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Alaska Env. Center v. Dept. of Natural Resources (12/23/93), 865 P 2d 745
NOTICE: This is subject to formal correction before
publication in the Pacific Reporter. Readers are
requested to bring typographical or other formal errors
to the attention of the Clerk of the Appellate Courts,
303 K Street, Anchorage, Alaska 99501, in order that
corrections may be made prior to permanent publication.
THE SUPREME COURT OF THE STATE OF ALASKA
TRUSTEES FOR ALASKA, CITY OF )
KAKTOVIK, AMERICAN WILDERNESS )
ALLIANCE, NORTHERN ALASKA )
ENVIRONMENTAL CENTER, ALASKA )
WILDLIFE ALLIANCE, THE SIERRA )
CLUB, THE WILDERNESS SOCIETY, )
ALASKA CENTER FOR THE )
) Supreme Court No. S-5275
) Superior Court No.
v. ) 3AN-88-9532 CI
STATE OF ALASKA, DEPARTMENT OF ) O P I N I O N
NATURAL RESOURCES; JUDY BRADY, )
Commissioner, State of Alaska )
Department of Natural Resources, )
and JAMES EASON, Director, )
Division of Oil and Gas, State )
of Alaska, Department of )
Natural Resources, )
ARCO ALASKA, Inc., CHEVRON U.S.A., )
Inc., PHILLIPS PETROLEUM Co., and )
STANDARD ALASKA PETROLEUM Co., )
Intervenor-Appellees. ) [No. 4039 - December 23,
Appeal from the Superior Court of the
State of Alaska, Third Judicial District,
Rene J. Gonzalez, Judge.
Appearances: Peter Van Tuyn, Trustees
for Alaska, Anchorage, for Appellants. Kyle
W. Parker, Assistant Attorney General,
Anchorage, and Charles E. Cole, Attorney
General, Juneau, for Appellee State of
Alaska. Carl J. D. Bauman and Clyde E.
Sniffen, Jr., Hughes, Thorsness, Gantz,
Powell & Brundin, Anchorage, for Intervenor-
Before: Moore, Chief Justice,
Rabinowitz, Burke, Matthews and Compton,
Seven environmental groups1 and the City of Kaktovik
("Trustees") challenged the State's sale of Oil and Gas Lease 55
(Sale 55). They contend that the Department of Natural Resources
(DNR) failed to consider several issues when it determined that
the sale was in the "best interests"of Alaska. Arco Alaska,
Inc., Chevron U.S.A., Inc., Phillips Petroleum Co., and Standard
Alaska Petroleum Co. intervened.
The superior court affirmed DNR's best-interest
determination as well as its decision to proceed with Sale 55.
This appeal followed. We reverse.
I. FACTUAL AND PROCEDURAL BACKGROUND
In Sale 55, the State offered oil and gas exploration
and development rights to 201,707 acres of offshore state land in
the Beaufort Sea near Demarcation Point. Demarcation Point is
located along the northern coast of the Arctic National Wildlife
Refuge (ANWR) in northeast Alaska. See Appendix A attached.
Pursuant to Alaska law, DNR can lease state lands only
if it makes "a written finding that the interests of the State
will be best served." AS 38.05.035(e); see also Trustees for
Alaska v. State, DNR, 795 P.2d 805, 809 (Alaska 1990). In order
to comply with this requirement, DNR began the lengthy
administrative determination process in August 1983.
In February 1988 DNR issued a preliminary best-interest
finding, tentatively concluding that Sale 55 was in the best
interests of Alaska. After this preliminary finding, DNR
solicited additional comments and analysis from the public, the
oil industry, and state and federal agencies. At this time,
Trustees submitted oral and written comments critical of DNR's
conclusion, and asked for a final determination that Sale 55 was
not in Alaska's best interests. On April 25, 1988, DNR issued
its final finding, concluding that the potential benefits of the
sale outweighed the possible adverse impacts, and that the sale
was in the best interests of the State.
Trustees filed a motion for reconsideration which DNR
denied. Trustees then appealed to the superior court. During
the briefing before the superior court, we decided Trustees for
Alaska v. State, DNR, 795 P.2d 805 (Alaska 1990) (Camden Bay),
which involved a challenge to the State's Oil and Gas Lease Sale
50. In Camden Bay, we concluded that the DNR should have
analyzed likely methods and risks of transporting oil to shore,
but failed to do so. Id. at 810-11. Because of Camden Bay's
relevance to the present case, the superior court allowed
supplemental briefing to address any possible effect the decision
might have on the issues under consideration. On January 24,
1991, the superior court issued its memorandum and decision
affirming Sale 55. Among other things, the superior court found
that Trustees had abandoned any arguments regarding
transportation of oil because they did not include the issue in
their points on appeal or argue the issue in their opening brief.
The superior court denied Trustees' motion for rehearing. This
Trustees challenge DNR's finding that Sale 55 is in the
State's best interests on two grounds: (1) DNR failed to
consider the environmental risks of transporting oil from the
lease area to market; and (2) DNR failed to consider the impact
of oil operations within the lease area on the Porcupine Caribou
herd and on subsistence users of this herd. In response,
Appellees contend that Trustees waived and abandoned the
transportation issue, and furthermore, that DNR did consider
these two issues. Appellees therefore contend that DNR's
decision was not arbitrary.
DNR's best-interest determination is subject to
deferential review by this court.2 Since the determination
"involve[s] complex subject matter or fundamental policy
formulations," this court reviews the decision "only to the
extent necessary to ascertain whether the decision has a
'reasonable basis.'" Camden Bay, 795 P.2d at 809 (quoting
Hammond v. North Slope Borough, 645 P.2d 750, 758 (Alaska 1982)).
Nevertheless, this court must ensure that DNR has taken a "hard
look" at the salient problems and has genuinely engaged in
reasoned decision making. Alaska Survival v. State, 723 P.2d
1281, 1287 (Alaska 1986). A decision will be regarded as
arbitrary "where an agency fails to consider an important factor
in making its decision." Camden Bay, 795 P.2d at 809.
A. THE TRANSPORTATION ISSUE
1. Trustees Did Not Waive or Abandon
the Transportation Issue.
Appellees argue that this court should not address the
transportation issue because (1) Trustees waived the issue by not
raising it during the administrative process, and (2) Trustees
abandoned the issue by not including it in their points on
appeal, and by failing to brief the issue before the superior
court. Trustees respond that they did raise the issue at the
administrative level, and that they properly preserved the issue
before the superior court.
Appellees are correct that a party must raise an issue
during the administrative proceedings to preserve the issue for
appeal. The United States Supreme Court has stated that it is
"incumbent upon intervenors who wish to participate [in agency
proceedings] to structure their participation so that it is
meaningful, so that it alerts the agency to the intervenors'
position and contentions." Vermont Yankee Nuclear Power Corp. v.
NRDC, 435 U.S. 519, 553 (1978). Review of the record, however,
demonstrates that Trustees did raise the transportation issue
before DNR in their comments on the preliminary best-interest
finding, and in their motion for reconsideration. Therefore,
Trustees did not waive the transportation issue.
The question whether Trustees abandoned the
transportation issue on appeal to the superior court is a closer
one. In examining this question, we focus on three aspects of
the litigation: (1) Trustees' framing of their points on appeal,
(2) the extent of Trustees' briefing on the transportation issue
before the superior court, and (3) the superior court's request
for supplemental briefing following our Camden Bay decision.
Appellate Rule 210(e) provides in part: "At the time
of filing his notice of appeal, the appellant shall serve and
file with this designation a concise statement of the points on
which he intends to rely on the appeal. The appellate court will
consider nothing but the points so stated." Alaska R. App. P.
210(e). In their points on appeal, Trustees alleged:
DNR's decision to proceed with
Lease Sale 55 without providing the public
with vital information on the scale of
operations and infrastructure which will be
required for a moderate to high level
petroleum development operation, was
arbitrary and capricious and without support
in the administrative record. Specifically,
DNR failed to follow standard analysis
procedures for resource estimates; strategies
used to explore, develop and produce and
transport potential petroleum resources.
. . . .
DNR's decision to proceed with Sale
55 without adequately considering or
identifying the types and locations of
facilities "not located in ANWR"which would
be used to facilitate the development of
Demarcation Point was arbitrary . . . .
We find that this statement is sufficient to preserve the issue
as required by Rule 210(e).
Nevertheless, Appellees argue that Trustees abandoned
the transportation issue by failing to brief it before the
superior court. Kodiak Electric Ass'n v. Delaval Turbine, Inc.,
694 P.2d 150, 153 n.4 (Alaska 1984) (even though the issue was
included in appellant's points on appeal statement, the issue was
abandoned because appellant failed to adequately brief it). We
disagree. Although Trustees did not brief the issue adequately
in their opening brief,3 they briefed the issue in response to
the superior court's request for supplemental briefing on the
Camden Bay decision.
In fact, all parties briefed the transportation issue
at this stage in the litigation. Given the extent of this
briefing, Appellees cannot argue that the transportation issue
was not adequately briefed, or that they will be prejudiced by
our consideration of the issue. The superior court was correct
to take judicial notice of the Camden Bay decision, and to
request supplemental briefing as to its effect on this case.
However, the superior court abused its discretion by refusing to
address the transportation issue on the grounds that it was not
Because the issue was not abandoned, we now turn to the
question whether DNR failed to consider the methods and risks of
transporting oil from the Sale 55 area.
2. DNR Erred in Failing to Consider
the Transportation Issue.
Alaska Statute 38.05.035(e) grants DNR the power to
sell or lease state lands upon a written finding that "the
interests of the state will be best served"by the disposition.
AS 38.05.035(e). The written findings must set out the law and
facts upon which DNR bases its conclusions, and must be made
available to the public at least twenty-one days before the
In Camden Bay, this court rejected DNR's best-interest
finding for Sale 50 because it failed to consider an important
factor -- "the unique risks presented by the oil transportation
methods that would be necessary if the legal status of ANWR
remains unchanged." 795 P.2d at 811. Trustees argue that DNR's
best-interest finding in this case is deficient for the same
reason. Trustees contend that the Finding "is utterly bereft of
any recognition of transportation as an issue, let alone any
discussion of the environmental risks of transportation and how
those risks affect the overall 'best interest' determination."
In response, DNR claims that the record demonstrates "a
careful consideration of the transportation issues." DNR argues:
(1) its drafting of several lease terms indicates its
acknowledgment of environmental risks associated with different
transport methods; (2) its cumulative effects analysis considers
transportation issues by acknowledging that a complete assessment
of the effects of the lease sale is impossible until actual
discoveries are made; and (3) it relied on a number of state and
federal studies concerning oil transportation for a nearby
federal oil lease. In addition, Intervenor-Appellees argue that
DNR took a "hard look"at the transportation issue since it
determined that development of Sale 55 might be economically
feasible, i.e., that a discovery of a large enough volume of oil
would make it "possible to build the necessary infrastructure to
transport oil safely from the Sale 55 area to Pump Station No. 1
of the Trans-Alaska Pipeline System."
Given the remote area of Sale 55, and the fact that
ANWR cannot be used as a site for transportation facilities, it
was incumbent upon DNR to consider and weigh the methods and
associated risks of transporting oil to available onshore
facilities. In Camden Bay, we stated:
[Transportation] facilities are
unquestionably a vital part of the
development of the sale area for oil
production and thus are important factors in
the decision to lease the sale area. They
would seem to present unique environmental
risks. Yet the Finding is remarkable in that
-- as detailed as it is on other subjects --
it fails to mention facilities of this
magnitude at all [such as undersea pipelines
as long as 50 miles], much less examine the
critical question of whether they are safe.
795 P.2d at 810-11. This language forewarns that transportation
is an important factor which DNR must consider when making its
best-interest finding on a proposed lease sale.
Review of the record, however, indicates that DNR did
not take a hard look at the transportation issue in making its
best-interest determination for Sale 55. For example, the
Finding concludes that offshore development would be "feasible"
without use of ANWR, but does not discuss how the oil would be
transported or what risks these methods would pose. A finding or
assertion that development is economically feasible is not the
same as a finding that the sale is in the State's best interests.
DNR must consider the "social, cultural and environmental impacts
on the state from oil production." State, DNR v. Arctic Slope
Regional Corp., 834 P.2d 134, 143 (Alaska 1991).
In fact, the Finding for Sale 55 is remarkably similar
to the Sale 50 Finding that was rejected by this court in Camden
Bay. Much of the Finding appears to have been copied -- without
alteration -- from the Sale 50 Finding. More importantly, the
Sale 55 Finding deals with transportation issues in a similar
Given the similarity between the Sale 50 and Sale 55
locations,4 as well as the two Findings' treatment of the
transportation issue, this court's decision in Camden Bay is
controlling.5 The best-interest Finding for Sale 55 failed to
adequately address the methods and risks of transporting oil from
the sale area to market. Accordingly, we reverse the decision of
the superior court, and remand the case to DNR for a supplemental
finding addressing this issue.
B. THE PORCUPINE CARIBOU HERD
Trustees further argue that the Porcupine Caribou Herd
is susceptible to adverse impacts from oil and gas development
off the shore of ANWR, and that DNR must consider this impact in
making its best-interest determination.6 Trustees contend that
the caribou use areas within, and immediately adjacent to, the
Sale 55 area as calving grounds and for insect relief. Trustees
raise concerns that oil development may cause the caribou to
avoid this important area. Further, caribou may be subject to
oil spills. Accordingly, Trustees argue that DNR's best-interest
Finding was deficient because it failed to consider the impact of
Sale 55 on the caribou herd.
In response, DNR argues that it adequately addressed
any impact development would have on the herd. DNR notes that
Sale 55 is an offshore lease sale, and that Trustees have
presented no evidence that "offshore activities themselves can
interfere with caribou onshore in ANWR." Further, DNR contends
that in formulating its final finding, it "considered volumes of
information on caribou including general biological information,
information regarding caribou in ANWR, and information concerning
the minimal effects of current onshore development in Prudhoe Bay
on the caribou herds." Because of this, DNR concludes that it
adequately considered any potential effects of the sale on the
Despite DNR's contentions that it "considered volumes
of information on caribou,"the Finding does not suggest this
level of consideration. In contrast to DNR's extensive
discussion detailing the effects of the sale on whales, seals,
polar bears, fish and birds, the Finding simply does not discuss
the effects on caribou. DNR is required to take a "hard look"at
the salient problems involved with a lease sale, and must engage
in reasoned decision making. Camden Bay, 795 P.2d at 809. DNR's
Finding indicates that it did not give the same level of
consideration to the caribou herd that it gave to other wildlife.
In fact, DNR's Finding consists of little more than an
assumption that, since Sale 55 is an offshore oil lease, it will
not affect ANWR or the caribou that use ANWR.7 DNR's Finding
Sale 55 thus should not have a direct
effect on ANWR lands themselves, although
exploration and production activity within
the sale area may be visible from ANWR.
Although DNR asserts that development "should not"affect ANWR or
the caribou that utilize ANWR, DNR has made no finding to this
effect. Rather, it has simply made the unsupported assumption
that offshore development cannot affect caribou.8 This approach
is evident in the following language of the Finding:
[W]hile the Department recognizes the
intent behind the creation of ANWR, the
department does not believe it is necessary
to establish yet another undeveloped area, or
buffer zone, around the refuge to achieve an
acceptable level of protection for fish and
wildlife within ANWR. Regulatory agencies
have designed lease terms, permit
requirements and field monitoring to control
industry exploration and production
activities. The protection of ANWR lands
will be a consideration when granting
approval of design, siting and construction
of exploration and production facilities. . .
. [T]he department does not expect
significant or permanent degradation to
refuge wildlife, the environment, or the
wilderness character of the refuge to occur.
Although DNR attempts to argue that it "carefully
considered caribou-related issues," the Finding language
indicates otherwise. What DNR is really arguing is that offshore
development cannot affect onshore caribou, i.e., that the sale's
effect on the Porcupine Caribou Herd does not represent a
"salient problem"for purposes of AS 38.05.035(e). See Camden
Bay, 795 P.2d at 809 (DNR must take a hard look at any salient
problems associated with sale). This argument is equally
unpersuasive. The caribou herd is an important resource for the
State of Alaska and the Natives that rely on the caribou for
subsistence. Since the State has a substantial interest in the
continued health and viability of the herd, the impact of the
sale on the herd is an important factor which DNR must consider
when making its best-interest determination.
DNR failed to take a hard look at the impact of Sale 55
on the Porcupine Caribou Herd, and on the subsistence users of
this herd. Accordingly, we reverse the superior court, and
remand the case to DNR for a supplemental finding addressing
Trustees did not abandon or waive the transportation
issue before the superior court. Since DNR failed to adequately
consider the issue in making its best-interest finding, we
REVERSE the decision of the superior court and REMAND the case
for a supplemental finding.
DNR failed to consider the effect of Sale 55 on the
"important factor"of the Porcupine Caribou Herd. Accordingly,
we also REVERSE and REMAND for a consideration of this issue.
1. The groups are Trustees for Alaska, American Wilderness
Alliance, Northern Alaska Environmental Center, Alaska Wildlife
Alliance, Sierra Club, Wilderness Society, the Alaska Center for
2. Since the superior court acted as an intermediate court
of appeal, we give no deference to the lower court's decision.
Tesoro Alaska Petroleum Co. v. Kenai Pipe Line Co., 746 P.2d 896,
903 (Alaska 1987). "Instead, we independently scrutinize
directly the merits of the administrative determination." Id.
3. Apparently, Trustees decided not to fully brief the
issue because the same court had previously rejected the argument
in the Camden Bay case. In a footnote to their opening brief,
Since these issues [including the
transportation issue] are pending before the
Supreme Court [in Camden Bay], Appellants are
not re-addressing those issues in the same
superior court which considered them
previously. Nonetheless, Appellants reserve
the right to address at a later date any
determinations made by the Supreme Court in
Camden Bay which have a bearing on Lease Sale
While we generally support efforts to conserve judicial
resources, we caution against this type of appellate practice.
Even if Trustees thought they would lose on the issue, they were
obligated to raise and brief the issue if only to preserve it for
appeal. See, e.g., Braun v. Alaska Commercial Fishing & Agric.
Bank, 816 P.2d 140, 145 (Alaska 1991) (issues insufficiently
briefed are deemed abandoned).
4. Remarkably, the Sale 55 area is considerably farther
away from conventional land-based transportation facilities on
the North Slope (80 miles) than the Camden Bay sale area (50
5. DNR attempts to limit the precedential value of Camden
Bay by suggesting that this court's holding as to the
transportation issue was "perhaps" a result of incomplete
6. Trustees argue that the herd is important to the State
because (1) it has been recognized by the United States and
Canada as "a unique and irreplaceable resource of great value,"
(2) many Alaska Natives utilize the herd for subsistence
purposes, and (3) the herd is used for recreation, aesthetic and
sport hunting purposes by Alaskans.
7. If DNR had given this issue the same level of attention
in its Finding that it gave the issue in the briefing before this
court and the superior court, the Finding may have been
sufficient. Nevertheless, the best-interest determination
required by statute must take place before the lease decision is
made, not as an after-the-fact exercise.
8. Although DNR did not find it necessary to study the
impact of the sale on adjacent ANWR lands, it did think it
appropriate to cite ANWR's petroleum potential as a factor
supporting its decision to lease the Sale 55 area. The Finding
Petroleum industry interest in the
[surrounding] region is significant . . . .
Members of the oil industry as well as the
U.S. Department of the Interior and State of
Alaska have assessed the petroleum potential
of the coastal plain of the Arctic National
Wildlife Refuge (ANWR) adjacent to the sale
areas and indicated that it may be the most
prospective unexplored region in North
America. These facts in conjunction with the
imminent decline of production from other
North Slope oil fields . . . support the
decision to lease now state lands in Sale 55.
DNR cannot use the surrounding ANWR lands as a factor justifying
development, and at the same time refuse to consider the impact
of the sale on these lands.