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~PP~DI~ ~ MMS'S OCS OBL ED GAS Al CISBO~ PROCESS (Prepared by NRC and MMS staff) ~IALYSI S 12[QUII [D BY SLCT10~1 1N OF THI OCS MODS ACT The leasing program consists of a schedule of proposed lease sales Cat indicates as precisely as possible the timing, size, and location of leasing activity that the secretary of the interior determines watt meet the nation's energy needs for He 5-year period following He schedule's approval (MMS, 1991a [OCS National Compendium through October 19901~. The current 5-year plan, approved in July 1992, is for m~d-1992 through m~d- 1997. Section IS of He Outer Continental Shelf Lands Act (OCSLA, 43 U.S.C. 1344) requires that MMS analyze He different OCS regions to consider the following before it determines where the leased sites will be (MMS, 1992c [1992-1997 Proposed Final Comprehensive Programed: Geographical, geological, and ecological characteristics. Equitable Caring of benefits and environmental risks of development. Location with respect to regional and national energy needs and energy markets. Location with respect to other users of He sea. Petroleum industry interest. 231

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232 OCS DECISIONS: ALASKA Laws, goals, and policies of the affected states. Relative environmental sensitivity and marine productivity. Relevant environmental and predictive information. The U.S. portion of the OCS is divided into 26 planning areas (a geographic subdivision of the OCS that is used for planning and adminis- trative purposes) to facilitate the Proposed Final Comprehensive Program's analysis arm program management as required by Section IS. The Section IS analysis is to determine the value to the nation as a whole of all the estimated of! and gas resources in each of 14 OCS planning areas proposed for leasing consideration in MMS's July 1992 Proposed Final Comprehen- sive Program. Cost-benefit aralysis is used to determine a lease site's value to the nation. The aralysis compares the net economic value of oil and gas to be produced against environmental externalities that can be quantified as social costs (costs not borne directly by of} and gas producers). The OCS program areas (an area within one or more planning areas that is proposed for leasing consideration in the Proposed Final Comprehensive Program (1992-1997~; Mere are 14 program areas made up of portions of 15 planning areas) are then ranked in groups in order of descending value (MMS, 1992c). Group ~ has the highest net social value; Group 5 has the lowest net social value. The Beautort Sea and Chukchi Sea planning areas are in Group 2, and the Navarin Basin is in Group 3. In addition to net social value, MMS's Proposed Final Comprehensive Program analyzes five other components. The first is the additional costs and benefits, such as indirect benefits related to price effects and national income effects, the potential costs of proposed environmental regulations, and Me nonquantifiable costs analyzed in final Environmental Impact Statements (EISs); the findings of this analysis were not grouped in the current 5-year plan. Second, an analysis of the relative marine productivity and environmental sensitivity is broken into Tree components: coastal habitats, marine habi- tats, and marine biota. Estimated total primary productivity and average primary productivity are given for each planning area, rather than for each program area, because of difficulty in applying the information to smaller areas. The current 5-year plan estimates Mat the Navarin Basin has moderate primary productivity and that the Chukchi and Beautort seas have low primary productivity relative to other areas. The third analysis is of He equitable sharing of development benefits and environmental risks among OCS regions. This analysis presents Be means

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APPENDS 233 of distributing developmental benefits and compensating costs associated wan the OCS oil and gas program. It also includes a review of the effects of constraints beyond the control of Me Department of the Interior, such as congressional moratoria, on the program. The fourth analysis reviews industry interest in leasing, exploration, and development of of} and gas resources in We program areas. The fifth analysis comes directly from Section IS language. The secretary is to choose He leasing program that "he determines will best meet Be national energy needs for the 5-year period following its approval or reapproval" and "to the maximum extent practicable, to obtain a proper balance between He potential for environmental damage, the potential for discovery of of} and gas, and He potential for adverse impact on the coastal zone." In this analysis, the secretary is to evaluate and balance four considerations. The first is developmental benefits, such as increased na- donal income, economic acidity, and job opportunities and reduced national deficits in international trade and in the federal budget. The second is He potential for environmental damage from such activities as placement of infrastructure, operations, and accidents. The Gird consideration is more general and includes aesthetics and special concern for marine mammals or endangered species. The fourth consideration is the comments of interested or affected parties. A~" I VALUAT10~ AD D[CIS10~ FOCI US In the first step in the oil and gas leasing process (called the Area Evaluation and Decision Process), MMS prepares a proposed 5-year of] and gas leasing schedule for review by the public, industry, states, and other affected agencies, as well as by other agencies within He department, such as the National Park Service (NPS) and the Fish and Wildlife Service (FWS). The Information Ban Review process gathers specific information on geology, resource estimates, the environment, and economics. The specific information on geology and resource reports is requested from the states, other federal agencies, NPS, and FWS, and is used to define the area in which of} or gas could be found. Once He potential areas of resources have been Refire, a public notice of Request for Interest and Comments is published in He Federal Register. The degree of response to a request indicates the degree of industry and public interest in an area. Next, a Call for Information and Nominations and a Notice of Intent to

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234 OCS DECISIONS: ALASKA Prepare an EIS are published in the Federal Register. The call solicits comments from the of} industry, government agencies, environmental groups, and the general public. The notice of intent announces the scoping (information gathering and evaluation) process that watt be followed for the EIS. During this process, important issues that deserve study in an EIS are identified. A 45~ay comment period follows. After the call closes, the comments from the public, industry, states, and other federal agencies, including NPS and FWS, are reviewed. in addidon, MMS evaluates po- tential impacts on multiple uses~fishing, tourism, shipping, etc. in the EIS process. An area for proposed leasing is identified at this point and subm~t- ted to Me secretary for approval. If the area is approved by the secretary, the scoping process ensues. It is open to input from the public, industry, states, and other federal agencies, including NPS and EWS. The process allows for early identification of im- portant issues that deserve review in an ElS. Afterwards, a draft ElS and a Proposed Notice of Sale are prepared. A 60~ay comment period and public hearings on the draft EIS and public notice are publicized by a Notice of Availability in the Federal Register. A final EIS and a Proposed Action and Alternatives Memorandum, which are submitted for the secretary's approval, are prepared in the appropriate regional office. The memos um's purpose is to assist Me secretary in de- termining whether to proceed with, delay, or cancel further development and analysis of a leasing proposal. If the secretary decides to proceed, a tentative sale decision is made; the proposed sale is publicized by a Notice of Availability in the Federal Register. A 60~ay comment period and public hearings follow. The state governors are notified of the proposed sale and are asked for input. During He 60 day comment period, the sec- retary holds a meeting to decide on areas, terms, and conditions. If the secretary gives final approval for the sale, a final Notice of Sale is published in the Federal Register at least 30 days before the sale. IrKlus~y bids are received within schedules identified in the notice. On the day of the sale, the bids are opened and read publicly. No decision on the adequacy of Me bids is made at that time. The Department of Justice and Be Federal Trade Commission Den review Me bids. The sale results also are reviewed in the regional office, which then determines whedler to accept a bid. If a bid is accepted, a lease is issued by Me regional office to Me highest bidder (MMS, 1991a [OCS National Compendium Trough October 1990]). Aver a lease has been issued, all exploration, development, and produc- tion activities, except for preliminary activities, must be conducted in

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APPENDIX A 235 accordance wig an Exploration Plan (EP) or a Development and Production Plan (DPP) approved by MMS. Preliminary activities, including geophysi- cal, geological, and over surveys, can be conducted to gather information for preparation of an EP or DPP. These surveys may not result in physical penetration of Me seabed more than 500 feet nor may they result in any significant harm to natural resources of Me OCS. [XPLO~AT10~ PLED Once a lease has been issued, Me lessee may submit an EP, which is reviewed and comments on by the state governor, with input from federal agencies. The EP provides a concise description of the proposed offshore operations and must be modified by He lessee if sigruficant changes are made to Be lessee's proposal. The EP is based on information collected by Me lessee during preliminary activities, including, but not limited to, geo- physical, geological, cultural, and biological surveys. It is reviewed by MMS to ensure that it is complete within 10 working days of receipt. If it is not complete, it is returned to the lessee for modification or supplemental information. Once the EP is complete, it is deemed submitted. Within 2 working days, Me plan is sent to the affected states' governors, the Coastal Zone Management agencies, NPS and EWS, and local governments that request copies. While the EP is being reviewed by state and over agencies, MMS conducts a technical review of the proposal. Concurrently, MMS regional staff analyze all activities proposed in Me EP as required by the National Environment Policy Act in an Environmental Assessment (EA). The EA reviews whether the proposed EP will have a significant impact on Me environment. If no significant impact is identified, Me plan proceeds Trough the approval process. If the EP is rejected, it goes back to the lessee for modification or for supplemental information, and Me process starts again. The plan may be resubmitted if conditions change. Leases can be canceled at this point in accordance wig OCSLA 43 U.S.C. 1334, although no such cancelation has occurred to date. Al Al LOPMI AT MID P~ODUCT10~ Pow Aver Me EP is approved, the lessee must submit a DPP, which describes

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236 OCSDEClSIONS: ALASKA Me specific work to be performed; Me drilling vessels, platforms, pipelines, and facilities to be used; Me location and depth of proposed wells; geolog'- cal and physical data; environmental safeguards and standards to be met; and a schedule of development and production activities. If Me DPP is deemed complete by MMS, it must be reviewed by Me affected state and federal agencies, NPS and FWS, and Me public, which is notified through Me Federal Register. The technical review is similar to Mat for an EP, ex- cept that Me review must be completed within 120 days after tile plan is deemed completed. If it is determined that an ElS must or should be pre- pared, tile 120~ay restriction does not apply. I ~VIQO~MI - AL IMPACT STATI MINT An EIS addresses Me environmental effects of the proposal, including seismic risks, descriptions of areas of high ecological sensi~vi~ and of hazardous bottom conditions, and Me uses of new or unusual technology. It is prepared either when MMS determines Mat approval of a DPP constitutes a major federal action that would sign~ficandy affect Me quality of Me environment or for an initial DPP activity in a frontier area (i.e., an area in which no oil or gas development or production has occurred). When an EIS is deemed necessary, particular consideration is given to addressing He significant adverse effects on Be marine, coastal, or human environment resulting from Me construction of new onshore and offshore facilities. Cumulative impacts are also considered. Once the EA has been reviewed, the DPP is approved if He Coastal Zone Management agencies have no objections. Coast Guard and U.S. Army Corps of Engineers permits are sought at this point. If approved and die permits are issued, a platform verification review is done in some cases; for example, in newly permitted areas where Here are hazardous condi- tions, such as ice, and over climatic hazardous or oceanic conditions. APPLICATIVE FOR PI I MIT TO DRILL Next, the Application for Permit to Drill (APD) is submitted by the lessee. If it is issued, a National Pollution Discharge Elimination System (NPDES) permit is sought from the Environmental Protection Agency.

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APPENDIX A 237 MMS Den determines whether He APD is technically acceptable. An APD must be filed and approved each time a well is proposed to be drilled, deepened, or plugged and abandoned. Extensive details about Be drilling program are required, including information about Me blowout prevention system and casing, cementing, and drilling-mud programs. MMS uses tills information to evaluate Me operational safety and pollution prevention measures of a proposed operation. Conditions of approval are often at- tached to the APD as a result of MMS's review of it. If the APD is approved, Me lessee is given an Exploration Drilling Permit to drill a test well. The lessee must also obtain a Coast Guard permit, a U.S. Army Corps of Engineers Navigation Permit, and an EPA NPDES permit. Once Me required permitting is complete, exploratory drilling may begin. Next, Me lessee must submit a Pipeline Permit Application. MMS pre- pares an EA, including off-lease right-of-way, which must take Department of Tran~ortadon regulations into consideration and undergo review by NPS and FWS. After the EA has been prepared, the Coastal Zone Management agencies notify MMS of any objections they have. If there are no objec- tions, MMS approves a pipeline permit. Next the lessee must obtain a U.S. Army Corps of Engineers construction permit, after which pipeline construction and production can begin. Once production has begun, the lessee must report its royalties and send monthly production reports to MMS's Office of Official Records, Title Actions. After production has ceased, relinquishment occurs. Shutdown requires weld abandonment, platform removal, and clearance of the seafloor within one year. TC~MI~AT10~ OF OPI RATIONS The lessee must obtain MMS approval before beginning to permanently or temporarily abandon operations. The lessee must adhere to strict stand- ards for removing platforms and subsea wellheads, and it must clear the seafloor of all other obstructions. MMS must consult with other federal agencies to ensure Mat abandonment operations do not harm natural resources in the vicinity of these operations.

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