Natural Resource Development Litigation
“Litigation is, for better or worse, part of the way it works up here”
Alaska will never lack resources or opinions on how to develop them. It is a constant balancing act to allow industry to develop in a way that promotes a healthy Alaska economy while mitigating negative impacts on the environment or even other industry. One way opinions about the development of Alaska’s natural resources are expressed is through litigation. According to attorney Eric Fjelstad, a partner at the Anchorage office of law firm Perkins Coie, “People fight because they’re passionate about the issues,” and that goes for those who are proposing a new project or those who may be fighting against it.
Fjelstad, who has been practicing law in Alaska since 1994, says his practice has focused on oil and gas and mining industry project development. He says what comes up the most in terms of litigation are issues related to the National Environmental Policy Act, or NEPA, a federal law which has been in place since the late ‘60s. This is the law that may require companies to either perform an EIS (environmental impact statement) or environmental assessment.
“We have a lot of federal land here, and a lot of federal agencies, so many or most of the decisions that [project developers] make will trigger NEPA,” Fjelstad says. He continues that an EIS may take two to six years to complete and can range from a couple of hundred pages of information to four or five thousand. “So, lots of money, lots of time.”
Following NEPA issues would probably be the Endangered Species Act (ESA) claims, which he says are centered in three areas: the North Slope (polar bears, eiders, seals), Cook Inlet (beluga whales), and Southwest Alaska and the Aleutians (Steller sea lions, otters). Fjelstad says that the conversation about protecting the animals has shifted in recent years. “Ten or fifteen years ago there was little if any discussion of climate change. It just wasn’t a cutting edge issue.”
Fjelstad says an emerging ESA argument is that an affected species may be unlisted currently, but if certain projections of climate change bear out, the species would potentially be listed as endangered in the future. This issue is further complicated by the fact that there are various models that predict climate change, and different parties may favor different models. Fjelstad says, “You could bring one hundred people into a room and they’d all have a different view on the models.”
He says one point of clarity in response to this argument has emerged from the court system: “Say you’re a new power plant in Louisiana, and you’re emitting carbon, and it’s assumed there’s a causal connection [to climate change]… You don’t have to go through an ESA evaluation in New Orleans to determine if you’re going to harm the polar bears in Alaska; it’s just viewed as too attenuated. But it still leaves open the question of what to do in Alaska.”
When Litigation Happens
Fjelstad says that generally litigation will enter the picture after permits have been issued. Technically when a person or party challenges a permit, they’re actually suing the entity that issued it, in the case of NEPA or ESA permits—the government. “We intervene on behalf of the government, and we jointly defend the permits with the government.” He says it’s unusual for permits for exploration to be challenged, as their impacts are generally minor. “The reality is most exploration, particularly in the minerals industry, does not lead to a project,” Fjelstad says.
The first thing an opponent to a project would typically seek is an injunction, temporary restraining order, preliminary injunction, or permanent injunction, all of which fall under the category of “injunctive relief,” Fjelstad says. He says that for the injunction to be successful, an opposing party must show 1) a probability of success on the merits (a likelihood to win the lawsuit) and 2) that the balance of harm favors them. In other words, “the harm to the environment or interests they represent outweighs the harm to the developer.” It amounts to a kind of mini-trial, he says, and if the opposing party is successful in enjoining the process, that’s often the end of the case. He says it’s rare a court will indicate that one party is likely to win and then issue a different ruling two or three years later if the case actually goes through. “Typically if a developer is enjoined, they will look at the project, evaluate the decision, and often go back to the drawing board and go into permitting and try to fix whatever the problem is,” Fjelstad says.
A large oil and gas or mining project may require anywhere from sixty to one hundred permits, “everything from food safety to stormwater permits,” Fjelstad says. “Less than half a dozen are significant permits that take a lot of time and typically get appealed.”
But, for a project in Alaska, the good bet is that litigation will spring up at some point. “For projects of significance, litigation is, for better or worse, part of the way it works up here,” Fjelstad says. Why is that? One reason, he suggests, is that for a project to be viable in Alaska, it has to overcome distance from market, climate, and infrastructure challenges. “Alaska is a long way from markets; we tend to have national or even international class projects because they need to be big to overcome the distance from market and the costs. You need economies of scale.” Additionally, Alaska is breathtaking, not just to look at but as an experience. “Every place, I’ve found, is a special place to someone,” Fjelstad says. “So there are places that are better places, so to speak, and places that are less advantageous, but there aren’t any places that no one cares about.”
It’s Different in Alaska
It’s not just the likelihood of litigation that’s unique to Alaska. For example, Instream Flow Reservation, or IFR: “it’s a right that exists under Alaska statute for any person to petition the Department of Natural Resources to keep water in a water body, typically a river or a creek,” Fjelstad says. Water rights typically involve drawing water out for irrigation or other purposes. This is the opposite of that, being a right to “ensure water stays in a stream to protect fish or some other reason,” Fjelstad says. He says that other states have IFR, but Alaska is the only state that allows any person to make the petition; it’s not necessary to be the landowner or even an Alaska resident.
Another unique aspect of Alaska: ANCSA (the Alaska Native Claims Settlement Act). “I would say a fair number of resource projects are located on ANCSA lands,” which means that in addition to state and federal agencies and the developers, regional or village corporations are a vital part of project development.
Fjelstad says one up and coming issue regards the ability of tribal entities to move land into Federal Trust status. Originally legislation about that process said Alaska tribes were exempt from being able to do so, but that’s been challenged. “A group of tribes represented by Native rights lawyers had been litigating that issue and they won in the federal district court in DC,” he says. “The petition process will be coming to Alaska, I don’t think there’s any question about it, and that will create an avenue for Alaska tribes.” The tribes were not allocated land under ANCSA, but there are methods by which Alaska tribes could acquire land. A unique complication in Alaska is that under ANSCA, in many cases surface and subsurface rights to the same acreage were conveyed to different entities. How would that play out if one entity entered the land into trust?
“It’s a great place to do what I do,” he says. “The issues are really interesting and there’s things up here you don’t see any place else.”
Five Best Practices for Developers
Eric Fjelstad, an attorney with Perkins Coie who manages the company’s Anchorage office, shared the following general advice, in no particular order, for any company developing a natural resource project in Alaska.
- Start Early: Reach out to relevant regulators early in the process to understand what needs to be done.
- Have Good Environmental Baseline Information: Really understand the area where your project is going to be, what resources are there, and what the potential impacts are.
- Have Alternatives: A project developer may have in mind a specific result, but is there a different way to accomplish that result? Fjelstady says, “One of the primary questions regulatory agencies are charged with asking is: ‘What alternatives exist?’” If a company wants a specific result, is there another way to achieve that result with less impact?
- Reach Out to Important Stakeholders: Communicating with the community is vital in order to obtain a “social license,” or the support of the community around a project. Depending on the project, that community could be a small geographical area or the entire state. “It’s really important to put in the time to understand what people are concerned about and to gain broad support. It matters. The process agencies are keenly aware whether a project is supported by the community, however that’s defined,” Fjelstad says.
- Have a Good Team: A good team of consultants allows a developer to have a good understanding of what the process is and to walk into it with eyes wide open.
Tasha Anderson is an Associate Editor for Alaska Business Monthly.
This article first appeared in the August 2016 print edition of Alaska Business Monthly.