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

|" Suprome Court, U, $y”

| FILED

No. 78-40 SEP 2O 1978

K, JR., CLERK

Iu the Supreme Court of the United States

OCTOBER TERM, 1978

WESTERN OL & GAS ASSOCIATION, ET AL., PETITIONERS

a

STATE OF ALASKA, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE DISTRICT OF COLUMBIA CIRCUIT

MEMORANDUM FOR THE SECRETARY OF

THE INTERIOR

WADE H. MCCREE, JR.

Solicitor General

Department of Justice

Washington, D.C. 20530

In the Supreme Court of the Hnited States

OCTOBER TERM, 1978

No. 78-40

WESTERN Ol1L & GAS ASSOCIATION, ET AL., PETITIONERS

Vv.

STATE OF ALASKA, ET AL.

ON PETITION FOR A WRIT OF CERTIORARI TO

THE UNITED STATES COURT OF APPEALS FOR

THE DISTRICT OF COLUMBIA CIRCUIT

MEMORANDUM FOR THE SECRETARY OF

THE INTERIOR

1. The State of Alaska and several other plaintiffs! filed

suit to enjoin the Secretary of the Interior from issuing oil

and gas leases covering portions.of the Outer Continental

Shelf (OCS) in the Northern Gulf of Alaska. Plaintiffs

alleged that the Secretary had failed adequately to

consider the environmental impact of issuing such leases,

as required under the National Environmental Policy Act

of 1969, 42 U.S.C. 4321 et seg. (NEPA) (Pet. App. 52a-

53a). Petitioners Western Oil & Gas Association, and ||

of its petroleum company members who were seeking to

acquire such leases, intervened in the district court as

defendants (Pet. App. 52a).

'The City of Yakutat, United Fishermen of Alaska, and the

Cordova District Fisheries Union were also plaintiffs in the district

court (Pet. App. 52a).

(1)

The district court denied plaintiffs’ motion for a

preliminary injunction to delay issuance of the leases and

the court of appeals declined to grant an injunction

pending appeal (Pet. App. 2a). Thereafter, the Secretary

issued the leases on 76 off-shore tracts (Pet. App. 57a-

58a). The case was then submitted to the district court for

decision on the merits. The district court held that the

Secretary had complied with the requirements of NEPA

and entered a judgment dismissing the complaint (Pet.

App. 2a, 65a).

On appeal, the court of appeals held that the Secretary

had not fully satisfied the requirements of NEPA in two

respects. First, the court held that the environmental

impact statement (EIS) prepared by the Secretary had

failed to give sufficient attention to the provisions of the

Secretary’s “operating orders” regulating the oil and gas

extraction activities of the lessees (Pet. App. 25a-32a).

The court directed the Secretary to prepare a supple-

mental EIS that would analyze alternative operating

orders, and the Secretary is now complying with that

portion of the court’s decision. Petitioners do not seek

review of this aspect of the decision of the court of ap-

peals (Pet. 10 n. 7).

The court of appeals also concluded that the EIS was

deficient because it failed to analyze the possibility of

issuing leases containing “termination clauses” (Pet. App.

32a-42a). Such clauses would empower the Secretary

to cancel a previously issued lease in the event that

unanticipated environmental hazards developed as a

result of oil and gas extraction in off-shore waters. The

EIS had not addressed the use of such clauses because the

Secretary then believed that the Outer Continental Shelf

Lands Act, 43 U.S.C. 1331 et seqg., did not authorize

cancellation unless the lessee violated the Act, the

Secretary’s regulations, or the terms of the lease (Pet.

App. 33a). The court of appeals concluded, however, that

the Secretary's existing statutory authority permitted use

of termination clauses, and that the Secretary should have

evaluated such clauses in the EIS (Pet. App. 4la-42a).

The court’s interpretation of the Secretary's authority

purported to be wholly declaratory and prospective in_

nature (Pet. App. 40a, 42a, 45a). The court declined to

require the Secretary to alter the leases previously issued,

noting the “grave legal tangles” (Pet. App. 46a) that might

result if the Secretary attempted to insert termination

clauses in them. The court also declined to invalidate the

leases previously issued (Pet. App. 42a-45a).

Petitioners contend in the petition for certiorari that the

court of appeals erred in interpreting Section 5 of the

Outer Continental Shelf Lands Act, 43 U.S.C. 1334,

because that provision does not authorize the Secretary to

issue leases including termination provisions (Pet. 11-23).

2. Petitioners’ objection to the interpretation of the

court of appeals has been rendered moot by the passage

of the Outer Continental Shelf Lands Act Amendments of

1978, Pub. L. No. 95-372, 92 Stat. 629, signed into law on

September 18, 1978. A copy of the relevant portions of

the new Amendments is attached as an appendix hereto.

Section 204 of the Amendments, amending Section 5 of

the Act, grants the Secretary authority to adopt

regulations providing for the cancellation of oil and gas

leases due to serious harm or damage to the environment.

The Amendments also direct the Secretary to promulgate

regulations providing for compensation of lessees whose

leases have been cancelled. Whether the court of appeals

correctly interpreted the original statute is now irrelevant,

since all future actions of the Secretary must comply with

the amended statute which provides for lease cancellation.

4

There is no need for review by this Court of a lower court

interpretation of a superseded statutory provision. See,

e.g., Morris v. Weinberger, 410 U.S. 422 (1973); United

States v. Alaska S.S. Co., 253 U.S. 113, 115-116 (1920);

Hall v. Beals, 396 U.S. 45, 48 (1969); Quinn v. Muscare,

425 U.S. 560, 563 (1976).?

3. On September 18, 1978, petitioners filed a sup-

plemental memorandum entitled “Petitioners’s Memo-

randum In Response To Suggestion That The Cause Is

Moot,” which acknowledges that “the issue raised in the

petition is now moot.” Petitioners accordingly request

that their petition be granted, that Part II-C of the

decision below be vacated, and that the cause be

remanded for dismissal of paragraph 37(j) of the

complaint. We concur in that request in light of the

mootness of the issue raised in the petition. See Hall v.

Beals, supra, 396 U.S. at 50.

It is therefore respectfully submitted that the petition

for awrit of certiorari should be granted, Part II-C of the

decision below vacated, and the case remanded to the

district court for dismissal of paragraph 37(j) of the

complaint.

WaADE H. McCree, JR.

Solicitor General

SEPTEMBER 1978

?The statutory amendments also render moot petitioners’ challenge

to certain regulations, issued by the Secretary during the pendency of

this litigation, that provided for termination of leases under certain

circumstances (Pet. 8-9, 11). Petitioners challenged those regulations

in Western Oil & Gas Association v. Andrus, No. 77-3987 (C.D.

Cal.), alleging that the regulations denied lessees just compensation in

the event of lease termination. On August 2, 1978, the district court

granted WOGA's motion for summary judgment and invalidated the

regulations.

la

APPENDIX

AN ACT

To establish a policy for the management of oil and na-

tural gas in the Outer Continental Shelf; to protect

the marine and coastal environment; to amend the

Outer Continental Shelf Lands Act; and for other

purposes.

Be it enacted by the Senate and House of

Representatives of the United States of America in

Congress assembled, That this Act may be cited as the

“Outer Continental Shelf Lands Act Amendments of

1978”.

+_ * * hh *

OUTER CONTINENTAL SHELF EXPLORATION AND

DEVELOPMENT ADMINISTATION

Sec. 204. Section 5 of the Outer Continental Shelf

Lands Act (43 U.S.C. 1334) is amended to read as

follows:

“Sec. 5 ADMINISTRATION OF LEASING OF THE OUTER

CONTINENTAL SHELF.—(a) The Secretary shall administer

the provisions of this Act 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 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, as of their effective date, apply to

all operations conducted under a _ lease issued or

maintained under the provisions of this Act. In the

enforcement of safety, environmental, and conservation

laws and regulations, the Secretary shall cooperate with

the relevant departments and agencies of the Federal

Government and of the affected States. In the formulation

and promulgation of regulations, the Secretary shall

request and give due consideration to the views of the

Attorney General with respect to matters which may

affect competition. In considering any regulations and in

preparing any such views, the Attorney General shall

consult with the Federal Trade Commission. The regula-

tions prescribed by the Secretary under this subsection

shall include, but not be limited to, provisions—-

“(1) for the suspension or temporary prohibition

of any operation or activity, including production,

pursuant to any lease or permit (A) at the request of

a lessee, in the national interest, to facilitate proper

development of a lease or to allow for the

construction or negotiation for use of transportation

facilities, or (B) if there is a threat of serious,

irreparable, or immediate harm or damage to life

(including fish and other aquatic life), to prop-

erty, to any mineral deposits (in areas leased or not

leased), or to the marine, coastal, or human en-

vironment, and for the extension of any permit or

lease affected by suspension or prohibition under

clause (A) or (B) by a period equivalent to the period

of such suspension or prohibition, except that no

permit or lease shall be so extended when such

suspension or prohibition is the result of gross

negligence or willful violation of such lease or permit,

or of regulations issued with respect to such lease or

permit;

“(2) with respect to cancellation of any lease or

permit —

2a

“(A) that such cancellation may occur at any time,

if the Secretary determines, after a hearing, that

“(i) continued activity pursuant to such

lease or permit would probably cause serious

harm or damage to life (including fish and

other aquatic life), to property, to any mineral

(in areas leased or not leased), to the national.

security or defense, or to the marine, coastal,

or human environment;

“(ii) the threat of harm or damage will not

disappear or decrease to an acceptable extent

within a reasonable period of time; and

“(ili) the advantages of cancellation

outweigh the advantages of continuing such

lease or permit in force;

“(B) that such cancellation shall not occur unless

and until operations under such lease or permit

shall have been under suspension, or temporary

prohibition, by the Secretary, with due extension

of any lease or permit term continuously for a

period of five years, or for a lesser period upon

request of the lessee;

“(C) that such cancellation shall entitle the lessee

to receive such compensation as he shows to the

Secretary as being equal to the lesser of (i) the fair

value of the canceled rights as of the date of

cancellation, taking account of both anticipated

revenues from the lease and anticipated costs,

including costs of compliance with all applicable

regulations and operating orders, liability for

cleanup costs or damages, or both, in the case of

an oilspill, and all other costs reasonably

anticipated on the lease, or (ii) the excess, if any,

3a

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

interest thereon from the date of receipt to date of

reimbursement) of all consideration paid for the

lease and all direct expenditures made by the

lessee after the date of issuance of such lease and

in connection with exploration or development,

or both, pursuant to the lease (plus interest on

such consideration and such expenditures from

date of payment to date of reimbursement),

except that (1) with respect to leases issued before

the date of enactment of this subparagraph, such

compensation shall be equal to the amount

specified in clause (i) of this subperagraph; and

(II) in the case of joint leases which are canceled

due to the failure of one or more partners to

exercise due diligence, the innocent parties shall

have the right to seek damages for such loss from

the responsible party or parties and the right to

acquire the interests of the negligent party or

parties and be issued the lease in question;

“(3) for the assignment or relinquishment

of a lease;

“(4) for unitization, pooling, and drilling

agreements;

“(5) for the subsurface storage of oil and

gas other than by the Federal Government;

“(6) for drilling or easements necessary for

exploration, development, and production;

‘(7) for the prompt and efficient

exploration and development of a lease area;

and

“(8) for compliance with the national

ambient air quality standards pursuant to the

4a

Clean Air Act (42 U.S.C. 7401 et seq.), to the

extent that activities authorized under this

Act significantly affect the air quality of any

State.

“(b) The issuance and continuance in effect of any

lease, or of any assignment or other transfer of any

lease, under the provisions of this Act shall be

conditioned upon compliance with regulations issued .

under this Act.

“(c) Whenever the owner of a nonproducing lease

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

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

Act, such lease may be canceled by the Secretary,

subject to the right of judicial review as provided in

this Act, if such default continues for the period of

thirty days after mailing of notice by registered letter

to the lease owner at his record post office address.

“(d) Whenever the owner of any producing lease

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

of the lease, or of the regulations issued under this

Act, such lease may be forfeited and canceled by an

appropriate proceeding in any United States district

court having jurisdiction under the provisions of this

Act.

“(e) Rights-of-way through the submerged lands of

the outer Continental Shelf, whether or not such

lands are included in a lease maintained or issued

pursuant to this Act, may be granted by the Secretary

for pipeline purposes for the transportation of oil,

natural gas, sulphur, or other minerals, or under such

regulations and upon such conditions as may be

prescribed by the Secretary, or where appropriate the

Secretary of Transportation, including (as provided

in section 21(b) of this Act) assuring maximum

Sa

environmental protection by utilization of the best

available and safest technologies, including the

safest practices for pipeline burial and upon the

express condition that oil or gas pipelines shall

transport or purchase without discrimination, oil or

natural gas produced from submerged lands or outer

Continental Shelf lands in the vicinity of the pipelines

in such proportionate amounts as the Federal Energy

Regulatory Commission, in consultation with the

Secretary of Energy, may, after a full hearing with

due notice thereof to the interested parties, determine

to be reasonable, taking into account, among other

things, conservation and the prevention of waste.

Failure to comply with the provisions of this section

or the regulations and conditions prescribed under

this section shall be ground for forfeiture of the grant

in an appropriate judicial proceeding instituted by

the United States in any United States district court

having jurisdiction under the provisions of this Act.

“(f)(1) Except as provided in paragraph (2), every

permit, license, easement, right-of-way, or other

grant of authority for the transportation by pipeline

on or across the outer Continental Shelf of oil or gas

shall require that the pipeline be operated in

accordance with the following competitive principles:

“(A) The pipeline must provide open and

nondiscriminatory access to both owner and

nonowner shippers.

“(B) Upon the specific request of one or more

owner or nonowner shippers able to provide a

guaranteed level of throughput, and on the

condition that the shipper or shippers requesting

such expansion shali be responsible for bearing

their proportionate share of the costs and risks

6a

= a

related thereto, the Federal Energy Regulatory

Commission may, upon finding, after a full

hearing with due notice thereof to the interested

parties, that such expansion is within

technological limits and economic feasibility,

order a subsequent expansion of throughput

capacity of any pipeline for which the permit,

license, easement, right-of-way, or other grant of-

authority is approved or issued after the date of

enactment of this subparagraph. This

subparagraph shall not apply to any such grant

of authority approved or issued for the Gulf of

Mexico or the Santa Barbara Channel.

“(2) The Federal Energy Regulatory Commission

may, by order or regulation, exempt from any or all

of the requirements of paragraph (1) of this

subsection any pipeline or class of pipelines which

feeds into a facility where oil and gas are first

collected or a facility where oil and gas are first

separated, dehydrated, or otherwise processed.

“(3) The Secretary of Energy and the Federal

Energy Regulatory Commission shall consult with

and give due consideration to the views of the

Attorney General on specific conditions to be

included in any permit, license, easement, right-of-

way, or grant of authority in order to ensure that

pipelines are operated in accordance with the

competitive principles set forth in paragraph (1) of

this subsection. In preparing any such views, the

Attorney General shall consult with the Federal

Trade Commission.

“(4) Nothing in this subsection shall be deemed to

limit, abridge, or modify any authority of the United

States under any other provision of law with respect

to pipelines on or across the outer Continental Shelf.

7a

“(g)(1) The lessee shall produce any oil or gas, or

both, obtained pursuant to an approved development

and production plan, at rates consistent with any rule

or order issued by the President in accordance with

any provision of law.

“(2) If no rule or order referred to in paragraph

(1) has been issued, the lessee shall produce such oil

or gas, or both, at rates consistent with any

regulation promulgated by the Secretary of Energy

which is to assure the maximum rate of production

which may be sustained without loss of ultimate

recovery of oil or gas, or both, under sound

engineering and economic principles, and which is

safe for the duration of the activity covered by the

approved plan. The Secretary may permit the lessee

to vary such rates if he finds that such variance is

necessary.

“(h) The head of any Federal department or

agency who takes any action which has a direct and

significant effect on the outer Continental Shelf or its

development shall promptly notify the Secretary of

such action and the Secretary shall thereafter notify

the Governor of any affected State and the Secretary

may thereafter recommend such changes in such

action as are considered appropriate.

“(i) After the date of enactment of this section, no

holder of any oil and gas lease issued or maintained

pursuant to this Act shall be permitted to flare

natural gas from any well unless the Secretary finds

that there is no practicable way to complete

production of such gas, or that such flaring is

necessary to alleviate a temporary emergency

situation or to conduct testing or work-over

operations.”.

8a