Testimony of Nancy Sutley, Chair of the White House Council on Environmental Quality, Before the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling

"Good morning and thank you for the opportunity to testify.

Today I will provide you with an overview of the National Environmental Policy Act (NEPA) process and discuss how it relates to agency actions and informs Federal decision-making associated with leasing, exploration and permitting of offshore drilling facilities.  I will also discuss the results of the Council on Environmental Quality's (CEQ) review of the Mineral Management Service's NEPA procedures for Outer Continental Shelf oil and gas exploration and development, on which we recently issued a report.

This year marks the fortieth anniversary of the National Environmental Policy Act, a cornerstone of our modern environmental protections.  NEPA passed Congress with overwhelming bipartisan support in 1970 and was signed into law by President Nixon.  Congress recognized that nearly all Federal activities affect the environment. Under NEPA, Federal agencies have an affirmative obligation to consider the environmental impacts of their decisions, by ensuring that high quality environmental information is available to government officials and to members of the public before the Federal government takes actions that may affect the quality of the environment.

The White House Council on Environmental Quality (CEQ) is itself a creation of NEPA.  It was established within the Executive Office of the President to work across the Federal Government, overseeing agency implementation of the environmental impact assessment process. 

NEPA's environmental impact assessment process is a procedural tool for informed agency decision-making that ensures that agencies look before they leap.  The environmental review process should begin when an agency proposes an action.  The degree of review required under NEPA is calibrated to the significance of the expected environmental impact.  When an agency considers taking an action that will have significant environmental effects, it must prepare an Environmental Impact Statement, or EIS.  If an agency is uncertain about whether a proposed action will have significant environmental effects, it can prepare an Environmental Assessment to determine whether an EIS is needed.  In some circumstances, an agency may determine that a proposed action falls within a category of actions that based on the agency's past experience and environmental reviews of similar actions does not normally have significant individual or cumulative impacts on the environment.  In that case, an action is categorically excluded from further environmental review.

Each agency in the Federal Government is responsible for its own compliance with NEPA, including establishing rules and procedures to implement the Act.   To help with this, in 1978, CEQ issued regulations interpreting the procedural provisions of NEPA.  The purpose of NEPA, as described in the regulations, is "not to generate paperwork—even excellent paperwork—but to foster excellent action" [40 CFR 1500.1(c)]. 

Each agency's NEPA procedures must adapt the CEQ requirements to the agency's specific authorities and decision-making processes.  An agency's NEPA procedures are not finalized until CEQ reviews them and determines that they are in conformity with NEPA and the CEQ regulations.  Any subsequent revisions to the agency procedures are subject to the same CEQ oversight. 

CEQ does not review every application of NEPA, or the NEPA documents prepared for every agency decision. Rather, CEQ periodically reviews agencies' NEPA implementing regulations and procedures, as well as agencies' overall program implementation. For example, in February of this year, CEQ released four draft guidance documents to assist all Federal agencies in meeting the policy goals of NEPA.  The development of our NEPA guidance preceded the Deepwater Horizon oil spill, but—as I will discuss in a moment—it has become an important vehicle for incorporating lessons learned from the spill to improve NEPA implementation going forward, both at the new Bureau of Ocean Energy Management, Regulation and Enforcement, and across the Federal government.

Before turning to that forward-looking effort, however, let me take a moment to describe those lessons we have learned from CEQ's review of the NEPA procedures applied to the planning and permitting decisions involving the Deepwater Horizon.  On August 18, 2010, CEQ released a report reviewing the NEPA practices and procedures used by the Department of the Interior's Minerals Management Service for key agency decisions involving the Outer Continental Shelf oil leasing process and the drilling permit for the Macondo well in the Gulf of Mexico.  Given the complexities of pending and future litigation, the report did not evaluate the substantive adequacy of the specific NEPA analyses and documents.  The purpose of our review was to ascertain how NEPA was applied at key decision points, and to develop recommendations for the Bureau of Ocean Energy Management, Regulation and Enforcement, or BOEM, to improve its NEPA practices going forward.

Our review found that MMS prepared several NEPA analyses for the Gulf of Mexico leases.  Environmental Impact Statements (EIS), the most intensive level of analysis, were prepared at two decision points.  First, in April 2007, MMS prepared a broad "programmatic" EIS on the Outer Continental Shelf Oil and Gas Leasing Program, which includes the five-year lease plan for 2007-2012.  Also, in April 2007, MMS prepared an EIS for the Gulf of Mexico OCS Oil and Gas Lease Sales in the Western and Central Planning Areas, the "Multi-Sale" EIS. 

In October 2007, MMS completed another NEPA analysis, an Environmental Assessment (EA), tiered off the Multi-Sale EIS, for Central Gulf of Mexico Lease Sale 206.  This is the sale in which the lease was issued for the location that includes the Macondo exploration well.  After the lease was issued, BP submitted an initial Exploration Plan and a revised Exploration Plan for the proposed Macondo well in the Mississippi Canyon Block 252 of the Gulf of Mexico.   MMS approved BP's Exploration Plan following two Categorical Exclusion Reviews completed in April 2009.  MMS approved BPs drilling permit applications under a Categorical Exclusion.

Our report concluded that while MMS conducted numerous levels of extensive environmental reviews, its NEPA process could be improved in some areas.

First, MMS relied on the "tiering" process, in which agencies can incorporate by reference general discussions from broad environmental impact statements into later, site-specific analyses.  This practice helps the decision maker focus on the issues that are ripe for decision. But when agencies rely on tiering, they must ensure that general information from one level of environmental review is carried forward effectively and transparently in subsequent reviews.  General assumptions from other levels of review must be independently evaluated in the context of site-specific environmental impacts.  This way, decision makers and the public can fully understand the possible reasonably foreseeable environmental consequences of all of the agency's decisions.  In CEQ's review, it was unclear and difficult to ascertain what environmental information was carried through to site-specific reviews. In future NEPA analyses, BOEM should ensure that its tiering process is transparent and easy to understand. 

As part of its authorization of the Macondo well, the agency relied on existing Categorical Exclusions for the decision to approve BP's Exploration Plan (EP) and its subsequent drilling permit applications.  These Categorical Exclusions were established in 1981 and 1986, prior to the deepwater leasing boom in the mid-1990's.

Although some parts of BP's Exploration Plan included oil spill information pertinent to drilling activities that include the Macondo well, the NEPA reviewers did not prepare a site-specific analysis of the Macondo well's location to assess impacts from a potential spill at that location.  When MMS approved the Exploration Plan, its knowledge of the potential for oil spill impacts was tiered to previous NEPA analyses.  Based on an extensive, documented historical record, a catastrophic spill the magnitude of the Deepwater Horizon incident was not analyzed in NEPA documents relative to the Macondo well.  It is unclear whether relevant information about the potential for a spill at this specific site, and its consequences, was conveyed to the decision makers who applied the Categorical Exclusions to BP's Exploration Plan and drilling permits.

Our report makes several recommendations to improve the environmental review process for offshore oil and gas activities in the OCS.  DOI and BOEM have committed to using CEQ's recommendations as guideposts as they continue their reform and reorganization activities.  CEQ will provide ongoing assistance to DOI in this effort.

First, BOEM has agreed to perform careful and comprehensive NEPA review of individual deepwater exploration activities, and to track and take into account all mitigation commitments made in NEPA and decision documents.

BOEM has also agreed to ensure that NEPA analyses fully inform and align with substantive decisions at all relevant decision points; that subsequent analyses accurately reflect and carry forward relevant underlying data; and that those analyses will be fully available to the decision maker and the public. 

In addition, BOEM committed to ensuring that NEPA documents provide decision makers with a robust analysis of reasonably foreseeable impacts, including those associated with low probability catastrophic spills for oil and gas activities on the Outer Continental Shelf. 

On August 18, 2010, DOI and BOEM announced that BOEM will restrict its use of categorical exclusions for offshore oil and gas development to activities involving limited environmental risk while it undertakes a comprehensive review of its NEPA process and practices, and of the use of categorical exclusions for exploration and drilling on the OCS.

BOEM recognizes that the basis for a categorical exclusion for these deepwater activities needs to be reexamined in light of today's deeper drilling depths, more complex technologies and associated risks.

DOI and BOEM also announced that the Interior Department intends to complete a supplemental environmental impact statement in the Gulf of Mexico that will help provide information to guide future leasing and development decisions.  When that review is complete, BOEM will announce a new approach to NEPA compliance that takes into account the joint recommendations included in CEQ‘s report, statutory and/or regulatory constraints, and other appropriate factors.

As I stated earlier, in February of 2010, CEQ released four draft guidance documents to assist all Federal agencies in meeting the policy goals of NEPA.  One of these draft guidance documents addresses the use of Categorical Exclusions, like the one applied to BP's drilling permit for the Macondo Well.  Categorical Exclusions, or CEs, have been used by Federal agencies since the late 1970s.  When appropriately established and applied, categorical exclusions serve a beneficial purpose.  They allow Federal agencies to streamline the environmental review process for proposed actions that do not normally have significant environmental impacts, so that they can focus their efforts and resources on actions that do have significant impacts. 

In recent years, the number and range of activities categorically excluded has expanded. The extensive use of CEs, combined with the limited opportunity for public involvement in CE application, has underscored the need for additional guidance in this area.  Given these circumstances, CEQ is increasing its review of agencies' use of CEs.  Our draft guidance clarifies when it is appropriate for agencies to establish CEs, and how agencies should apply existing CEs.  The guidance calls for greater documentation and public involvement in the process.  And it calls on agencies to conduct periodic reviews of CEs to ensure that they are being used appropriately.

Using this guidance, CEQ will work with the Bureau of Ocean Energy Management, Regulation and Enforcement as it reviews its use of Categorical Exclusions for exploration and drilling on the OCS.

In closing, the recommendations in CEQ's report are targeted to ensure robust environmental reviews for future oil and gas exploration and development, and the Administration is committed to ensuring these activities are conducted in a safe and environmentally responsible manner.  CEQ worked productively and collaboratively with DOI and BOEM during this review, and BOEM has committed to developing a new approach to NEPA compliance to improve the agency's decision-making process and provide useful, transparent information to the public about environmental impacts. I am committed to continuing to work collaboratively with BOEM to ensure it applies NEPA in a manner that meets the goals of the Act.

Thank you for the opportunity to testify, and I look forward to your questions."

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