Judge suspends controversial sale of Cook Inlet leases due to impacts on beluga whales

A federal judge is sending Interior Department officials back to the drawing board after concluding that the sale of an oil and gas lease in Cook Inlet did not adequately consider the potential impacts on the region’s endangered beluga whales.

The ruling temporarily suspends a lease held by dominant Cook Inlet producer Hilcorp. The privately held Texas-based oil and gas company won a 5,693-acre lease in a 2022 sale.

Hilcorp was the only bidder in the lease sale mandated by the Inflation Reduction Act of 2022. At the urging of West Virginia Democratic Senator Joe Manchin, that climate-related federal law also included provisions mandating the sale of oil and gas leases in Cook Inlet and the Gulf of Mexico.

A coalition of environmental groups from Alaska and across the country have challenged the sale of the Cook Inlet lease, arguing that the Interior Department agency that offered the sale did not carefully study the potential impacts of drilling on the endangered population of about 300 beluga whales that live in Cook Inlet. Oil and gas production is associated with loud underwater noise from pile driving, drilling and ship traffic, and the groups argued that this could affect the beluga whales’ echolocation.

U.S. District Judge Sharon Gleason agreed, but did not completely overturn the lease. She ordered the Bureau of Ocean Energy Management to submit a supplemental environmental analysis and a set of alternative lease agreements that better address the potential impacts on beluga whales in Cook Inlet.

“In summary, the Court concludes that BOEM failed to consider a reasonable range of alternatives at the leasing stage, in violation of the National Environmental Policy Act, because it failed to consider an alternative that would offer a smaller number of blocks for leasing that would significantly reduce overall impacts, realistically meet the purpose and need of Lease Sale 258, and better facilitate ‘informed decision-making and informed public participation,'” Gleason wrote in the 49-page order.

This could ultimately force the Interior Department to shorten or cancel Hilcorp’s lease, says Carole Holley, an attorney with Earthjustice who represented the Center for Biological Diversity, the Natural Resources Defense Council, Cook Inletkeeper, Alaska Community Action on Toxics and the Kachemak Bay Conservation Society.

“This ruling only confirms that the scope of the Inflation Reduction Act is much more limited than industry and its allies – and in this case the state of Alaska – have been demanding. Nor does it override NEPA or our other core environmental laws,” Holley said by phone.

The National Environmental Policy Act is a Nixon-era law that requires federal agencies to evaluate the potential environmental impacts of their actions. Earthjustice and various conservation groups are also challenging similar lease sales mandated by the Inflation Reduction Act in the Gulf of Mexico.

Although the state of Alaska and the federal government often clash over mineral extraction, Alaska intervened in this case to support the lease sale. Patty Sullivan, communications director for the Justice Department, said in a prepared statement that the state was disappointed with the decision.

“In 2022, Congress sought to provide certainty for this overdue and long-awaited lease sale,” Sullivan said. “The state is disappointed by the continued leasing uncertainty caused by the court’s order, which runs counter to Congress’ intent to provide certainty.”

A spokesman for the Alaska office of the Bureau of Ocean Energy Management did not respond to a call seeking comment. The agency oversees oil and gas activity in federal waters, which typically begins three miles offshore. Most oil and gas production in Cook Inlet occurs onshore or in state waters.

Hilcorp is the only company with active federal leases in Cook Inlet, although none of its 15 federal leases were producing oil or gas as of January 2024, according to Interior Department data. Hilcorp did not return a call seeking comment.

Oil and gas industry analysts cite long-term trends as reasons for the lack of interest in recent oil and gas lease sales, including rising renewable energy production and higher production costs.

The judge ruled that the Bureau of Ocean Energy Management must inform the court within six months of the progress of a supplementary environmental analysis.