. Hodel, 869 F.2d 1185, 1192 (9th Cir.1988). At the same time, the agency cannot shirk its responsibility to " consider[ ] all foreseeable direct and indirect impacts" of the proposed action in its EIS. N. Alaska Envtl. Ctr., 457 F.3d at 975 (internal quotation marks omitted). The agency also must " discuss[ ] ... adverse impacts" without " improperly minimiz[ing] negative side effects." Id.
B. Lease Sale 193
After completing a five-year leasing plan for the Chukchi Sea, BOEM decided to offer a large portion of the Sea for oil and gas leasing. The FEIS analyzed four alternatives for the lease sale: (1) a 34-million acre proposed lease option covering 6,156 blocks of the Chukchi Sea; (2) a no-lease option; (3) a proposed lease option excluding 1,765 blocks extending along a corridor about 60 miles from the Alaskan coast; and (4) a proposed lease option excluding 795 blocks extending along a corridor between 25 and 50 miles from the Alaskan coast.
The National Marine Fisheries Service recommended that the Secretary of the Interior select the third alternative, under which development would be farther from the coast, based on its conclusion that numerous endangered and threatened species living close to shore would be adversely affected by oil development. The Secretary of the Interior accepted BOEM's recommendation and selected the fourth alternative, under which development would be closer to the coast.
The lease sale occurred on February 6, 2008. The federal government collected over $2.6 billion from the winning bidders. At the time of the lease sale, there were no active leases in the Sea.
C. Procedural History
Plaintiffs filed suit, alleging seven deficiencies in the FEIS:
1. [The FEIS] does not adequately analyze and present the impacts of Lease Sale 193 on the environment and human communities;
2. [It] fails to include essential missing information about the Chukchi Sea and the potential impacts of the lease sale, or explain why excluding this information is justified;
3. [It] fails to adequately analyze the impact of the lease sale in the context of a warming climate;
4. [It] understates the potential impacts of oil and gas development pursuant to the leases by analyzing a limited development scenario;
5. [It] understates the risks of an oil spill;
6. [It] fails to fully analyze the cumulative impacts to threatened eiders of the lease sale and other oil and gas development in threatened eiders' Arctic habitat; and
7. [It] provides a misleading analysis of the effects of seismic surveying.
The parties cross-moved for summary judgment.
The district court agreed with defendants that much of the FEIS complied with NEPA, including the FEIS's assumption that there would be one billion barrels of economically recoverable oil. However, the court concluded that the FEIS's analysis was flawed in three respects: it " failed
to analyze the environmental impact of natural gas development, despite industry interest and specific lease incentives for such development" ; it " failed to determine whether missing information identified by the agency was relevant or essential under 40 C.F.R. § 1502.22" ; and it " failed to determine whether the cost of obtaining the missing information was exorbitant, or the means of doing so unknown." The district court granted in part ...