[00:00:01] Speaker 00: State number 20-5179, Gulf Restoration Network at Al, at Balance, versus Deborah A. Haland in her official capacity as Secretary of the Interior at Al. [00:00:11] Speaker 00: Ms. [00:00:12] Speaker 00: Hardy for the at Balance, Mr. Heminger for the at Belize. [00:00:14] Speaker 03: Good morning, Ms. [00:00:20] Speaker 03: Hardy, you may proceed. [00:00:23] Speaker 05: Good morning, may it please the court? [00:00:25] Speaker 05: I'm Brettney Hardy for the Conservation Group at Balance. [00:00:28] Speaker 05: I'd like to reserve two minutes for rebuttal. [00:00:31] Speaker 05: The environmental impact statement that we've challenged is the last chance for the Bureau of Ocean Energy Management to evaluate the environmental effects of offering millions of acres of public land for oil and gas development. [00:00:46] Speaker 05: And it's important that the agency gets it right. [00:00:49] Speaker 05: It matters. [00:00:50] Speaker 05: Here, the Bureau didn't get it right. [00:00:53] Speaker 05: Instead, the EIS for the two lease sales contains false assumptions that misled the public about the true risks of the sale. [00:01:02] Speaker 05: I'd like to talk about three stark errors with the agency's analysis that warrant vacatur. [00:01:08] Speaker 05: First, the Bureau skewed its analysis about whether to hold these lease sales and instead treated the decision as a foregone conclusion. [00:01:19] Speaker 05: Second, the Bureau relied on the existence of brand new safety regulations to conclude that another catastrophic spill wouldn't happen when it was well aware that Interior was in the process of dismantling those same regulations. [00:01:36] Speaker 05: And third, the Bureau promised commenters that it would analyze substantial enforcement shortcomings that the GAO had identified. [00:01:44] Speaker 05: But in its analysis, it didn't even consider those gaps. [00:01:49] Speaker 05: So turning to the first claim, which is the Bureau's skewed no action alternative. [00:01:55] Speaker 05: Here, the agency improperly assumed that the effects of the proposed lease sale would happen eventually, whether or not they decided to hold those sales. [00:02:04] Speaker 05: And that completely skewed the agency's analysis of benefits and costs and affected its decision, led to an arbitrary decision. [00:02:15] Speaker 01: Ms. [00:02:15] Speaker 01: Hardy, I was confused as to why in your [00:02:19] Speaker 01: brief, you didn't cite to or focus on the interior's assessment of a no action alternative in the programmatic EIS. [00:02:35] Speaker 01: You didn't see that in your brief, and I'm just wondering why that is. [00:02:40] Speaker 05: Well, the no action alternative from the programmatic analysis can't substitute for the decision that the agency was making at this stage, the lease sale stage. [00:02:52] Speaker 05: So at the programmatic level, the agency was deciding whether or not to hold these sales at all. [00:02:58] Speaker 05: And that's a different decision when you get to your two or three and you're deciding whether to hold an individual lease sale. [00:03:06] Speaker 05: to give a practical example. [00:03:09] Speaker 04: If the first EIS assesses the broader question, why can't the second EIS zoom in and focus on the marginal effect of the two lease sales directly at issue at the later stage? [00:03:31] Speaker 05: Well, first, the second EIS didn't zoom in. [00:03:34] Speaker 05: The second EIS didn't look at the question of whether to hold those lease sales. [00:03:39] Speaker 05: It assumed that the lease sales would happen eventually. [00:03:42] Speaker 05: Later, lease sales would make up for those effects. [00:03:45] Speaker 01: But it assumed that in the context of the programmatic EIS and the evaluation that the agency had made that they were going to make a certain number of lease sales during this five-year period. [00:03:57] Speaker 01: It assumed that in context, it wasn't in the air that they thought, okay, if this lease sale doesn't happen, another one will, because that determination was made at the programmatic stage. [00:04:09] Speaker 01: So I'm curious as Judge Katz is as to why you didn't really assess the fact or challenge the fact that the programmatic EIS did the assessment of no action, meaning no lease sales during this period of time. [00:04:28] Speaker 05: Well, the question is different at the lease sale stage. [00:04:31] Speaker 05: So it's important to understand at the programmatic level, they set a schedule to hold 10 lease sales. [00:04:38] Speaker 05: And if they don't hold these two lease sales, that means there will be eight lease sales instead of 10. [00:04:43] Speaker 05: It doesn't mean that those lease sales will happen later. [00:04:48] Speaker 05: It means there will be a lower number of lease sales. [00:04:51] Speaker 05: And that matters because if there are less lease sales. [00:04:54] Speaker 01: I'm sorry, can I just, I don't understand. [00:04:57] Speaker 01: The initial stage is where they say we're going to hold 10 lease sales. [00:05:02] Speaker 01: So when they get to the later stage and they're assessing a particular lease sale, why is it unreasonable for them to say, even if we don't do this one, that is the no action alternative in this context, there will be another one because we have previously determined that we're going to do 10 during this period of time. [00:05:23] Speaker 01: That's how I read these documents. [00:05:25] Speaker 01: You seem to suggest [00:05:26] Speaker 01: that they could stay at the second stage. [00:05:29] Speaker 01: If we don't do these, we'll just have eight now. [00:05:33] Speaker 01: And I'm suggesting that they had previously said, no, no, we're going to have 10 regardless. [00:05:39] Speaker 05: Well, the fundamental, I guess, what's important to understand here is that the programmatic stage, they did not commit to holding 10 lease sales. [00:05:50] Speaker 05: And the agency isn't arguing that it committed at that stage. [00:05:54] Speaker 05: The underlying statute, the Outer Continental Shelf Lands Act, [00:05:58] Speaker 05: doesn't require the agency to hold all the lease sales in its schedule. [00:06:03] Speaker 05: And in fact, in the past, the agency has decided not to hold all scheduled lease sales. [00:06:09] Speaker 05: So the programmatic level is just setting a tentative schedule. [00:06:12] Speaker 05: It's not committing to those lease sales. [00:06:15] Speaker 05: At the lease sales stage, and if you look at the purpose that they articulate in the lease sale EIS, [00:06:22] Speaker 05: The purpose of that process was to decide specifically whether and how to hold these lease sales. [00:06:30] Speaker 05: And so the question of whether to hold this lease sale was made, the commitment was made at the lease sale stage. [00:06:37] Speaker 05: And that's at J.A. [00:06:39] Speaker 05: 859. [00:06:41] Speaker 05: So, just to give a practical example, if you were looking at your retirement investments and you decided I'm going to sell 10% of my investments once a month for the next 10 months, and then you move forward January and February sold 10% of your investments. [00:06:59] Speaker 05: March, you said, I want to relook at this decision and decide whether to sell 10% of my investments. [00:07:06] Speaker 05: The decision at that stage is much different than deciding whether to sell all of your assets writ large. [00:07:13] Speaker 05: It's a question of whether to sell your assets in that month. [00:07:18] Speaker 05: And you couldn't just assume that you would double up and sell 20% of your assets in April, because that's a different decision-making process. [00:07:26] Speaker 05: You may decide to do that. [00:07:28] Speaker 05: Or it's equally as likely that you may not double up and you may not sell any assets in April. [00:07:35] Speaker 05: But the agency here improperly assumed that all the effects from selling eight lease sales would be exactly the same as if they had sold 10. [00:07:46] Speaker 03: You may want to move on to your second and third argument. [00:07:50] Speaker 05: Sure. [00:07:51] Speaker 05: In terms of the safety regulations, I want to step back and just put this in context. [00:07:57] Speaker 05: We had the Deepwater Horizon spill just a little over a decade ago, and now the Bureau is saying that everything is fine, all the problems have been fixed, so we don't need to worry about going full steam ahead with oil and gas production. [00:08:10] Speaker 05: But the record tells a different story. [00:08:13] Speaker 05: Interior was dismantling important safety regulations and evidence shows that reforms hadn't been. [00:08:21] Speaker 03: I can think the problem I see with that argument is that at the time those regulations had not been amended. [00:08:30] Speaker 03: And so I don't see how you can have an agency in an EIS assume that regulations are going to be changed when they haven't been changed yet. [00:08:43] Speaker 03: And then further, the changes that were made didn't completely dismantle them. [00:08:49] Speaker 03: They changed some of the requirements, but they weren't completely dismantled. [00:08:54] Speaker 03: I'm more interested in your argument about enforcement assumptions, given the results of the [00:09:09] Speaker 03: of the commission that examined the Deepwater Horizons bill and the GAO findings. [00:09:21] Speaker 05: Sure. [00:09:22] Speaker 05: Yeah, so to answer your questions about the safety rules, NEPA requires agencies to look at impacts at the earliest possible time. [00:09:30] Speaker 05: And these rule repeals were well underway by the time the agency completed its EIS. [00:09:37] Speaker 05: The administration had issued two executive orders directing Interior to dismantle these rules. [00:09:43] Speaker 05: The Secretary of Interior had also issued an administrative order telling the agencies to do the same. [00:09:50] Speaker 05: And days after the agency completed its EIS, the Interior had sent proposed rules to the OMB and had published proposed rules in the Federal Register. [00:10:00] Speaker 05: So this was not a crystal ball inquiry. [00:10:03] Speaker 05: This was information that was available to the agency. [00:10:07] Speaker 05: And it's important to remember that in the environmental impact statement, the agency gave false information. [00:10:14] Speaker 05: It told the public that these rules were not changing. [00:10:17] Speaker 05: At the very least, it needed to acknowledge that these changes were underway. [00:10:22] Speaker 05: And it relied on these rules specifically to prevent a catastrophic spill from happening. [00:10:28] Speaker 05: Which is the very- Ms. [00:10:30] Speaker 01: Hardy, didn't it rely on other things as well so that even if we agree with you that these two rules were under revision, that it was clear as to how they were being revised, that they were being revised, and the agency should not be able to close its eyes to that with respect to the EIS, in this particular circumstance, I had understood the agency to rely not only on those rules, [00:10:58] Speaker 01: but also a statistical analysis and other safety regulations in making its determination that a catastrophic oil spill was unlikely. [00:11:08] Speaker 01: So what do we do with that? [00:11:10] Speaker 01: If there is say a problem with their reliance on one aspect of the record, but there are other things in the record to support the conclusion. [00:11:24] Speaker 05: The agency relied primarily on the safety rule changes, particularly the well control rules. [00:11:30] Speaker 05: So at JA369, the agency said a catastrophic spill is not expected, partly given the extremely low probability, the quantitative analysis, but more importantly, as a result of the reforms put in place after Deepwater Horizon. [00:11:48] Speaker 05: And the agency goes on to say that these reforms would help ensure that the US can safely and responsibly expand development. [00:11:57] Speaker 05: The agency also specifically said at JA1018, finalization of the well control rule was expected to decrease the probability of deep water blowouts. [00:12:09] Speaker 05: So the agency considered these reforms to be the most important part of its conclusion that a catastrophic spill wouldn't happen. [00:12:16] Speaker 05: And turning to the Judge Wilkins' question about the substance of the repeals, the Interior Department was removing critical requirements. [00:12:29] Speaker 05: For example, the agency was removing requirements to close a blowout preventer seal at all times. [00:12:36] Speaker 05: and removing requirements to ensure that the seal closes properly. [00:12:43] Speaker 05: And the blowout preventer remembers the equipment that failed during Deepwater Horizon. [00:12:48] Speaker 05: The revisions also eliminated standards for third parties inspectors to remain independent. [00:12:54] Speaker 05: And that was something the Deepwater Horizon Commission identified as critical. [00:12:59] Speaker 05: So these were these were not minor changes these were removing important requirements that were needed to address Deepwater Horizon when the agency was [00:13:09] Speaker 05: Putting these rules into place too, the agency stated in the proposed rules that one consistent element in the Deepwater Horizon investigations was that additional requirements related to blowout preventers and well control equipment are needed. [00:13:25] Speaker 05: And a primary purpose of the well control rule was to do those things. [00:13:30] Speaker 05: And that's at 81 Fedreg 21508 and 25890. [00:13:38] Speaker 05: I can turn to the safety enforcement claim, Judge Wilkins, that you alluded to in the GAO report briefly. [00:13:46] Speaker 05: In the GAO report, the GAO identified substantial failings with the Safety Division of Interior's enforcement and inspection program. [00:14:00] Speaker 05: And the Bureau, in its environmental impact statement, when it was doing the programmatic EIS, [00:14:05] Speaker 05: recognized that the GAO report was a critical issue and told the public it would address those shortcomings and any planned reforms in the lease sale EISs. [00:14:17] Speaker 05: Then when it got to the lease sale EIS stage, the agency changed its story. [00:14:22] Speaker 05: It said that the GAO report was outside the scope of leasing and to direct any questions to the safety division, another agency. [00:14:31] Speaker 05: So, and then in its brief, the agency's counsel changed its story again, saying that what it meant in the programmatic EIS was that the agency was going to address these findings at a later stage. [00:14:44] Speaker 05: But that's not what the agency said in the EIS and the agency, this court shouldn't attribute arguments from the agency's counsel that the agency itself hasn't made. [00:14:57] Speaker 05: Also, that argument doesn't hold water. [00:15:00] Speaker 05: The lease sale is thus the critical stage. [00:15:03] Speaker 05: As this court has held, it's the stage of no go, no go. [00:15:07] Speaker 05: So it was critical for the agency to address these shortcomings now. [00:15:11] Speaker 05: And as this court has found in Delaware Department of Natural Resources, it's insufficient for an agency in responding to comments to push the issue off to another agency. [00:15:21] Speaker 05: It must meaningfully respond to comments. [00:15:24] Speaker 01: I'm wondering whether the GAO report though is really all that damning. [00:15:30] Speaker 01: I mean, is it something that we need to be concerned that the agency didn't adequately take into account because it might actually change its view of how things are going or should be going in this situation? [00:15:45] Speaker 01: It was somewhat critical of the safety agency, but was that enough? [00:15:54] Speaker 01: to undermine the agency's conclusion that there will be enforcement of these safety protocols in a way that would mitigate environmental impacts. [00:16:08] Speaker 05: The GAO report identified significant deficiencies. [00:16:12] Speaker 05: These weren't just minor problems. [00:16:13] Speaker 05: So if you look at JA441 in the appendix, the GAO concluded that the safety division, it terms it with acronym BESSI. [00:16:24] Speaker 05: BESSI's deficient oversight capabilities continue to undermine its ability to effectively oversee offshore oil and gas operations. [00:16:33] Speaker 05: And at JA 438, the GAO found that the safety division had, in fact, reversed steps taken to address post-Deepwater Horizon concerns. [00:16:44] Speaker 05: So what it found was that seven years after the Deepwater Horizon spill, the Bureau still had not corrected gaping holes in their regulatory enforcement and made the reforms that were needed. [00:16:59] Speaker 05: These were big problems that needed to be addressed. [00:17:01] Speaker 05: And remember, the Bureau itself recognized that these were problems it needed to address, but then failed to do so. [00:17:08] Speaker 03: In the interest of time here, let's suppose for the sake of argument, we agree with you on one or more of those claims. [00:17:19] Speaker 03: Why is vacatur appropriate here given the arguments made by the EPA and the interveners? [00:17:30] Speaker 05: The presumption in this circuit is that if an agency makes an arbitrary decision, this court should vacate that decision. [00:17:37] Speaker 05: This is not the rare case where the court should remand without vacatur because here the errors the agency made were serious. [00:17:46] Speaker 05: They go to the heart of NEPA. [00:17:49] Speaker 05: What the agency did was undermine public disclosure, which is a fundamental requirement of NEPA. [00:17:56] Speaker 05: And it undermined decision making. [00:17:58] Speaker 05: One of the most important questions in NEPA process is whether or not to take the proposed action. [00:18:05] Speaker 03: Remember to disagree that that that you're not saying that in every NEPA case, there should be a different rule. [00:18:14] Speaker 03: You have to vacate in the case. [00:18:16] Speaker 03: But in other APA cases, you can remand without vacancy. [00:18:21] Speaker 03: You're not saying that are. [00:18:24] Speaker 05: No, I'm saying that the ordinary remedy for an arbitrary decision is to vacate that decision. [00:18:31] Speaker 05: And the court has discretion to depart from that ordinary remedy in rare cases. [00:18:38] Speaker 05: But it must balance the seriousness of the agency's errors with any disruptive consequences if it is going to exercise its discretion to depart from that ordinary remedy. [00:18:49] Speaker 05: Here the errors are serious, so they don't warrant a remand without vacatur. [00:18:56] Speaker 05: And keep in mind, too, this is not a decision to build a highway. [00:19:00] Speaker 05: This is a massive decision about whether to open all available land in the Gulf of Mexico to oil and gas leasing. [00:19:08] Speaker 05: And these errors go to the heart of these operations. [00:19:12] Speaker 05: After Deepwater Horizon, there couldn't be a more important issue to get right than whether or not there should be a catastrophic spill and all the devastating consequences expected. [00:19:24] Speaker 05: It's important for the agency to look at that risk and evaluate those impacts in full before it makes its decision. [00:19:32] Speaker 05: And here the agency didn't do so. [00:19:35] Speaker 05: So it's important for the court to vacate this decision so they can start from a clean slate and get it right. [00:19:43] Speaker 03: One of one of the economic impacts that interveners and EPA identified the disruption. [00:19:52] Speaker 05: The destructive consequences here are limited. [00:19:55] Speaker 05: This court has held that destructive consequences alone, first of all, shouldn't be a basis for declining to vacate. [00:20:05] Speaker 05: They have to be considered in the context of the errors that were made. [00:20:10] Speaker 05: Here, the only information that we have about economic disruption is that the oil companies have made payments to buy leases and rental payments. [00:20:20] Speaker 05: We don't have any specific evidence of reliance that the industry has placed on these leases or drilling that has started or expenses related to drilling. [00:20:30] Speaker 05: So we're really just talking about refunding money here. [00:20:33] Speaker 05: That's just right. [00:20:35] Speaker 03: The intervener says we'd have to, you know, [00:20:39] Speaker 03: if the leases were in effect vacated and then they had to be bid out again, we're in a situation where now the public knows what the winning bids were. [00:20:51] Speaker 03: And so you can't really kind of put the toothpaste back in the tube and have the same sort of bidding process. [00:21:01] Speaker 05: Well, the industry, first of all, placed its bids with knowledge that these lease sales were under challenge. [00:21:10] Speaker 05: The result, too, is not that these companies can't bid in the future. [00:21:14] Speaker 05: If the Bureau decides to reopen this lease sale, the companies are able to bid. [00:21:20] Speaker 05: They may have to pay slightly higher prices. [00:21:23] Speaker 05: But that competition happens all the time in this area. [00:21:27] Speaker 05: That's a minor effect compared to the bigger NEPA errors that are at stake here and the importance of getting this analysis right. [00:21:40] Speaker 03: Judge Jackson, Judge Katz, do you have any other questions at this time? [00:21:45] Speaker 01: Thank you. [00:21:47] Speaker 03: All right, Council, you're over time, but we'll give you some time on rebuttal. [00:21:51] Speaker 03: Let's hear from Council for the department, Secretary Highland, Mr. Hemminger. [00:22:04] Speaker 02: Morning, Judge Wilkins, and may it please the court, Justin Hemminger for the Department of Interior and Federal Appellees. [00:22:12] Speaker 02: Before deciding to hold two lease sales in the Gulf of Mexico in 2018, Interior's scientific and technical experts did an extensive and deep dive into the potential environmental impacts that would come from leasing. [00:22:29] Speaker 02: And it documented those potential effects in three tiered environmental impact statements. [00:22:38] Speaker 02: Because interior's analysis complies with NEPA, this court should affirm the district court's judgment. [00:22:44] Speaker 02: I'd like to cover each of the topics that we've heard today, starting with the no action alternative, addressing the safety rules, also addressing the safety agency's role in enforcement, and finally addressing remedy. [00:23:00] Speaker 02: So turning first to the no action alternative, [00:23:04] Speaker 02: I think it's helpful to take a step back and orient the court to the statutory program here. [00:23:10] Speaker 02: This is under the Outer Continental Shelf Lands Act. [00:23:14] Speaker 02: OXLA has a four-step process that it applies for leasing. [00:23:20] Speaker 02: But the express policy that Congress has established here is to make the shelf's resources available for expeditious and orderly development. [00:23:32] Speaker 02: subject to environmental safeguards, keeping in mind the nation's interests. [00:23:38] Speaker 02: So at the first stage, Interior is setting up a five-year plan for leasing decisions. [00:23:46] Speaker 02: That plan is not, in fact, a commitment, which I think was one of the Court's questions. [00:23:54] Speaker 02: It is a plan. [00:23:57] Speaker 02: It is a schedule of proposed leases, but it doesn't mean that Interior is in fact going to do each of those leases exactly the same when it comes time for those leases. [00:24:08] Speaker 01: At the five year- Sorry, Mr. Heminger. [00:24:11] Speaker 01: Does it mean that it will do those leases though? [00:24:14] Speaker 01: I mean, the most interesting part of Ms. [00:24:16] Speaker 01: Hardy's argument from my perspective is the revelation that [00:24:21] Speaker 01: Even though the plan said 10 leases, she indicates that that doesn't mean that the agency will ultimately have 10 leases during that time frame. [00:24:32] Speaker 01: Is she wrong about that? [00:24:33] Speaker 02: No, I agree. [00:24:34] Speaker 02: Actually, I agree with the Appellants Council. [00:24:38] Speaker 02: She's correct. [00:24:39] Speaker 02: The fact that there is a schedule of 10 leases does not mean that inter is going to do each of those leases at the. [00:24:47] Speaker 02: So the decision at the five year stage is to plan [00:24:51] Speaker 02: So to be clear, what Interior cannot do is after scheduling, and here was 10 lease sales over a five-year period, Interior can't then add an 11th sale to that five-year period. [00:25:06] Speaker 02: So it can't expand or change the, go outside the scope of that five-year plan, but within the five-year plan, decisions about how many leases and what those leases look like are made at the second stage. [00:25:22] Speaker 01: Okay, so she says at the second stage now, you've gotten there, you have these two leases, and to the extent that you are required to assess a no action alternative, why is it enough to essentially say, well, if we don't do these two leases, we're going to do other leases per our original plan? [00:25:49] Speaker 02: So I think there are two things that are important to understand here. [00:25:53] Speaker 02: First, it is still relevant that at the first stage, Interior did look at the no leasing in the Gulf, no action alternative. [00:26:03] Speaker 02: That no action alternative is relevant because Interior tiered to and incorporated that same no action alternative when it reached the leasing stage. [00:26:14] Speaker 02: So at the second stage, Interior didn't ignore [00:26:18] Speaker 02: the alternative of no leasing at all in the Gulf of Mexico. [00:26:21] Speaker 02: It just said, we've done that analysis. [00:26:24] Speaker 02: We've incorporated that by reference into this analysis at the second stage. [00:26:29] Speaker 01: But I hear Ms. [00:26:29] Speaker 01: Harvey saying it's actually a different analysis at the second level. [00:26:33] Speaker 02: It is. [00:26:34] Speaker 01: And I... Okay. [00:26:35] Speaker 02: So I would agree. [00:26:36] Speaker 02: Yes. [00:26:37] Speaker 02: So, and there is a... So, [00:26:41] Speaker 02: Again, it's sort of a pyramid process. [00:26:43] Speaker 02: And so you're filtering down. [00:26:44] Speaker 02: And I think Judge Katz has referred to this as zooming in. [00:26:47] Speaker 02: So at the second stage, when you zoom in to the lease sale stage, what Interior is looking at is the proposed action, the proposed decision to do a single lease sale. [00:26:59] Speaker 02: That's the question that Interior is looking at. [00:27:02] Speaker 02: And so what it needs to determine is what are the environmental impacts of either doing a single lease sale, canceling that lease sale, [00:27:11] Speaker 02: Or, in fact, doing something that's in between those two options. [00:27:14] Speaker 02: All options are on the table. [00:27:16] Speaker 02: Interior has the full menu of options in terms of how much leasing it does at that lease sale stage. [00:27:23] Speaker 01: All right. [00:27:23] Speaker 01: So when you're looking at the no action, cancel that lease sale, what are the relevant criteria? [00:27:30] Speaker 01: And does it make sense for them to say something about, well, this is going to happen anyway? [00:27:35] Speaker 02: Yes. [00:27:36] Speaker 02: So here's where I think the plaintiffs are simply incorrect and wrong about what interiors analysis shows we're looking at two different categories of effects NEPA says you look at the direct and indirect impacts of the proposed action. [00:27:54] Speaker 02: that's the primary analysis, but the second thing you look at is cumulative impacts and cumulative impacts. [00:28:01] Speaker 02: are what happens from other actions that are not the action that you're actually looking at, proposed action. [00:28:08] Speaker 02: So what Interior does at the second stage, and this is documented in two EISs, it's the multi-sale EIS and the supplemental EIS, what it says is, look, the effects of the direct and indirect impacts of holding a sale [00:28:28] Speaker 02: are a comparison between a baseline and no action alternative and holding that sale. [00:28:33] Speaker 02: But let's look over here at what's going on in the Oxlap program as a whole. [00:28:38] Speaker 02: This is the program that Interior has administered for decades. [00:28:42] Speaker 02: It has a five-year plan in place. [00:28:44] Speaker 02: It expects to do more five-year plans in the future. [00:28:46] Speaker 02: What are the cumulative impacts, the effects of leasing that has happened, that is ongoing, and that will happen in the future? [00:28:55] Speaker 02: Those cumulative effects [00:28:57] Speaker 02: are what Interior refers to when it says, look, if we cancel one sale, that doesn't change the overall impacts, the cumulative effects of what is going to be happening, what has happened, what is happening, and what will happen reasonably foreseeable in the future. [00:29:13] Speaker 02: Those cumulative impacts are what we expect to happen. [00:29:22] Speaker 02: That's a reasonable judgment. [00:29:23] Speaker 02: It's a prediction by Interior based on its experience and its deep knowledge of leasing and its administration of a program that Congress put in place decades ago. [00:29:35] Speaker 04: Doesn't it presuppose that when you do the broad assessment at the early stage, let's just say it's 10 versus zero, [00:29:48] Speaker 04: And you get your plan and you say, we think we'll do 10. [00:29:54] Speaker 04: I understand there's no final commitment finding legal obligation to do all 10. [00:30:04] Speaker 04: But isn't there some understanding that that's what you're intending to do, likely to do, presuming to do? [00:30:15] Speaker 04: Because if not, then I don't understand why at the second stage, you wouldn't have the 10 versus eight question be completely open and the no action alternative would be [00:30:29] Speaker 04: that there are two leases before us, we're not committed to doing anything else, so we have to assess 10 versus eight. [00:30:38] Speaker 02: No, that's exactly right, Judge Katz. [00:30:40] Speaker 02: There is a plan here to do 10 lease sales. [00:30:45] Speaker 02: The final decision to do those, whether to do each of those sales happens at the point of the sale. [00:30:55] Speaker 02: But keep in mind, this is a program, Congress put this program in place and the program is to do expeditious and orderly development of the shelf. [00:31:03] Speaker 02: And so what Interior is looking at and the cumulative impacts analysis, the best place to see that is at JA 939 to 942 and JA 950 to 951. [00:31:19] Speaker 02: But Interior talks about how it's looking at energy demand, it's looking at [00:31:24] Speaker 02: the OXLA program and its forecasting based on its experience with leasing in the Gulf of Mexico for many decades, it's forecasting that it's reasonably predictable that leasing will continue into the future. [00:31:40] Speaker 02: And plaintiffs call that a false assumption, but that's based on interior's expertise. [00:31:47] Speaker 02: It's based on its judgment. [00:31:48] Speaker 02: And this court's decision in Village of Bensonville, VFA says, [00:31:53] Speaker 02: you're defining a baseline and then you're looking at the way to predict the future, when you're defining a baseline, it's really an expert judgment by the agency. [00:32:06] Speaker 02: In light of the plan. [00:32:10] Speaker 02: Correct. [00:32:10] Speaker 01: Can you speak to the other two issues? [00:32:14] Speaker 01: I'm mindful of your time. [00:32:16] Speaker 02: Yes. [00:32:16] Speaker 02: Judge Jackson, so on the safety regulations, [00:32:21] Speaker 02: I wanted to highlight the point that you had asked council for the appellants, which is interiors primary conclusion here about the risk of a catastrophic oil spill. [00:32:32] Speaker 02: is based on a technical and statistical analysis that it did, and that is in the program is the joint appendix sites are j 289 to 291 and j 371. [00:32:49] Speaker 02: 289 to 291 and JA 371. [00:32:51] Speaker 02: And Interior's conclusion from that, so that analysis in that risk assessment is based on data that comes from 1964 to 2014. [00:33:04] Speaker 02: So it includes data that pre-existing the Deepwater Horizon disaster. [00:33:11] Speaker 02: And it doesn't, and that data doesn't include or account for the 2016 safety rules that are at issue here. [00:33:18] Speaker 02: But Interior's conclusion from that data-driven analysis is the risk of a catastrophic spill is very low. [00:33:26] Speaker 02: In fact, it's so low that it's not a reasonably foreseeable result or occurrence in the context of these lease sales. [00:33:37] Speaker 02: So that's Interior's conclusion, and that's the basis, the record evidence that supports that conclusion. [00:33:44] Speaker 02: plaintiffs simply overlook that and focus on the 2016 rules. [00:33:48] Speaker 01: What is your argument about the rules? [00:33:50] Speaker 01: Because I guess I'm a little concerned about the suggestion that if the agency is in any way relying on rules that are under construction, so to speak, that it has flagged as being subject to amendment, that the proposed amendments are out there, that we, according to Ms. [00:34:13] Speaker 01: Hardy, have [00:34:14] Speaker 01: executive orders saying we're going to change these particular rules, I guess I'm concerned about the suggestion that the agency doesn't have to take that into account if it relies on those rules when it's putting together an EIS. [00:34:31] Speaker 01: So is that your position? [00:34:32] Speaker 01: Are you taking the sort of hard line, unless the rule is in effect, we don't have to look at it? [00:34:39] Speaker 02: No, Your Honor, and I don't think the court has to draw a bright line test here between [00:34:42] Speaker 02: based on legal effect. [00:34:44] Speaker 02: I think that's a relevant consideration. [00:34:46] Speaker 02: Are these rules that are in effect? [00:34:49] Speaker 02: Because as we all know, a proposed rule can change. [00:34:51] Speaker 02: So there's not, there is a certain amount of uncertainty there, but I don't think you have to agree that that somehow releases the agency from any obligation to consider the issue. [00:35:05] Speaker 02: I think more importantly here, [00:35:07] Speaker 02: the plaintiffs are really exaggerating the amount of reliance that Interior was placing on these 2016 rules. [00:35:14] Speaker 02: So plaintiffs try to suggest that the 2016 rules encapsulate all of what Interior was relying on in deciding that the risk of a catastrophic spill was very low. [00:35:27] Speaker 03: Here's my problem with your argument, Council, is that there was a catastrophic spill in 2010. [00:35:35] Speaker 03: So who cares about the statistics? [00:35:37] Speaker 03: We just had one. [00:35:39] Speaker 03: And we had a report by the commission that focused in on that catastrophic spill and said that one of the key reasons it happened was because of lack of enforcement and basically agencies not really taking their NEPA obligations seriously. [00:35:59] Speaker 03: And then rule changes are promulgated [00:36:03] Speaker 03: in response to that catastrophic spill to try to keep it from happening again. [00:36:09] Speaker 03: And then you're going to argue to me that undoing those rule changes is kind of a nothing burger and a GAO report that says that the agency isn't really effectively enforcing [00:36:29] Speaker 03: The old regulations, let alone any new regulations and procedures, is really something that should just not really take any serious role here in the EIS after we've had a catastrophic spill that did devastating damage to the environment and decimated lots of livelihoods from people [00:36:59] Speaker 03: who make their living on the Gulf? [00:37:04] Speaker 03: You're really going to make that argument this morning? [00:37:07] Speaker 02: No, I wouldn't, Your Honor. [00:37:08] Speaker 02: I wouldn't dare to. [00:37:10] Speaker 02: And I would say the Interior took the Interior's reforms after the Deepwater Horizon disaster. [00:37:17] Speaker 02: And it talks about this throughout these EISs. [00:37:21] Speaker 02: Interior undertook the most serious reform in the Department's history. [00:37:27] Speaker 02: And those reforms are not solely the 2016 rules. [00:37:35] Speaker 02: Those reforms covered many other areas and other rules. [00:37:39] Speaker 02: And we've, I think at J 245 to 246, Interior had laid out a listing of the comprehensive reforms that it included. [00:37:52] Speaker 02: And one of those reforms is the well-controlled rule. [00:37:54] Speaker 02: And Interior certainly [00:37:56] Speaker 02: saw that rule as an important safety measure. [00:38:00] Speaker 02: But to be clear, we're also not arguing that we also completely disagree with the notion that Interior repealed or dismantled the 2016 safety rules. [00:38:14] Speaker 02: As Interior explained in several places, it made targeted amendments, revisions to those two rules. [00:38:23] Speaker 02: It didn't dismantle them, or as the plaintiff's saying, a reply to repeal them. [00:38:27] Speaker 02: Those rules, the substance, the core of those rules, and the environmental safeguards, the important environmental safeguards that those rules provided are still in place. [00:38:36] Speaker 02: And that's reflected in Interior's analysis at Joint Appendix 1058 to 1064. [00:38:49] Speaker 02: That's a fact sheet [00:38:50] Speaker 02: going over the revisions to the well control rule. [00:38:55] Speaker 02: And then to the extent, so this issue, Interior did acquire more information later in this NEPA process. [00:39:06] Speaker 03: Why wasn't it addressed really head on and straight and in a straightforward way in the supplemental EIS? [00:39:15] Speaker 03: So what Interior said there- Reliant on enforcement [00:39:21] Speaker 03: to say, well, you know, we're not going to have any catastrophic failures. [00:39:26] Speaker 03: And then you're going to rely on that, but you're not going to address head on the systemic failures at enforcement and why your reliance, you know, is justified given that. [00:39:42] Speaker 02: And you're talking about the GAO report, your honor? [00:39:45] Speaker 03: GAO report and [00:39:49] Speaker 03: For that matter, what the deep rather horizon commission reporting. [00:39:55] Speaker 03: sound. [00:39:57] Speaker 02: Right so on the on the amendments interior did did do a sub so interior said. [00:40:03] Speaker 02: In the supplementary is we don't have we're relying on the information that we have now, and these proposed rules are to amend the 2016 rules aren't in place later in the process. [00:40:16] Speaker 02: toward the end of the process, Interior said, we have more information. [00:40:19] Speaker 02: So it gave another look at the amendments to the 2016 safety rules in response to a letter from one of the plaintiffs and said, we'll take another look at this for NEPA purposes. [00:40:32] Speaker 02: But their conclusion was that the amendments to the 2016 safety rules didn't substantially change the environment, didn't impose any significant environmental impacts. [00:40:44] Speaker 02: JA 1072 to 1076. [00:40:46] Speaker 02: So that was, sorry, your honor. [00:40:53] Speaker 03: What about enforcement issues? [00:40:55] Speaker 02: Yes. [00:40:57] Speaker 02: So on enforcement, so Interior did consider and address the safety agency's role. [00:41:06] Speaker 02: The safety agency's role, this is BSEE, B-S-E-E is the acronym for the agency. [00:41:14] Speaker 02: the safety agency's role doesn't occur, doesn't kick in until the third and fourth stages of the leasing process. [00:41:22] Speaker 02: But Interior did analyze the safety agency's role at this leasing stage in these EISs. [00:41:31] Speaker 02: And Interior's conclusion, and this is a JA1022, is that the safety agency did have a rigorous inspection program. [00:41:39] Speaker 02: So in the, [00:41:43] Speaker 02: So certainly the GAO report says that there is work to be done. [00:41:46] Speaker 02: That's what the district court found, that there is work to be done. [00:41:50] Speaker 02: There are specific areas where GAO, which is a government auditing agency, identified areas for improvement that the agency needed to focus on, that the safety agency needed to focus on. [00:42:05] Speaker 02: But I think the report, [00:42:08] Speaker 02: plaintiffs suggest that the report shows that the agency can't do any enforcement or that it's that it's incapable of effectively enforcing the law. [00:42:15] Speaker 04: None of these EIS engages with that report, right? [00:42:23] Speaker 04: The first EIS says we'll deal with it later. [00:42:27] Speaker 04: And I'm sorry I forgotten if it's the second or the third but the later one says this is outside the scope of our inquiry at this stage. [00:42:40] Speaker 04: That's correct. [00:42:41] Speaker 04: If there's a if there's a concern about [00:42:45] Speaker 04: systematic failures in an agency that's just as relevant to the global decision but the 10 versus zero decision as it is to whenever it is you come to the point of making a final decision on any individual lease. [00:43:06] Speaker 02: I would agree with that your honor and there's some tension between what Interior says as you point out in the five-year program EIS and what it said in the supplemental EIS. [00:43:15] Speaker 02: Interior [00:43:16] Speaker 02: said, we'll take a look at this. [00:43:17] Speaker 02: And then when it reached the supplemental EIS, it said that it's outside the scope. [00:43:22] Speaker 02: I guess what I would say is the interior is NEPA obligations. [00:43:31] Speaker 02: So interior involves a lot of line drawing. [00:43:34] Speaker 02: And at some point you can't, the agency can't analyze every single element of every single [00:43:45] Speaker 02: decision that it's making. [00:43:47] Speaker 02: It has to decide where to draw the line. [00:43:49] Speaker 02: It decided to draw the line at, we know that the agency is going to enforce the law. [00:43:55] Speaker 02: And we can also assume that when we put conditions on leases, when we... Yeah, it's a question of degree. [00:44:06] Speaker 04: And normally you would just invoke the presumption of regularity and move on. [00:44:13] Speaker 04: if you address it at all. [00:44:15] Speaker 04: But I mean, this does seem like a pretty significant concern that's been raised. [00:44:21] Speaker 04: And, you know, there's always a question of line drawing about you have to resolve, you have to respond to major concerns, but not every little tiny concern. [00:44:32] Speaker 04: This seems like it's closer to major. [00:44:36] Speaker 02: So I agree it's a question of degree. [00:44:39] Speaker 02: And if, you know, you have to look at how, [00:44:43] Speaker 02: You can read the GAO report several ways. [00:44:45] Speaker 02: So I would point to, Council for Plaintiffs pointed to several pages. [00:44:50] Speaker 02: I'd point to GA 435, 433 to 435. [00:44:54] Speaker 02: As pages where the agency says, look, excuse me, where GAO says that the safety agency has made progress. [00:45:07] Speaker 02: It has taken steps to address [00:45:10] Speaker 02: some of our prior concerns, but it has more work to do. [00:45:14] Speaker 02: So it is a question of degree. [00:45:18] Speaker 02: And I think in these circumstances, the agency is entitled to deference on its judgment that this is where we know that this is their judgment, that this is outside the scope of their analysis. [00:45:31] Speaker 04: Yeah, except, I mean, you'd have a somewhat stronger case if they had said, [00:45:37] Speaker 04: We've looked at this, it's a question of degree. [00:45:41] Speaker 04: The report says they're making progress. [00:45:49] Speaker 04: That's a different case from what we have, which is the agency saying, oh, we're just not gonna tell you, we're not gonna say anything about the report and the progress or lack of it. [00:46:05] Speaker 02: I would agree with that. [00:46:05] Speaker 02: I would go back though to the basis for interiors conclusions that the environmental impacts here would be negligible to minor. [00:46:15] Speaker 02: That's the ultimate question here. [00:46:16] Speaker 02: What are the environmental impacts from leasing and interiors? [00:46:20] Speaker 01: Wasn't one of those conclusions that the safety agency would be enforcing these requirements. [00:46:27] Speaker 01: I mean, that's my concern with the safety agency point is that it appeared that from the beginning [00:46:34] Speaker 01: the agency itself was invoking in many different places the safety agency and its role and what it would do in coming to the determination that we're not gonna have serious environmental impacts. [00:46:50] Speaker 01: So then when the critique comes, yes, but look at this report, it seems incumbent upon the agency if for no other reason than its initial reliance [00:47:02] Speaker 01: on the safety agency to engage with it as Judge Katz says. [00:47:08] Speaker 01: So I'm a little concerned about this. [00:47:10] Speaker 01: And then might you also speak to if it turns out that the court finds that this aspect or any other is a reversible error and that the agency does have to go back and address this, what do you say about Baker or not under these circumstances? [00:47:30] Speaker 02: Well, I think the agency did talk about the role of both the safety agency and BOM, the other agency, in future lease sale stages. [00:47:43] Speaker 02: And certainly those are an important role. [00:47:46] Speaker 02: But the agency also was looking at what it requires within lease sales and within permits and plans. [00:47:54] Speaker 02: And that is stipulations, [00:47:59] Speaker 02: and conditions of approval that tell the leaseholders, that tell the companies what they can and can't do. [00:48:06] Speaker 02: And part of what Interior is doing here is reasonably relying on the fact that parties are going to comply with the requirements that are in their leases, that are in their plans and in their permits. [00:48:18] Speaker 02: Certainly the safety agency plays a role in backstopping and double and enforcing and overseeing that. [00:48:24] Speaker 02: But the starting point for Interior's conclusion was [00:48:28] Speaker 02: we're requiring mitigation. [00:48:30] Speaker 02: The mitigation is by the companies and that mitigation is going to go a long way towards ensuring that leasing is done in a safe and environmentally sound way. [00:48:42] Speaker 02: And Judge Jackson, turning to your question about remedy, if the court is concerned that the agency hasn't responded to the GAO report, I think that's the sort of area where the agency can provide more explanation if necessary, [00:48:57] Speaker 02: But that doesn't require, that's not the sort of serious error that requires you to go back to the beginning of the starting place and the drawing board. [00:49:06] Speaker 02: The agency should have an opportunity to listen to this court's concerns and provide a better explanation and a better analysis of that specific issue. [00:49:16] Speaker 02: And in terms of the disruptive nature of vacator, so we agree that setting aside agency action is the ordinary remedy in an APA case, [00:49:27] Speaker 02: But under Allied Signal, you look at the disruptive consequences. [00:49:30] Speaker 02: And I think this court's decisions in Vecenio's El Bienestar and Oglala Sioux are examples of cases where this court has looked at the regulated parties, here the leaseholders, their reliance interests, their economic interests. [00:49:48] Speaker 02: I would point to the declaration submitted by industry and relied on in their intervener brief [00:49:57] Speaker 02: at JA 149 as providing evidence of the sorts of economic and reliance interests that warrant not vacating these decisions. [00:50:11] Speaker 03: We have done that, but we've also said that in a NEPA case, kind of a remanding [00:50:20] Speaker 03: without vacature is pretty weak sauce. [00:50:23] Speaker 03: I mean, it pretty much kind of undermines. [00:50:27] Speaker 03: If NEPA is only a procedural statute, and it requires a hard look at issues before you make a decision. [00:50:39] Speaker 03: Judge Wilkins. [00:50:41] Speaker 03: then it seems to me that you're really undermining the principles of NEPA and the statutory scheme and purpose if every time an agency fails to really look at something that's not an ancillary issue, this is core. [00:51:10] Speaker 03: Like whether you're going to enforce the rules and regulations and policies and inspect properly is core to preventing a catastrophic spill. [00:51:24] Speaker 03: This isn't some ancillary issue. [00:51:28] Speaker 03: This goes to the heart of the decision in whether you should move forward. [00:51:34] Speaker 03: Shouldn't that be part of our analysis? [00:51:37] Speaker 02: I agree it should your honor that the the seriousness of the of the issue is important and to be clear. [00:51:46] Speaker 02: interior takes this court's views seriously and if there is a defect in its NEPA analysis, then it will look take a hard look at well will seriously study what the Court has said and also take a hard look at the NEPA issue. [00:51:59] Speaker 02: I will point out that again to contextually. [00:52:05] Speaker 02: at Joint Appendix 122, Interior did say that the safety agency has a rigorous inspection program. [00:52:12] Speaker 02: So Interior's view was that the safety agency would do its job. [00:52:17] Speaker 02: And if the agency, if Interior thought that the safety agency was not going to enforce the law, it was not going to provide appropriate environmental safeguards as required by OXLA, then Interior would have said so. [00:52:33] Speaker 02: But if there's more work to be done, then Interior will take a hard look at that. [00:52:39] Speaker 02: And I would say, again, stepping back, we're looking at hundreds of pages of analysis on innumerable topics, three EISs, many years of study. [00:52:52] Speaker 02: So to say that Interior has taken a hard look at the environmental impacts of leasing, and it did that before it made its decision. [00:53:02] Speaker 03: Judge Katz, Judge Jackson, any other questions? [00:53:06] Speaker 03: All set. [00:53:09] Speaker 03: All right. [00:53:10] Speaker 03: Thank you, Council. [00:53:12] Speaker 03: We'll hear on rebuttal from Ms. [00:53:16] Speaker 03: Hardy, and we'll give you two minutes. [00:53:21] Speaker 05: Thank you, your honor. [00:53:22] Speaker 05: I'd like to address each of the three issues briefly in turn. [00:53:25] Speaker 05: So turning to the skewed no action analysis. [00:53:29] Speaker 05: Mr. Heminger points to the cumulative impact analysis, and that is exactly the problem here. [00:53:36] Speaker 05: the agency actually didn't compare what would happen cumulatively over the next 50 years if it did not hold these two lease sales compared to the action alternatives, if it did. [00:53:48] Speaker 05: And you can look at JA939, the agency says that if we don't hold the lease sale, it will be postponed. [00:53:56] Speaker 05: So a separate analysis of the cumulative effects under alternative E, which is the no action alternative, is not considered here. [00:54:04] Speaker 05: You can also look at J.A. [00:54:06] Speaker 05: 239, which shows the cumulative impact analysis that the agency did. [00:54:12] Speaker 05: And it doesn't include the no action alternative. [00:54:16] Speaker 05: It also shows the differences in production over the next 50 years if you vary least [00:54:23] Speaker 05: sale by size. [00:54:24] Speaker 05: So if you offer all of the golf versus half of the golf, production is going to be substantially different over the next 50 years. [00:54:33] Speaker 05: It's equally as likely that if you have eight lease sales instead of 10, there's going to be less bids, less leases sold, less production, less environmental effects. [00:54:43] Speaker 05: So the effects are going to be substantially different for that alternative. [00:54:47] Speaker 05: And the agency just didn't consider that possibility. [00:54:51] Speaker 05: That's the core of the problem here, turning to the safety rules issue. [00:54:56] Speaker 05: The agency never said that based on the quantitative probability analysis alone of catastrophic spill will not happen. [00:55:04] Speaker 05: And this court shouldn't put those words into the agencies. [00:55:08] Speaker 05: EIFs. [00:55:08] Speaker 05: They don't exist there. [00:55:10] Speaker 05: Instead, the agency numerous times points to the reforms because it said, like Judge Wilkins points out, a spill is always low probability, a catastrophic spill. [00:55:21] Speaker 05: But since Deepwater Horizon happened, the world has changed. [00:55:25] Speaker 05: And so the agency had to point to all the reforms and say, we've made strides since Deepwater Horizon. [00:55:32] Speaker 05: So be assured a catastrophic spill is not going to happen again. [00:55:35] Speaker 05: And it points to the reforms time and time again. [00:55:38] Speaker 05: We point the sites out on pages 15 and 34 to 35 of our opening brief. [00:55:44] Speaker 05: It specifically points to the well control rules at JA 289, JA 634, and JA 1018. [00:55:53] Speaker 05: The agency doesn't cite specifically any of the other reforms in its EIS. [00:55:59] Speaker 05: Those were the critical pieces of change that the agency was repealing and that it relied on. [00:56:05] Speaker 03: All right, your time has expired. [00:56:08] Speaker 03: So we'll take the matter under advice. [00:56:10] Speaker 03: Thank you.