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1 Case: /22/2011 ID: DktEntry: 24 Page: 1 of 95 Nos and IN THE UNITED STATES COURT OF APPEALS FOR THE NINTH CIRCUIT NATIVE VILLAGE OF POINT HOPE; ALASKA WILDERNESS LEAGUE; CENTER FOR BIOLOGICAL DIVERSITY; DEFENDERS OF WILDLIFE; GREENPEACE, INC.; NATURAL RESOURCES DEFENSE COUNCIL; NATIONAL AUDUBON SOCIETY; NORTHERN ALASKA ENVIRONMENTAL CENTER; OCEANA; PACIFIC ENVIRONMENT; RESISTING ENVIRONMENTAL DESTRUCTION ON INDIGENOUS LANDS (REDOIL); SIERRA CLUB; and THE WILDERNESS SOCIETY; INUPIAT COMMUNITY OF THE ARCTIC SLOPE, Petitioners, v. KENNETH SALAZAR, Secretary of the Interior; and BUREAU OF OCEAN ENERGY MANAGEMENT, REGULATION AND ENFORCEMENT, Respondents, STATE OF ALASKA and SHELL OFFSHORE INC., Respondent-Intervenors. Petition for Review of Department of Interior Decision PETITIONERS OPENING BRIEF Holly A. Harris Eric P. Jorgensen EARTHJUSTICE 325 Fourth Street Juneau, AK T: Erik Grafe EARTHJUSTICE 441 W 5 th Avenue, Suite 301 Anchorage, AK T: Christopher Winter Tanya Sanerib CRAG LAW CENTER 917 SW Oak Street, Suite 417 Portland, OR T: December 22, 2011

2 Case: /22/2011 ID: DktEntry: 24 Page: 2 of 95 CORPORATE DISCLOSURE STATEMENT Pursuant to Rule 26.1 of the Federal Rules of Appellate Procedure, Native Village of Point Hope, Alaska Wilderness League, Center for Biological Diversity, Defenders of Wildlife, Greenpeace, Inc., Natural Resources Defense Council, National Audubon Society, Northern Alaska Environmental Center, Oceana, Pacific Environment, Resisting Environmental Destruction On Indigenous Lands (REDOIL), Sierra Club, The Wilderness Society, and the Inupiat Community of the Arctic Slope hereby state that none of them has any parent companies, subsidiaries, or affiliates that have issued shares to the public. i

3 Case: /22/2011 ID: DktEntry: 24 Page: 3 of 95 TABLE OF CONTENTS TABLE OF AUTHORITIES... v INTRODUCTION... 1 JURISDICTIONAL STATEMENT... 3 STATEMENT OF ISSUES... 4 STATEMENT OF THE CASE... 5 STATEMENT OF FACTS... 6 I. THE BEAUFORT SEA... 7 II. DEEPWATER HORIZON EXPLORATION DRILLING DISASTER III. THE NATIONAL OIL SPILL COMMISSION S FINDINGS AND RECOMMENDATIONS A. Oil Spill Prevention and Response B. Arctic Conclusions and Recommendations IV. SHELL S NEW BEAUFORT EXPLORATION PLAN A. Shell s Multiple Drilling Proposals B. Content of the Exploration Plan C. The Exploration Plan Relied on an Unapproved Oil Spill Response Plan The Old Beaufort Spill Plan was approved before the Deepwater Horizon disaster The New Beaufort Spill Plan has not been approved D. Shell Proposed a Well Capping and Containment System in the Arctic Shell historically rejected well capping in the Arctic ii

4 Case: /22/2011 ID: DktEntry: 24 Page: 4 of Shell proposed well capping in the Arctic for the first time E. Shell Asserted it Can Drill a Relief Well Faster Than it Can Drill the Actual Exploration Wells V. BOEM S REVIEW PROCESS REGARDING THE EXPLORATION PLAN A. Lack of an Approved Oil Spill Response Plan B. Shell s Reversal Regarding Well Capping and the Failure to Explain the Containment System C. Relief Well Drilling May Take Significantly Longer Than Shell s Estimate VI. BOEM CONDITIONALLY APPROVED THE EXPLORATION PLAN VII. PETITIONERS INTERESTS SUMMARY OF ARGUMENT ARGUMENT I. STANDARD OF REVIEW II. III. BOEM VIOLATED OCSLA WHEN IT APPROVED THE EXPLORATION PLAN DESPITE THE FACT SHELL IS RELYING ON AN UNAPPROVED SPILL PLAN BOEM ACTED ARBITRARILY WHEN IT APPROVED THE EXPLORATION PLAN BASED ON A NEW, NOT-YET- DESIGNED WELL CAPPING AND CONTAINMENT SYSTEM THAT SHELL PREVIOUSLY CONCLUDED WAS ILL-SUITED FOR THE ARCTIC A. It was Arbitrary for BOEM to Approve the Exploration Plan Given Shell Provided the Agency No Explanation of the New Well Capping and Containment System iii

5 Case: /22/2011 ID: DktEntry: 24 Page: 5 of 95 B. OCSLA Prohibits the Agency from Creating its Own Undefined Approval Process for Exploration Plans IV. BOEM S APPROVAL OF SHELL S ESTIMATE OF A MAXIMUM DURATION BLOWOUT FROM ITS ARCTIC DRILLING OPERATIONS WAS ARBITRARY AND CAPRICIOUS V. THE COURT SHOULD VACATE BOEM S APPROVAL OF THE EXPLORATION PLAN AND REMAND IT TO THE AGENCY FOR FURTHER PROCEEDINGS CONCLUSION iv

6 Case: /22/2011 ID: DktEntry: 24 Page: 6 of 95 TABLE OF AUTHORITIES CASES Am. Bioscience, Inc. v. Thompson, 269 F.3d 1077 (D.C. Cir. 2001) Arrington v. Daniels, 516 F.3d 1106 (9th Cir. 2008) Bonnichsen v. United States, 367 F.3d 864 (9th Cir. 2004) Ctr. for Biological Diversity v. Nat l Highway Traffic Safety Admin., 538 F.3d 1172 (9th Cir. 2008) Idaho Farm Bureau Fed n v. Babbitt, 58 F.3d 1392 (9th Cir. 1995)... 58, 59 Motor Vehicle Mfrs. Ass n of U.S., Inc. v. State Farm Mut. Auto. Ins. 463 U.S. 29 (1983) Native Ecosystems Council v. United States Forest Serv., 418 F.3d 953 (9th Cir. 2005) Native Vill. of Point Hope v. Salazar, 378 F. App x. 747 (9th Cir. 2010) Native Vill. of Point Hope v. Salazar, 730 F. Supp. 2d 1009 (D. Alaska 2010) Natural Res. Def. Council v. Houston, 146 F.3d 1118 (9th Cir. 1998) Southeast Alaska Conservation Council v. U.S. Army Corps of Eng rs, 486 F.3d 638 (9th Cir. 2007) Tribal Village of Akutan v. Hodel, 869 F.2d 1185 (9th Cir. 1988) W. Oil and Gas Ass n v. U.S. Envtl. Protection Agency, 633 F.2d 803 (9th Cir. 1980)... 57, 58, 59 v

7 Case: /22/2011 ID: DktEntry: 24 Page: 7 of 95 STATUTES 5 U.S.C. 706(2)(A) U.S.C. 1321(a) U.S.C. 1321(j) U.S.C. 1332(3)... 56, U.S.C. 1340(c)... 3, 47, U.S.C. 1347(b) U.S.C. 1349(c)... 4, 48, 49, 57 REGULATIONS 30 C.F.R (a) C.F.R (c)... 4, 41, 43, C.F.R (d) C.F.R C.F.R (h)... 21, C.F.R C.F.R C.F.R , C.F.R C.F.R C.F.R (d)... 4, 41, C.F.R (g)... 5, 51, 52, C.F.R , 36 vi

8 Case: /22/2011 ID: DktEntry: 24 Page: 8 of C.F.R (a)... 4, 16, 37, 39, C.F.R (b) FEDERAL REGISTER NOTICES Executive Order 12777, Implementation of Section 311 of the Federal Water Pollution Control Act of Ocotber 18, 1972, as amended, and the Oil Pollution Control Act of 1990, 56 Fed. Reg. 54,757 (Oct. 18, 1991) Bureau of Safety and Environmental Enforcement and Bureau of Ocean Energy Management, Reorganization of Title 30, 76 Fed. Reg. 64,432 (Oct. 18, 2011)... 1, 16 vii

9 Case: /22/2011 ID: DktEntry: 24 Page: 9 of 95 INTRODUCTION Oil companies are embarking on a new era of offshore drilling in more remote and sensitive areas, like the Arctic Ocean, and in deeper water, as in the Gulf of Mexico. Companies proposing this new type of drilling face some different challenges in different regions, but the risks posed by untested technology and uncoordinated response, unfortunately, have become apparent. The Deepwater Horizon disaster in the Gulf of Mexico illustrates the tragic and widespread consequences of the Bureau of Ocean Energy Management s (BOEM) 1 decision to approve high-risk drilling plans before requiring oil companies to demonstrate they can safely and effectively prevent, contain, and respond to an oil spill. These petitions challenge BOEM s decision to approve a plan for Shell Offshore Inc. (Shell) to drill for oil in the Arctic Ocean s Beaufort Sea. The Arctic supports vibrant indigenous subsistence-based cultures and an extraordinary diversity of species found nowhere else in the world. The Beaufort Sea is also 1 On October 1, 2011, the Bureau of Ocean Energy Management, Regulation and Enforcement, formerly the Minerals Management Service, divided into three organizations including, BOEM, which assumed responsibility for the review and approval of exploration drilling plans, and the new Bureau of Safety and Environmental Enforcement (BSEE), which assumed responsibility for the review and approval of oil spill response plans. See 76 Fed. Reg. 64,432 (Oct. 18, 2011); id., 64,438 (BOEM duties); id. 64,434 (BSEE duties). The approval at issue in this case predates the agency reorganization, but, for purposes of convenience, Petitioners refer to the newly formed bureaus throughout this brief. 1

10 Case: /22/2011 ID: DktEntry: 24 Page: 10 of 95 remote and often dangerous with 20-foot swells, floating pack ice, and hurricaneforce winds in the summer and early fall and covered by ice the rest of the year. The challenges presented by the Arctic setting as well as the sensitive balance between the ecosystem and the subsistence-based culture of the Inupiat people present unique challenges related to energy development seen nowhere else in America. Despite these risks and challenges, BOEM approved Shell s exploration plan without critical information related to safety and spill response capabilities, in violation of the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C a. Contrary to its own regulations, BOEM approved the exploration plan despite the fact that Shell is relying on an unapproved oil spill response plan to support its drilling activities. BOEM ignored, contrary to its regulations, Shell s failure to address two fundamental aspects of well control and containment. First, BOEM acted arbitrarily when it approved the exploration plan, because Shell failed to explain a new, not-yet-designed well capping and containment system based on a technology Shell had for years rejected as infeasible and ineffectual for its Arctic drilling operations. Second, BOEM approved Shell s blowout scenario without addressing the conflict between record evidence and Shell s estimate of the time required to drill a relief well to stop a blowout, and the resulting potential that a blowout volume could exceed Shell s own spill plan and that, for drilling late in 2

11 Case: /22/2011 ID: DktEntry: 24 Page: 11 of 95 October, Shell might be prevented from even completing a relief well and stopping a blowout before winter sets in and the Arctic Ocean freezes. In the aftermath of the Deepwater Horizon disaster, the consequences of the government approving a drilling plan without ensuring in advance that the company can safely and effectively prevent and respond to an oil spill could not be more apparent. As the National Commission on the BP Deepwater Horizon Oil Spill cautioned: Whether we explore for and produce oil and gas in such challenging environs as the Alaskan Arctic, and if so, under what conditions, depends crucially on taking to heart the lessons we learn from the Deepwater Horizon disaster and the energy policies we put in place. ER 399. BOEM s approval of Shell s exploration plan in this case is a troubling indication that the agency has not learned those lessons. JURISDICTIONAL STATEMENT These are consolidated petitions for review pursuant to Fed. R. App. P. 15 of the Secretary of Interior s approval of an offshore exploratory oil drilling plan under OCSLA, 43 U.S.C. 1340(c). Challenges to exploration plans are subject to judicial review in the court of appeals for the circuit in which the affected state is located. Id. 1349(c)(2). The Native Village of Point Hope, Alaska Wilderness League, Center for Biological Diversity, Defenders of Wildlife, Greenpeace, Inc., Natural Resources Defense Council, National Audubon Society, Northern Alaska 3

12 Case: /22/2011 ID: DktEntry: 24 Page: 12 of 95 Environmental Center, Oceana, Pacific Environment, Resisting Environmental Destruction On Indigenous Lands (REDOIL), Sierra Club, and The Wilderness Society (collectively the Point Hope Petitioners) and the Inupiat Community of the Arctic Slope (the Inupiat Tribe) (collectively the Petitioners) participated in the process leading to the decision, are aggrieved by the decision, and filed their petitions on September 29, 2011 and October 3, 2011, respectively, within 60 days of the Secretary s approval of Shell s exploration plan on August 4, See 43 U.S.C. 1349(c)(3); Dkt. 1-2 (No (Point Hope Petition)); Dkt. 1-2 (No (Inupiat Tribe Petition)). STATEMENT OF ISSUES 1. Did BOEM violate OCSLA, 30 C.F.R (a), by approving Shell s exploration plan in the absence of a final oil spill response plan approved pursuant to the Oil Pollution Act of 1990? 2. Did BOEM act arbitrarily and capriciously, under 30 C.F.R (d) and (c), by approving Shell s exploration plan without requiring Shell to discuss or describe its new well capping and containment system, which has not been designed, built, or tested, or explaining why the agency accepted Shell s assertion that the system will work given that the company concluded for years that well capping would not be effective in its Arctic drilling operations? 4

13 Case: /22/2011 ID: DktEntry: 24 Page: 13 of Did BOEM act arbitrarily and capriciously, under 30 C.F.R (g), by approving Shell s exploration plan without determining whether Shell s blowout scenario, which is unexplained and contrary to evidence in the administrative record, understates the number of days needed to drill a relief well, and, therefore, the maximum duration and the total volume of a blowout during Shell s drilling activities in the Arctic Ocean s icy waters? STATEMENT OF THE CASE On September 29, 2011, the Point Hope Petitioners filed their petition (No ). Dkt On October 7, 2011, Shell and the State of Alaska (the State) filed motions to intervene. Dkt. Nos. 6; 8-1. Shell also requested assignment of the Point Hope Petition to the panel that decided Native Village of Point Hope v. Salazar, Nos , , , Dkt. No. 6. On October 3, 2011, the Inupiat Tribe filed its petition (No ). On October 12, 2011, Shell and the State filed motions to intervene. Dkt. Nos. 5; 7-1. Shell requested assignment of Inupiat Tribe Petition to the panel that decided Native Village of Point Hope v. Salazar, Nos , , , Dkt. No. 5. On October 17, 2011, the Petitioners and the Federal Respondents filed a joint motion to consolidate the two petitions, modify the briefing schedule, and request expedited consideration to allow for a decision on the merits as soon as 5

14 Case: /22/2011 ID: DktEntry: 24 Page: 14 of 95 possible, and prior to the planned commencement of offshore drilling activities on July 1, Dkt. No. 13 (No ); Dkt. No. 12 (No ). Shell and the State concurred in the motion for consolidation, modification of the briefing schedule, and expedited consideration. Id. On October 18, 2011, the panel of A. Kozinski, Chief Judge, C. Bea and S. Ikuta, Circuit Judges, accepted assignment of the Inupiat Tribe Petition. Dkt. No. 17 (No ). The panel also granted the motions to intervene filed by Shell and the State in that case. Id. On November 18, 2011, the Court granted the motion to consolidate the two petitions. Dkt. No. 22 (No ). The Court also granted the motions to intervene filed by Shell and the State in the Point Hope Petition. Id. The Court granted the joint motion for expedited briefing and argument. Id. The Court calendared the petitions for oral argument the week of March 19, Id. On November 22, 2011, the Court entered an amended order changing the due date for the answering briefs. Dkt. No. 23. STATEMENT OF FACTS This case concerns Shell s readiness to conduct exploratory oil drilling in the Arctic Ocean s Beaufort Sea. Shell proposes to drill two wells at its Sivulliq prospect and two wells at its Torpedo prospect in the Beaufort Sea. ER Shell s drilling season extends from July 10 through October 31 of each year. ER 6

15 Case: /22/2011 ID: DktEntry: 24 Page: 15 of Shell expects to begin drilling activities in 2012, and will continue in subsequent summers until it completes the program. Id. Unlike its previous proposals, Shell plans to conduct simultaneous exploration drilling activities in the Chukchi Sea with another drilling fleet. See ER 328 (agency staff explaining Shell plans to drill in both Beaufort Sea and Chukchi Sea simultaneous [sic] in the same year using two drilling vessels and separate support vessels and oil spill response for each activity ). I. THE BEAUFORT SEA The Beaufort Sea provides important habitat for thousands of species of animals, birds, and fish, including endangered and threatened species such as the bowhead whale, the polar bear, and spectacled and Steller s eider. See ER Alaska Native communities across the Arctic depend on this biological richness for their subsistence use of animals such as bowhead whale, seal, fish, and birds. See, e.g., ER ; ER ; ER ; ER As BOEM has explained, subsistence (and the relationship between people, land, water, and its resources) is the expression of cultural identity, and production of subsistence foods is the activity around which social organization and generational transmission of the culture occurs. ER 26. The Beaufort Sea, however, is also a harsh and challenging environment. In Barrow, Alaska, the northernmost community in the country, ER 433, there are 7

16 Case: /22/2011 ID: DktEntry: 24 Page: 16 of 95 more than 320 days with temperatures below the freezing point each year. ER 420. As BOEM acknowledges in its environmental assessment, the Beaufort Sea region has hurricane-force storms and sea states that produce 20-foot waves during open water periods. See ER ( Frostbite can occur following less than five minutes of exposure when the wind chill drops as low as minus 90 degrees Fahrenheit (deg. F) during these storms. ); ER (describing sea states in the Beaufort Sea). Sea ice of varying thickness is present in the Beaufort Sea most of the year; during approximately three months of the year it is predominantly icefree, but it still has floating ice. See generally ER According to Shell: In the vicinity of Shell s drilling locations, the average duration of open water (defined as 1/10th or less pack ice) is 7.5 weeks, with the most consistent period of continuous open water beginning mid-august and ending with the first complete coverage of new ice in deep water in mid- to late October (based on a review of historical ice charts from 1997 to 2006). ER 567; see also ER (National / Naval Ice Center, Beaufort Sea, Ice Analysis); ER 220 (providing latitude and longitude for Shell s drill sites); ER 530 (Shell s spill response contractor describing freeze-up median dates October 1-31 ). A large oil spill in the Beaufort Sea would have significant impacts on people, mammals, fisheries, birdlife, and the marine ecosystems. See ER For the Alaska Native communities along the Arctic coast, an oil spill also could 8

17 Case: /22/2011 ID: DktEntry: 24 Page: 17 of 95 have significant effects on their culture and way of life, which are heavily dependent on the sea for subsistence hunting and fishing. See, e.g., ER ; ER ; ER The Arctic s sea ice, low visibility, high winds, rough seas, and cold temperatures complicate all aspects of a spill response, from stopping a well blowout to predicting or tracking the movement of an oil spill trapped in sea ice[.] ER 475. Spill response technologies face operational limits based on the Arctic s wind speed, wave height, ice conditions, and visibility. See ER , ; ER As a result of these factors, spill response operations can be slowed or shut down. See ER ; ER 475; ER (describing gaps in Arctic oil spill response). In addition, there is limited infrastructure in the region. There are no major docks or port facilities in Barrow or anywhere on the U.S. Arctic coast[.] ER 433. The nearest major port is 1,300 nautical miles from Point Barrow. ER 432. The nearest U.S. Coast Guard air station is roughly 1000 air miles away and no Coast Guard vessels reside in the region. ER 112. The U.S. Coast Guard Commandant Admiral Robert Papp, Jr., recently explained that, with regard to Coast Guard infrastructure and oil spill response resources, [t]here is nothing [in the Arctic] to operate from at present and we re really starting from ground zero. ER

18 Case: /22/2011 ID: DktEntry: 24 Page: 18 of 95 II. DEEPWATER HORIZON EXPLORATION DRILLING DISASTER On April 20, 2010, BP s Deepwater Horizon offshore drilling rig exploded and caught fire, causing the deaths of 11 people and resulting in a blowout that spilled roughly 4.9 million gallons of oil into the Gulf of Mexico. ER 338; ER 383. Two days after the explosion and fire, the Deepwater Horizon sank to the bottom of the ocean. ER 349. The blowout continued uncontrolled in part because the blowout preventer, or BOP, did not function properly. In a drilling emergency, the blowout preventer is designed to contain pressure within the wellbore and halt an uncontrolled flow of hydrocarbons to the rig. ER 352. The blowout preventer is a stack of enormous valves that rig crews use both as a drilling tool and as an emergency safety device. Once it is put in place, everything needed in the well drilling pipe, bits, casing, and mud passes through the BOP. ER 350. The Deepwater Horizon s blowout preventer failed in numerous ways. ER BP, however, had no available, tested technique to stop a deepwater blowout other than the lengthy process of drilling a relief well. 2 ER 363. BP initially tried to use the blowout preventer to stop the flow of oil, but the efforts were unsuccessful. ER As the oil continued to spill, BP designed and 2 A relief well is a second well drilled to depth to intersect the out-of-control well at its source and enable a drilling rig to pump in cement to stop the flow of oil. See ER 360; ER 107 (showing directional drilling for relief well). 10

19 Case: /22/2011 ID: DktEntry: 24 Page: 19 of 95 deployed at least five different well control and containment techniques over the following months to stop the flowing oil and capture the oil. ER , , In the words of one senior government official, BP hoped for the best, planned for the best, expected the best during this process. ER 377. On September 19, 2010, 152 days after the blowout, the first relief well was completed and the leaking well was declared dead. ER 385. III. THE NATIONAL OIL SPILL COMMISSION S FINDINGS AND RECOMMENDATIONS Following the Deepwater Horizon, President Barack Obama created the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling (the Commission). ER 338. The President charged this independent, nonpartisan entity to improve the country s ability to respond to spills, and to recommend reforms to make offshore energy production safer. Id. The Commission released its final report in January ER 335. A. Oil Spill Prevention and Response The Commission concluded that the Deepwater Horizon blowout was not the product of a series of aberrational decisions.... The missteps were rooted in systemic failures by industry management (extending beyond BP to contractors that serve many in the industry), and also by failures of government to provide effective regulatory oversight of offshore drilling. ER 354; see also ER

20 Case: /22/2011 ID: DktEntry: 24 Page: 20 of 95 ( Both government and industry failed to anticipate and prevent this catastrophe, and failed again to be prepared to respond to it. ). Of its numerous recommendations, the Commission paid specific attention to the areas of oil spill prevention, containment, response, and planning. ER 393 ( Oil spill response planning and analysis across the government needs to be overhauled in light of the lessons of the Deepwater Horizon blowout. ). The Commission concluded: A new process for reviewing spill response plans is needed. Id. The new process should ensure that all critical information and spill scenarios are included in the plans, including oil spill containment and control methods to ensure that operators can deliver the capabilities indicated in their response plans. ER 394. The Commission observed that the most obvious, immediately consequential, and plainly frustrating shortcoming of the oil spill response set in motion by the events of April 20, 2010 was the simple inability of BP, of the federal government, or of any other potential intervener to contain the flow of oil from the damaged Macondo well. ER 396. The Commission noted that neither BOEM nor the U.S. Coast Guard had the expertise or resources to supervise the well-containment efforts. Id. The Commission cautioned that future plans should demonstrate that an operator s containment technology is immediately deployable and effective. ER

21 Case: /22/2011 ID: DktEntry: 24 Page: 21 of 95 In the wake of the Deepwater Horizon disaster, BOEM issued Notice to Lessees No N10 (NTL 2010-N10) requiring operators to demonstrate that they have access to and can deploy containment resources that would be adequate to promptly respond to a blowout or other loss of well control. ER 406; see also ER 407 (detailing the types and quantities of required surface and subsea containment equipment). 3 The Commission advised that in enforcing NTL N10, BOEM must ensure that operators provide detailed descriptions of their technology and demonstrate that it is deployable and effective. ER 397. B. Arctic Conclusions and Recommendations During its investigation, the Commission focused heightened attention on offshore drilling in the Arctic due to the unique risks associated with drilling in such a remote area. See, e.g., ER a ( In 1985, an Office of Technology Assessment study of Arctic and deepwater oil drilling highlighted the special safety risks of harsh environments and remote locations. ) (internal quotation and citation omitted); ER (recommending changes for frontier or high-risk areas such as the Arctic ). 4 3 NTL 2010-N10 applies to operators conducting operations using subsea blowout preventers (BOPs) or surface BOPs on floating facilities. ER 406. Shell will be using a floating facility, either the Kulluk or the Discoverer, ER , and a subsea blowout preventer. ER 236, The Commission defined frontier areas as areas of the [outer continental shelf] that either have never been leased, or have not been leased in many years. It includes the Arctic (Beaufort and Chukchi Seas)[.] ER

22 Case: /22/2011 ID: DktEntry: 24 Page: 22 of 95 The Commission identified the failure to plan effectively for a large-scale, difficult-to-contain spill in the deepwater environment or potentially in the Arctic as one of the three critical issues or gaps in the government s existing response capacity. ER 393. The remoteness and weather of the Arctic frontier create special challenges in the event of an oil spill. Successful oil-spill response methods from the Gulf of Mexico, or anywhere else, cannot simply be transferred to the Arctic. ER 404. The Commission warned that Arctic drilling proposals require the closest scrutiny, given the potential energy resources and the physical and environmental challenges of pursuing them safely. ER 402. The Commission concluded that finding and producing... oil offshore Arctic Alaska requires the utmost care, given the special challenges and risks associated with this frontier. ER 403. IV. SHELL S NEW BEAUFORT EXPLORATION PLAN A. Shell s Multiple Drilling Proposals In 2009, BOEM approved Shell s exploration plan to drill two offshore wells in the Beaufort Sea during a single season. ER 219. In May 2010, the Court denied two petitions challenging the approval. Native Vill. of Point Hope v. Salazar, 378 F. App x. 747 (9th Cir. 2010). Shell, however, did not drill these wells during the summer of 2010 because the Secretary of the Interior refused to allow drilling until BOEM could evaluate the Deepwater Horizon disaster and take 14

23 Case: /22/2011 ID: DktEntry: 24 Page: 23 of 95 steps to limit the potential for a similar failure in the Arctic. See ER 219 (BOEM suspended all exploration drilling activities in the Arctic following the Deepwater Horizon incident. ). In October 2010, Shell announced it would seek to drill a single well in the Beaufort in 2011 (and forgo Chukchi drilling due to pending litigation). ER ; see also Native Vill. of Point Hope v. Salazar, 730 F. Supp. 2d 1009 (D. Alaska 2010). Shell submitted an update to its approved Beaufort exploration plan, seeking permission to drill at the Sivulliq N drill site. ER 219. By February 2011, as the post-deepwater Horizon review and permitting processes were still underway, Shell decided it would not drill in See id.; ER 328; ER 225 (noting that the Environmental Appeals Board remanded Shell s air permit). In May 2011, Shell submitted a further revised exploration plan to drill in the Beaufort Sea. ER 302. At the same time, Shell submitted a new oil spill response plan (hereinafter the New Beaufort Spill Plan) to support its proposed 15

24 Case: /22/2011 ID: DktEntry: 24 Page: 24 of 95 exploration drilling. 5 ER 228, 234; ER In June 2011, Shell provided BOEM a second revised exploration plan for the Beaufort Sea (hereinafter the Exploration Plan). 7 ER 212. B. Content of the Exploration Plan Among other changes, the Exploration Plan proposed using a different drilling unit, 8 made the proposal a multi-year drilling plan, and increased the numbers of wells Shell plans to drill to a total of four. ER 219. In the revised 5 OCSLA requires operators seeking to conduct exploration drilling activities under a regional oil spill response plan to have that plan approved prior to submitting their drilling proposal. See 30 C.F.R (a). On October 1, 2011, 30 C.F.R moved to 30 C.F.R to be included under BOEM s authority, as part of the agency reorganization. See 76 Fed. Reg. at 64,439. Petitioners use the new regulatory citations in this brief, but note that some record documents cite the prior versions. 6 Despite the title page and the signature page, ER 546 is the New Beaufort Spill Plan. See ER 549 (It is a redlined version of the Old Beaufort Spill Plan showing many, but not all, of the changes between the two spill plans.). 7 The Exploration Plan made various technical changes to the version submitted in May. See, e.g., ER Shell reserved the opportunity to use its original drillship, the Discoverer. ER 219, 223. If Shell uses the Discoverer, then it plans to keep the Kulluk in Dutch Harbor, Alaska, to serve as an alternative drilling rig in the event it becomes necessary to drill an emergency relief well. ER

25 Case: /22/2011 ID: DktEntry: 24 Page: 25 of 95 proposal, Shell sought to use the conical drilling unit, the Kulluk, id., which was built in 1983, ER 313, and has not drilled a well in 18 years. 9 Id. BOEM determined that the plan revisions [were] likely to result in a significant change to the impacts previously identified and, as a result, BOEM concluded that the revised [exploration plan] [wa]s appropriately subject to the full procedures pursuant to 30 [C.F.R. ] ER 310; see also ER 220 (Shell acknowledging the same). C. The Exploration Plan Relied on an Unapproved Oil Spill Response Plan. The Exploration Plan relies upon the New Beaufort Spill Plan to support Shell s proposed exploration drilling. ER 228, 234; ER The New Beaufort Spill Plan revises a spill plan that was developed and approved prior to the Deepwater Horizon oil spill. ER 226 (Table 2.a-1). 1. The Old Beaufort Spill Plan was approved before the Deepwater Horizon disaster. In March 2010, BOEM approved Shell s Beaufort Sea Regional Exploration Oil Discharge Prevention and Contingency Plan (January 2010) (the Old Beaufort 9 Earlier this year, Shell provided a tour of the Kulluk to various government officials and representatives. ER The tour revealed substantial surface corrosion on the exterior of the Kulluk, exterior corrosion on the vessel hull, and exterior corrosion on piping, railing, and other rig equipment. ER 312; see also ER 313 ( The March 1, 2011 tour showed that the Kulluk was not in drillready condition and most of the upgrades announced to the press had not been completed. ). 17

26 Case: /22/2011 ID: DktEntry: 24 Page: 26 of 95 Spill Plan). ER 535a; see also ER 531. Approximately one month after the approval, the Deepwater Horizon blowout occurred. ER 345. In May 2010, in response to direction from BOEM, Shell provided the agency information about additional safety procedures that Shell plan[ned] to undertake [in the Arctic] in light of [the Deepwater Horizon disaster]. ER 574. Shell committed to several new safety and oil spill response measures including changes to Shell s well control, blowout preventers, remote operating vehicles and divers, and containment and response equipment and procedures. ER Shell committed to having a pre-fabricated coffer dam pre-staged in Alaska 10 to locate the dome for immediate deployment. ER 578. Shell stated it would incorporate these new measures into its plans. ER 577. In June 2010, BOEM revised and increased the requirements for [worst case discharge] scenario calculations through [Notice to Lessees] No N06 [(NTL 2010-N06)]. ER 234 (Shell describing the changes). BOEM explained that [d]ue to the explosion and sinking of the Deepwater Horizon, the resulting deaths of 11 people, and changing conditions caused by the blowout of the BP Macondo prospect well that was being drilled by the Deepwater Horizon, the 10 A coffer dam (also spelled cofferdam) is a dome designed to cover a spilling well; it has a pipe at the top of the dome to channel oil and gas to the surface. ER

27 Case: /22/2011 ID: DktEntry: 24 Page: 27 of 95 BOEM requires additional information concerning [oil companies ] planned activities. ER 522. In December 2010, BOEM solicited public comments on the previously approved Old Beaufort Spill Plan. 11 Petitioners provided extensive comments outlining the inadequacies of the Old Beaufort Spill Plan. See, e.g., ER 115, 121, , 131, 136, 139. Petitioners specifically criticized Shell s failure to explain its new subsea containment system. ER 136 ( In December 2010, groups noted that Shell is proposing a well capping and containment system that is not described, built, tested or verified as effective in Arctic conditions. ). In January 2011, Shell stated publicly that it had just completed its selection of a design concept for the system and [] plann[ed] to have fabrication completed by May 31, 2011, for crew training in June and field deployment in July [2011].... ER 330. In March 2011, Shell admitted its subsea capping and containment system had not been built. ER 318. Shell explained that it was still being designed. Id. 2. The New Beaufort Spill Plan has not been approved. In May 2011, Shell submitted the New Beaufort Spill Plan together with the Exploration Plan. ER 228, 234; ER 546. The New Beaufort Spill Plan reflects 11 The agency accepted comments on [the Old Beaufort Spill Plan] and associated information on [the] blowout scenario and containment required under NTL See 19

28 Case: /22/2011 ID: DktEntry: 24 Page: 28 of 95 the inclusion of using either the Kulluk or the Discoverer as the drilling vessel and updates the [worst case discharge] information and the oil spill response based on the new [worst case discharge]. ER 234. It attempts to respond to the government s heightened scrutiny following the Deepwater Horizon disaster, including NTL No N06. See ER 549; ER 219. The New Beaufort Spill Plan contemplates a worst case discharge spill of 480,000 barrels (bbl). ER 550 (showing that the Old Beaufort Spill Plan contemplated a worst case discharge spill of 165,000 bbl). The New Beaufort Spill Plan also incorporates Shell s new proposed subsurface control options, including a well capping and containment system. ER In August 2011, in its environmental assessment for the Exploration Plan, the agency explained, [t]he [New Beaufort Spill Plan] is currently being reviewed given th[e] new information [Shell provided after the Deepwater Horizon] and appropriate actions will be taken pending the evalutation [sic] of this new information and how it impacts Shell s capability to respond to an oil spill event. ER 14. To date, BSEE, the bureau now responsible for this review process, still has not approved the New Beaufort Spill Plan. D. Shell Proposed a Well Capping and Containment System in the Arctic. In the Exploration Plan, following direction from BOEM after the Deepwater Horizon, Shell proposed to use a new capping stack and containment 20

29 Case: /22/2011 ID: DktEntry: 24 Page: 29 of 95 system. ER 237. The proposal reflects a change in Shell s historical position regarding the feasibility of such a system and, indeed, the system is still being designed. 1. Shell historically rejected well capping in the Arctic. In offshore drilling areas where the ocean floor is subject to extensive ice gouging and ice keel scouring, companies are required to construct large pits in the ocean floor, called mudline cellars, to protect the blowout preventer. 12 ER 227, 230. Shell s proposed drill sites are at water depths where the seafloor is subject to extensive ice gouging and ice keel scouring, ER 230, and, as a result, Shell will construct mudline cellars as part of its drilling activities. ER 275a (Shell explaining that its mudline cellars are approximately 24 feet in diameter and 41 feet below the seafloor.); see also ER 221, 226; ER 61 ( relief well BOP would need to be left in place and consequently exposed to ice gouging and ice keel scouring ). According to Shell, [t]here are three methods of regaining well control once an incident has escalated to a blowout scenario; implementation of dynamic surface control measures, well capping, and relief well drilling. ER 540; ER BOEM regulations require companies to dig a mudline cellar and install their blowout preventer stack in the hole when they are using a subsea blowout preventer system in an ice-scour area. See 30 C.F.R (h). The mudline cellar, also known as a glory hole, must be deep enough to ensure that the top of the blowout preventer stack is below the deepest probable depth that ice will scour the ocean floor. Id. 21

30 Case: /22/2011 ID: DktEntry: 24 Page: 30 of 95 In its previous exploration plan, Shell identified surface control measures and relief well drilling as the only viable means of achieving well control during its Arctic exploration activities. ER (not proposing well capping); see also ER 594 (Shell explaining in a public meeting: There is no technology for a containment sleeve of the type you re suggesting that can do that without interfering with [Shell s] anchoring system. That s one of the biggest problems. ) Similarly, Shell explained in its previous oil spill response plans dating back to 2007 that for Arctic drilling operations [p]roven technology [for well capping] is not available. ER 605. Shell explained: Well capping is not feasible for offshore wells from moored vessels with [BOPs] sitting below the mud line in a well cellar (glory hole)[.] ER 602; see also ER 606 (According to Shell, techniques for performing well capping in mud line cellars constructed on the sea floor from moored vessels have not been proven. Therefore, well capping would not be an effective option[.] ); ER 544 (same); ER 604 (same). Last year, Shell reiterated well capping is not feasible for its operations because Shell plans to use moored vessels with the blowout preventer sitting below the mud line in a well cellar. ER 540; see also ER ( Equipment is not available for wells drilled from moored vessels. ). 22

31 Case: /22/2011 ID: DktEntry: 24 Page: 31 of Shell proposed well capping in the Arctic for the first time. In May 2011, for the first time in an exploration plan, Shell responded to the new requirements imposed following the Deepwater Horizon blowout and proposed to design, build, and use a well capping stack and containment system as part of its Beaufort exploration activities. See ER 237. In the Exploration Plan, Shell explained that [c]ontainment capability in the unlikely event of a blowout in Camden Bay is provided by a combination of a subsea capping stack... and surface separation equipment on a containment vessel. Id. The Exploration Plan acknowledged that the system is still not built, and stated only that it will have the following priorities: 1. Attaching a device or series of devices to the well to affect a seal capable of withstanding the maximum anticipated wellhead pressure (MAWP) and closing the assembly to completely seal the well against further flows (commonly called capping and killing ); 2. Attaching a device or series of devices to the well and diverting flow to surface vessel(s) equipped for separation and disposal of hydrocarbons (commonly called capping and diverting ). ER 237. Shell asserted that it expects the new capping stack system to work in conditions found in the Arctic including ice and cold temperatures and the equipment will also be designed for maximum reliability, ease of operation, flexibility and robustness so it could be used for a variety of blowout situations. 23

32 Case: /22/2011 ID: DktEntry: 24 Page: 32 of 95 Id. The Exploration Plan did not explain why Shell now expects this system to work in Arctic conditions given its previous contrary conclusions. See id. E. Shell Asserted it Can Drill a Relief Well Faster Than it Can Drill the Actual Exploration Wells. In the Exploration Plan, Shell estimated that a well drilled at the Torpedo prospect will require approximately 44 days, ER 246, and a well drilled at a Sivulliq prospect will require approximately 34 days. ER 243. For emergency relief well operations, Shell provided a shorter time frame to drill. Shell asserted it can drill a relief well at its Torpedo prospect in 25 days, and drill a relief well at its Sivulliq prospect in 20 days. ER 229; see also ER 274. The Exploration Plan did not explain the company s basis for the difference in drill times, except to say Shell will not construct a mudline cellar for the relief well. ER 273; see also ER 233 (mudline cellar construction only takes a few days ). The Exploration Plan, however, acknowledged that mudline cellars are required for Beaufort Sea wells to protect wellhead equipment from ice. ER 240. In the New Beaufort Spill Plan, Shell explains that relief well [t]echnology [in the Arctic] may be seasonally limited. ER 573. According to the plan, drilling a relief well in light of the Arctic s seasonal limitations can take 60 to 180 days. Id. 24

33 Case: /22/2011 ID: DktEntry: 24 Page: 33 of 95 V. BOEM S REVIEW PROCESS REGARDING THE EXPLORATION PLAN After submission of the Exploration Plan and the New Beaufort Spill Plan, BOEM solicited public comments and conducted its review of the adequacy of the Exploration Plan. A. Lack of an Approved Oil Spill Response Plan. In May 2011, public commenters explained that BOEM[] should not deem [the Exploration Plan] complete until it has reviewed and approved a revised spill plan. ER 294; see also They explained that Shell s Old Beaufort Spill Plan was developed and approved prior to the Deepwater Horizon oil spill and did not reflect the changes and additional safety and spill response measures required after the disaster. Id. In July 2011, Petitioners provided hundreds of pages of comments and exhibits addressing various inadequacies in the New Beaufort Spill Plan. ER ; ER ; ER ; ER Other stakeholders also provided extensive comments. See, e.g., ER ; ER B. Shell s Reversal Regarding Well Capping and the Failure to Explain the Containment System. BOEM received extensive comments questioning Shell s readiness to rely on its proposed well capping and containment system in the Beaufort Sea. Petitioners and others explained that the system must be designed and built to work in Arctic conditions. ER ; ER ; ER 194. The North Slope 25

34 Case: /22/2011 ID: DktEntry: 24 Page: 34 of 95 Borough, for example, raised numerous concerns including hydrate formation, 13 late season ice conditions, the ability to keep a vessel stable over the blowout (known as station-keeping), reduced buoyancy, and the availability of trained and qualified personnel to operate the new system. ER The North Slope Borough noted that Shell failed to provide the agency any engineering drawings or technical specifications for the arctic well containment system, including a description of the system components, capabilities, ratings and throughput capacity and a comparison to the worst case blowout conditions that may be encountered in a Camden Bay well blowout[.] ER 65. The comments also questioned, in light of the new capping and containment system, Shell s assertion that there is no new or unusual technology proposed in the Exploration Plan. See ER 227; ER 149; ER The State of Alaska, for example, sought additional details on the system. ER 180 (observing that [i]t is not clear whether [Shell s well capping and containment equipment] has been used previously in the Arctic or is based on designs used elsewhere in the Arctic ). The State of Alaska also asked about Shell s progress on having this equipment in place for the 2012 drilling season. ER One of Shell s contractors cautioned that hydrates can greatly hinder well control operations and, as a result, [h]ydrate problems cannot be ignored and might become a major factor in well control. ER

35 Case: /22/2011 ID: DktEntry: 24 Page: 35 of 95 During the agency s review, BOEM staff questioned Shell s assertion on this point in an inquiry to other agency staff: Do you concur with this statement? Would the containment stack and capping system... qualify as new and unusual technology according to the definition in 30 CFR (b) in that it has not been previously been used extensively in the Alaska region nor has it been used under anticipated operating conditions? ER 281. The only response indicated that such technology has been used in the Gulf of Mexico. ER 276; see also ER 269 (Shell explaining it had used the technology in other places ). C. Relief Well Drilling May Take Significantly Longer Than Shell s Estimate. Petitioners and other stakeholders challenged Shell s assertion that it could drill an emergency relief well faster than the company can drill the original well. ER 296; ER ; ER 157; ER 164; ER ; ER , 197; ER In the Exploration Plan, Shell identified Wild Well Control as a company that will provide Shell well control and relief well construction advice. ER 272. Comments pointed to a Wild Well Control report advising the Canadian 14 In a separate proceeding, BOEM recently evaluated the operational failures and other constraints that would affect a well-control incident and response in association with the Shell program for a Chukchi environmental review process. ER 291. The agency concluded it could take 74 days to restore well control if the relief well required an alternative rig. ER

36 Case: /22/2011 ID: DktEntry: 24 Page: 36 of 95 Government that drilling a relief well will take longer than the time needed to drill the original well. See ER 583; ER The report cited several considerations for the additional time: directional drilling results in greater lengths, time needed to control direction and position of the wellbore, problems with the blownout well, the relief well might itself suffer the same problematic issues as the original well, and the limited length of the drilling season. 15 ER 583. During the inter-agency review of BOEM s environmental assessment, the National Oceanic and Atmospheric Administration asked BOEM to explain how quickly Shell could complete its relief well. ER 689 (noting it [w]ould be helpful to include industry standards / schedules for relief well setup in the [A]rctic. ). BOEM responded that this issue was not part of the proposed action and [wa]s not, therefore, addressed in the [environmental assessment]. ER 684. Numerous commenters, including the Inupiat Tribe and the Point Hope Petitioners, expressed concern that Shell failed to address any of these issues in the Exploration Plan given the potential importance of the emergency relief well, especially late in the season when the Arctic is freezing solid. ER 157, 164, 166; ER ; ER 61-62, If a relief well cannot be completed in the Arctic Ocean before pack ice encroaches on a drill site, it is possible that a blowout 15 By way of illustration, another oil company projected a potential 60 day timeframe to complete a relief well for a shallow well in the Canadian Beaufort Sea. ER

37 Case: /22/2011 ID: DktEntry: 24 Page: 37 of 95 could continue uncontrolled through the eight- to nine-month ice season. ER 480. The comments explained that oil left behind over winter can travel considerable distance either because it is trapped in ice or because it carried by currents under the pack ice. ER (explaining that [a] scenario developed in the mid- 1980s for the Chukchi Sea estimated that spilled oil trapped in ice could move as much as 300 to 500 miles ). VI. BOEM CONDITIONALLY APPROVED THE EXPLORATION PLAN On August 4, 2011, BOEM conditionally approved the Exploration Plan. ER 1-3. In its decision letter, BOEM did not address the lack of approval of the New Beaufort Spill Plan at the time of the decision. Id. BOEM acknowledged that Shell s subsea well capping and containment system is currently in the design stage. ER 3. The agency s letter required Shell to provide the agency documentation that the new system is designed for the projected worst case discharge conditions for approval by BOEM[]. Id. It also required Shell to explain its procedures for deployment, installation and operation of the system under anticipated environmental conditions, including the potential presence of sea ice for approval by BOEM[]. Id. Finally, it required Shell to conduct a field exercise to demonstrate Shell s ability to deploy the system. Id. 29