Did Obama Just Permanently Block All Offshore Drilling in US Federal Arctic Waters?

He just might have!

The 1953 Outer Continental Shelf Lands Act (OCSLA) provides federal jurisdiction over the leasing of the outer continental shelf (i.e. submerged land lying seaward of state coastal waters and extending to 3 miles offshore) for the purposes of energy exploration. Interestingly however, under the same act the President of the United States has the right to withdraw from disposition any of the lands of the outer continental shelf which are unleased (see § 1341 – Reservation of lands and rights).

Using this authority, yesterday President Obama, in co-ordination with Canada’s Prime Minister Trudeau (who is enacting parallel actions within Canada, albeit with a five-year time limit), announced the withdrawal of almost 119 million acres of US ocean from future mineral extraction (including areas within the north and mid Atlantic, and the US Arctic Ocean, thereby encompassing the entirety of the US Chukchi Sea and significant portions of the US Beaufort Sea). It is usual for the President to announce a five year plan for the leasing of federal waters (Obama announced his 2017-2022 plan earlier this year), but the enactment of this right to withdraw is rare and might have long-lasting consequences: while it has been used in the past by previous presidents (the most recent being Clinton), most of those enactments were limited to a certain period of time – President Obama’s is not, with the White House having described the ban as indefinite.

Considering the policies of the current President-Elect it’s unlikely that such a move will remain unchallenged once the new regime comes into power. This then begs the question: can the decision be reversed?

The short answer is not anytime soon. The OCSLA might endow the President with the right to withdraw these lands from being leased for offshore exploration and exploitation, but it doesn’t provide him (or subsequent presidents) with any express authority to repeal that decisionIt’s even possible to argue that had Congress intended this right to be reversible, they would have drafted the relevant OCSLA provision accordingly.

It means that if Trump wants to fight this, he’ll have to do it through the courts – this would be unprecedented and therefore the potential outcome is unclear. The ban has been enacted in the past without a time limit (Eisenhower did it back in the 1950s when he permanently blocked drilling off the Florida Keys) but while the ban still remains in place to this day, it’s never had to withstand the test of a battle in court and thus offers no real guidance on establishing whether the withdrawn lands could be un-withdrawn.

Of course, Trump’s other option would be to convince Republican-dominated Congress to amend the OSCLA to expressly allow for such a rescission (thus saving himself the trouble of needing to establish whether the right to un-withdraw existed in the first place), but were Congress to agree, the amendments would take time to enact; meanwhile, the ban would remain in place.

It’s difficult to say definitively whether or not Obama has managed to permanently ban offshore drilling in the US-controlled areas of the Arctic Ocean, but it’s going to be a while before anyone can answer that question with absolute certainty, let alone actually try to reverse his decision.

As a side note (considering this is a maritime law blog) it’s also worth noting that in the White House’s announcement yesterday it was stated that Canada and the US are launching the first processes ever to identify sustainable shipping lanes throughout their connected Arctic waters. I’ll be honest, I don’t know what those processes are or could entail, but I suppose it’s nice to see that they’re trying…

Of Default Gas and Freedom of Contract

It’s a good day for freedom of contract as Christopher Clarke LJ handed down his judgment for Scottish Power UK Plc v BP Exploration Operating Company Ltd & Ors [2016] EWCA Civ 1043 in favour of the respondents.

The appellants, Scottish Power – the buyers of natural gas under four, almost identical long term gas sales agreements – argued they should be allowed to recover damages for a contractual breach (the underdelivery of gas) under the general law. This was in spite of a compensation mechanism within their agreements which limited the remedy for such a breach to the delivery of the entitled quantity of gas at a discounted rate (“Default Gas”), and which expressly excluded the buyer’s right to seek compensation for such a breach through any other means.

During the initial case, in considering the commercial purpose of the compensation clause in the contracts, Leggatt J thought it improbable that the parties intended a situation where the buyer would automatically receive a quantity of Default Gas as compensation for the undelivered gas and yet still be permitted to seek another remedy for the failure to deliver the very same quantity of gas that already been compensated for. Christopher Clarke LJ was in agreement and further argued, quite sensibly, that the wording of the compensation regime was clear enough that the court was obliged to give effect to it, even though it deprived Scottish Power of a right it would have otherwise had under the law.

This case (along with the recent Transocean v Providence) is rather refreshing given how one of the very cornerstones of English contract law – freedom of contract (a rather sensible and practical doctrine which provides a good deal of certainty and thus is beloved by businesses everywhere) – has been placed under some scrutiny recently.

One hopes for more cases like Scottish Power v BP on the horizon but we’ll have to wait and see.