OIL AND GAS ALERT: PROTECTING POLAR BEARS AND IT’S IMPACT ON THE OIL AND GAS INDUSTRY?

    22 October 2008

    On May 15, 2008, the United States Fish and Wildlife Service (“Service”) decided to list the polar bear as a “threatened” (rather than “endangered”) species under the Endangered Species Act (“Act”). The Service essentially determined that global climate change – caused by increased concentrations of greenhouse gases (“GHG’s”) in the atmosphere – has contributed to the melting of polar ice, thereby harming the polar bear’s habitat. Depending on the outcome of pending litigation, this decision could have nationwide implications for all companies and projects that emit greenhouse gases (“GHG’s”). For the oil and gas industry, this could impact everything from gas processing plants, to compressor stations, to refineries and even trucking operations.

    Because the polar bear is now a “threatened” species, private parties and the government may claim that certain prohibitions apply under the Act to activities that emit GHGs. For example, private parties or the government could claim that a company’s GHG-emitting activities harm the polar bear or its habitat. The company could then be subject to civil or criminal lawsuits or be required to obtain an incidental take permit for those activities. In addition, if the company was seeking any type of federal permit for its GHG-emitting activities, the federal permitting agency could be required to consult with the Service to determine whether the project should proceed or contain measures to mitigate the impacts on the polar bear and its habitat.

    The Service also issued a companion rule when it listed the polar bear, which provides a safe harbor for companies with GHG-emitting activities. These activities will not be deemed to harm the polar bear or its habitat if the company meets certain requirements under the Marine Mammal Protection Act (“MMPA”) and the Convention on International Trade in Endangered Species of Wild Fauna and Flora (“CITES”). The companion rule further provides that for companies with GHG-emitting activities in all states except Alaska, the requirement to obtain an incidental take permit for those activities does not apply, even if the company is not meeting the MMPA and CITES requirements. For GHG-emitting activities in Alaska, however, companies still must obtain an incidental take permit or risk civil or criminal liability.

    Several lawsuits have been filed by various groups challenging the Service’s two rules. The outcome of these lawsuits will determine whether the polar bear should be de-listed, upgraded to an “endangered” species, or remain as a “threatened” species. If the polar bear’s status is upgraded to “endangered,” the companion rule will no longer apply, thereby subjecting companies across the country either to additional permitting requirements or civil or criminal liability. If the “threatened’ status is left in place, these lawsuits will determine whether the protections afforded by the companion rule should remain and, if so, whether the exemption from incidental take permits also should extend to GHG-emitting activities in Alaska.

    The American Petroleum Institute and other industry groups are defending the “threatened” listing and the companion rule, and have challenged the Service’s failure to include GHG-emitting activities in Alaska in the exemption from the requirement to obtain an incidental take permit. These lawsuits may not be resolved for another year or longer. Participants in the oil and gas industry would be well-advised to monitor the situation and await the outcome of the litigation, or of any steps that the Service might take under a new administration to limit the safe harbor that the companion rule provides or to upgrade the polar bear’s listing to “endangered.”