Petition — Western Oil & Gas Ass'n v. Alaska

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ai Supreme Court ut, US,

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i JUL 6 1978

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IN THE an

Supreme Court of the United States

OcroBER TERM, 1978

No 678-45

WesteRN Ort & GaAs ASSOCIATION, ET AL., Petitioners,

STATE OF ALASKA, ET AL., Respondents,

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

kK. Epwarp BrucE

Mark D. Nozerre

Covington & Burling

888 Sixteenth Street, N.W.

Washington, D.C. 20006

WiLuiAM M. Meyers

J. Berry St. JOHN

Liskow & Lewis

One Shell Square

New Orleans, Louisiana

70139

Attorneys for Western Oil &

Gas Association, et al.

July 1978

tare Re ten tel Aon ks.

Se _

TABLE OF CONTENTS

Page

nc tehabidrnasebedobaseneneteenas 2

nde lo dcnasendeesanwherssesocuneees 2

IID 3s cinlly Svnew isk sbesesesamaaes os 2

OD nae c ees wdebercctsnesnenegeests 3

SraTeMenT op THB Case ...........ccccceess idee 4

REASONS FOR GRANTING THE WRIT ..............-005- 11

EE Secichok Srakephetepelesonbeceddninwels so 23

TABLE OF CASES

A. L. Mechling Barge Lines, Inc. v. United States, 368

EE nin cn Kae ewente senna date ba 19, 23

Aetna Life Insurance Co. v. Haworth, 300 U.S. 227

a ath a ik ke big Ci nw sack oc w0s 18

Boesche v. Udall, 373 U.S. 472 (1963) ............... 13

County of Suffolk v. Secretary of the Interior, 562 F.2d

1368 (2d Cir. 1977), cert. denied, —— U.S. ——,

ee fo er eee 10, 14

Golden v. Zwickler, 394 U.S. 103 (1969) ............. 18

Gulf Oil Corp v. Morton, 493 F.2d 141 (9th Cir. 1973) . 14

Maryland Casualty Co v. Pacific Coal @ Oil Co., 312

i chk ieah bie betccodataes< esses 18

Powell v. McCormick, 395 U.S. 486 (1969) ........... 18

Sierra Club v. Morton, 510 F.2d 813 (5th Cir. 1975) .. 14

Union Oil Co. v. Morton, 512 F.2d 743 (9th Cir. 1975) .9, 17

United States v. Maine, 420 U.S. 515 (1975) ......... ll

Western Oil & Gas Association et al. v. Andrus, No.

Sy Ms CUE GID cance ecehancccccccces 11

ii Table of Cases Continued

Page

STaTurEs:

Outer Continental Shelf Lands Act, 43 U.S.C.

ea ee te ae piveda na skis 3, 14, 17

SNES RORY Be Dy 6 ctr Sms 15

EE PRRs. bk boy bb sab 6 bA WER b Ob ht Che uecr es 2

EE ok ko sas cas 5 4 ao deinen cae ebees 4,12

Te ee 15

National Environmental Policy Act, 42 U.S.C.

NE i a ua aa oe ets OR oe +

Mineral Leasing Act of 1920, 30 U.S.C.

ae) ice Cer hays caceth dvekacke 13

ED oa foods coh buvickue sewedee eames 2

Leotsuative History:

H.R. Rep. No. 95-590, Ad Hoe Select Committee on the

OCS, 95th Cong., 1st Sess. 8 (1977) ............ 19, 21

S. Rep. No. 85-284, OCS Lands Act Amendments, 25th

I ON nod ae Vaca ess ce 'Se'e 12

S. Rep. No. 411, 83rd Cong., Ist Sess. 36 (1953) ...... 16

Hearings on H.R. 1614, Ad Hoc Committee on the OCS,

House of Representatives, 95th Cong., 1st Sess.

Ra pi ORI lara cain ten 20

MEE BONA, OO Gite, ook. occ ccccccccccoce cee 19, 20

Nel ieboawedens 19, 20

99 Cong. Rec. 12,747 (1958) .......cccccccccececece. 16

123 Cong. Ree. 8. 11,986 (daily ed. July 15, 1977) .19, 20, 22

124 Cong. Ree. H. 414 (daily ed. January 31,1978) ... 21

124 Cong. Rec. at S3964, H2269 (daily ed. March 17,

eh san Wal. «cay badiew datos ockcre ke, 22

Table of Cases Continued

Page

Oruer AUTHORITIES: ;

42 Fed. Reg. 36,273 .......seeeeeeereceeerceseececes ‘

BG2T4 cc ccccscccscecccccececscescecss

GEGTT ccccccecvccccvcccssseceveccecees 9

3 Williams & Meyers, Oil and Gas Law,

GGOLL at VB ...ccccrcccrccccescccecressereres 2 .

~~ GOOLE at 7 wcrc rcccvcvvccvrcvccversccseveesere

aan ove

IN THE

Supreme Court of the United States

OcroBerR TERM, 1978

No.

WESTERN Or & Gas ASSOCIATION, ET AL., Petitioners,

Vv.

STaTe OF ALASKA, ET AL., Respondents,

PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

The Western Oil & Gas Association (WOGA) and

the eleven WOGA members who appeared as appellees

and as intervening defendants below’ petition this

Court for a writ of certiorari to review a decision en-

tered by the United States Court of Appeals for the

District of Columbia Circuit on February 24, 1978.

‘The other eleven petitioners here are Amoco Production Co.,

Champlin Petroleum Co., Cities Service Co., Continental Oil Co.,

Exxon Corp., Gulf Oil Corp., Mobil Oil Corp., Murphy Oil Corp.,

Ocean Production Co., Shell Production Co., and Sun Oil Co.

OPINIONS BELOW

The opinion of the United States Court of Appeals

for the District of Columbia Circuit is not yet reported.

A copy of that opinion appears in the Appendix at

pages la-48a. The order of the Court of Appeals deny-

ing petitioners’ motion for rehearing appears in the

Appendix at page 50a, and its judgment appears at

page 49a. The memorandum opinion and judgment en-

tered by the United States District Court for the Dis-

trict of Columbia on August 13, 1976, is not officially

reported, but is reproduced in the Appendix at pages

51a-66a.

JURISDICTION

The judgment of the United States Court of Appeals

for the District of Columbia was entered on February

24, 1978. Petitioners’ timely motion for rehearing was

denied on April 24, 1978. The jurisdiction of this Court

is invoked under 28 U.S.C. § 1254(1).

QUESTIONS PRESENTED

(1) Whether the court of appeals erred in con-

struing Section 8 of the OCS Lands Act, 43 U.S.C.

§ 1337, which provides that all Outer Continental Shelf

oil and gas leases issued by the Secretary of the In-

terior ‘‘shall... be for a period of five (5) years and

as long thereafter as oil and gas may be produced... ,’’

as allowing the issuance of leases that can be termi-

nated at any time without compensation to the lessee?

(2) Whether the court of appeals erred in issuing

a declaratory judgment so construing the OCS Lands

Act, in the light of the facts that

(a) the question of this construction of the OCS

Lands was not treated as a major issue by the

parties;

AEE a Ty ita cl Seth le sn

(b) after oral pa, sma in the court of appeals,

the court was informed that the Secretary had

changed his position and agreed with the plain-

tiffs, although not with WOGA, that he could

terminate OCS leases without payment of compen-

sation; and

assed both Houses, that would modify the OCS

nds Act in a fashion contrary to the construc-

tion of the court of appeals?

STATUTES INVOLVED

Section 5(a)(1) of the OCS Lands Act, 43 U.S.C.

§ 1334(a) (1), provides as follows:

‘The Secretary shall administer the provisions

of this subchapter relating to the leasing of the

outer Continental Shelf, and shall prescribe such

rules and regulations as may be necessary to carry

out such provisions. The Secretary may at any

time prescribe and amend such rules and regula-

tions as he determines to be necessary and proper

in order to provide for the prevention of waste and

conservation of the natural resources of the outer

Continental Shelf, and the protection of correlative

rights therein, and, notwithstanding any other

provisions herein, such rules and regulations shall

apply to all operations conducted under a lease

issued or maintained under the provisions of this

subchapter. In the enforcement of conservation

laws, rules, and regulations the Secretary is au-

thorized to cooperate with the conservation agen-

cies of the adjacent States. Without limiting the

generality of the foregoing provisions of this sec-

tion, the rules and regulations prescribed by the

Secretary thereunder may provide for the assign-

ment or relinquishment of leases, for the sale of

royalty oil and gas accruing or reserved to the

United States at not less than market value, and,

in the interest of conservation, for unitization,

pooling, drilling agreements, suspension of opera-

tions or production, reduction of rentals or royal-

ties, compensatory royalty agreements, subsurface

storage of oil or gas in any of said submerged

lands, and drilling or other easements necessary

for operations or production.”

Section 8(b)(2) of the OCS Lands Act, 43 U.S.C.

§ 1337(b) (2) provides as follows:

‘An oil and gas lease issued by the Secretary

pursuant to this section shall... be for a period

of five years and as long thereafter as oil or gas

may be produced from the area in paying quanti-

ties, or drilling or well reworking operations as

approved by e Secretary are conducted there-

STATEMENT OF THE CASE

This case was originally brought under the National

Environmental Policy Act (NEPA), 42 U.S.C. § 4321,

to prevent, and was subsequently pursued to nullify,

the Secretary of the Interior’s sale of oil and gas

leases on that portion of the Outer Continental Shelf

(OCS) known as the Northeast Gulf of Alaska, The

sale of these leases—styled OCS Sale No. 39 *—was

ultimately upheld by both the district court and the

court of appeals. WOGA strongly urged as an inter-

vening defendant below that Sale No. 39 be sustained,

* Although referred to as ‘‘sales,’’ OCS transactions of the type

at issue here involve the issuance of leases which give lessees the

right to explore for and then develop and produce oil or gas under-

lying their tracts. These leasehold rights are sold for substantial

cash bonuses via a competitive bidding system, They also entail the

obligation of paying the federal government annual rentals and

substantial royalties,

———

and it therefore does not seek to have this Court review

this aspect of the decision below.

The court of appeals, however, also entered a declar-

atory judgment which drastically alters the Secretary’s

administration of OCS leasing by authorizing him to

issue leases, in which tens or even hundreds of millions

of dollars may be invested, that he can subsequently

take back without the payment of any compensation.

Accordingly, petitioners have been compelled to in-

voke this Court’s certiorari jurisdiction to review this

aspect of the decision below.

A. Pre-Sale Developmenis

As part of the program to expand OCS production

of oil and gas to reduce the Nation’s dependency on

foreign imports (App. 61a-62a), the Department of

the Interior in late 1974 focused on leasing OCS tracts

in the Gulf of Alaska. After publication of a draft

impact statement and the conduct of public hearings

on the draft, a final environmental impact statement

(EIS) for a proposed Gulf of Alaska leasing of 1.8

million acres was published in late 1975.

The publication of this EIS led to extensive con-

sultation between the lead plaintiff here, the State of

Alaska, and various federal agencies—Interior, the

Council on Environmental Quality (CEQ), the En-

vironmental Protection Agency (EPA), and the Na-

tional Oceanographic and Atmospheric Administra-

tion (NOAA)—as to a possible reshaping of the sale

in response to information contained in the EIS. As

a result of this consultation, the leasing proposal was

reduced by approximately 40% to 1.1 million acres and

the Secretary took a number of other actions respon-

sive to the concerns voiced by Alaska and the federal

environmental agencies.’ (App. 57a). Moreover, just

prior to the sale, the Secretary eliminated an addi-

tional 92,000 acres, which were of particular concern

to the State. (App. 57a).

Thus, as a result of the NEPA process, the scope

of Sale No. 39 was significantly reduced and the sale

was conditioned to mitigate substantially its environ-

mental impacts. Indeed, the chairman of CEQ ‘‘com-

mended the Department’’ of the Interior for ‘‘im-

prov[ing] the substance and process of OCS decision

making’’ by engaging in the consultative process which

led to the reduction of the proposed sale area and

the conditioning of the sale to deal with CEQ’s and

others’ environmental concerns:

‘‘(T }he council has also been impressed with the

Department’s clear commitment to incorporate the

best and most recent environmental information

available into the preparations for or decision on

this lease sale. The Department appears to us to

be approaching this matter even-handedly and a

number of environmentally protective alin are

being considered in the decision-making process.’’

(JA 234).

The State of Alaska and several other Alaskan

plaintiffs nonetheless sued in the United States Dis-

trict Court for the District of Columbia to enjoin

Sale No. 39 several weeks before it was scheduled to

* Specifically, the OCS operating orders; which regulate in detail

all aspects of OCS operations, were revised to incorporate in ‘‘sub-

stantial measure’’ the recommendations made by CEQ and EPA;

a two-year moratorium upon the leasing of any additional portions

of OCS acreage in the Gulf of Alaska was imposed; and EPA’s

suggestion that lessees provide state and local governments with

needed information for onshore planning was adopted, (App. 57a).

re i Ok ee

take place.‘ Plaintiffs’ principal claim was that the

Secretary should have awaited the compilation of ad-

ditional information as to the environmental impact

of the sale before authorizing it. However, their com-

plaint also charged (as part of a list of 13 other

alleged EIS defects) inadequate discussion of the al-

ternative of including a provision in OCS leases al-

lowing their termination for unforeseen environmental

hazards. Reflecting their lack of emphasis of this issue,

plaintiffs’ preliminary injunction memorandum failed

even to mention the claim that OCS leases should con-

tain such termination clauses.

On April 8, 1976, the district court denied plaintiffs’

motion for a preliminary injunction. Four days later,

the court of appeals denied plaintiffs’ request for an

injunction pending appeal, and the sale took place

the next day, on April 13, 1976, as scheduled.

B. The Sale and Post-Sale Developments

Although leases covering approximately one million

acres were offered at Sale No. 39, about 400 thousand

acres were actually leased for bonus payments of

nearly $560 million.

Thereafter in August, 1976, the parties submitted

the case on the merits to the district court. Although

once again stressing other matters, plaintiffs did de-

vote a short section of their trial brief (pp. 29-30) to

the contention that the Secretary should have con-

sidered the alternative of issuing leases with clauses

* In addition to the state, the City of Yakutat, United Fishermen

ase and the Cordova District Fisheries Union joined in the

tigation

permitting him to cancel leases without compensation

to lessees. On August 13, 1976, the district court en-

tered final judgment for the federal and WOGA de-

fendants. (App. 65a-66a).

When plaintiffs returned to the court of appeals

to seek review of the district court’s final judgment,

they proclaimed that they sought appellate action ‘‘to

declare [Sale No. 39] invalid.’’ (Br. 3). In their briefs

and oral argument in support of their contention that

Sale No. 39 should be invalidated, plaintiffs once again

focused principally upon whether the information in

the EIS was sufficient to permit the Secretary to pro-

ceed with Sale No. 39 and secondarily upon the claim

that the EIS insufficiently discussed the Gulf of Alaska

OCS operating orders (see p. 6, n. 3, supra).

Plaintiffs devoted significantly less attention to their

several other claims, Thus, the contention that the

KIS was deficient because it did not consider the al-

ternative of utilizing terminable leases received only

two and one-half pages of discussion in plaintiffs’

70-page opening brief.’ This issue was similarly down-

played in the oral argument which was presented to

the court of appeals on January 17, 1977.

Although the termination issue thus received little

attention from the parties, the Department of the

Interior’s subsequent actions apparently caused the

D.C. Cireuit to give heightened attention to this ques-

tion. The Secretary, like WOGA, had argued in his

appellate brief that the OCS Lands Act does not au-

thorize the use of clauses in OCS leases that would

allow their termination without compensation to the

* In the light of plaintiffs’ treatment of the issue, WOGA allotted

only four of the 68 pages of its brief to the termination question.

ea ct

lessee. However, on July 14, 1977, Interior published

a notice of proposed rulemaking (which plaintiffs

promptly filed with the D.C. Circuit) in which the

Department repudiated the view taken in its brief

with respect to the Secretary’s termination authority.

See 42 Fed. Reg. 36,273; 36,277. While receiving this

notice, the court of appeals invited no further com-

ment from the Secretary (and none was o.fered by

him) to explain this change in position.

On February 24, 1978, the court of appeals handed

down its decision on the merits. In an opinion written

by Judge Bazelon, the court rejected plaintiffs’ chief

contention that the Secretary should not have gone

forward with Sale No. 39 without undertaking further

environmental study of the sale area.

Of significance here, however, the court of appeals

went on in a lengthy section of its opinion (App. 32a-

42a) to hold that the Secretary could, under the OCS

Lands Act, issue leases containing clauses that would

allow him to terminate operations without compensa-

tion to lessees upon the discovery of unforeseen en-

vironmental hazards. Having so construed the OCS

Lands Act, the court also held that under NEPA the

*The variation between the position taken by the Department in

the brief filed with the court of appeals in late 1976 and the view

taken in the July 1977 regulations is vividly illustrated by their

conflicting attitudes toward Union Oil Co, v. Morton, 512 F.2d 743

(9th Cir, 1975). In its appellate brief, the government argued that

under Union Oil the Secretary had no authority to condition OCS

leases to inake them terminable upon the subsequent discovery of

environmental hazards, (Fed. Br, 49). In the July 1977 proposed

regulations, the Department took the position that the Union Oil

case permitted the Secretary to so condition OUS leases, See 42

Fed. Reg, at 36,274.

Secretary should have considered the use of terminable

leases in the EIS as an alternative to the proposed

action.’

In so ruling, however, the court recognized that the

use of termination clauses constituted only a ‘‘partial

alternative’ to Sale No. 39—<.e. ‘‘a different, pre-

sumably less environmentally harmful means, of con-

ducting such sale.’’ (App. 44a). For this reason and

also because inserting termination clauses in the $560

million worth of Sale No. 39 leases that had already

been issued ‘‘would create grave legal tangles’’ (App.

46a), the court declined to hold that the ‘‘defect’’ in

the EIS, which it had identified, affected the validity

of the Secretary’s decision to proceed with Sale No. 39.

Instead of thus dismissing this aspect of plaintiffs’

complaint against Sale No. 39, the court of appeals

proceeded to render a declaratory judgment that the

OCS Lands Act empowers the Secretary to insert

termination clauses into OCS leases and that the Sec-

retary must consider the use of leases with such clauses

in conducting all future OCS sales.

WOGA filed a timely petition for rehearing as to

that portion of the court’s opinion dealing with the

termination issue and identified important develop-

ments that had occurred after oral argument which

"The court of appeals also found that the EIS contained inade-

quate discussion of the operating orders and remanded that portion

of the case for further consideration by the Secretary. However,

the court rejected plaintiffs’ request to invalidate Sale No, 39 on

this basis, noting that the operating orders could be changed after

the lease sale had been held, See County of Suffolk v, Secretary of

the Interior, 562 F.2d 1368, 1381-82 (2d Cir. 1977), cert. denied,

—— U.S. ——, 98 S.Ct. 1238 (1978). Petitioners do not seek review

of this aspect of the court of appeals’ decision.

a re Se a a

ee ee Se

a as ae at et a Ea a

demonstrated that the court should have modified its

decree: First, that the Department of the Interior’s

July 1977 proposed termination regulations had been

adopted on October 4, 1977, and were being challenged

by WOGA in litigation devoted solely to the proper

construction of the OCS Lands Act (Western Oil &

Gas Association, et al., v. Andrus, No. 77-3987—L.E.W.

(C.D. Cal.)); Second, that both Houses of Congress

had passed amendments to the OCS Lands Act which

would provide for environmentally motivated lease

cancellation, ableit unlike the scheme envisioned by the

court of appeals, with compensation to the lessee.

On April 24, 1978, the court of appeals denied

WOGA’s petition for rehearing.

REASONS FOR GRANTING THE WRIT

The D.C. Circuit has construed the OCS Lands Act

as authorizing the use of leases which are terminable

without compensation in situations where the lessee

is entirely without fault. From the time of its enact-

ment in 1953 until the submission of this case to the

court of appeals nearly 25 years later, the OCS Lands

Act had been consistently construed by the Depart-

ment of the Interior to require the issuance of leases

that could not be so terminated except upon the gov-

ernment’s payment of just compensation to the lessee.

Pursuant to this interpretation of the Act, Interior

had, as of 1975, conducted over thirty OCS lease sales

‘‘in which 1,940 leases, embracing over eight million

acres, have been issued.’’ I/nited States v. Maine, 420

U.S. 515, 527 (1975). As of 1977, the federal govern-

ment had received more than 18 billion dollars in

bonuses, rental payments and royalties from OCS

lessees."

The court of appeals’ construction of the OCS Lands

Act would thus radically modify OCS leasing. Be-

cause that construction of the Act is so patently at

variance with its terms and legislative history, and

because the court of appeals rendered a declaratory

judgment with respect to this issue in a case, at a time,

and under circumstances which called for restraint,

as opposed to judicial revision of a statute, petitioners

submit that the issues raised in this petition make it

a compelling vehicle for the exercise of this Court’s

certiorari jurisdiction.

The central mechanism underlying the OCS pro-

gram, and the one which most clearly reflects the finely-

tuned legislative scheme established by Congress, is

the OCS lease itself. Section 8(b)(2) of the OCS

Lands Act, 43 U.S.C. § 1337(b) (2), specifies the lease-

term provisions required to be inserted in every OCS

lease :

‘‘An oil and gas lease issued by the Secretary

pursuant to this section shall ... be for a period

of five (5) years and as long thereafter as oil and

gas may be produced from the area in paying

uantities, or drilling or well reworking opera-

tions as approved by the Secretary are conducted

thereon, . . .’’ (emphasis supplied).

* See, Outer Continental Shelf Lands Act Amendments of 1977,

S. Rep. No. 95-284, 95th Cong., Ist Sess, p. 49 (1977).

et at tea

This language is mandatory, not discretionary; the

Secretary is required to issue leases for a minimum

period of five years and must extend the leases unde.

carefully defined circumstances.

In adopting the language of Section 8(b), Congress

was simply directing the Secretary to follow what has

long been common practice in the issuance of mineral

leases.’ This lease form, which is typical of ‘virtually

all contemporary [mineral] leases,’ 3 Williams &

Meyers, Oil and Gas Law, § 601.4, at 7, was evolved

after decades of experience and reflects the accommo-

dation of the interests of both lessees and lessors. The

short initial term benefits the lessor by compelling

the lessee to begin production as soon as possible, id.,

while the ‘‘habendum”’ or ‘“‘thereafter”’ clause guaran-

tees the lessee the opportunity to realize a return on

his investment, id. at § 601.1, at 2-3.

The interpretation of the Act proposed by the court

below upsets this careful balance. For the court of

appeals has now, in effect, revised the statute so as to

* The lease form prescribed by Section 8(b) was essentially de-

rived from the Mineral Leasing Act of 1920, 30 U.S.C. § 226(e) :

‘Competitive leases issued under this section shall be for a

primary term of five (5) years and noncompetitive leases for

& primary term of ten (10) years, Each such lease shall con-

tinue so long after its primary term as oil or gas is produced

in paying quantities... .’’

The court of appeals relied on Boesche v, Udall, 373 U.S, 472

(1963), a case decided under the Mineral Leasing Act. (App. 38a-

39a). But that decision held that the Secretary of the Interior had

authority to cancel leases administratively for technical errors in

their issuance, In so holding, this Court carefully distinguished be-

tween technical defects of that nature and ‘‘post-lease events’’ 373

U.S. at 478 (emphasis in original). The subsequent discovery of

environmental hazards is, of course, a classic example of a ‘‘post-

lease event’’ not at issue in Boesche.

vest the Secretary with discretion to cancel OCS leases

for reasons wholly outside the control of the lessee,

without any obligation to pay the lessee compensation

for a lease in which millions of dollars may have been

invested.

The lower court’s reliance upon Section 5(a) (1) of

the Act, 43 U.S.C. § 1334(a)(1), does not excuse its

failure to adhere to the terms of Section 8(b). That

section merely gives the Secretary general authority

to regulate OCS operations after leases are issued.

See, County of Suffolk v. Secretary of Interior, supra,

562 F.2d at 1381-82; Sierra Club v. Morton, 510 F.2d

813 (5th Cir. 1975).

Moreover, the very terms in which Section 5(a)

spells out the contours of the Secretary’s regulatory

authority show that Congress did not arm him with the

termination power the court below now suddenly finds

in his arsenal:

‘Without limiting the generality of the foregoing

provisions of the section, the rules and regulations

prescribed by the Secretary thereunder may pro-

vide for the assignment or relinquishment of

leases, for the sale of royalty oil and gas accruing

or reserved to the United States at not less than

market value, and, in the interest of conservation,

for unitization, pooling, drilling agreements, sus-

pension of operations or production, reduction of

rentals or royalties, compensatory royalty agree-

ments, subsurface storage of oil or gas in any of

said submerged lands, and drilling or other ease-

ments necessary for operations or production.”’’

(emphasis supplied).”°

Tt is now settled that the Secretary of the Interior has the

authority to suspend OCS operations—i.e. to order their cessation

for a limited period of time—upon the discovery of environmental

hazards. See Gulf Oil Corp. v. Morton, 493 F.2d 141 (9th Cir.

1973).

a ee

Congress’ use of the term ‘‘suspension,”’ as opposed

to ‘‘termination’’ or ‘‘cancellation’’ was not inadver-

tent. Indeed, the very next section of the Act, 43 U.S.C.

§ 1334(b) (1), outlines the circumstances—all of which

involve fault on the part of the lessee and thus do not

support the decision below—when termination is per-

missible :

‘*Whenever the owner of a nonproducing lease

fails to comply with any of the provisions of this

subchapter, or of the lease, or of the regulations

issued under this subchapter and in force and

effect on the date of the issuance of the lease...

such lease may be cancelled by the Secretary... .’’

(emphasis supplied).

Moreover, the legislative history of the Act shows

clearly that Congress knew what it meant when it

authorized ‘‘suspension,’’ but not ‘‘termination’’ or

‘cancellation’ of leasehold rights in Section 5(a).

As the bills underlying the 1953 Act went into con-

ference, the predecessor of Section 12 (43 U.S.C.

§ 1341) provided that ‘‘in time of war or where neces-

sary for national defense’’ the Secretary could ‘‘termi-

nate any lease,’’ albeit with liability ‘‘to the lessee for

just compensation.’’ In conference, the section was

modified into its present form for reasons which show

the clear distinction recognized by the conferees be-

tween ‘‘suspension’’ and ‘‘termination:”’

‘‘No AUTHORITY TO TERMINATE LEASES.”’

“On page 42 appears amendment No. 21, in

line 10, and again in line 13. That amendment

strikes out the language which would give the

Secretary of the Interior, upon a recommendation

of the Secretary of State, during a period of war

or national emergency, the right to terminate

leases. He would still have the right to suspend

operation under leases, but not to terminate leases;

and the words ‘or to terminate,’ in line 10, are

stricken out; and in lines 13 and 14 the words ‘or

whose lease thus terminated’ are also stricken

out.’’ 99 Cong. Ree. 10,474 (1953) (emphasis

added).

Not only does this change in the statute show that

Congress was acutely aware of the distinction between

termination and suspension, but also it shows a strong

aversion to vesting termination authority in the Sec-

retary. Since Congress was unwilling to sanction no-

fault termination in times of national emergency—the

most compelling circumstance for the exercise of such

a termination power—it surely did not contemplate

termination for the reasons identified by the D.C.

Circuit,

This conclusion is further reinforced by other parts

of the Act’s legislative history. Thus, the Report of

the Senate Committee on Interior and Insular Affairs

accompanying the OCS Act states:

‘*Both Senate and House Bills authorize the

Secretary to make new oil and gas leases, The

House bill establishes a permanent procedure, with

detailed provisions (House Bill, see. 10); the

Senate bill is designed only to meet ‘the present

emergency’ and imposes a minimum of restrictions

on the complete discretion of the Secretary (S.

1901, sec. 8). It is believed that a permanent pro-

cedure is preferable; the practice of limiting the

Secretary's discretion as to leasing procedure and

lease provisions follows the precedent of the Min-

eral Leasing Act, and is not objectionable.” 8.

Rep. No. 411, 83rd Cong., 1st Sess. 36 (1953). (em-

phasis supplied).

The court below, contrary to this legislative history,

grants broad discretion to the Secretary as to leasing

provisions. In embracing such a discretionary view

of the Act, the D.C. Circuit brought itself into direct

conflict with the view of the statute previously articu-

lated by the Ninth Circuit in construing the scope of

the Secretary’s regulatory authority under Section

5(a) of the OCS Lands Act—Union Oil Co. v. Morton,

512 F.2d 743 (9th Cir. 1975).

In Union Oil, a lessee challenged the Secretary’s

de facto termination of a lease by virtue of his refusal

to permit installation of a drilling platform on an OCS

tract. The court ruled against the Secretary in terms

which clearly conflict with the D.C. Circuit’s view that

the Secretary has broad discretion to place termina-

tion clauses in OCS leases:

“TA)lthough 43 U.S.C. § 1334(a)(1) authorizes

regulations providing not only for suspensions

but for any other action affecting operations which

the Secretary determines ‘necessary and ttl

for ‘conservation of natural resources,’ Congress

clearly did not intend to grant leases so tenuous

in nature that the Secretary could terminate them,

in whole or in Fw at will,’’ 512 F.2d at 750

(emphasis added) (footnote omitted).

The decision below permits the Secretary to do pre-

cisely what Union Oil says Congress prohibited—i.e.,

to use his powers under Section 5 of the OCS Lands

Act to grant leases which are ‘‘so tenuous in nature

that the Secretary could terminate them, ... at will.’

We have demonstrated in Part I above that the

D.C. Circuit fundamentally misconstrued the OCS

Lands Act. The circumstances leading up to this mis-

construction of the Act help to explain how the court

of appeals might have made such a mistake. They also

demonstrate, as an independent basis for the issuance

of the writ of certiorari which WOGA here seeks, that

the D.C. Circuit ignored settled principles established

by this Court to assure that declaratory relief is pro-

vided only in cases where it is clearly warranted. See

Powell v. McCormick, 395 U.S. 486 (1969) ; Golden v.

Zwickler, 394 U.S. 103 (1969) ; Maryland Casualty Co.

v. Pacific Coal & Oil Co., 312 U.S. 270 (1941) ; Aetna

Life Insurance Co. v. Haworth, 300 U.S. 227 (1937).

As noted in the statement of the case (pp. 7-8,

supra) the termination issue received little attention

from the parties in their presentation of this case to the

court of appeals. Moreover, the court of appeals re-

fused to apply its construction of the Act to the sole

issue before it in this litigation (the validity of the

Secretary’s Sale No. 39 decision), and the Department

changed position with respect to the termination issue

and came into agreement with the plaintiffs on this

question. Thus, this was not a case where the parties

had the necessary ‘‘adverse legal interests, of sufficient

immediacy and reality’’ to support the issuance of a

declaratory judgment."

There is, moreover, a further compelling reason for

reversing the lower court’s declaratory judgment. As

WOGA pointed out in its petition for rehearing in the

court of appeals, at the very time this case was under

submission, the Congress was (as it still is) giving

focused attention to the question of how best to deal

with the discovery of unanticipated environmental haz-

ards on OCS leases. That fact should have been, but

was not, considered by the court of appeals in issuing

'* Maryland Casualty Co. v. Pacifie Coal & Oil Co., supra, 312

U.S, at 273,

Debt we

Se RE A Bini et

Ot eee Sem ees <td he = tine AT es

i ee ee ee ee

a declaratory judgment as to the termination ques-

tion.” For as this Court held in A. L. Mechling Barge

Lines, Inc. v. United States, 368 U.S. 324, 331 (1961),

declaratory relief should be withheld when ‘‘it appears

that a challenged ‘continuing practice’ is, at the mo-

ment adjudication is sought, undergoing significant

modification so that its ultimate form cannot be con-

fidently predicted.”’

The fact is, to the extent that predictions can be

made about the type of ‘‘termination’’ provision which

Congress might enact, it seems it would be far differ-

ent than the scheme envisioned by the court of appeals

in its declaratory judgment. At the outset of the 95th

Congress, bills were introduced in both the Senate

(8.9) and the House (H.R. 1614) to authorize the

Secretary to cancel leases for environmental, as well

as other reasons. Both bills would amend Section 5(a)

of the 1953 Act to direct the Secretary to promulgate

detailed regulations providing for cancellation of an

OCS lease under specifically defined circumstances.

H.R. Rep. No. 95-590, Ad Hoc Select Committee on the

OCS, 95th Cong., Ist Sess., p. 8 (1977).”

Unlike the lower court’s construction of the 1953

Act, however, the proposed legislation clearly requires

12 WOGA’s brief on the merits indicated that Congress was con-

sidering proposed amendments to the OCS Lands Act bearing upon

the use of termination clauses in OCS leases. As noted above, p. 11,

WOGA’s petition for rehearing advised the court below that both

Houses of Congress had passed bills which would allow for the

termination of OCS leases, albeit with compensation to the lessee.

18 The Senate bill similarly v;vuld allow the Secretary to cancel

leases for environmenial reasons. See 123 Cong. Rec. $11986 (daily

ed. July 15, 1977).

that compensation be paid to lessees when their leases

are cancelled. Thus, as it was reported out of commit-

tee, H.R. 1614 provided that in

‘‘the case of a lease issued after the date of the

enactment of this paragraph . . . the lessee [shall

be entitled] to receive such compensation as he

shows to the Secretary as being equal to the lesser

of (I) the fair value of the cancelled rights as of

the date of cancellation, ... or (II) the excess, if

any, over the lessee’s revenues from the lease (plus

interest thereon from the date of receipt to the

date of reimbursement) of all consideration paid

for the lease and all direct expenditures made by

the lessee... ;

‘‘in the case of a lease issued before the date of

the enactment of this paragraph . . . the lessee

{shall be entitled] to receive fair value in accord-

ance with subclause (1) [above]’’ (House Report

at 8).**

This provision was adopted in the face of hearing

testimony embodying an argument—strikingly similar

to the position adopted by the lower court—that OCS

lessees should be forced to bear the risk of lease can-

cellation:

‘‘T would modify the provision regarding lease

cancellations by explicitly prohibiting compensa-

tion for canceliation of leases issued pursuant to

this proposed law. The risk of lease cancellation

for environmental reasons is financially similar to

the risk of not discovering commercial resources.

Potential bidders routinely consider such risks

when deciding what they will bid.’’ Hearings on

H.R. 1614 before the Ad Hoc Select Committee

%*The Senate bill has a similar compensation provision (S. 9,

§ 204, amending § 5(a) (2), 123 Cong. Ree. 11,986).

on the OCS, House of Representatives, 95th Cong.,

Ist Sess., p. 663 (1977).

It is clear from the House Committee’s action in

reporting out a bill which does provide for compensa-

tion to lessees that this view was rejected. Any doubts

on this score are put to rest by the House Committee’s

report:

‘‘The committee wishes also to insure that ade-

quate compensation would be granted to a lessee

or permittee when cancellation occurs through no

fault of the lessee or permittee ... . Cancella-

tion for environmental reasons would be compen-

sated. ...’’ (House Report at 132).

Moreover, the further revision of the bill after it

was reported out of committee, underscores the

House’s intent with respect to this question. At that

time, Congressman Wiggins of California succeeded

in amending the bill to provide the constitutional meas-

ure of ‘‘just compensation’’ to lessees whose leases

were cancelled for environmental reasons. 124 Cong.

Rec H414 (daily ed. January 31, 1978). As he ex-

plained the amendment which the House then adopted :

‘The record of our ad hoe committee, and surely

the debate thus far in this House, establishes no

compelling reasons for refusing to pay a tenant

his just compensation. The only reason that comes

to mind is that we are frugal, and do not want to

do so. That, I suggest, is not an overriding na-

**TIn much the same manner, the lower court reasoned that

‘OCS leases are inherently risky investments; and since termi-

nation clauses could make such investments riskier still, poten-

tial lessees might well be unwilling to pay as much for leases

with such clauses as they would pay for leases without them.’’

(App. 41a).

tional interest which would justify the denial to

a lessee of constitutional rights.’’ Jd. at H413.

The bill which passed the Senate on July 15, 1977,

also amends section 5(a) of the OCS Lands Act to

provide for cancellation of OCS Leases with payment

of compensation (123 Cong. Rec. 11,986)."* Thus, it is

clear that both Houses of Congress believe it is in

the public interest to require that any termination

power which is given to the Secretary be accompanied

by a corresponding obligation to compensate lessees

for the cancellation of their leases, rather than to in-

vest Interior with the unqualified power to deprive an

OCS lessee of an asset in which it has invested millions

upon millions of dollars.

These recent developments in Congress further

strengthen the showing made in Part I above that

Congress has always recognized that OCS leases should

be structured in a fashion to create fixed property in-

terests, rather than being subject to the discretionary

authority of the Secretary in the manner contemplated

by the court of appeals. These developments also re-

veal the error in the D.C. Circuit’s present exercise

of its declaratory judgment jurisdiction with respect

to the termination question.

Although both Houses of Congress have proposed

amendments to the OCS Lands Act providing termina-

tion with compensation, neither House considered

the general provisions of Section 5 as interpreted by

the court below in issuing its declaratory judgment. It

1® Senate and House conferees were appointed to resolve the dif-

ferences between the two Houses in March of this year (124 Cong.

Ree. at $3964, H2269, daily ed. March 17, 21, 1978). To date, no

conference report has been issued on the pending bills.

is true, of course, that the bills now pending before the

Conference Committee could be amended to correct

the error made by the D.C. Circuit in its interpretation

of the statute. It is obvious, however, that Congress

may simply enact the proposals now before the Con-

ference Committee, almost certainly spawning litiga-

tion as to the continuing effect of the D.C. Circuit’s

construction of the OCS Lands Act.

Under these circumstances, this case constitutes a

most compelling occasion for the enforcement of the

rule of A. L. Mechling Barge Lines v. United States,

supra. Indeed, this is a classic case of the need for

judicial deference to the legislature, rather than ‘‘crea-

tive’’ statutory construction, since only Congress can

provide the compensation arrangements that are nec-

essary for the fair treatment of lessees whose leases

are cancelled for reasons entirely beyond their control.

CONCLUSION

For all the reasons stated above, the petition for a

writ of certiorari should be granted.

Respectfully submitted,

KE. Epwarp Bruce

MarK D. Nozerre

Covington & Burling

888 Sixteenth Street, N.W.

Washington, D.C. 20006

WituiaM M, Meyers

J. Berry St. JoHN

Liskow & Lewis

One Shell Square

New Orleans, Louisiana

70139

Attorneys for Western Oil &

Gas Association, et al.

July 1978

APPENDIX

United States Court of Appeals

FOR THE DISTRICT OF COLUMBIA CIRCUIT

No. 76-1829

STATE OF ALASKA, et al., APPELLANTS

Vv.

CECIL D. ANDRUS, et al.

Appeal from the United States District Court

for the District of Columbia

(D.C. Civil 76-0368)

Argued January 17, 1977

Decided February 24, 1978

Sanford Sagalkin, Assistant Attorney General, Alaska

of the Supreme Court of Alaska pro hac vice by special

leave of Court and Bruce J. Terris with whom Avrum

M. Gross, Attorney General, Alaska was on the brief, for

appellants.

Kathryn A. Oberly, Attorney, Department of Justice,

with whom Peter R. Taft, Assistant Attorney General,

Raymond N. Zagona and William M. Cohen, Attorneys,

Department of Justice, were on the brief, for federal

appellees. Edmund B. Clark, Attorney, Department of

Justice also entered an appearance for federal appellees.

E. Edward Bruce for appellees, Western Oil and Gas

Association, et al.

Before: BAZELON, Chief Judge, LEVENTHAL and

WILKEY, Circuit Judges

Opinion for the Court filed by Chief Judge BAZELON.

BAZELON, Chief Judge: On April 18, 1976, the De-

partment of the Interior (DOI) offered for bid over one

million acres of oil and gas leases in the Gulf of Alaska

(GOA) Outer Continental Shelf (OCS). Appellants chal-

lenge the legality of that lease sale and seek to have it

set aside. They argue both that the Environmental Im-

pact Statement (EIS) prepared by DOI in connection

with the sale does not satisfy the requirements of the

National Environmental Policy Act (NEPA), 42 U.S.C.

§ 4321 et seg., and that the Secretary of the Interior’s

decision to proceed with the sale in April, 1976 was itself

a violation of the Act, because of the alleged inadequacy

of the information available to the Secretary at that time.

Appellants originally sought to enjoin the sale; however,

the district court denied their motion for a preliminary

injunction, and this court refused to grant appellants

an injunction pending appeal. DOI was thus able to

conduct the sale on April 13 as planned. Thereafter, the

parties agreed to submit the case on the merits to the

district court on the basis of the record compiled at the

preliminary injunction stage of the proceedings; the dis-

trict court concluded that the appellees had complied with

all applicable statutes, and entered a final judgment dis-

missing the complaint.

We have determined that, on the facts of this case,

it would be inappropriate for us to set aside the lease

sale and to enjoin the exploratory drilling now underway

in the Gulf of Alaska. However, this is on the premise

that the Secretary’s undertaking prior to the sale, to

confine environmental damage through departmental op-

erating orders governing exploration and drilling, will be

given meaningful effect through prompt reconsideration of

the operating orders already issued, with an environ-

mental impact statement that presents discussion of al-

ternatives.

I, BACKGROUND OF LEASE SALE No, 89

On January 28, 1974, former President Nixon an-

nounced that as part of “Project Independence” '* he was

directing the Secretary of the Interior “to increase the

acreage leased on the Outer Continental Shelf to 10 mil-

lion acres beginning in 1975, more than tripling what

had originally been planned.” * The President ordered the

Secretary, in carrying out this directive, “to ensure that

. . environmental safeguards are observed.” * In addi-

tion, ‘he President pointed out that there would be “no

decision on leasing on the Outer Continental Shelf in the

Atlantic and in the Gulf of Alaska until the Council on

Environmental Quality [CEQ] completes its current en-

vironmental study of those areas.” *

“Project Independence” was the name the former Presi-

dent gave to his program, announced on November 7, 1973,

to free the United States from dependence on foreign sources

of oil. See 9 Compilation of Presidential Documents 1309,

1817 (1978).

*10 Compilation of Presidential Documents 69, 84 (1974),

J.A. at 365.

‘Td.

‘Id,

The CEQ study to which the President referred was

released on April 18, 1974.° That study concluded that

the environmental risks associated with OCS development

varied from region to region but that of the regions

studied, development in the Eastern Gulf of Alaska would

pose the highest level of environmental risks.’ Indeed,

* Council on Environmental Quality, OCS Oil and Gas—An

Environmental Assessment: A Report to the President by the

Council on Environmental Quality (1974) (CEQ Report),

Record No. 7, Exhibit 8.

*Id, at 6. The National Academy of Sciences prepared a

critique of the CEQ study which was included as a part of

that study. The NAS agreed with CEQ that development in

the Gulf of Alaska would entail “high risk,” id. at 194, and

concluded that “[i]t is clear that the available data do not

recommend the development of OCS resources at the present

time in the Gulf of Alaska.” Jd. at 201. See also a report pre-

pared for the Environmental Protection Agency, Energy De-

velopment; The Environmental Tradeoffs, Vol. 3: Relative

Environmental Ranking of Proposed Offshore Continental

Shelf Areas on the Basis of Impacts of Oil Spills (September,

1975) (EPA Report), Record No. 7, Exhibit 17. That study

concluded that of ten OCS regions studied, “[t]he regions

judged most likely to suffer damage from oil spills are Bristol

Bay (Alaska), Cook Inlet (Alaska), and the Gulf of Alaska.”

Id, at 2. See also the EPA’s comments on the draft PEIS,

dated January 10, 1975:

[The CEQ] study documented the need for caution in

development and assessed frontier areas in order of en-

vironmental risk. Some of these areas, especially the Gulf

of Alaska, contain unique and vulnerable natural re-

sources combined with significant natural hazards that

would make precipitous development highly undesirable

from an environmental standpoint.

PEIS, Vol. II, at 380.

The “unique and vulnerable natural resources” to be found

in the Gulf of Alaska area include the largest marine mammal

habitat in the nation, EPA Report, supra at 28, and the most

important bird habitat in the world, with the possible excep-

tion of the Bering Sea, EIS, Vol. III, at 12. The Gulf is also

=ab & Sie & -

CEQ concluded that the “conditions in the Gulf of Alaska

are more severe than the [oil and gas] industry has yet

experienced anywhere in the world.”

On October 18, Interior published a draft program-

matic EIS (PEIS) analyzing the President’s proposed

acceleration of OCS leasing to 10 million acres per year."

The Environmental Protection Agency (EPA) reviewed

the draft and informed Interior that “in accordance with

the EPA rating system for environmental statements, we

have classified this statement as Category 3, Inadequate.” °

The statement, in EPA’s view, had failed to address “key

policy options and managerial issues pertaining to an

accelerated OCS oil and gas leasing program.” ** EPA

an important commercial fishing grounds, EIS, Vol. I, at 197

et seq.; EPA Report, supra at 24-5. The portion of Alaska

bordering on the gulf is a sparsely populated wilderness area

possessing a “pristine environment.” EIS, Vol. I, at 397.

The “significant natural hazards” in this region include an

unusually high susceptibility to serious earthquakes. Of the

areas studied in the EPA Report, supra, the Gulf is “the most

susceptible to severe earthquakes... .” Id. at 45. Richter 7

earthquakes are predicted to occur every three-to-five years in

the Gulf (as opposed to once every 100 years in the Atlantic) ;

Richter 8 earthquakes are predicted once every twenty-five

years. CEQ Report, supra at 81. In addition, wave heights

in the Gulf regularly reach eight feet or more (a factor which

would seriously complicate attempts to clean up any oil spills

in this region). EIS, Vol. II, at 674-5. Storms are more fre-

quent in the Gulf than anywhere else in the Northern Hemis-

phere. CEQ Report, supra at 78-80.

*CEQ Report, supra n. 5, at iii.

*In California ex rel. Younger v. Morton, 404 F. Supp. 26

(C.D. Cal. 1975), appeal pending, No. 76-1431 (9th Cir.), the

PEIS was found to satisfy the requirements of NEPA. The

adequacy of the PEIS is not at issue here.

* PEIS, Vol. II, at 379.

10 Td,

was especially critical of the proposed inclusion of Alaskan

OCS areas in the leasing schedule:

The CEQ Task Force on the OCS, in which DOI

participated, states that the petroleum industry would

encounter a higher environmental risk in the develop-

ment of the Gulf of Alaska than in any other area.

DOI has not been able to demonstrate that the benefit

in oil development outweighs the environmental cost.

In fact, DOI’s own data .. . show conclusively that

because of material constraints, there is no relative

advantage to leasing Alaskan OCS areas at this time

despite the magnitude of Alaska’s reserves. EPA’s

position is therefore that leasing in Alaskan waters

should not be considered at this time and that sub-

stantial technical and biological research is required.

Although we expect that as a result of that research,

exploration and subsequent production will be feasi-

ble at some point in the future, EPA believes that

the point cannot be predicted at this time. In our

opinion, it is therefore neither necessary nor prudent

for Alaskan OCS areas to be placed on the leasing

schedule at this time. We think that the future deci-

sion should be based on (1) baseline and biological

effects research, most of which has not been funded

or planned at this time, (2) coastal zone planning,

and (3) assessment of operating experience with ad-

vanced technologies which can be tested in other OCS

areas,"

In response to these comments from EPA, and to com-

ments from the State of Alaska and others, Interior in-

dicated that it fully concurred in CEQ’s analysis of the

relative environmental risks associated with OCS develop-

ment in various regions,” and agreed that development

in the Gulf of Alaska would be “highly hazardous.”

'' Id. at 8386 (emphasis added).

Td, at 401.

"Id. at 98.

“The Gulf of Alaska,” it said, “is a high risk area.” *

Nonetheless, Interior’s “Proposed Planning Schedule,” is-

sued in November, 1974, scheduled the Gulf of Alaska

for leasing earlier than any of the other, lower-risk areas

examined in the CEQ Study.”

A draft “site-specific”? EIS (EIS or Sale No. 39 EIS)

focusing on this proposed sale in the GOA, was next

prepared. The following steps were taken in the prepara-

tion of that EIS:

a. On November 27, 1974, notice of a call for nomi-

nations of tracts suitable for oil and gas leasing in

the Northern Gulf of Alaska was published in the

Federal Register. . . .

b. In this same notice, Interior requested comments

from all interested parties on possible oil and gas

leasing in the general area of the call for nomina-

tions. Interior asked that such comments include, but

need not be limited to, environmental, technical, and

socioeconomic aspects of potential oil and gas leasing

and development in the area.

ce. After receipt of numerous nominations and

comments pursuant to this notice, the BLM [Bureau

of Land Management] Alaska OCS Office and the

U.S. Geological Survey (USGS) field office prepared

joint tentative tract recommendations.

d. On March 20, 1975, the Secretary publicly an-

nounced that certain identified tracts, totaling 3.5

million acres, had been tentatively selected for fur-

ther environmental study to be made in connection

“4 Id. at 401.

18 See J.A. at 938-4. Delays in initiating the leasing program

led Interior to issue a revised leasing schedule in June, 1975.

EIS, Vol. III, Appendix 1-1. The revised schedule left the

order of proposed sales essentially unchanged. Id.

with the Department’s on-going consideration of a

possible OCS lease sale offshore the Northern Gulf

of Alaska in 1975.

e. Studies and analyses of potential oil and gas

leasing and development of the proposed sale area

were undertaken to provide an information base for

a draft EIS. BLM’s Alaska OCS Office then prepared

a draft EIS for proposed lease sale No. 39, which

was submitted to the Council on Environmental Qual-

ity (CEQ) and made available to federal, state, and

local agencies and interested members of the public

on June 27, 1975....

f. In the course of its consideration of the OCS

oil and gas lease sale proposal in the Northern Gulf

of Alaska, the Department involved the State of

Alaska in the various procedures followed by the De-

partment in considering that lease sale. State and

local agencies and citizens groups were invited to

designate experts to work with BLM’s staff in the

preparation of the draft EIS for the lease sale.

Findings of Fact by the District Court, J.A. at 44-45.

Public hearings were held on the draft site-specific

KIS in Anchorage, Alaska. Government officials, environ-

mental groups, and members of the public were invited to

testify and to submit written comments on the draft

EIS. Pursuant to this request, comments were received

from a number of departments of the State of Alaska.

Id. at 46. In its comments on the draft, EPA again

stressed the lack of reliable information on the environ-

mental hazards that would be encountered in the GOA,

and urged that exploration and development in that

region be delayed:

In view of the substantial environmental risks of pro-

ceding at this time with the proposed sale, we

strongly urge the Department to more actively con-

sider delaying the proposed action while, at the same

ee ee

said oe ae

time pursuing the biological baseline studies and

other studies which would provide a better informa-

tion base for designing and implementing technology

to mitigate the environmental hazards. We believe

the sale should be delayed at least until the biological

baseline work is completed. .. .*

Following the hearings and comment period, the Depart-

ment revised the site-specific draft EIS in light of the

comments received. J.A. at 46.

On November 18, 1975, the Bureau of Land Manage-

ment (BLM) published a final EIS for the lease sale in

the Northern Gulf of Alaska. In addition to the final

EIS, BLM prepared a Program Decision Option Docu-

ment (PDOD) for the lease sale, which discussed the

major issues to be considered by the Secretary and iden-

tified the alternative courses of action that were avail-

16 BIS, Vol. III, at 98 (emphasis added). See also id. at

100-101.

The baseline studies referred to by EPA include, in particu-

lar, a major environmental research program undertaken in

the GOA in mid-1974 by the National Oceanic and Atmos-

pheric Administration (NOAA), in cooperation with BLM.

This research program was described by CEQ as “[t]he prin-

cipal vehicle for improved understanding of frontier OCS

regions....” J.A. at 241. The study was designed as a four-

to-five year research effort. J.A. at 381. However, at the time

the Secretary made his decision to proceed with Sale No. 39,

there had been only one full year of field research. J.A. at

241. Accordingly, the data available from the program at

that time were “quite limited.” Jd. CEQ indicated in Janu-

ary, 1976, that “the environmental/oceanographic data base

for tract selection and operations regulation can be substan-

tially improved by at least two more years of work under” the

NOAA program. Id. Interior indicated in the EIS that “[a]

delay of approximately 14 to 114 years would allow for com-

pletion of all preoperational phases of the environmental

studies program. ...A delay of up to 4 years would allow for

completion of the longer term or ‘ecological relationship’

studies.” WIS, Vol. II, at 678.

10a

able. The PDOD explained the advantages and disad-

vantages of several alternatives, which ranged from a

lease sale of 1.8 million acres to more restricted lease sales

to no sales at all. Id. at 47.

The final EIS for the lease sale makes note of EPA’s

recommendation that the sale be delayed,’ and includes

a brief discussion of the “alternative” of delaying the

sale “pending completion of studies in the Northern Gulf

of Alaska concerning the potential environmental impacts

of offshore minerals development.” ** This final EIS was

once again submitted to EPA, pursuant to § 309 of the

Clean Air Act Amendments of 1970, 42 U.S.C. § 1857h-

7. That provision requires the Administrator of EPA

to “review and comment in writing on the environmental

impact” of federal actions to which NEPA applies. If

the Administrator should determine that a proposed ac-

tion is environmentally “unsatisfactory,” § 309(b) re-

quires him to publish his determination and refer the

matter to CEQ. On December 18, the Administrator in-

formed the Secretary that EPA had

concluded that the action as proposed and presently

scheduled is unsatisfactory from the standpoint of

environmental quality based on its potentially harm-

ful effects to the environment and on the fact that

potential operational and technical safeguards which

might be utilized may not adequately protect the en-

vironment from hazards arising from this action.”

EPA again argued that the sale should be delayed in

order to allow, inter alia, the completion of the environ-

11 BIS, Vol. III, at 114.

18 Jd., Vol. II, at 676-679. See Part II A(2) infra.

1° J.A. at 184.

SC Nae ale te ARS, BRR. eine Gass aad A.

lla

mental studies.” Accordingly, under the terms of § 309

(b), the Administrator referred the question of Sale No.

39 to CEQ.

Following this § 309 referral, the Council, Interior,

EPA, and other interested agencies engaged in an “in-

tensive review of the objections raised by Administrator

Train. ...”** Based on this review, CEQ informed the

Secretary that it agreed with EPA that “it would be

most desirable, from an environmental point of view, ‘to

delay the sale... .”* However, while CEQ urged the

Secretary to “give careful consideration to that opinion,”

it also suggested an alternative, fallback position, in the

event that the Secretary should decide that “a blanket

delay of the sale is not in the national interest... .”™

The Council acknowledged that it was the Secretary who

had to make the “final decision” and who had to balance

“the enviromental benefits” of delay against “the costs

of postponing potential oil and gas production and reve-

nues.” ** But, if after conducting such a balancing, the

Secretary concluded that some sale was required immedi-

ately, CEQ “strongly urge[d] that the sale be limited to

those tracts that, relative to other tracts in the original

proposal, appear to represent the lowest possible degree

of risk of environmental damage.”* Specifically, CEQ

20 Id. at 185-6.

21 Td. at 238.

22 Id. at 2836. Other federal agencies also noted the need for

additional research, and recommended delay. See, e.g., EIS,

Vol. III, at 61 (Coast Guard); J.A. at 211-13 (U.S. Depart-

ment of Commerce, National Marine Fisheries Service) ; EIS,

Vol. III, at 77 (U.S. Department of Commerce) ; J.A. at 407-

08 (Marine Mammal Commission) ; Jd. at 189 (U.S. Fish and

Wildlife Service).

23 J.A. at 236.

*¢ Id.

36 Id.

12a

urged that any sale be restricted to ‘a contiguous block”

of tracts “in the northeasternmost zone of the original

sale proposal,’ comprising a total of some .15 million

acres. This area, in CEQ’s view, was both “highly promis-

ing in oil and gas potential and relatively low in vulner-

ability to environmental dainage.” *°

The Secretary’s staff subsequently prepared a Status

Report and Decision Paper on the CEQ recommendations,

which served as a supplement to the PDOD. It contained

both a discussion of the advantages and disadvantages

of the CEQ recommendations and alternatives to them.

J.A. at 48. Interior also prepared a third option paper

called the Tract Selection Option Paper. This document

supplemented the PDOD by posing additional options for

tract offerings in the event the Secretary decided to pro-

ceed with the lease sale. The options included the recom-

mendation of CEQ. Zd.

Upon consideration of these materials and consultation

with the CEQ, EPA, the National Oceanographic and

Atmospheric Administration and the Federal Energy Ad-

ministration, the Secretary concluded, on February 17,

1976, that sufficient information was available to identify

and reduce environmental risks from exploration and

production in the Sale No. 39 area, and thus decided to

proceed with the sale.

26 Jd. at 236-7. This “limited sale” option was first proposed

to CEQ by EPA, in a letter dated January 19, 1976. Id. at

401. The Administrator of EPA informed the Chairman of

CEQ that “[i]f in the national interest it becomes imperative

to proceed with the sale this year, it is our view that such an

action could only be made environmentally satisfactory” if

the sale were limited to the .15 million acres described in

CEQ’s letter to Interior. Jd. at 404 (emphasis added). CEQ’s

recommendations to Interior were also endorsed by Interior’s

own National OCS Advisory Board. Id. at 418.

atest

Nd Een oe ee ee See ee

De a tO ER lets eebinbsna BRK eater beac Nie cates Katte weal a Sass iad bt Fels as (Balai tid

Fis cee scr AN

13a

On that date, the Secretary informed CEQ of his de-

cision to proceed with the sale as scheduled. In response

to the suggestions that the sale be delayed, the Secretary

indicated that, in his ‘considered judgment,”

delays of ... [several years] in the lease sale would™..

not gain us enough to be worth the cost in postpone-

ment of development of the resources. I am con-

vinced that we already know what the major hazards

are in oil and gas development of the Gulf of Alaska;

further studies will refine that knowledge, but they

are unlikely to change it fundamentally. I am fur-

ther convinced that the operating orders, safety re-

quirements, and lease stipulations developed by the

Bureau of Land Management and the U.S. Geological

Survey will reduce those hazards to levels which are

acceptable.”

Although the Secretary indicated that he had decided to

reduce the amount of acreage to be offered for leasing

from the 1.8 million acres originally proposed to some

1.1 million acres, he rejected the CEQ suggestion of a

sale restricted to .15 million acres of contiguous tracts

in one limited area of the Gulf. The Secretary stated that

the .7 million acres he had eliminated from the sale

removed

by far the most risky tracts ..., that the remaining

overall probability of damaging accidents is low, and

that the potential value to the Nation of discoveries

in this area is very high. If we are to make sizeable

discoveries, we must make sizeable acreage available

for exploration. Unwarranted risks should not be

taken, and in my judgment the tracts I have included

in the offering can all be developed with a favorable

balance of benefits to risks.”

21 Id. at 699.

8 Id. at 700.

l4a

On February 25, 1976, CEQ sent to the Secretary its

final evaluation of the sale decision. The Council in-

dicated that it was “greatly disappointed” with the Sec-

retary’s decision “to proceed with a sale of such magni-

tude and such wide dispersion of tracts.” ** Such a sale

would, in its view, pose “unwarranted risks to the natura!

resources and environment of the northern Gulf of Alaska

and to the communities bordering it;” * accordingly, the

Council expressly affirmed EPA’s determination, made

pursuant to § 309 of the Clean Air Act, that the sale was

“environmentally unsatisfactory.” "' The Council argued

that Interior had “consistently failed to recognize the

truly unique environmental conditions of the Gulf of

Alaska,” and it reiterated its view that “the informa-

tion available simply does not justify” the Secretary’s

decision :

[I]n our view, the OCS program for the Northern

Gulf of Alaska has not progressed to the point where

the information is adequate for making sound leasing

decisions or conducting operations beyond the limited

area we recommended and under the most tightly

controlled conditions.”

On April 6, 1976, after receipt of new data, the

Secretary withdrew an additional 92,000 acres from the

sale area, by deleting all tracts west of Kayak Island,

which had been identified by CEQ as an area of par-

ticular environmental concern." The remaining 189

tracts, comprising approximately one million acres, were

*° Td. at 418.

% Td, at 414.

" Id, See p. 10 supra.

"Id, at 414-415.

Td, at 89.

Se ee eT

oe a ee ee i ei ec

——

15a

offered for sale on April 18, 1976. Of these 189 tracts,

only 81 received bids. The Secretary then rejected five

of those 81 bids and accepted the remaining high bids

for 76 tracts.* These tracts comprised approximately

410,000 acres. J.A. at 49.

II, THE Issues

A. The Alternative of Delay

Appellants make two related arguments with respect

to the Secretary’s decision not to delay the sale. They

argue, first, that the information available to the Sec-

retary in April, 1976, was insufficient, as a matter of

law, to permit a decision to proceed with the sale at that

time. They argue, second, that even if this lack of in-

formation did not absolutely preclude a sale in April,

1976, the Secretary’s response to the suggestions that

the sale be delayed was inadequate; they contend, in

other words, that the analysis in the EIS of the “alterna-

tive of delay” was insufficient, and that the Secretary

failed to articulate (either in the EIS or elsewhere) the

reasons that led him to reject the advice of EPA, CEQ,

and others.

We dicuss each of these arguments in turn.

The district court concluded that “(tjhe information

and the studies which were available to the Secretary

were sufficient to permit the preparation of an EIS which

meets the requirements of NEPA... .” Conclusion of

Law No. 7, J.A. at 56. Appellants strenuously disagree.

They argue that even though the EIS may have been

based on the best information available as of the date

of its preparation, under NEPA the “best available in-

formation” may not be good enough. They contend that

* Id. at 90.

16a

NEPA imposes on agencies affirmative information-

gathering obligations; and until those obligations have

been satisfactorily carried out—until, that is, sufficient

data has been amassed “to provide a factual basis for

responsible impact prediction or mitigation,” Appt.’s Br.

at 31—NEPA imposes an absolute bar to proceeding with

a given project. Jd. at 31-2.

Appellants conceded, of course, that these information-

gathering obligations, like an agency’s other NEPA ob-

ligations, are necessarily bounded by a “rule of rea-

son;” ** but they contend that Interior’s action here was

clearly “unreasonable.” They agree that agencies need

not ‘wait forever to fathom the unfathomable, or arrive

at definitive answers on questions far beyond the exist-

ing state of scientific or technological ability.” Appt. Br.

at 85. Where, however, the data deficiencies are sub-

stantial, and where the present level of scientific ability

is adequate to cure those deficiencies within a reasonable

period of time, appellants contend that those deficiencies

must be rectified before the project may be allowed to

proceed. Thus, in the present case, appellants argue that

the Secretary really had no discretion to reject the sug-

gestions of CEQ and others that the sale be delayed in

order to allow further progress in the ongoing environ-

mental research program. The data to be obtained from

that additional research were, in appellants’ view, an es-

sential prerequisite to the Secretary’s lease-sale decision.

As a preliminary matter, we note that NEPA does,

unquestionably, impose on agencies an affirmative obliga-

tion to seek out information concerning the environmental

consequences of proposed federal actions. Indeed, this is

one of NEPA’s most important functions. As this court

** Natural Resources Defense Council, Inc. (NRDC) v. Mor-

ton. 458 F. 2d 827, 837 (D.C. Cir. 1972).

17a

has held, ‘the basic thrust of an agency’s responsibilities

under NEPA is to predict the environmental effects of

proposed action before the action is taken and those

effects fully known.” Scientists’ Institute for Public In-

formation, Inc., v. AEC (SIPI), 481 F.2d 1079, 1092

(D.C.Cir. 1973). And prediction—or, at least, informed

prediction—is only possible after an agency has con-

ducted a thorough inquiry into all aspects of the con-

templated project and the area to be affected.

Predictions, however, by their very nature, can never

be perfect; and the information available to an agency

could always be augmented. The question in each case

is, “How much information is enough?” And that is not

a question to which NEPA provides a clear, firm answer.

Certainly, NEPA cannot be

read as a requirement that complete information con-

cerning the environmental impact of a project must

be obtained before action may be taken. If we were

to impose a requirement that an impact statement

can never \. prepared until all relevant environ-

mental effects were known, it is doubtful that any

project could ever be initiated.”

Some element of “speculation” is “implicit in NEPA.” ”

And just as agencies may not be allowed “to shirk their

responsibilities under NEPA by labeling any and all dis-

cussion of future environmental effects as ‘crystal ball

** Jicarilla Apache Tribe of Indians v. Morton, 471 F. 2d

1275, 1280 (9th Cir. 1973) (emphasis added). Some environ-

mental impacts will always be unknown at the time a decision

to proceed is made; indeed, “one of the functions of a NEPA

statement is to indicate the extent to which environmental

effects are essentially unknown.” SIPI, supra, at 1092.

*' SIPI, supra, at 1092.

18a

inquiry,’” ** so also agencies may not be precluded from

proceeding with particular projects merely because the

environmental effects of that project remain to some ex-

tent speculative. NEPA simply does not specify the quan-

tum of information that must be in the hands of a

decisionmaker before that decisionmaker may decide to

proceed with a given project. Rather,

NEPA was intended to ensure that decisions about

federal actions would be made only after responsible

decisionmakers had fully adverted to the environ-

mental consequences of the actions, and had decided

that the public benefits flowing from the actions out-

weighed their environmental costs.”

One of the costs that must be weighed by decisionmakers

is the cost of uncertainty—i.e., the costs of proceeding

without more and better information. Where that cost

has been considered, and where the responsible decision-

maker has decided that it is outweighed by the benefits

of proceeding with the project without further delay, the

courts may not substitute their judgment for that of

the decisionmaker and insist that the project be delayed

while more information is sought. Kleppe v. Sierra Club,

427 U.S. 390, 410 n.21 (1976).

We thus hold that the Secretary was not required, as

a matter of law, to await the results of the ongoing

8 Id.

* Jones v. District of Columbia Redevelopment Land

Agency, 499 F.2d 502, 512 (D.C.Cir. 1974).

*’ Nor are the environmental agencies empowered to substi-

tute their judgment for that of the responsible agency official.

As the CEQ noted in its letter of January 28, 1976, to the Sec-

retary, urging that the sale be delayed, “[t]he Council recog-

nizes, of course, that the final decision is yours and that you

must decide whether the environmental benefits gained by

such delay outweigh the costs of postponing potential oil and

gas production and revenues.” J.A. at 236.

iiziek i ded GRE. <cath

19a

studies before deciding to proceed with the lease sale.

Even though the “alternative of delay’ was vigorously

advocated by CEQ, EPA, and others, it is the Secretary

ot the Interior who has been charged by Congress with

the responsibility for deciding whether, and when, to

lease portions of the OCS; in making those decisions, the

Secretary did have the discretion to reject the advice that

had been offered to him.

While the Secretary was thus not required to accept

the “alternative of delay,” he was required to give full

and careful consideration to that alternative prior to

reaching his decision. Section 102(2)(C) of NEPA, 42

U.S.C. § 4882(2)(C), specifies that an EIS must con-

tain a “detailed statement” of “alternatives to the pro-

posed action.” And §102(2)(E) of the Act requires

agencies to “study, develop, and describe appropriate

alternatives to recommended courses of action... .” As

noted supra, the final Sale No. 39 EIS does make note

of EPA’s recommendation that the sale be delayed, and

includes a brief discussion of the “alternative of delay.” *

Appellants argue, however, that that discussion is insuf-

ficient to satisfy the requirements of NEPA.

As this court and others have frequently pointed out,

NEPA requires agencies to engage in a “finely tuned

and ‘systematic’ balancing analysis,” in which the en-

vironmental costs of proposed projects are compared to

and balanced against their economic and other benefits.

Calvert Cliffs’ Coordinating Committee, Inc. v. AEC, 449

F.2d 1109, 1118 (D.C. Cir. 1971). The requirement that

agencies prepare “detailed” environmental impact state-

ments aids this broader purpose in several ways. First,

the statement aids the agency’s own decisionmaking

** See nn.17 & 18, supra.

20a

process, by ensuring that the agency has before it “all

possible approaches to a particular project . . . which

would alter the environmental impact and the cost-benefit

balance.” Jd. at 1114. Moreover, the statement provides

evidence that “the mandated decision making process has

in fact taken place... .” Jd, Finally, and most impor-

tantly, the statement makes it possible for “those removed

from the initial process’—in other agencies, in Congress,

and in the public—“to evaluate and balance the factors

on their own.” Id.; NRDC v. Morton, supra, at 833.

The ‘detailed statement” of “alternatives to the pro-

posed action” called for by § 102(2)(C) of NEPA, 42

U.S.C. § 4832(2)(C), has been aptly characterized as

“the linchpin of the entire impact statement.” Monroe

County Conservation Council, Inc. v. Volpe, 472 F.2d 693,

697-8 (2d Cir. 1972); NRDC v. Callaway, 524 F.2d 79,

92-8 (2d Cir. 1975). This statement must not simply

list possible alternatives; instead, it must contain a “de-

tailed and careful analysis of the relative environmental

merits and demerits of the proposed action and possible

alternatives. . . .” NRDC v. Callaway, supra at 92;

NRDC v. Morton, supra at 884. The CEQ’s Guidelines

on the Preparation of Environmental Impact Statements

indicate that the statement should include a “rigorous

exploration and objective evaluation of the environmental

impacts of all reasonable alternative actions,” including

“the alternative of taking no action pending further study

....” 40 C.F.R. § 1500.8(4). The statement’s analysis

“should be sufficiently detailed to reveal the agency’s

comparative evaluation of the environmental benefits,

costs and risks of the proposed action and each reason-

able alternative.” Jd. The discussion of alternatives

“must go beyond mere assertions” if it is to fulfill its

vital role of “exposing the reasoning and data of the

agency proposing the action to scrutiny by the public

and by other branches of the government.” Callaway,

supra at 98, 94; Silva v. Lynn, 482 F.2d 1282, 1286-7

2la

(1st Cir. 1973). An agency may not, in other words,

“keep[] its thought processes under wraps.” Ely v. Velde,

451 F.2d 1180, (4th Cir, 1971).

The discussion of the “alternative of delay” in the Sale

No. 39 EIS is brief—consisting of three pages out of

1700 in the final EIS. See EIS, Vol. II at 676-79. The

statement discusses the benefits of delay in general

terms.” It notes that “a delay of approximately 1% to

144 years would allow for completion of all preoperational

phases of the environmental studies program in the north-

ern Gulf of Alaska ....” Id. at 678. And the state-

ment concedes that “|(t)he information obtained from the

completion of these studies prior to holding the proposed

sale would provide a greater degree of confidence than

presently exists concerning the leasing of any given OCS

area and the siting of offshore facilities, including

pipelines, in relation to geologic, oceanographic, and biotic

parameters.” Jd. However, the statement contains no in-

formation whatsoever as to the costs of such a delay.

* Aside from the statement’s reference to the “greater de-

gree of confidence” that would result from delay, the only dis-

cussion of the benefits of delay is the following:

Completion of the studies could provide the necessary in-

formation that could prompt deletion of a tract or tracts

prior to holding the sale based on unacceptable potential

environmental risk. Presently unknown impacts could be

avoided or reduced, but until all studies are completed

and analyzed, impacts can only be speculative.

It is conceivable that information obtained from the en-

vironmental studies would provide a basis for the prep-

aration of additional special stipulations and for the

additional protection of environmental values prior to

holding the proposed sale.

RIS, Vol. Il, at 679. The discussion of the alternative of delay

makes no reference to the vigorous advocacy of this alterna-

tive by EPA, the State of Alaska, and others.

22a

NEPA’s requirement that an agency discuss “alterna-

tives to the proposed action” is subject to a “rule of

reason,” ** and that rule of reason necessarily governs

both which alternatives the agency must discuss, and the

extent to which it must discuss them. Here the EIS

does not even avert to the costs of delay in terms of lost

oil production opportunities, and makes no attempt to

quantify the benefits to be expected from delay. Nor

can quantitative estimates uf the costs and benefits of

delay be found in any of the documents prepared by

DOI after publication of the final EIS, including the

Secretary’s letter of February 17, 1976 to the Chairman

of the CEQ, informing him of the decision to proceed

with the sale as scheduled.“

** See n. 86 supra. \

** See p. 13 supra.

The Secretary’s duty to consider the alternative of delay is

underlined by the EPA/CEQ determinations, made pursuant

to § 809 of the Clean Air Act, that the sale was “environmen-

tally unsatisfactory.” See nn. 19 & 31 and accompanying text

supra. As we have noted, these determinations did not bar

Interior from proceeding with the sale; but they did give rise

to a heightened obligation on Interior’s part to explain clearly

and in detail its reasons for proceeding. It seems clear to us

that § 309 was intended to do something more than merely

reiterate § 102(2)(C) of NEPA, which itself requires the

transmittal of impact statements to CEQ. The Senate Report

on § 309 notes that NEPA permits CEQ review of environ-

mental impact statements, but suggests that mere review may

not be enough:

[NEPA] does not assure that Federal Environmental

agencies will effectively participate in the decisionmaking

process. It is essential that mission-oriented Federal

agencies have access to environmental expertise in order

to give adequate consideration to environmental factors.

S.Rep. No. 1196, 91st Cong., 2d Sess. 48 (1970). It was evi-

dently Congress’ intention, in enacting § 309, to make the

environmental agencies more “effective participants” in the

decisionmaking process, and to assure more “adequate consid-

~~ =

i ae

23a

The question is, was it reasonable to proceed without

quantitative estimates? *° Appellants do not indicate how

the Secretary could have made a quantitative estimate

of benefits to be expected from delay. We can assume

for discussion that the Interior Department had data

that would permit some quantitative estimate of crude

oil that might be available from the lease sites, and

the time frame of delivery. There still remains the ques-

tion whether and to what extent NEPA requires, in these

circumstances, something in the nature of a quantitative

cost-benefit analysis. Often such analyses are misleading,

since the difficulty of assigning quantitative values to

environmental considerations tends to minimize their sig-

eration” of their views by the “mission-oriented Federal agen-

cies.” We believe that this requires, at a minimum, that

where the environmental agencies have concluded that a par-

ticular project is “environmentally unsatisfactory,” and where

a “mission-oriented” agency has nonetheless decided to pro-

ceed with the project, it must articulate clearly its reasons for

doing so. In light of our conclusion that it would be anomalous

to set aside the lease sale at this late date, we find it unneces-

sary to determine with further precision the nature of the

added burden imposed on the agency by § 309.

*° Speaking only for himself, the writer of this opinion be-

lieves that the court should also consider whether the Secre-

tary’s balancing was sufficiently particularized—whether he

was required to weigh these energy resources against the un-

usually grave environmental risks of this particular sale.

Although “the energy shortage is practically a matter capable

of judicial notice,” Govt. Br. at 56 n.29, this does not mean that

the mere invocation of the energy shortage necessarily consti-

tutes a sufficient explanation for every policy decision that will

in any way alleviate that shortage. The “energy shortage” is

unhelpful as an explanation because it proves far too much—it

would also justify (or fail to justify) a sale larger, earlier, or

less regulated than the sale at issue here. This kind of “explana-

tion” may preclude intelligent evaluation of the Secretary’s

decision by those outside the agency—and it was precisely that

kind of evaluation that NEPA was intended to facilitate.

24a

nificance. In the last analysis the decisionmaker is left

with a comparison of non-commensurable entities—dam-

age to the environment versus added energy resources.

We recognize that it is a central purpose of NEPA to

compel an agency to make such comparisons. Yet the

agency retains, under NEPA, reasonable discretion to

decide when it has sufficient information to choose in-

telligently between alternative courses of action that af-

fect the environment. The Secretary’s letter to the chair-

man of CEQ stated that this was an “especially difficult

instance of the problem of balancing two of the Nation’s

nighest priorities, energy supply and environmental pro-

tection” but that he had become convinced “that on bal-

ance it is in the National interest to move ahead with

the lease sale.” *

For the present, we find it unnecessary to decide

whether the Secretary’s rejection of the alternative of

delay represents a reasonable exercise of this discretion.

The period of delay originally recommended by EPA and

CEQ has by now very nearly elapsed. It would obviously

be somewhat anomalous to set the sale aside now, so that

the Secretary could reconsider whether, in early 1976,

he should have postponed a sale decision until mid-1977.

More importantly, however, although the Secretary de-

EIS, the Secretary also apparently had before him at the time

he made the decision to proceed a so-called Program Decision

Option Document (PDOD) prepared by BLM, and a “Status

Report and Decision Paper” on CEQ’s suggestions prepared

by the Secretary’s own staff. Govt. Br. at 10-12, 55. The

PDOD’s discussion of the option of delay simply repeats, vir-

tually verbatim, the discussion of that subject in the EIS. See

J.A. at 518-519. The “Status Report and Decision Paper,”

J.A. at 450-51, is somewhat more helpful, but there is abso-

lutely no indication in the record that the Secretary’s decision

to proceed with the sale was, in fact, premised on this staff

analysis of the “costs of delay.”

25a

cided not to delay a sale decision pending the results of

the studies in the Gulf, those studies have been continu-

ing. Accordingly, most, if not all, the data that CEQ

considered necessary for the initial sale decision have

by now presumably been gathered; and these data will

obviously be available to the Secretary when he considers,

on remand, whether to change the operating orders.

B. The Operating Orders

The OCS Lands Act, 43 U.S.C. § 1881 et seq., grants

to the Secretary of the Interior broad responsibility for

administering an oil and gas leasing program on the

OCS. That responsibility has in turn been divided be-

tween two subdivisions of the Interior Department (sub-

ject, of course, to the Secretary’s ultimate supervisory

authority). The Bureau of Land Management is charged

with the primary responsibility for administering the

actual leasing of particular tracts. See 43 C.F.R..§ 3300

et seq.; see also Affidavit of Stanley Doremus, Deputy

Assistant Secretary of the Interior for Program Dévelop-

ment and Budget (Doremus Affidavit), J.A. at 649-650.

It is thus BLM that conducted Lease Sale No. 39, and

that authored the EIS challeged here. On the other hand,

the United States Geological Survey (USGS) has the

primary responsibility for supervising and regulating

the lessees’ operations on the leased tracts. See 30 C.F.R.

§ 250.1 et seg. and EIS, Vol. II, at 558; see also EIS,

Vol. III, at 164. In carrying out this supervisory au-

thority, USGS both enforces the operating regulations set

forth at 80 C.F.R. § 250.1 et seqg., and promulgates de-

tailed “operating orders” (hereinafter, Orders) for each

region in which drilling operations are contemplated.

These Orders govern the manner in which exploration

and development may be carried out, and specify, inter

alia, the safety and environmental standards that lessees

will be required to meet. See 30 C.F.R. §§ 250.2(j);

26a

250.11; 250.12(a). USGS published draft Orders for

the Gulf of Alaska on January 6, 1975; these Orders

were adopted, with some revisions, effective March 1,

1976."

The draft Orders are attached as an appendix to the

EIS published November 18, 1975. The contents of the

Orders is described briefly in a section of the EJS en-

titled “Mitigating Measures Included in the Proposed

Action.” * Appellants argue that more was required.

They note that decisions regarding how OCS operations

are to be conducted, which are incorporated in the Or-

ders, may be at least as significant as decisions regarding

whether to allow OCS development at all in a particular

region. Appellants’ Br. at 10. Accordingly, they contend

that Interior was required to prepare a “detailed” evalu-

ation of the environmental impact of the Orders, either

in a separate EIS focusing on the Orders themselves,

or as a part of the Sale No. 39 EIS. In particular, they

argue that Interior was required to evaluate alternatives

to those Orders that were actually adopted.

As a preliminary matter, we agree with the district

court that the Secretary was not required to prepare a

separate EIS on the Orders, and that “[i]t was within

the discretion of the Secretary to consider the OCS Orders

within the context of the EIS for Sale No. 39.” °° While

the Orders may have considerable impact on the environ-

ment, that impact can arise only after a lease sale has

been held and drilling operations have commenced under

740 Fed. Reg. 1086 (1975), reprinted at EIS, Vol. III,

Appendix 2.

4841 Fed. Reg. 10105 (1976), reprinted in J.A. at 216 et seq.

*° BIS, Vol. II, at 552 et seq.

°° Conclusion of Law 8, J.A. at 56.

pi oa as tonnaeis

27a

the terms of the Orders. The promulgation of the Orders

cannot, by itself, affect the environment in any way. Cf.

NRDC v. NRC, 547 F.2d 683, 653 n.57 (D.C.Cir. 1976),

cert. granted sub nom. Vermont Yankee Nuclear Power

Corp. v. NRDC, 429 U.S. 1090 (1977). The Secretary

was, of course, free to prepare a separate EIS on the

Orders; and such a course might well have ‘seen desirable,

since the Orders do extend to a much broader geographical

area than any individual lease sale. Nonetheless, we

cannot say that his decision to defer consideration of the

impact of the Orders until a particular sale was con-

templated was unreasonable.

While the Secretary could thus consider the impact of

the Orders within the context of the Sale No. 39 EIS,

the more important issue is whether the “consideration”

given to the Orders in that EIS was adequate. We con-

clude that it was not. As noted supra, the EIS merely

describes the Orders that had been proposed and adopted;

there is no attempt to evaluate the environmental impact

of those orders, as opposed to other Orders that might

have been adopted. In essence, the EIS simply treats

the Orders as a given—i.e., the environmental impact of

the lease sale is evaluated on the assumption that any

exploration and development in the sale area will be

conducted in accordance with those particular orders."

** Indeed, when appellants suggested, in their comments on

the draft EIS, that a fuller evaluation of the Orders was re-

quired, BLM responded by simply disclaiming any responsi-

bility for the Orders or for evaluating them:

It is not the responsibility of BLM to establish operating

requirements or to supervise OCS operations. The State

of Alaska has reviewed the proposed OCS orders for the

Gulf of Alaska published January 6, 1975, and submitted

comments. These comments were considered in preparing

the Gulf of Alaska Orders which will be issued shortly.

28a

The Secretary argues that a fuller evaluation of the

Orders, and of possible alternative orders, was not re-

quired, because “these orders are nothing more than

methods of mitigating potential adverse environmental

impacts and promoting safety ....” Govt. Br. at 47.”

Further comments on operating practices should be sub-

mitted at that time.

EIS, Vol. III, at 164. The Department of the Interior has

overall responsibility both for deciding whether to lease a

particular area, and for regulating the manner in which the

lessees’ operations are conducted. The fact that Interior has

chosen to bifurcate that authority between two of its subdivi-

sions obviously cannot affect in any way its responsibility to

evaluate fully the environmental impacts of a lease sale.

“The Secretary also argues that the Orders need not be

analyzed in an EIS because “they are subject to change and

retroactive incorporation into prior leases whenever USGS

determines that more stringent standards may be achieved.

... Govt. Br. at 47. While this observation is correct, see

Doremus affidavit, J.A. at 660, we fail to see how the fact that

the Orders may someday be changed affects Interior’s obliga-

tion to analyze their present environmental impact. Obvi-

ously, even a short-lived project may constitute a “major Fed-

eral action significantly affecting the quality of the human

environment... .” 42 U.S.C. § 4882(C). Indeed, one of the

items that must be included in the “detailed statement” on a

“major Federal action” is an analysis of “any irreversible and

irretrievable commitments of resources which would be in-

volved in the proposed action... .” 42 U.S.C. § 4882(C) (v).

The clear implication is that the “action” itself need not be

“irreversible” in order to require the preparation of an EIS.

It is certainly possible that any operations conducted pursu-

ant to the Orders as presently written could entail “irreversi-

ble and irretrievable commitments of resources,” even if the

Orders were later to be amended.

The Intervenors suggest that it “just wouldn’t make sense”

to require an analysis of the Orders now, since additional

analyses might then be required whenever the Orders were

amended. Interv. Br. at 58. However, minor modifications

of the Orders would presumably not constitute a “major Fed-

29a

This description of the Orders raises the question of

whether or in what circumstances NEPA applies to

agency action that has a beneficial effect on the environ-

ment.

We find it unnecessary to address this broad issue on

the facts before us. The Operating Orders in the case

at bar present a far narrower question. They are not

bestowed by the Secretary of the Interior out of sheer

beneficence toward the environment. Rather, they rep-

resent a central mechanism by which the Secretary car-

ries out his undertaking to keep to a minimum the ad-

verce impact of the lease sale upon the environment.

Specifically, the Secretary’s decision to proceed with the

lease sale without delay was based on the premise of

protective operating orders. This is set forth in the

critical letter of the Secretary to the Chairman of CEQ,

dated February 17, 1976, advising of his decision to

proceed with the sale. He stated his reasons as follows:

The first question we have faced is whether the sale

of leases in the Gulf of Alaska should be held now

or should be delayed for further study and prepara-

tion.

We believe that our information on geologic hazards

is already sufficient for holding the sale; the U.S.

Geological Survey advises me that it has completed

analysis of both public and proprietary geophysical

data on such hazards, and is professionally satisfied

that it now has sufficient knowledge to make recom-

mendations on tracts which should or should not be

included. Moreover, in the course of the last few

eral action,” and would therefore not require the preparation

of a new or updated EIS; and if USGS were to propose a

significant amendment of the Orders, we would see nothing

“senseless” in a requirement that additional environmental

analyses be performed.

30a

weeks, working in consultation with the Environ-

mental Protection Agency, we have progressed sub-

stantially in our drafting of operating orders for

the Gulf of Alaska, and we will shortly issue in final

form those orders which affect exploratory activity

undertaken immediately after leasing.

On the other hand, I must substantially agree with

your estimates of the length of the delay that would

be necessary to improve significantly our knowledge

and readiness in other areas. It will be several years

before further biological and oceanographic studies

will yield most of their results; and it may be that

long or longer before the State of Alaska will accom-

plish the major legislative and planning steps which

it would prefer to have complete before leasing.

It is my consicered judgment, based on all these fac-

tors, that delays of such length in the lease sale would

not gain us enough to be worth the cost in postpone-

ment of development of the resources. I am con-

vinced that we already know what the major hazards

are in oil and gas development of the Gulf of Alaska;

further studies will refine that knowledge but they

are unlikely to change it fundamentally. I am fur-

ther convinced that the operating orders, safety re-

quirements, and lease stipulations developed by the

Bureau of Land Management and the U.S. Geological

Survey will reduce those hazards to levels which are

acceptable.

J.A. at 698-99.

In this context, agency action that might otherwise

be viewed as “merely” beneficial to the environment takes

on a new cast. When forthcoming operating orders are

expressly viewed by the Secretary as part of the basic

premise for the kind of consideration of adverse environ-

mental impact that is mandated by NEPA, then the

completion of the undertaking—issuance of protective op-

3la

erating orders—must be conducted with full considera-

tion of environmental consequences and alternatives.

It would not be meaningful to consider at length, at

the present time, what kind of discussion of environmental

impact of operating orders and alternatives should have

been considered either in the EIS for Sale No. 39, or

at a subsequent time prior to the sale. The Secretary

provided no discussion whatever in the EIS. Yet the

district court found that the Secretary, in deciding on

February 17, 1976, to proceed with the sale, not only

reduced the size of the sale area by forty percent, but

“revised the OCS Operating Orders to incorporate in

substantial measure the recommendations made by CEQ

and EPA. ...” J.A. at 48. In any case, we must now

be concerned with the present, and at the present time

there is presumably more information that should be

taken into account in any discussion of the environmental

impact of the operating orders.

As we have noted, supra, an agency’s responsibility to

evaluate alternatives to a proposed action is governed

by a “rule of reason.” In this case, that “rule of reason”

would require, at a minimum, an evaluation of any rea-

sonable alternative orders put forward by those com-

menting upon Interior’s own proposed orders. However,

the “primary responsibility” for carrying out NEPA’s

mandate rests with the relevant agency, which may not

simply “sit back, like an umpire, and resolve adversary

contentions” presented to it. Calvert Cliffs Coordinating

Comm. v. AEC, 449 F.2d 1109, 1119 (D.C.Cir. 1971).

See also Aeschliman v. NRC, 547 F.2d 622, 627 (D.C.

Cir. 1976), cert. granted sub nom. Vermont Yankee

Nuclear Power Corp. v. NRDC, 429 U.S. 1090 (1977).

Accordingly, an analysis limited to the precise orders

suggested to Interior might not necessarily fulfill its

NEPA responsibilities. The nature and form of environ-

mental analysis required in any given case are matters

32a

left to the discretion of the agency involved,” and we will

therefore not attempt to prescribe how Interior should,

on remand, conduct its analysis of the impact of the

Orders. We note, however, that one option open to In-

terior would be to analyze the impact of a range of

operating orders—it could, in other words, compare each

of the Orders promulgated by USGS to relatively more

strict and relatively less strict Orders. But whatever

the form of the analysis chosen by Interior, the goal

must be to provide all those reading the statement with

“information sufficient to permit a reasoned choice of

alternatives so far as environmental aspects are con-

cerned.” NRDC v. Morton, supra at 836. See also En-

vironmental Defense Fund, Inc. v. Corps of Engineers,

492 F.2d 1123, 1186 (5th Cir. 1974).

C. Termination Clauses

Appellants argue that the environmental hazards and

uncertainties of drilling in the Gulf of Alaska could

have been substantially mitigated by the inclusion of

“termination clauses” in the leases sold by Interior. As

described by the appellants, such clauses would provide

that the Secretary could terminate a lease if environ-

mental hazards, unknown or unforeseen at the time of

leasing, subsequently arose or were discovered. Appel-

lants contend that the possibility of including such termi-

nation clauses in the leases constitutes an “alternative

to the proposed action” that should have been considered

by the Secretary and evaluated in the EIS. The Secre-

tary contends, however, that he lacks the statutory au-

thority to include such clauses in OCS leases, and he

therefore concludes that “termination clauses” do not con-

stitute the kind of “alternative” he was obligated to

consider.

53 See, e.g., Jones v. District of Columbia Redevelopment

Land Agency, supra at 510; SIPI, supra at 1092.

‘

33a

The Secretary argues that, under the OCS Lands Act,

leases may be cancelled only where the lessee has been

guilty of some wrongdoing—i.e., where the lessee has

done (or failed to do) something in violation of the

lease’s terms, of regulations in effect at the time of the

lease’s issuance, or of the Act itself. In his view, a termi-

nation clause would therefore violate the Act, since it

would condition cancellation not on any wrongdoing by

the lessee, but rather on the occurrence of some event

wholly outside the control of the lessee, namely the dis-

covery of a previously unforeseen environmental hazard.

The Secretary bases his interpretation primarily on two

specific provisions of the Act. The Act provides that the

“issuance and continuance in effect of any lease... .

shall be conditioned upon compliance with the regula-

tions issued under this subchapter and in force and

effect on the date of the issuance of the lease... .”

43 U.S.C. § 1334(a) (2); and the Act further provides

that a lease may be cancelled whenever the lease owner

“fails to comply with any of the provisions of this sub-

chapter, or of the lease, or of the regulations issued under

this subchapter and in force and effect on the date of the

issuance of the lease... .” 48 U.S.C. § 1884(b) (1), (2).

In the Secretary’s view, this cancellation provision was

intended by Congress to provide the exclusive means by

which a lease might be cancelled.

In our view, this interpretation is inconsistent with

other specific provisions of the Act, and with the evident

Congressional intent to grant to the Secretary broad

discretion in the administration of the OCS leasing pro-

gram. In charging the Secretary with the administra-

** An agency’s interpretation of a statute it is charged with

administering is normally entitled to deference from the

courts. Train v. NRDC, 421 U.S. 60, 87 (1975); Udall v.

Tallman, 380 U.S. 1, 16 (1965). Such deference is particu-

larly due when the statutory interpretation at issue “involves

34a

a contemporaneous construction of a statute by the men

charged with the responsibility of setting its machinery in

motion, of making the parts work efficiently and smoothly

while they are yet untried and new.” Udall v. Tallman, supra

at 16 (citation omitted). The government argues in its brief

that the Secretary has consistently interpreted the Act, since

its passage in 1958, to bar the inclusion of “termination

clauses” in OCS leases. Govt. Br. at 52. There is, however,

no evidence in the record to support this assertion. The only

evidence in the record of the Secretary’s “long-established

position on lease termination,” Govt. Br. at 50, n.26, is an

affidavit prepared for this litigation by Stanley Doremus,

former Deputy Assistant Secretary of the Interior for Pro-

gram Development and Budget. J.A. at 703-707. This affi-

davit is conclusory in tone, and does not even assert that the

statutory interpretation in question is “long-established” or

dates back to the passage of the Act. While Mr. Doremus

states that Interior Department officials have ‘‘administered

and supervised the OCS leasing program on the understanding

that the Secretary .. . does not possess the legal power to

terminate such leases,” id. at 705, he does not explain when,

how, or in what context that “understanding” arose. More-

over, as the passage just cited demonstrates, Mr. Doremus

consistently blurs the line between two legally distinct ques-

tions of statutory authority—i.e., 1) whether the Secretary

has the authority to include a termination clause in the OCS

leases he offers for sale, and 2) whether he has the much

broader authority to cancel a lease even if it does not contain

such a clause.

Typically, of course, an agency’s statutory interpretation

may simply be inferred from the action the agency has taken.

See, e.g., Train v. NRDC, supra, and Udall v. Tallman, supra.

Here, however, where the issue is the agency’s inchoate, dis-

cretionary authority, our task is not so simple—the fact that

the agency has chosen not to exercise that authority does not

constitute evidence either of a lack of such authority, or even

of a “long-established position” that the authority is lacking.

Cf. FTC v. Dean Foods Co., 384 U.S. 597, 610 (1966) ; Na-

tional Petroleum Refiners Asa’n. V. FTC, 482 F.2d 672, 696

(D.C. Cir. 1978), cert. denied, 415 U.S. 951 (1974). Accord-

ingly, where the only evidence of an agency's statutory inter-

pretation is contained in an ambiguous litigation affidavit, pre-

35a

tion of the leasing program, the Act gives him “very

broad authority, with few guidelines.” The Act pro-

vides that

pared some twenty-three years after the enactment of the rele-

vant statute, we conclude that that interpretation is entitled

to no special deference.

* H. Rep. No. 1084, 94th Cong., 2d Sess. 86 (1976). This

Report, prepared by the House’s Ad Hoc Select Committee on

the OCS, accompanied the proposed OCS Lands Act Amend-

ments of 1976, which would have substantially revised the

1953 Act. As the Report makes clear, it was precisely be-

cause of the breadth of the Secretary's discretion under the

1953 Act that the Committee wished to amend the Act. The

Report describes the 1953 Act as

an all too general piece of legislation containing few man-

dates for the Secretary of the Interior in carrying out

his important responsibilities in leasing OCS oil and gas

resources. Much of the recent criticism leveled at the

Act is based on its lack of specificity.

Id, at 50. In a section of the report discussing the “need”

for the amendments, the Committee specifically referred to

President Nixon’s 1974 directive to accelerate leasing on the

OCS, see n, 2 supra, and noted that this proposal had

crystallized growing concern on the part of many in

Congress and elsewhere about the open-ended authority

in the 28-year-old legislation. The existing law gives

little guidance to the Secretary of the Interior on how

he is to go about leasing OCS lands.

Id. at 73-4.

Section 204 of the proposed Act would have empowered the

Secretary to “cancel[] ... any lease... , at any time, when

it is determined, after hearing, that continued activity pur-

suant to such lease would cause serious harm or damage” to

the environment. The Secretary argues that this proposed

amendment “underscores the correctness” of his interpreta-

tion of the 1958 Act, since “it demonstrates congressional

awareness of the gap in the Secretary’s existing authority

{with respect to termination clauses].” Govt. Br. at 54. In

our view, however, the fact that Congress considered requir-

36a

[t]he Secretary shall administer the provisions of

this subehapter relating to the leasing of the outer

Continental Shelf, and shall prescribe such rules and

regulations as may be necessary to carry out such

provisions. The Secretary may at any time prescribe

and amend such rules and regulations as he deter-

mines to be necessary and proper in order to provide

for the prevention of waste and conservation of the

natural resources of the outer Continental Shelf... .

Without limiting the generality of the foregoing pro-

visions of this section, the rules and regulations pre-

scribed by the Secretary thereunder may provide for

the assignment or relinquishment of leases, for the

sale of royalty oil and gas accruing or reserved to

the United States at not less than market value, and,

in the interest of conservation, for unitizati», pool-

ing, drilling agreements, suspension of operations or

production, reduction of rentals or royalties, compen-

satory royalty agreements, subsurface storage of oil

ing OCS leases to be cancellable in no way indicates that the

Secretary now lacks the discretion to make them cancellable

by the inclusion of termination clauses. On the contrary, as

we have indicated supra, the Committee’s goal, in proposing

the amendments to the 1958 Act, was to replace the Secre-

tary’s broad, largely unregulated discretion with more specific

guidelines. Thus, in the Report’s comments on § 204 of the

proposed Act, the Committee notes that it would amend “Sec-

tion 5 of the Outer Continental Shelf Lands Act of 1953 by

providing detailed requirements for the administration of

leasing on the OCS.” Jd. at 86 (emphasis added). The Re-

port noted further that

{t]he original subsection (a) of subsection 5 of the OCS

Act [48 U.S.C. § 1834(a), quoted in text, infra] granted

very broad authority, with few guidelines, to the Secre-

tary to promulgate regulations. The amended subsection,

while not limiting the generality of the power granted to

the Secretary to promulgate any appropriate regulation,

does provide statutory guidelines and requirements for

certain types of regulations.

Id. at 86-7 (emphasis added).

—

37a

or gas in any of said submerged lands, and drilling

or other easements necessary for operations or pro-

duction.

43 U.S.C. § 18384(a)(1). Moreover, the Act specifically

provides that leases “shall . . . contain such rental pro-

visions and such other terms and provisions as the Sec-

retary may prescribe at the time of offering the area for

lease.” 43 U.S.C. § 1887(b) (4).

On its face, this latter provision would clearly seem

to grant the Secretary the discretion to include termi-

nation clauses in OCS leases, if he wishes to do so; and

we find nothing in the Act’s legislative history to support

a contrary reading. The legislative history contains vir-

tually no discussion of the two provisions upon which the

Secretary relies.° There is certainly no indication that

Congress intended the cancellation provision set forth at

48 U.S.C. § 1884(b) (1), (2), supra, to be the exclusive

means by which leases might be cancelled. In the absence

of any such indication, we believe that the commonsense

reading of these provisions is the correct one—i.e., in

specifying that the “continuance in effect of any lease. . .

shall be conditioned upon compliance with” the applicable

regulations, 43 U.S.C. § 1884(a)(2) (emphasis added),

Congress indicated only that leases must be cancellable

where the lessee has been guilty of some wrongdoing; ”

but Congress did not thereby indicate that the Secretary

°° See H. REP. No, 418, 88d Cong., lst Sess. (1958) ; see also

S. Rep. No. 411, 88d Cong., lst Sess. (19538).

‘' The original Senate version of the Act had provided only

that “[t]he continuance in effect of any lease . . . may be con-

ditioned upon compliance with the regulations prescribed by

the Secretary under the provisions of this section.” S.Rep.

No. 411, supra n.66 at 24 (emphasis added). The Committee

indicated that it had adopted the present mandatory phrasing

of this sentence in order to “be[] more specific” and to “cre-

at[e] legislative standards.” Jd.

38a

and the lessees are precluded from contracting to make

the leases cancellable for other reasons as well.

Insofar as we are aware, no other court has addressed

the particular question of statutory authority at issue

here. However, our statutory interpretation is fully con-

sistent with the limited caselaw dealing with related

issues. In Boesche v. Udall, 873 U.S. 472 (1968), the

Supreme Court considered whether the cancellation pro-

vision of the Mineral Leasing Act, 30 U.S.C. § 188—

which is very similar to the cancellation provision of the

OCS Lands Act upon which the Secretary here relies °—

* The Intervenors argue that another provision of the Act,

43 U.S.C. § 1887(b), would also preclude the Secretary from

inserting termination clauses in OCS leases. That section

provides in pertinent part:

An oil and gas lease issued by the Secretary pursuant to

the Section shall... (2) be for a period of five years and

as long thereafter as oil and gas may be produced from

the area in paying quantities, or drilling or well rework-

ing operations as approved by the Secretary are con-

ducted thereon ....

The Intervenors contend that a termination clause, which

would create the possibility that a particular OCS lease might

have a duration of less than five years, would be inconsistent

with this provision of the Act. We disagree. There is noth-

ing inconsistent about a lease having both a fixed duration

and a provision permitting the reduction of that duration in

the event of changed conditions. Similarly, of course, where

operations on a lease have been suspended, pursuant to

§ 1384(a) (1) of the Act, the lease term may be extended for

a comparable period, even though this results in a lease with

a duration of more than five years. See Gulf Oil Corp. v.

Morton, 498 F.2d 141 (9th Cir. 1978).

* 80 U.S.C. § 188(a) provides that

[A]ny lease issued under the provisions of this chapter

may be forefeited and canceled . . . whenever the lessee

fails to comply with any of the provisions of this chapter,

39a wy

provided the “exclusive source of the Secretary’s power”

to terminate a lease issued under the terms of that act.

873 U.S. at 475. The Court concluded that it did not.

The specific question addressed in the Boesche case was

whether the Secretary had the authority to cancel in an

administrative proceeding a lease that had been granted

in violation of the Mineral Leasing Act, even though

there had been no wrongdoing on the part of the lessee.

The Court noted that the Secretary of the Interior has

been vested with “general managerial powers over the

public lands,” 878 U.S. at 476, and it held that these

“general powers of management” gave him the authority

to cancel a lease invalid at its inception, and that that

authority had not been withdrawn by the Mineral Leas-

ing Act. Jd, at 478-9,

In reaching this conclusion, the Court pointed out that

the Mineral Leasing Act “was intended to expand, not

contract, the Secretary’s control over the mineral lands

of the United States... ,” 878 U.S. at 481, and noted

that it would be “surprising” to find in the Act a limita-

tion on authority the Secretary already possessed (under

his “general managerial powers”) to cancel leases issued

through administrative error. Jd. The OCS Lands Act

was aimed primarily at resolving questions of federal

versus state control over the OCS; like the Mineral Leas-

ing Act; it represented a substantial expansion of the

Secretary’s authority. Here, too, it would be “surpris-

ing” to find in the Act’s cancellation provision a limita-

tion on the Secretary’s authority to prescribe the terms

and conditions that should be included in each lease.“

of the lease, or of the general regulations promulgated

under this chapter and in force at the date of the

lease ....

question whether it was “true that the primary responsibility

for laying down the conditions for granting leases is to be in

40a

To reiterate, we find only that the Secretary does have

the authority, under the specific terms of the Act, as well

as under his “general managerial powers over the public

lands,” to determine what clauses should be included in

the OCS leases offered for sale; and one of the clauses

he may, in his discretion, include in these leases is a

“termination clause.” We thus need not decide whether

the Secretary, as part of his “general managerial powers,”

has the inherent authority to cancel an OCS lease (even

if the lease does not contain a termination clause) if he

should determine that the public interest requires such

action because of the discovery of a previously unfore-

seen environmental hazard. We note, however, that the

Ninth Circuit has concluded that the Secretary does not

have this sort of inherent cancellation authority. Union

Oil Co, v. Morton, 512 F. 2d 748 (9th Cir. 1975). That

court held that “the Secretary .. . has no intrinsic powers

of condemnation,” id, at 750, and that such powers were

not conferred “by implication” in the OCS Lands Act.

Id, While the Secretary has the authority to suspend

operations on a lease because of an environmental threat,

id., an “open-ended suspension”, like a lease cancellation,

would be equivalent to a “taking.” Jd. at 751. And the

court concluded that such a “taking” was not within the

Secretary’s authority:

Such a taking by interference with private property

rights is within the constitutional power of Congress,

subject to payment of compensation. But Congress

no more impliedly authorized the Secretary to take

the leasehold by prohibiting its beneficial use than by

condemnation proceeding. A suspension for which

the hands of the Secretary of the Interior, and is not to be

delegated or farmed out to the respective State authorities?”

Senator Cordon (the OCS Lands Act’s sponsor in the Senate)

replied: “The bill goes further than that... . Not only the

primary power, but the absolute and complete power, rests in

the Secretary. He is acting for the Federal Government.”

tla

the fifth amendment would require compensation is

therefore unauthorized and beyond the Secretary’s

power.

Id, (citation omitted).

The Secretary argues that the statutory construction

he advances here is supported, and perhaps compelled,

by Union Oil. We disagree. Obviously, the mere inclu-

sion of a termination clause in a lease that is being

offered for sale could in no way be considered a “taking,”

since no one is compelled to purchase the lease and to

subscribe to its terms. More importantly, if a lease did

include a termination clause, and if it were subsequently

cancelled in accordance with the terms of that clause,

no “taking” would have occurred. As the Union Oil

court pointed out, “[a] lease may be terminated by its

own terms in the event that stated conditions subsequent

occur.” Id, at 749. OCS leases are inherently risky in-

vestments; and since termination clauses could make such

investments riskier still, potential lessees might well be

unwilling to pay as much for leases with such clauses

as they would pay for leases without them. Nonetheless,

a lessee who has purchased a lease containing such a

clause, and who has paid a reduced price for the lease

precisely because it does contain such a clause, could

hardly claim that his “property” had been “taken” if at

some point in the future his lease were cancelled in ac-

cordance with the terms of the clause.”

Since we conclude that the Secretary does have the

authority to include termination clauses in OCS leases,

there can be little question that the possibility of in-

cluding such clauses in the leases at issue here does con-

*: Compare the discussion in McBride & Wachtel, GOVERN-

MENT CONTRACTS § 80 (1976) of the government’s “inherent”

right to cancel contracts into which it has entered, and of the

effect of termination clauses in such contracts.

42a

stitute an “alternative to the proposed action” that should

have been evaluated in the EIS and considered by the

Secretary.” Termination clauses would mitigate the ir-

revocability of a decision to conduct a lease sale, and

would thus reduce, at least to some extent, the risk of

proceeding with a sale on the basis of incomplete en-

vironmental data. They would therefore have constituted

a significant alternative to the options of simply proceed-

ing with the sale or of delaying it pending the receipt of

additional data.

We make this declaration in order to provide the de-

claratory relief requested by the complaint, which is

appropriate in light of the omission we have identified.

We do not, however, accord to appellants the further re-

lief they have requested, namely, invalidation of the lease.

We turn now to a discussion of appropriate relief.

III. RELIEF

Appellants urge that the Secretary’s failure to comply

fully with NEPA requires that the lease sale be set

aside as invalid, and that any further drilling in the

Gulf of Alaska be enjoined until compliance has been

achieved. We conclude, however, that such relief is not

required here.

Government leases issued in violation of the law may,

in appropriate cases, be invalidated. See, e.g., Cady v.

Morton, 527 F.2d 786, 798 (9th Cir. 1975); Boesche v.

Udall, supra. And, as this court has noted, “{i]n most

* Even if the Secretary did lack the statutory authority to

include termination clauses in OCS leases, he might still have

been required to evaluate this alternative in the EIS. NRDC

v. Morton, swpra at 837. Indeed, since Congress was consider-

ing amendments to the OCS Lands Act at the time the EIS

was published, see n.65 supra, such a discussion would un-

questionably have proven helpful.

43a

cases, . . . it is possible and reasonable for the courts

to insist on strict compliance with NEPA, and actions

can, consistently with the public interest, be enjoined

until such compliance is forthcoming.” Jones v. District

of Columbia Redevelopment Land Agency, 499 F.2d 502,

518 (D.C.Cir. 1974). However, while there is, in cases

of NEPA noncompliance, a “presumption” in favor of

injunctive relief,’ such relief does not follow automati-

cally from every finding of a violation of NEPA. Rather,

where courts have enjoined ongoing projects, they have

done so primarily to preserve for the relevant decision-

maker the full opportunity to choose among alternatives

that is contemplated by NEPA. By maintaining the

status quo, while additional environmental studies are

performed, or additional alternatives are considered, an

injunction ensures that there will be at least a “pos-

sibility” that the agency will “change its plans in ways

of benefit to the environment. It is this possibility that

courts should seek to preserve.” Jones v. District of

Columbia Redevelopment Land Agency, supra at 518;

Realty Income Trust v. Eckerd, 564 F.2d 447, 456 (D.C.

Cir. 1977). More generally, the purpose of equitable re-

lief, in a NEPA case as in any other, is to remedy the

particular violations that have taken place; accordingly,

where an injunction is not required to preserve the de-

cisionmaker’s opportunity to choose, an ongoing project

should obviously not be enjoined, especially where, as here,

there are substantial public interests in the project’s con-

tinuation. What is called for, in each case, is a “par-

ticularized analysis” of the violations that have occurred,

of the possibilities for relief, and of any countervailing

considerations of public interest. Jd.

Thus, we begin our discussion of the appropriate re-

lief in this case by focusing on the rature of the violations

** Realty Income Trust v. Eckerd, 564 F.2d 447, 456 (D.C.

Cir. 1977).

44a

we have found. We found that the Secretary had failed to

consider certain alternatives to the proposed federal ac-

tion—namely, the possibility of including termination

clauses in OCS leases, and the possibility of conducting

the lease sale pursuant to different, more rigorous operat-

ing orders than those promulgated by USGS. Both of

these alternatives are only partial alternatives to the pro-

posed action. That is, neither of these “alternatives” is,

in fact, an alternative to the holding of a lease sale in

the Gulf of Alaska OCS; rather, each constitutes a dif-

ferent, presumably less environmentally harmful means

of conducting such a sale.”

Consequently, adding these two alternatives to the list

of alternatives considered by the Secretary could not

possibly have led him to reject altogether a lease sale in

the Gulf of Alaska, because both of these alternatives

expressly contemplate such a sale. At most, considera-

tion of these alternatives might have led the Secretary

to choose to conduct the sale somewhat differently—i.e.,

with termination clauses in the leases, or pursuant to

different operating orders. To the extent that the Sec-

retary retains the flexibility to protect the environment

that these alternatives would have provided, there is

simply no need to set the sale aside.

As all parties concede, operating orders may be

changed after a lease sale has been conducted and may

be made effective retroactively upon existing lessees. See

n.52 supra, Consequently, we see no need to set the sale

aside while the Secretary conducts the required environ-

mental evaluation of alternative orders; if, after conduct-

** The fact that these are only partial alternatives does not,

of course, relieve the Secretary of the obligation to consider

them or to include them in the EIS. NRDC v. Morton, supra

at 836; Aeschliman v. NRC, supra at 629 n. 10. But it may

affect the relief that is called for when, as here, the Secre-

tary has failed to fulfill that obligation.

45a

ing that evaluation, he concludes that the orders promul-

gated by USGS should be changed, he may change them.

Any damage that may have resulted from the exploration

that has already been conducted pursuant to the existing

orders could not, in any event, be remedied by an injunc-

tion. Although continued operations pursuant to the

existing orders might conceivably cause some environ-

mental harm during the period in which the Secretary

is conducting the necessary evaluation and is deciding

whether to change the orders, that risk is simply too

small and too speculative to justify the imposition of an

injunction, as long as the Secretary proceeds reasonably

expeditiously.”

Concerning the inclusion of termination clauses in the

leases, the court concludes that it is neither necessary

nor appropriate to require the Secretary to consider such

an option at this time."* A decision to insert the termina-

*’ We note that, for the present, the operations in the Gulf

of Alaska are limited to exploratory drilling; assuming that

oil is discovered during the course of this exploration, it is

estimated that large-scale production operations, with their

correspondingly greater risk of environmental harm, will not

commence until June, 1981. Peak oil production operations

are not expected to take place before 1986-1987. Kleppe Affi-

davit, J.A. at 91-92.

We assume that the Secretary can complete the required

evaluation and consideration of alternative operating orders

prior to the commencement of production operations; if this

assumption should prove to be inaccurate, appellants would,

of course, be free to seek supplemental relief in the district

court.

* Speaking only for himself, the writer of this opinion is of

the view that the Secretary should consider the alternative of

amending existing leases to include termination clauses. The

possible practical drawbacks of this alternative—such as the

difficulty of determining compensation and the possibility that

some lessees would be deterred from further exploration—

should not preclude us from requiring the Secretary to: con-

46a

tion clauses now would create grave legal tangles stem-

ming from the impairment in the value of the leases that

such modification would undoubtedly cause. Beyond the

problem of determining appropriate compensation for

this impairment, there is serious question whether the

insertion of such clauses might deter some private con-

tractors from pursuing this venture, with consequent in-

jury to our energy resource mobilization. If it should

eventually develop that the exploration would produce

environmental damage that cannot be avoided by a modi-

fication of the operating orders,’ or by a suspension of

sider it. These are the types of factors the Secretary should

take into account in determining whether to adopt an alterna-

tive, not reasons to foreclose such a consideration altogether.

Admittedly, the Secretary’s authority to adopt this alterna-

tive is uncertain. Cf. Union Oil Co. v. Morton, supra, dis-

cussed at pp. 40-41 supra. Moreover, the question of the

Secretary’s authority to amend the leases in this manner

was not addressed by the Secretary or by the parties in their

briefs, and should not be decided by this court in the first

instance, particularly when there is no guarantee that the

Secretary would adopt this option. Cf. Collins Securities

Corp. v. SEC, 562 F.2d 820, 827 (D.C. Cir. 1977); Nassar

and Co. v. SEC, Nos. 76-1278 & 1536 (D.C. Cir., October 3,

1977) (cases remanded to the agency for initial resolution of

questions of statutory interpretation). In any event, the Sec-

retary should consider this alternative, whether or not he has

the authority to adopt it. “The mere fact that an alternative

requires legislative implementation does not automatically es-

tablish it as beyond the domain of what is required for discus-

sion, particularly since NEPA was intended to provide a

basis for consideration and choice by the decisionmakers in

the legislative as well as the executive branch.”” NRDC v.

Morton, supra at 887.

** As the Second Circuit has recently observed:

{U]nder § 6(a) (1) of the Outer Continental Shelf Lands

Act, 43 U.S.C. § 1834(a) (1), the Secretary possesses full

power to prescribe “such rules and regulations as may

be necessary” to protect the environment from hazards

47a

operations,” the government would, of course, retain the

posed by exploitation of the continental shelf. Although

a lease may be formally cancellable only for violation of

pre-existing regulations, 43 U.S.C. § 1834(b), § 5(a) (1)

provides that “The Secretary may at any time prescribe

and amend such rules and regulations . . . and, notwith-

standing any other provisions herein, such rules and reg-

ulations shall apply to all operations conducted under a

lease issued or maintained under the provisions of this

subchapter” (emphasis supplied),.... [A] willful vio-

lation of subsequently-issued regulations would consti-

tute a misdemeanor, 48 U.S.C. § 1834(a) (2), ard could

provide the basis for injunctive relief. A properly-

adopted later regulation would have the force of law,

the public interest in compliance would be persuasive in

inducing the courts to grant relief, Virginian Ry. Co. v.

System Federation No. 40, 800 U.S. 515, 552 (1987),

and the government’s control over the seabed and its

threatened resources by virtue of the OCS Lands Act, 43

U.S.C. § 1882(a), would give it standing to seek injunc-

tive relief, see United States v. Ray, 423 F.2d 16, 22 (5th

Cir. 1970).

County of Suffolk v. Secretary of Interior, 562 F.2d 1368,

1381-82 (2d Cir. 1977).

In County of Suffolk the court’s opinion notes that ‘the

Sale 40 leases provide that each lessee must in its OCS op-

erations comply with the Secretary’s regulations as they may

be revised or supplemented to provide for prevention of waste,

for conservation of the OCS and for protection or correlative

rights therein.” Jd. at 1881. We do not readily identify the

actual leases that were issued in the Alaska sale in the record

before us and have not pursued the matter since it is not

central to our opinion. The Second Circuit opinion also indi-

cates that the subsequent regulations would have to be obeyed

in any event since their violation would constitute a misde-

meanor, 48 U.S.C. § 1884(a) (2).

** See County of Suffolk, supra at 1882; Union Oil Co.,

supra at 751-52; Gulf Oil Co. v. Morton, 493 F.2d 141, 144

(9th Cir. 1973). In referring to the possibility of suspension

our intent is to take note of a possible authority without

purporting to recognize it or define it. However, we do take

48a

power to institute formal eminent domain proceedings

at that time, to take the leasehold interests.

In conclusion, we (a) grant the declaratory relief set

forth in section II C supra, and (b) remand to the dis-

trict court, and direct that it remand the case to the

Secretary for consideration of alternative operating or-

ders as we have outlined above.

So ordered.

note that in the Union Oil case the Ninth Circuit stated that if

operations are suspended indefinitely, property rights have

been taken, but that there was authority to promulgate a

temporary suspension. The court said:

A suspension whose termination was conditioned on the

occurrence of events or the discovery of new knowledge

which can be anticipated within a reasonable period of

time would be a valid exercise of the Secretary’s regu-

latory power, and not a fifth amendment taking.

512 F.2d at 752.

49a

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

September Term, 1977

No. 76-1829

Fitep Frsruary 24, 1978

State or Auaska, eT aL., Appellants

Vv.

Creow D. ANprRus, ET AL

APPEAL FROM THE Unitep States District Court

FOR THE District or CoLUMBIA

Before: Bazeton, Chief Judge, LevenrHat and WiLkey,

Circuit Judges.

Judgment

This cause came on to be heard on the record on appeal

from the United States District Court for the District of

Columbia, and was argued by counsel. On consideration of

the foregoing, it is

OrpERED AND ApyupcEp by this Court, that the judgment

of the District Court appealed from in this cause is here-

by reversed, in part, and certain declaratory relief is

granted; and the remainder of the judgment of the Dis-

trict Court is vacated and the case is remanded to the Dis-

trict Court with instructions to remand the case to the

Secretary for consideration of alternative operating or-

ders, in accordance with the opinion of this Court filed

herein this date.

Per Curiam

For the Court

/s/ Grorce A, FisHer

Grorce A. FisHer

Clerk

Date: February 24, 1978

Opinion for the Court filed by Chief Judge Bazelon

50a

UNITED STATES COURT OF APPEALS

FOR THE DISTRICT OF COLUMBIA CIRCUIT

September Term, 1977

No. 76-1829

Firep Apri 24, 1978

State oF ALasKa, ET AL, Appellants

Cecit D. AnpRUS, ET AL.

Berore: Bazeton, LeventHat and Wiikey, Circuit Judges

Order

Upon consideration of the petition for rehearing filed

by appellees Western Oil and Gas Association, et al, it is

Orperep by the Court that appellees’ aforesaid petition

is denied.

Per Curiam

For the Court:

/s/ Grorce A. Fisher

Greorce A. FIsHEeR

Clerk

5la

U.S. DISTRICT COURT

DISTRICT OF COLUMBIA

State or AuaSKA, ET AL. v. THomas S. K eppr, ET AL,

Western Om & Gas Association, et al., Intervenor

Defendants, No. 76-0368, August 13, 1976.

Findings of Fact, Conclusions of Law and Judgment

Judgment

Waddy, J.

In this action plaintiffs seek a declaration that defend-

ants violated the National Environmental Policy Act

(NEPA), 42 U.S.C. § 4321 et seq., the Inter-governmental

Cooperation Act, and various statutes designed to protect

the nation’s wildlife and environment, by holding an oil

and gas lease sale, OCS Lease Sale No. 39, offering ap-

proximately one million acres of Outer Continental Shelf

(OCS) lands in the Northern Gulf of Alaska. Plaintiffs

initially sought a preliminary injunction to enjoin the de-

fendants from holding OCS Sale No. 39 on April 13, 1976,

as scheduled. They did not seek to block the sale alto-

gether—only to delay it.

On April 8, 1976, this Court entered an Order denying

plaintiffs’ motion for a preliminary injunction. Plaintiffs

appealed. On April 12, 1976, the motions panel of the

United States Court of Appeals for the District of Co-

lumbia Circuit denied plaintiffs’ motion to delay the lease

sale pending a disposition of the appeal. The Lease Sale

was held April 13, 1976, as scheduled. Plaintiffs subse-

quently withdrew their appeal.

Notwithstanding the fact that Lease Sale No. 39 was

held on April 13, 1976, plaintiffs continued to press for a

declaration as to the adequacy of the Environmental Im-

pact Statement (EIS) prepared in connection with the

Lease Sale.

52a

On May 26, 1976, the parties submitted to this Court a

joint motion seeking approval of trial procedures agreed

to by the parties. This motion was granted by the Court

on June 15, 1976, and an Order to that effect was entered

on that date. Under the terms of the June 15 Order, the

materials presented by the parties e% the preliminary in-

junction were admitted into evideace. Additionally, the

parties were to file trial briefs and further affidavits and

exhibits to supplement the record. Briefs were filed and at

a hearing on the merits on August 3, 1976, an Order was

entered from the bench admitting into evidence the sup-

plementary documents and materials filed by the parties.

On August 3, 1976, the Court, by stipulation of the par-

ties, heard the cause on its merits without a jury. Upon

consideration of that hearing together with the trial brief

of the parties, and all affidavits, exhibits and documents

submitted which were admitted into evidence by stipulation

of the parties, the Court makes the following findings of

fact and conclusions of law:

1. This lawsuit was brought by the State of Alaska,

the City of Yakutat, the United Fishermen of Alaska, and

the Cordova District Fisheries Union.

2. The federal defendants are Thomas 8. Kleppe,

Secretary of the Interior, and Curtis Berklund, Director,

Bureau of Land Management, Department of the Interior,

who are sued in their official capacities. Intervening as de-

fendants in this proceeding are the Western Oil & Gas

Association—a trade association—and eleven petroleum

companies.

3. Plaintiffs primarily contend that the Environmen-

tal Impact Statement (EIS) prepared pursuant to the

provisions of NEPA is insufficient to support the Secre-

tary’s decision to proceed with the lease sale on April 13,

1976; that the sale should have been delayed pending fur-

ther environmental research and studies; that a specific

58a

EIS should have been prepared for the OCS Operating

Orders; that the leases offered by the Secretary should

have contained a termination clause; and that the Secre-

tary’s decision to proceed with the lease sale on April 13,

1976, was, in view of the omissions and inadequacies, arbi-

trary and capricious.

4. Defendants contend that the EIS is sufficient to

support the Secretary’s decision including an adequate

treatment of the operating orders, and that a separate

EIS for the operating orders is not required; that the

sale should not have been delayed; that the Secretary

adequately weighed the costs and benefits; and that his

decision to proceed with the sale on April 13, 1976, was

not arbitrary and capricious,

5. The Secretary of the Interior scheduled OCS Lease

Sale No. 39 pursuant to his authority under 43 U.S.C.

§ 1337 to grant oil and gas leases on the submerged lands

of the outer Continental Shelf “[i]n order to meet the

urgent need for exploration and development of the oil

and gas deposits” contained thereon.

6. In making his decision to proceed with Lease Sale

No. 39 the Secretary was required by the National Envi-

ronmental Policy Act (NEPA), 42 U.S.C. $§ 4821 et seq.,

to consider the environmental ramifications of the sale and

therefore, pursuant to 42 U.S.C. § 4332, had an environ-

mental impact statement compiled,

Presale Activity

7. The Department of Interior (DOI) prepared aw

EIS pursuant to §102(2)(C) of NEPA pertaining to

Outer Continental Shelf Sale No. 389—Gulf of Alaska. The

following steps were taken in the preparation of that EIS

(see lst Doremus Aff.) :

a. On November 27, 1974, notice of a call for nomi-

nations of tracts suitable for oil and gas leasing in the

54a

Northern Gulf of Alaska was published in the Federal

was approximately 11.8 million acres.

b. In this same notice, Interior requested comments

from all interested parties on possible oil and gas leasing

in the general area of the call for nominations. Interior

asked that such comments include, but need not be limited

to, environmental, technical, and socio-economic aspects of

potential oil and gas leasing and development in the area.

ce. After receipt of numerous nominations and com-

ments pursuant to this notice, the BLM Alaska OCS Of-

fice and the U. S. Geological Survey (USGS) field office

prepared joint tentative tract recommendations.

d. On March 20, 1975, the Secretary publicly an-

nounced that certain identified tracts, totaling about 3.5

million acres, had been tentatively selected for further en-

vironmental study to be made in connection with the De-

partment’s ongoing consideration of a possible OCS lease

sale offshore the Northern Gulf of Alaska in 1975,

e. Studies and analyses of potential oil and gas leas-

ing and development of the proposed sale area were un-

dertaken to provide an information base for a draft EIS.

BLM’s Alaska OCS Office then prepared a draft EIS

for proposed lease sale No. 39, which was submitted to the

Council on Environmental Quality (CEQ) and made avail-

able to federal, state, and local agencies and interested

members of the public on June 27, 1975 (I EIS iv).

f. In the course of its consideration of the OCS oil

and gas lease sale proposal in the Northern Gulf of

Alaska, the Department involved the State of Alaska in

the various procedures followed by the Department in

considering that lease sale. State and local agencies and

citizens groups were invited to designate experts to work

with BLM’s staff in the preparation of the draft EIS for

the lease sale.

55a

g. Public hearings were held on the draft EIS for

Sale No. 39 in Anchorage, Alaska, on August 12-13, 1975.

Federal state and local officials, environmental groups,

industry and interested members of the public were in-

vited to testify. In addition, the same parties were re-

quested to submit written comments on the draft EIS dur-

ing the 60-day comment period from June 27, 1975, to Au-

gust 29, 1975. Pursuant to this request, comments were

received from the following departments of the State of

Alaska: Department of Law, Environmental Conservation,

Fish and Game, Natural Resources, Community and Re-

gional Affairs, Commerce and Economic Development,

Highways, Revenue, Education and Public Works. Com-

ments were also received from the Joint Federal-State

Land Use Planning Commission. (III EIS 123-351).

h. Following the hearings, the Department proceeded

to revise the site-specific draft EIS in light of comments

received during the public hearings and all written com-

ments submitted to the Department (/d. at 163-86, 218-37,

282-88, 306-16, 343-45, 350-51).

i, On November 17, 1975, BLM published a final EIS

for the proposed OCS lease sale in the Northern Gulf of

Alaska which was submitted to CEQ and made available

to federal, state, and local agencies and interested mem-

bers of the public. (40 F.R. 53413),

8. In addition to the final EIS, BLM prepared a Pro-

gram Decision Option Document (PDOD) for Lease Sale

No. 39 which discussed the major issues to be considered

by the Secretary and identified the alternative courses of

action that were available. The PDOD explained the ad-

vantages and disadvantages of several alternatives, which

ranged from a lease sale of 1.8 million acres to more

restricted lease sales to no sale at all. (lst Kleppe Aff.,

Ex. 1).

56a

9. On December 18, 1975, the Administrator of the

Environmental Protection Agency (EPA), pursuant to

the EPA’s responsibilities under Section 309 of the Clean

Air Act, 42 U.S.C. 1857h-7, communicated to the Council

on Environmental Quality (CEQ) a determination that

the proposed Lease Sale No. 39 was unsatisfactory from

the standpoint of environmental quality. EPA urged a de-

lay in the offering of the leases pending: (1) preparation

of adequate Operating Orders for the Gulf of Alaska, (2)

further progress in State Coastal Zone planning, and (3)

completion of environmental baseline and other special

studies. Subsequently, the EPA stated that if it were im-

perative to proceed with the sale in 1976, the sale should

be severely limited in acreage offered.

10. On December 22, 1975, the Chairman of CEQ re-

quested a study in connection with the Section 309 referral

to consider the objections raised by EPA. A one-month

interagency study followed. The study group included the

Department of the Interior, CEQ, EPA, the National

Oceanographic and Atmospheric Administration (NOAA)

and the Federal Energy Administration (FEA).

11. On January 23, 1976, following completion of the

one-month study, the Chairman of CEQ recommended that

the Secretary give careful consideration to a delay of the

lease sale or alternatively to consider a lease sale offering

of approximately .15 million acres.

12. The Secretary’s staff subsequently prepared a

Status Report and Decision Paper on the CEQ recom-

mendations for Sale No. 39, which served as a supplement

to the PDOD. It contained both a discussion of the CEQ

recomemndations and alternatives to them. (lst Kleppe

Aff., Ex. 1).

13. Interior also prepared a third option paper called

the Tract Selection Option Paper. This document supple-

mented the PDOD by posing an additional five options for

57a

tract offerings in the event the Secretary decided to pro-

ceed with Lease Sale No. 39. The options included the

recommendation of CEQ as weil as a discussion of each

option and a map depicting each option. (Jd. Ex. 1)

14. Upon consideration of the materials and consulta-

tion with the agencies identified above in paragraph 10,

the Secretary on February 17, 1976, concluded that infor-

mation then available to the Department was sufficient to

identify and reduce environmental risks from exploration

and production in the Sale No, 39 area, and thus decided

to proceed with the sale. In so doing, however, he reduced

the size of the sale area 40 percent to 1.1 million acres

and implemented many of the EPA/CEQ recomendations

concerning the sale to mitigate any adverse environmental

impacts of the sale. Specifically, he revised the OCS Oper-

ating Orders to incorporate in substantial measure the

recommendations made by CEQ and EPA; he imposed

stipulations in Sale No. 39 leases to require leasees to pro-

vide state “nd local governments with information needed

for onshore planning; and he imposed a two-year mora-

torium on further leasing in the area. (Jd. Ex. 10)

15. On April 5, 1976, after receipt of new data concern-

ing the migratory fowl rich Copper River Delta area, an

additional 16 environmentally sensitive tracts comprising

approximately 92,000 acres were deleted by the Secretary.

(2d Kleppe Aff. /1). Thus, actually offered for sale, were

189 tracts covering 1.0 million acres.

The Sale and Post-Sale Activities

16. On April 13, 1976, Sale No. 39 took place as sched-

uled. Of the 189 tracts, comprising approximately one

million acres, offered for sale at that time, only 81 re-

ceived bids. The Secretary then rejected five of those 81

bids and accepted the remaining high bids for 76 tracts.

These 76 tracts comprised approximately 410,000 acres

and generated revenues of nearly $560 million. (2d Kleppe

58a

Aff. 1] 3-4). On June 1, 1976, leases on these 76 tracts

were issued to 32 separate companies. (2d Kleppe Aff. 115

& Ex. Nos. 3-6).

Tue EIS

A. Baseline Studies

17, In 1974, BLM contracted for thirteen studies of the

Gulf of Alaska sale area covering all major aspects of en-

vironmental concern. In mid-1975, at the end of the first

year of laboratory and field research, reports were sub-

mitted to BLM containing the baseline data obtained dur-

ing the initial 12 months of study. All thirteen first-year

reports were available for use prior to the drafting of the

EIS on the sale. Baseline research completed at the end

of the first year, though, of course, not all-inclusive, was

quite extensive and involved considerable effort. Nine re-

search vessels were employed by the research teams on 13

different cruises conducted during all seasons of the year.

A grid of 68 data-gathering stations was established for

the performance of field experiments. In addition, four

non-vessel field operations were conducted to obtain infor-

mation on oil seeps, intertidal biology and marine mam-

mal habits. Thousands of individual experiments and sur-

veys were conducted and that data from this research ef-

fort were made available for use in the preparation of the

EIS. (Monastero Aff. Ex. 6, pp. 17-25).

18. As an adjunct to these individual studies, litera-

ture searches of available scientific information were con-

ducted on the proposed sale area. Two such literature

searches were performed under contract by independent

scientists and, in addition, BLM performed its own survey

which was included in the final EIS on Sale No, 39. (Mon-

astero Aff. [ff 12, 13).

B. Socio-Economic and Secondary Impacts

19. The EIS describes at length the existing social and

economic environment of the Northern Gulf of Alaska

59a

coast, including such aspects as regional and local eco-

nomics, human resources, land-use patterns, transportation

systems, and recreation, I EIS 282-409. Next, the EIS con-

tains predictions of social and economic impact of the pro-

posed lease sale (II EIS 289-446). Changes in regional

economics, population patterns, and cultural traditions are

all assessed, as is the need for new facilities, such as hous-

ing, education, medical facilities and sewerage. Also dis-

cussed is the impact on both native and non-native com-

munities.

C. Impact of Oil Spills

20. The EIS first discusses in general terms the prob-

ability of oil spills in the Northern Gulf of Alaska (II EIS

13-37) and then describes the effects of oil spills on var-

ious aspects of the environment, such as the terrestrial

and marine biotic comunities, the ecosystem and food web,

and endangered wildlife species. II EIS 84-288. Next, the

EIS develops a matrix analysis for each block in the pro-

posed lease area. From this analysis, predictions are made

as to the potential for oil spills in each block, as well as

evaluations of potential spills on the basis of their magni-

tude and persistence and the block’s proximity to high-

value resources, such as wildlife refuges, seabird colonies

and fishing areas, II EIS 492-514.

D. Alternatives

21. With regard to the Northern Gulf of Alaska sale,

all reasonable, viable and meaningful alternatives were

considered in Volume II of the EIS, including the possi-

bility of delaying the sale, cancelling the sale, as well as

the availability of other energy proposed action beginning

at page 642 and ending at page 736. Pages 642 to 669 dis-

cussed holding the sale in modified form including tract

deletions and alternatives within the proposed action such

as government exploratory drilling prior to leasing. Dis-

cussion of delay pending various developments was had

60a

on page 669 to 683. And the alternative of withdrawing

the sale and meeting energy needs from other sources

was contained in pages 683 to 721. Also discussed were al-

ternatives relating to different leasing areas in the United

States, different areas in Alaska and holding a prototype

sale, In addition to the alternatives discussed in the site-

specific EIS dealing with the Northern Gulf of Alaska, a

variety of alternatives are also discussed in the program-

matic environmental impact statement for accelerated

OCS leasing, which was published in 1975 prior to the

Gulf of Alaska OCS sale.

E. The OCS Operating Orders and Other

Mitigating Measures

When the Department opens a new region, such as the

Gulf of Alaska, to OCS development, it promulgates for

the region a comprehensive set of operational controls

and equipment requirements for every phase of OCS ex-

ploration and development which are known as OCS Op-

“erating Orders. The EIS discuses the possible impacts

which may ocur, sets forth the draft of the OCS Orders,

and then sets forth the effect of the implementation of

these orders on reducing possible adverse impacts. Ap-

pendix 2 of Volume III contains a complete copy of the

proposed Gulf of Alaska OCS Orders. To the extent the

final orders were modified after the publication of the

EIS, they incorporated recommendations of EPA/CEQ

which were designed to further mitigate adverse environ-

mental impacts. Appendix 8 of Volume IIT is a 103-page

description of “Oil and Gas Operations in the Northern

Gulf of Alaska,” containing numerous references to the

USGS regulations and OCS Orders governing operations.

Part III of the EIS (IIT EIS I-551) discusses the environ-

mental impacts of oil and gas operations and related de-

velopment in the lease sale area. Part IV of the EIS (II

EIS 552-90) discusses the mitigating measures—includ-

ing OCS Operating Orders—proposed for the Sale No. 39

6la

area to reduce the type, occurrence, and extent of adverse

impacts, Finally, Part V of the EIS (II EIS 591-630) dis-

cuses adverse environmental impacts which cannot be

avoided even though the. mitigating measures set forth in

Section IV are implemented.

23. The OCS Orders have been the subject of public

scrutiny. Drafts of these orders were submitted to CEQ/

EPA and the State of Alaska and were published in the

Federal Register, 40 F.R. 1086, Jan. 6, 1975, for comment

by the public. The State submitted comments on the pro-

posed orders in conjunction with comments submitted on

the draft EIS. (2d Doremus Aff. {| 16).

24. Under OCS regulations and procedures both the

exploratory and development plans of the lessees must be

submited to and approved by Interior before the corre-

sponding phases of the lease operation can begin. II EIS

553, III EIS App. 14, pp. 7-8. Furthermore, the EIS on

Sale No. 39 states that approval of a lessee’s development

plan may require the preparation of a subsequent EIS

specifically directed to the plan. If EIS 667.

The Lease

25. The Leases offered by the Secretary in OCS Sale

No. 39 do not contain a termination clause. Plaintiffs ar-

gue that the Secretary should have taken the necessary

steps to include such a clause in the leases which would

allow their cancellation upon subsequent discovery of en-

vironmental hazards.

The Secretary’s Decision

26. With respect to his responsibilities to enhance the

Nation’s energy supplies, the Secretary stated in an affi-

davit filed in this Court that domestic production of oil

in the United States peaked in 1972 at 11.2 million barrels

per day (BPD), declined to about 9.2 million BPD in

1973, to 8.8 milion BPD in 1974 and an estimated 8.5 mil-

62a

lion BPD in 1975, Meanwhile, demand in 1975 was about

16 million BPD. The Secretary also stated that foreign oil

imports have increased from about 20 percent of U.S.

petroleum demand in 1970 to approximately 40 percent in

1975. He expected that demand could be as much as 24

million barels per day by 1980 and imports are anticipated

to increase to 50 percent of this demand by that time. If

exploration areas are not made available, imports could

reach 70 percent of demand by 1990. (1st Kleppe, pp. 7-8).

Cono.usions or Law

1. The Secretary of the Interior has authority under

the Outer Continental Shelf Lands Act (OCS Lands Act),

43 U.S.C, 1331 et seq., to lease OCS lands “in order to

meet the urgent need for further exploration and develop-

ment of the oil and gas deposits of the submerged land of

the Outer Continental Shelf... .” 43 U.S.C. 1337. In ad-

dition to this policy statement contained in the OCS

Lands Act, there are numerous recent statements by Con-

gress and the Executive concerning the need for OCS de-

velopment to diminish this country’s dependence upon im-

ported oil, See, e.g., 15 U.S.C. § 751, 87 Stat. 627. Act of

Nov. 23, 1973; Report of Committee on Conference on

Coastal Zone Management Act Amendments of 1976, Re-

vort No, 94-1298, June 24, 1976, at p. 25; President Ford’s

energy message released on February 26, 1976; FEA 1976

National Energy Outlook, Executive Summary, pp. XXV,

XXBITI.

2. The Secretary also has a responsibility under

NEPA to consider environmental factors along with other

considerations (economic, social, national security, en-

ergy) in the decision-making process and to balance the

various factors. Calvert Cliffs’ Coordinating Comm. v.

AEC, 449 F.2d 1109 (C.A.D.C., 1971).

3. In holding Sale No. 39, the Secretary has per-

formed this balancing to further the National policy of

63a

increasing domestic energy supplies while at the same time

being aware of and mitigating the possible adverse envi-

ronmental consequences of his actions.

4. The Secretary’s decision to hold Sale No. 39 was

not arbitrary or capricious, nor did he abuse his descre-

tion in so doing.

5. It is for the Secretary—not the courts—to balance

the various competing public interests. Indeed, it is not

appropriate for a court to substitute its judgment for that

of the administrator. Camp v. Pitts, 411 U.S. 138 (1973) ;

Citizens to Preserve Overton Park v. Volpe, 410 U.S. 402,

415-16 (1971); Calvert Cliffs Coordinating Comm. v.

AEC, 449 F.2d 1109 (C.A.D.C., 1971).

6. The EIS prepared for Sale No. 39 meets the re-

quirements of NEPA in that it is an objective, good-faith

document disclosing the known and unknown environmen-

tal impacts of a proposed project and reasonable and vi-

able alternatives thereto.

7. The information and the studies which were avail-

able to the Secretary were sufficient to permit the prepa-

ration of an EIS which meets the requirements of NEPA

and accordingly there is no warrant under NEPA for in-

validating the EIS for Sale No. 39 on the grounds that

additional studies are required. Sierra Club v. Morton

(MAFLA), 510 F.2d 813 (C.A. 5, 1975

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