712 F.2d 584 | D.C. Cir. | 1983
Opinion for the Court filed by Circuit Judge WILKEY.
This case requires the court, for the second time, to review the Secretary of Interior’s proposed five year schedule of offshore oil and gas leasing activity. After our first review we remanded the program to the Secretary to correct defects resulting largely from the Secretary’s erroneous interpretation of the relevant statute. This time we uphold the program, concluding that the earlier errors have been rectified and that the overall program now conforms with the requirements of the Outer Continental Shelf Lands Act.
I.Background
A. The Statutory Scheme
The Outer Continental Shelf Lands Act,
Section 18 requires the Secretary to prepare, maintain, and periodically revise a five-year leasing program consisting of a “schedule of proposed lease sales, indicating, as precisely as possible, the size, timing and location of leasing activity.”
(1) Management of the outer Continental Shelf shall be conducted in a manner which considers economic, social, and environmental values of the renewable and nonrenewable resources contained in the outer Continental Shelf, and the potential impact of oil and gas exploration on other resource values of the outer Continental Shelf and the marine, coastal, and human environments.
*275 (2) Timing and location of exploration, development, and production of oil and gas among the oil- and gas-bearing physiographic regions of the outer Continental Shelf shall be based on a consideration of—
(A) existing information concerning the geographical, geological, and ecological characteristics of such regions;
(B) an equitable sharing of developmental benefits and environmental risks among the various regions;
(C) the location of such regions with respect to, and the relative needs of, regional and national energy markets;
(D) the location of such regions with respect to other uses of the sea and seabed, including fisheries, navigation, existing or- proposed sealanes, potential sites of deepwater ports, and other anticipated uses of the resources and space of the outer Continental Shelf;
(E) the interest of potential oil and gas producers in the development of oil and gas resources as indicated by exploration or nomination;
(F) laws, goals, and policies of affected States which have been specifically identified by the Governors of such States as relevant matters for the Secretary’s consideration;
(G) the relative environmental sensitivity and marine productivity of different areas of the outer Continental Shelf; and
(H) relevant environmental and predictive information for different areas of the outer Continental Shelf.
(3) The Secretary shall select the timing and location of leasing, to the maximum extent practicable, so as to obtain a proper balance between the potential for environmental damage, the potential for the discovery of oil and gas, and the potential for adverse impact on the coastal zone.
(4) Leasing activities shall be conducted to assure receipt of fair market value for the lands leased and the rights conveyed by the Federal Government.12
The present litigation focuses on the Secretary’s compliance with these principles in preparing and adopting the latest five-year leasing program.
B. The Present Litigation
On 16 June 1980 the Secretary adopted a five-year leasing program containing a schedule of proposed lease sales for the years 1980-1985. This program, largely prepared by Secretary Andrus, was challenged in this court by various state and local governments and several environmental groups. In an opinion filed 6 October 1981,
(1)to identify Sales 73 and 80 with greater specificity, (2) to consider the need to share developmental benefits and environmental risks among the various OCS regions, (3) to consider the relative environmental sensitivity and marine productivity of different areas of the OCS, (4) to base timing and location of leasing on some of the standards of section 18(a)(2), (5) to strike a proper balance incorporating environmental and coastal zone factors and not simply administrative need and economic factors such as potential oil and gas recovery, (6) to quantify environmental costs to the extent they are quantifiable, and (7) to adequately explain his determination of net economic value, particularly the economic effects of delaying leasing.15
The court retained jurisdiction over the case and directed that lease sales scheduled to
At the time Secretary Watt was in the process of revising and reapproving the program pursuant to section 18(e).
Petitioners launch a multi-pronged attack on the new five year program. They contend that (1) the program fails to indicate the size and location of leasing activity “as precisely as possible” as required by section 18(a); (2) the Secretary failed to give adequate consideration to, or base the program on, the environmental factors listed in 18(a)(2); (3) the Secretary violated section 18(a)(3) by making arbitrary assumptions and using incorrect methodology to ascertain the costs and benefits of leasing; (4) the program violates section 18(a)(4) because it fails to assure receipt of fair market value; (5) the Secretary failed to consider the environmental impact of the leasing program on Oregon and Washington causing him to violate section 18(a)(1), (2), and (3) of the OCLSA and section 102 of the National Environmental Policy Act;
II. Standard of Review
At the outset it is important to note the difference between the nature of the challenges presented in this case and the challenges presented in Watt I. In Watt I the court noted that the five year program is based on three types of determinations: (1) the Secretary’s factual findings, (2) the Secretary’s policy judgments, and (3) the Secretary’s legal interpretations. The court set out the standard for reviewing each of these types of determinations, stating that review of the first two types of determinations is quite deferential.
When reviewing findings as ascertainable fact made by the Secretary,.the substantial evidence test guides our inquiry. When reviewing the policy judgments made by the Secretary, including those predictive and difficult judgmental calls the Secretary is called upon to make, we will subject them to searching scrutiny to ensure that they are neither arbitrary nor irrational — in other words, we must determine whether “the decision [was] based on a consideration of the relevant factors and whether there has been a clear error of judgment.”21
The distinction between review of factual findings and policy judgments and review of legal interpretations is important in this case because the majority of the defects noted in Watt I concerned the previous Secretary’s erroneous interpretation of the statute.
It is also important to note that the suspicion which sometimes arises when an agency reaches the same result after remand does not apply in the present context. This is not a case in which the agency had an incentive to defend its prior actions. The original five year plan was formulated by Secretary Andrus during the Carter Administration. On remand Secretary Watt, a member of the Reagan Administration, took a hard look at the program, and came up with a program resembling the earlier one in many respects. Secretary Watt had no incentive to defend the actions of Secretary Andrus unless he thought that they were correct. Thus, to the extent that the present program imitates the prior program it is not a reflective defensive gesture, but the result of an original appraisal. Therefore, the jaundiced view which courts sometimes take of an agency determination which remains largely the same after remand is not in order in the present case.
Keeping these two points in mind we turn to an analysis of each of the main contentions raised by petitioners, concluding that none of them undermines the validity of the five year program.
III. Precise Indication of the Size and Location of Leasing Activity
Section 18(a) directs the Secretary to prepare a leasing program which consists “of a schedule of proposed lease sales indicating, as precisely as possible, the size, timing, and location of leasing activity.”
Petitioners contend that the program is insufficiently precise because each entire planning area is scheduled as one lease sale even though the Secretary has indicated that it is likely that only a portion of each area will actually be leased.
Petitioners argue that the Secretary cannot defer beyond the program stage the decision of which areas to lease, apparently concluding that the Secretary must designate at the program stage which tracts will actually be leased. This argument ignores the structure of section 18(a). Section 18(a) is, as noted above, pyramidic in structure. Greater specificity is anticipated at each stage. Before an area is actually put up for sale, other steps must be taken, including an evaluation of the potential environmental and coastal zone effects under the National Environmental Policy Act and the Coastal Zone Management Act and state concerns under section 19 of the Outer Continental Shelf Land Act.
Petitioners attack the precision of the leasing program in three other respects. These attacks are also unavailing. Petitioners first contend that the Secretary has violated section 18(a) because the size of the planning areas designated on the proposed lease sale schedule are vastly larger than under the Andrus program.
Second, petitioners claim that the Secretary has violated section 18(a) by unlawfully delegating to the members of the oil industry the designation of the areas which will actually be leased.
Petitioners’ argument that the Secretary has unlawfully delegated the identification of tracts for sale to the oil industry is in reality a challenge to this new procedure adopted by the Secretary, but we reject that attack. It is not unreasonable for the Secretary to seek input from the industry before proceeding to the exact designation of which tracts will be offered for sale. Indeed, in light of the pyramidic structure of the statute it would be surprising if the Secretary did not at least consider the possibility of narrowing down the size of the proposed lease sales, and input from industry is one factor which can reasonably be considered when that decision is made.
Finally, we note that the Secretary complied with this court’s order in Watt I that he change the California sale designation. In the latest program the broad California planning area is divided into two planning areas, Southern California and Central and Northern California.
IV. Compliance With Section 18(a)(2)
Section 18(a)(2) directs the Secretary to prepare the five-year leasing program consistent with the principle that “timing and location of exploration, development, and production of oil and gas among the oil- and gas-bearing physiographic regions of the outer continental shelf shall be based on a consideration of [eight enumerated factors].”
In an effort to comply with this dual obligation the Secretary, on remand, engaged in a six-step process to determine the timing and location of the leasing activity. First, he reviewed the results of a comparative analysis of planning areas prepared by the Interior staff and examined the conclusions which could be drawn from that analysis. All of the factors included under section 18(a)(2) which in the view of the Interi- or staff were subject to quantification were incorporated in this comparative analysis. Second, the Secretary considered the extensive comments received on the comparative analysis. Third, using the results of the analysis and the comments, initial conclusions were reached about the location and timing of the leasing activity, basing priority on a calculation of net social value for each planning area. Fourth, the section 18(a)(2) considerations which were not subjected to quantitative analysis or which were not incorporated in the net social value estimates, including more explicit consideration of the relative environmental sensitivity and marine productivity than was possible in the quantitative analysis, were reviewed in order to determine whether any of the initial conclusions should be modified. Fifth, after making the adjustments required by review of each of the factors listed in section 18(a)(2), the Secretary grouped the areas into three categories: those areas which should be leased on an annual basis, those which should be leased on a biennial basis, and those which should be leased only on a triennial basis. Finally, these groups were used to develop a schedule of proposed lease sales which became the five year program.
A. Consideration of the Section 18(a)(2) Factors
There is no dispute that Secretary Watt made an effort to consider all of the factors enumerated in section 18(a)(2). In this respect the present case is different from Watt I in which the Secretary erroneously interpreted the statute in a manner which, relieved him of the responsibility of considering all of these factors at the program stage. Petitioners in the present case challenge the adequacy oí the consideration, not the fact that the consideration was made. This lessens the level of our scrutiny.
Petitioners’ challenge focuses on section 18(a)(2)(B), which requires that the Secretary consider “an equitable sharing of developmental benefits and environmental risks among the various regions,”
1. Section 18(a)(2)(B).
Petitioners contend that the Secretary’s section 18(a)(2)(B) analysis is inadequate because it did not evaluate regional benefits and environmental risks on a planning area basis but rather on the basis of regions composed of states and groups of states
The Secretary specifically noted that “[estimates of both developmental benefits and environmental risks have been calculated on a planning area basis.”
2. Section 18(a)(2)(G).
Petitioners contend that the Secretary’s 18(a)(2)(G) analysis is inadequate because the Secretary limited his consideration of relative environmental sensitivity and ma
In Watt I this court noted that “[t]he statute provides no method by which environmental sensitivity and marine productivity are to be measured.”
The Secretary admitted that “[a] number of factors could be considered in ranking the environmental sensitivity of the OCS planning areas.... The sensitivity of those resources to the various aspects of OCS development, such as oil spills, structure placement, discharges and air emissions could also be considered.”
[Consideration of habitat sensitivity was confined to the sensitivity to oil spills because spill effects are considered by many experts to be the greatest measurable biological effect of OCS development. Furthermore, some non-spill effects are localized and highly dependent on site-specific factors, and therefore have limited value for comparing entire planning areas. Finally, sensitivity to some environmental effects of OCS development is almost impossible to evaluate without considering the expected level of OCS activities — i.e., it is difficult to establish a consensus definition of sensitivity.51
In essence the Secretary explained that oil spills were the greatest measurable effect on the environment and that other factors could not adequately be considered on the basis of available evidence. Since section 18(a)(2)(G) requires a comparative analysis,
Petitioners also attack the Secretary’s section 18(a)(2)(G) methodology in a different manner. The Secretary determined that the relative environmental sensitivity and marine productivity analysis could be performed by dividing each area into various coastal and marine habitats. Thus, in each area the coastal habitats were divided into beaches (including barrier islands), wetlands (including marshes and tundra), rocky shores (including cliffs), and lagoons (Alaska only).
The Secretary stated that he examined environmental sensitivity on a habitat basis because this allowed “all OCS areas to be analyzed according to common factors, avoiding the difficulty of weighing and comparing very different resources in different planning areas.”
B. Basing the Leasing Program on the Section 18(a)(2) Factors
As noted above, the Secretary must not only consider the section 18(a)(2) factors, he must “base the leasing program upon the result of his consideration of these factors.”
Petitioners advance three arguments in support of their contention that the Secretary has not based the leasing program on a consideration of the section 18(a)(2) factors. The first two are easily disposed of. The Petitioners first contend that the program could not have been based on a consideration of the section 18(a)(2) factors since that consideration was inadequate. Since we have already determined that the Secretary’s consideration of all the section 18(a)(2) factors was in fact adequate there is no merit to this argument. Petitioners next contend that the Secretary unlawfully refused to adjust the timing of the various lease sales to reflect the results of his consideration of the section 18(a)(2) factors. This argument is also meritless.
Contrary to petitioners’ implication, the Secretary did make adjustments after con
Petitioners’ final attack on the adequacy of the Secretary’s efforts to base the leasing program on the section 18(a)(2) factors is more troubling. Petitioners point out that while the Secretary utilized the section 18(a)(2) factors as a basis for determining the frequency of leasing activity in the various areas, the Secretary himself admitted that “the timing of first sales in an area should not be subject to this analysis.”
The Secretary’s admission that the timing of the first sales in an area would not be subject to the section 18(a)(2) analysis was based on his realization that “as a factual matter offshore leasing does not begin when this program is approved, but rather it began in 1954 when the first Federal lease sale was held.”
Congress expressly stated that “leasing shall be permitted to continue” throughout the period necessary for the formulation and reformulation of the leasing program and “for so long thereafter as such program is under judicial or administrative review.”
The fact that we do not have control over the timing of first sales in most areas does not negate the Department’s responsibility to schedule those where we do have control on a rational basis, that is, at a point when the Department is prepared to meet its responsibilities under the OCS Lands Act, NEPA, and other applicable statutes. These were, in fact, the primary factors in determining the scheduling of first sales.74
Similarly, the Secretary quantified what to him seemed possible to quantify, and evaluated other factors qualitatively.
We therefore reject petitioners’ argument that the program is not based on the Secretary’s consideration of the factors listed in section 18(a)(2). The Secretary properly concluded that none of these factors precluded him from arranging the schedule as he did and there is no serious dispute over whether these factors were used to strike the proper balance under section 18(a)(3)
V. The Section 18(a)(3) Cost Benefit Analysis
Under section 18(a)(3) the Secretary is required to “select the timing and location of leasing, to the maximum extent practicable, so as to obtain a proper balance between the potential for environmental damage, the potential for the discovery of oil and gas, and the potential for adverse im
It is first important to understand what is being evaluated.' As noted above petitioners challenge the factual basis and the methodology used by the Secretary in various aspects of the cost benefit analysis. These are aspects of the analysis which fall within what the court in Wait I described as the “frontiers of scientific knowledge.”
It is also important to realize that because the analysis is speculative and predictive in nature, it could go on forever. However, it is clear that Congress did not want the Secretary to spend years developing a five-year leasing program. Indeed, the Secretary was required to submit the first proposed program to Congress, the Attorney General, and the Governors of the affected states within nine months of the effective date of the 1978 amendments.
A. Calculation of .Net Economic Value
Petitioners first challenge the Secretary’s calculation of net economic value. They contend that the Secretary’s determination of net economic value was completely inaccurate because it failed to reflect the costs and benefits of delaying lease sales. According to petitioners, the Secretary did not consider the possible benefits or costs of delaying lease sales beyond the first year of the program and therefore his analysis was skewed. However, it is the petitioners’ argument which is skewed and therefore unconvincing.
The Secretary in his initial calculation determined net economic value as if all oil in all areas would be leased and developed in the first year of the program.
Petitioners next contend that the Secretary’s calculation of net economic value was defective because it was based on two arbitrary assumptions. They first assert that the Secretary unreasonably assumed that the price of oil would increase in real terms at a rate of one percent per year. Second, they complain because the Secretary assumed that the production costs in all planning areas would in real terms remain constant throughout the five year period. We reject both of these arguments.
The Secretary’s assumption that the price of oil would increase by one percent per year in real terms is not unreasonable and is supported in the record. The Secretary noted that the one percent rate was consistent with the assumptions the Department of Interior had made in most lease sale designs in the past year, that it was within the low range estimated by a study completed in 1980 comparing seventeen major studies of petroleum price forecasts, and that since the study’s completion, world price trends had moderated somewhat, justifying reliance on a somewhat lower long-
We also find that the Secretary’s assumption that production costs in all planning areas would remain constant in real terms throughout the five year period was reasonable. Petitioners contend that the only reasonable assumption was that production costs in frontier areas would decline as technology improved. The Secretary acknowledged that production costs might decline in frontier areas. He therefore noted that if that should happen resources of average value in frontier areas would yield greater benefit if produced later. He correctly noted that a two percent decline in costs in such areas would narrow the differences in net economic value between programs with earlier and more frequent leasing in such areas and programs which were less aggressive. However, he concluded that such differences were not sufficient to require adjusting the schedule because it was likely that resources of above average value would be discovered and produced first in such areas, at a time when the cost of production was still high. He further stated that the market was capable of anticipating technological developments better than the government and that, accordingly, the market would delay investments whenever greater profits could be achieved. The Secretary’s assumption was therefore reasonable, and we conclude that he adequately considered changes in production costs in frontier areas.
B. Calculation of External Costs
Petitioners also challenge the Secretary’s calculation of external costs, raising three particular challenges to this aspect of the Secretary’s cost benefit analysis. They first contend that the Secretary understated the cost of potential oil spills because no effort was made to determine whether the oil spills studied by the Secretary would have a similar effect in each of the planning areas. Second, they contend that the Secretary failed to count the cost of oil spills of less than a thousand barrels and that this resulted in a serious understatement of the costs. Third, they contend that the Secretary arbitrarily assumed that cleanup costs for oil spills would be the same in all regions. We find each of these arguments unpersuasive.
In determining the cost of major oil spills (oil spills greater than a thousand barrels) the Secretary relied on the most reliable information available, a study evaluating damage estimates for the only five oil spills which had been subjected to economic analysis.
Petitioners contend that the Secretary did not adequately consider the differences between the environments in the planning areas under review and those in which the oil spills in the study occurred and that as a result the range used by the Secretary was too restrictive. They claim that the Secretary should have engaged in additional analysis to determine whether the environments of the coasts where the oil spills occurred were similar to those of each planning area. However, we find the Secretary’s method reasonable. It was reasonable to base the range of estimates on actual events which had been quantified in the past. This range was based on a study of the only five major oil spills which the Secretary felt provided reliable evidence. Petitioners can cite no major oil spills which the Department did not consider. The Secretary’s methodology was far from irrational, and we have been provided no more reasonable alternative.
Petitioners’ complaint about the Secretary’s failure to quantify the costs of oil spills of less than a thousand barrels is also misdirected. Petitioners intimate that the Secretary completely failed to consider the costs of oil spills of less than a thousand barrels and that this understated the external costs. However, petitioners ignore the methodology chosen by the Secretary. The Secretary did not base his entire section 18(a)(3) analysis on the cost benefit analysis. Instead, he considered the quantifiable costs in the cost benefit analysis and then later considered costs which he determined could not be quantified.
there were several suggestions that the cost of spills under 1000 barrels should be calculated since they may inflict damage equal to or higher than that of spills over 1000 barrels. These and similar recommendations raise issues which are subject to much debate and disagreement.... [A] number of external costs were not estimated due to the difficulty of establishing values on which there is little consensus. The Department believes these costs exist, but are more appropriately considered in other terms than dollars.94
We do not think it was arbitrary for the Secretary to consider the cost of these oil spills in terms other than dollar and cents, particularly when the record before him contained very little reliable evidence on which the calculation could be based.
We also reject petitioners’ contention that the' Secretary acted arbitrarily in assuming that the cleanup costs for each region would be the same. The Secretary did not identify regional cost differences in oil cleanups. However, his refusal to do so was reasonable. The Secretary noted that, for purposes of the cost benefit analysis, he chose to assume that cleanup costs would not vary from region to region because “it is difficult to identify what the regional cost differences might be, and [further] location, type, and size of spill [will] be the primary factors” in determining the costs of oil cleanup.
C. Methodology for Calculating Costs and Benefits
Petitioners final attack on the Secretary’s cost benefit analysis is directed toward the methodology used by the Secretary. They contend that the entire analysis is flawed because the Secretary did not measure costs and benefits on the same basis. Petitioners argue that in calculating the net economic value of each area the Secretary did not discount to present value the estimated benefits from oil production. On the other hand, petitioners assert, the Secretary did discount to present value the external costs associated with that development. The result, petitioners conclude, is either an overstatement of benefits or an understatement of costs which is so great that the entire five year program is flawed. However, petitioners overstate the magnitude of the Secretary’s error and, more importantly, ignore the Secretary’s overall procedure which rendered that error insignificant.
The Secretary’s calculation of net economic value was based on a formula involving three factors: (1) the estimated residual value per barrel of oil (the value of the oil after taxes and royalties are paid); (2) the taxes received by the government as a result of development; and (3) the royalties received by the government.
Petitioners contend that even if the Secretary failed to discount only the royalty factor, the resulting miscalculation is still so large that the entire program is unsupportable. We reject that argument because it ignores the overall process the Secretary utilized in promulgating the five year program. Petitioners’ argument implies that the Secretary felt that his cost benefit anal
The Secretary’s cost benefit calculations were not as precise as they could have been, since they were slanted in favor of lower benefits and higher costs. This is not to say that they were erroneous. The Secretary merely realized the uncertainty inherent in such predictions and he made allowances to give him room for error. For example, the Secretary deliberately overstated costs to an extent, noting that “when judgments were needed on the dollar value to use for damages on how an area’s environmental resources should be rated, the practice was always made to err on the high side.”
The estimates of net economic value did not include any estimate of the benefits from reduced requirements for the Strategic Petroleum Reserve due to higher production levels. The net economic benefits are thus understated by 5% to 10%. In addition, the estimates of net economic value did riot include any allowance for “premium” value of domestic oil production above the value set by the world price. Such a premium may result from decreased vulnerability to import disruptions. Such estimates range from a few dollars to nearly $100 per barrel, but there is substantial uncertainty as to their validity. By neglecting these benefits of decreased economic disruption that accrue from import disruptions when domestic price, is higher, the net economic value estimates again understate the potential national benefits of OCS oil and gas production.104
We are not suggesting that the Secretary’s error with respect to the calculation of royalties was exactly offset by these other assumptions. We merely intend to show that the Secretary allowed room for such errors. More importantly, the Secretary realized that the cost benefit analysis should be used only for generalized conclusions.
In summary, petitioners challenge the Secretary’s cost benefit analysis on a variety of fronts. However, they fail to recognize the limited scope of our review. Too often they attempt to prove that the Secretary’s decision is not supported by evidence in the record by citing evidence which conflicts with the Secretary’s conclusion. They ignore the evidence which supports the Secretary’s decision or claim that it is not as persuasive as the evidence to which they cite. However, as this court recently noted
Disagreement among the experts is inevitable when the issues involved are at the “very frontiers of scientific knowledge,” and such disagreement does not preclude us from finding that the Administrator’s decisions are adequately supported by the evidence in the record.... It is not our function to resolve disagreements among the experts or to judge the merits of competing expert views.... Óur task is the very limited one of ascertaining that the choices made by the Administrator were reasonable and supported by the record.... That the evidence in the record may also support other conclusions, even those that are inconsistent with the Administrator’s, does not prevent us from concluding that his decisions were rational and supported by the record.107
On the basis of all the evidence before him the Secretary’s cost benefit analysis was reasonable. Even if we disagreed with some of the conclusions he reached, we would be unable to remand the program on that basis.
VI. Receipt of Fair Market Value-Section 18(a)(4)
In addition to the principles stated in subsections 1, 2 and 3 of section 18(a), the Act requires that the five-year leasing program accord with the principle that “[l]easing activities shall be conducted to assure receipt of fair market value for the lands leased and the rights conveyed by the federal government.”
“Fair market value” is defined as the amount in cash, or on terms reasonably equivalent to cash, for which in all probability the property would be sold by a knowledgeable owner willing but not obligated to sell to a knowledgeable purchaser who desired but is not obligated to buy.109
Petitioners do not attack this definition, but they do contend that the program adopted by the Secretary does not assure receipt of fair market value. We must reject their contention once again.
Petitioners assert that the large size of the lease offerings and the accelerated rate of leasing combine to drive the prices of the leases down.
. Section 18(a)(4)’s requirement that the program assure receipt of fair market value does not mandate the maximization of revenues, it only requires receipt of a fair return. The Secretary acknowledged that the accelerated rate of leasing might ordinarily result in less intense competition and lower bids for some tracts. He pointed out, however, that the contrived intensity of competition achieved by the government’s prior use of its monopoly power may have produced prices in excess of fair market value and thus not socially optimal.
*293 [The] monopolistic tendencies of past leasing rates raise the possibility that lease prices were at least somewhat higher as a result. The question now is, what is the effect from the perspective of fair market value of increasing the rate of leasing in order to catch up on the amount of investment in exploration? Lease prices could be held at higher levels by continuing to restrict the availability of leases. Such a policy could result in prices that would be higher than those in a market in which supply is competitively determined. It would, however, be tantamount to exertion of monopoly power by the government. Losses to the economy would result just as they do from private monopolies. It would be very costly to the Nation to exercise the government’s monopoly over the supply of OCS leases as the means for assuring receipt of fair market value. Other means are available that are far less costly to the nation’s economy.111
Thus, rather than attempt to maximize the amount of money the government could receive by delaying the sale of leases, the Secretary decided to rely on the competitive bidding process to assure receipt of fair market value, concluding that that process did “much to assure that the bids the government receives represent the value of the leases under the supply and demand conditions at the time of the lease sale.”
The process for receiving bids on leases is not an open public auction but a competitive sealed bid procedure under which none of the bidders knows what its competitors will bid. The Secretary observed that there was evidence that one and two bid lease sales have not yielded surplus profits to their owner, and that such leases have not been made at less than fair market value.
Moreover, the Secretary did not rely exclusively on the competitive bidding process to assure that fair market value would be received. As a double check, the Secretary adopted evaluation procedures designed to assure further the government’s receipt of fair market value. Petitioners contend that these procedures are not sufficient, noting that they are less comprehensive than the tract evaluation previously used. However, we cannot conclude that these procedures are unreasonable or that they will not assure the receipt of fair market value, particularly when they are viewed merely as a complement to the effect of the competitive bidding process.
Under the prior evaluation procedure, each tract put up for lease was evaluated by the government to determine what minimum price should be bid in order to assure receipt of fair market value. The Secretary noted that this was not the most effective way of assuring the receipt of fair market value because evaluations were often made on tracts for which no bids were received. In an effort to avoid the costly and unnecessary task of estimating the value of tracts which would not be leased, the Secretary, observing that the tract evaluation system was best viewed as a mechanism to deter any tendency for bidders to exploit unusual situations or new conditions by systematically underbidding, attempted to design a cost effective sample of tracts for evaluation. Although the program is apparently still in the testing phase,
Under the proposed program the tract evaluation will be made after bids are received. Each high bid will be subjected to a quantitative evaluation developed to decide whether to accept or reject bids and, when validated, to a comparative evaluation. Bids passing this initial screening will then be evaluated on the following basis. Bids received on leases containing proven, drainage, or development tracts will all be evaluated. Bids received for frontier areas will be evaluated in two ways. First, an appropriate sample of the tracts receiving bids, depending on the particular sale, but generally in the range of thirty percent, will be evaluated. Second, a random sample of five percent of the tracts will be evaluated.
VII. Effects of the Five Year Leasing Program on Washington and Oregon
Petitioners Washington and Oregon contend that the Secretary failed adequately to consider the effects of the five-year leasing program on their states. In particular they contend that the Secretary’s analysis with respect to the impact of the program on Washington and Oregon was so inadequate that it violated section 18(a)(1) and section 18(a)(2) of the OSCLA and section 102 of the National Environmental Policy Act. We reject all of these arguments.
A. Compliance With Section 18(a)
Washington and Oregon challenge the adequacy of the Secretary’s section 18(a) analysis in two respects. First, they contend that section 18(a)(1) and section 18(a)(2) require the Secretary to evaluate each region of the outer continental shelf even if no leasing activity is contemplated there and that the Secretary failed to do this. However, this argument is flawed because it is based on an erroneous interpretation of section 18.
Section 18 does not require the Secretary to engage in the fruitless exercise suggested by Washington and Oregon. The purpose of the Secretary’s section 18 analysis is to determine which areas will be leased under the five-year leasing program and when those areas will be leased. If the Secretary has already determined that no leasing activity will occur in a particular area there is no need to fully evaluate that area. Thus, if the Secretary adequately considered the costs to Washington and Oregon associated with the leasing in other areas he has not violated the statute.
Washington and Oregon next assert that the Secretary’s analysis is inadequate because he did not adequately consider the effect of oil spills from Alaska and Northern California which could impact on Washington and Oregon. We disagree. There is no dispute that the Secretary expressly took into account the impact on Washington and Oregon in his consideration of section 18(a)(2)(B) — arriving at a quantified estimate of 300 million dollars.
It is undisputed that the Secretary considered the costs of oil spills from Alaska and California and concluded that most of the damage would be inflicted on those two states. Oregon and Washington contend that more of the impacts will occur in Oregon and Washington because of the northward flow of the Davidson current during the winter months. However, even if the Secretary erred in deciding where these costs would occur, his analysis is still sustainable as long as he adequately considered how much the costs would be. Washington and Oregon dispute this conclusion, asserting that the accuracy of the Secretary’s determination of where the impacts will occur is important because their shores are different in terms of environmental sensitivity from those of California. However, the Secretary reasonably concluded that “the ecological damages for Washington and Oregon would be expected to be similar to those of Central and Northern California.”
B. Compliance with NEPA
Section 102 of the National Environmental Policy Act (NEPA) requires all agencies of the federal government to include in their recommendations for major federal actions significantly affecting the quality of the human environment, a detailed statement of “the environmental impact of the proposed action [and] any adverse environmental effects which cannot be avoided should the proposal be implemented.”
The supplemental environmental impact statement which was filed as a part of the five year program expressly discusses the effect of oil spills on the Pacific region of which Washington and Oregon are a part. It explains in detail the effects of a spill on fish in this region, including the stocks of concern to Washington and Oregon: salmon, herring, steelhead trout, shrimp, and crabs.
Washington and Oregon may have hoped that the Secretary would perform a more extensive evaluation of the effect of the
VIII. Compliance With Section 18(f)(5)
Washington and Oregon advance one final attack on the five-year leasing program. They contend that the program violates section 18(f)(5) because the Secretary did not expressly declare when he would make the consistency determination which Washington and Oregon contend is required by section 307 of the Coastal Zone Management Act.
Section 18(f)(5) requires the Secretary “by regulation, [to] establish procedures for ... consideration of the coastal zone management program being developed or administered by an affected coastal state pursuant to section [805 or 806 of the Coastal Zone Management Act of 1972.]”
Washington and Oregon contend that the legislative history of section 18(f)(5) indicates that the Secretary is required to explain when the consistency determination will be made. However, we read the legislative history to the contrary. Washington and Oregon’s argument would have been stronger if Senate bill 9, the 1977 Senate bill, would have been passed. That version of section 18(f)(5) required
The Secretary [to], by regulation, establish procedures for .. . (5) coordination of the program with the management program being developed by any State for approval pursuant to section 305 of the Coastal Zone Management Act of 1972 and consistency, to the extent practicable, with the management program of any state which has been approved pursuant to Section 306 of such Act.131
However, the House version differed from the Senate version, and the conference committee adopted the House version, stating:
Both versions provide for regulations as to coastal zone management applicability. The House amendment provides for regulations involving “consideration ” of a program “being developed or administered” pursuant to section 305 or 306, respectively, of the Coastal Zone Act. The Senate Bill provides for “coordina*297 tion” of the program with the management program being developed and also for “consistency” to the extent practicable with the management program. The conference report is the same as the House amendment. The Secretary is to establish procedures by regulation for consideration of state coastal zone management programs.132
Thus, the version of section 18(f)(5) which was ultimately adopted required the Secretary merely to establish procedures for considering the programs being developed or administered by the states pursuant to section 305 or 306 of the Coastal Zone Management Act. It did not require him to outline when a consistency determination under section 307 would be made.
IX. Conclusion
The Secretary’s second attempt to promulgate a five-year leasing program successfully complied with the requirements of the Outer Continental Lands Act as interpreted by this court in Watt I. Petitioners’ all-out attack on this program is not well founded.
. 43 U.S.C. §§ 1331-1356 (1976 & Supp. V 1981).
. Events leading up to the 1978 amendment are outlined in California v. Watt, 668 F.2d 1290, 1295-96 (D.C.Cir.1981) (per curiam).
. Pub.L. No. 95-372, Title II, 92 Stat. 632 (1978).
. H.R.Rep. No. 95-590, 95th Cong., 1st Sess. 53 (1977), U.S.Code Cong. & Admin.News 1978, p. 1450, 1460.
. 43 U.S.C. § 1344 (Supp. V 1981).
. Id., § 1337.
. Id., § 1340.
. Id., § 1351.
. Id., § 1353.
. California v. Watt, 668 F.2d 1290,1297 (D.C.Cir.1981).
. 43 U.S.C. § 1344(a) (Supp. V 1981).
. Id.
. California v. Watt, 668 F.2d 1290 (D.C.Cir.1981) (per curiam) (Watt I).
. Id. at 1325.
. Id.
. Id at 1326.
. 43 U.S.C. § 1344(e) (Supp. V 1981). Section ■ 18(e) directs the Secretary to review the leasing program annually and authorizes him to revise and reapprove the program “at any time.”
. Petitioners in the consolidated cases include the States of California, Alaska, Florida, Washington and Oregon, the Natural Resources Defense Council, Inc., the Sierra Club, the Conservation Law Foundation of New England, Inc., Trustees for Alaska, the Friends of the Earth, National Wildlife Federation, the National Audubon Society, the North Slope Borough and Cenaliulrit (the Yukon-Kuskowim Coastal Resource Service Area Board). The Commonwealth of Massachusetts, the Oregon Shores Conservation Coalition, the Oregon Environmental Council, and the Oregon Wilderness Coalition filed as amicus curiae in support of petitioners’ position.
. 42 U.S.C. § 4332 (1976).
. 16 U.S.C. § 1456(c)(1) (1976).
. Watt I, 668 F.2d at 1302 (quoting in part Citizens to Preserve Overton Park, Inc. v. Volpe, 401 U.S. 402, 416, 91 S.Ct. 814, 824, 28 L.Ed.2d 136 (1971)).
. Id. at 1303 (footnote omitted).
. For example, the Secretary’s primary error with respect to the evaluation required by section 18(a)(2) was that he mistakenly felt that the statute did not require him to consider fully all of the factors at the program level. See id. at 1305-07. Similarly, the Secretary’s analysis under section 18(a)(2)(B) was flawed mainly because the Secretary “interpreted the term ‘environmental risk’ contrary to the plain meaning of the statute.” Id. at 1308. Finally, the primary deficiency in the Secretary’s section 18(a)(3) analysis was his failure to “consider and factor in all aspects of section 18(a)(2),” id. at 1318, a defect directly attributable to the Secretary’s misinterpretation of section 18(a)(2).
. 43 U.S.C. § 1344(a) (Supp. V 1981) (emphasis added).
. Watt I, 668 F.2d at 1304.
. Id.
. Id.
. Brief for Petitioners’ States of California, State of Alaska, Natural Resources Defense Council, North Slope Borough, and Cenaliulrit at 36-37 [hereinafter referred to as California Brief].
. Watt I, 668 F.2d at 1304.
. 43 U.S.C. § 1345 (Supp. V 1981).
.California Brief at 33-34. Petitioners note that the largest offering in the history of the offshore leasing program comprised 2.9 million acres, id at 34 n. 1, while the present program includes one planning area of 133 million acres.
. California Brief at 39-40.
. We also reject petitioners’ contention that the Secretary was required to separate the Central and Northern California lease sale into two distinct sales. Petitioners argue that the Secretary had, in an earlier sale, divided the area into two sales and that accordingly a more precise offer was possible. However, the Secretary has never divided the Central and Northern area into two planning areas. What petitioners refer to is the Secretary’s decision to delete four basins from a sale in the area to permit further review. Respondents’ Brief at 28. This in no way indicates that there will be two sales there in the future. The Secretary did not limit himself to such a course by separating a portion of the area for further consideration.
.Respondents’ Brief at 19-20.
. 43 U.S.C. § 1344(a)(2) (Supp. V 1981). The eight factors the Secretary must consider are listed at TAN 12.
. Watt I, 668 F.2d at 1304-05.
. Id. at 1305.
. Id.
. Joint Appendix (JA) at 2300-08.
. 43 U.S.C. § 1344(a)(2)(B) (Supp. V 1981).
. 43 U.S.C. § 1344(a)(2)(G) (Supp. V 1981).
. California Brief at 115.
. JA at 1278 (emphasis added).
. The fact that the Secretary analyzed each planning area under § 18(a)(2)(B) is further evidenced by petitioners Washington and Oregon’s argument that they were harmed because “the Secretary chose ... to consider the section 18(a)(2) factors only as they applied to the Department of Interior’s designated ‘planning areas.’ ” Brief for Petitioners Washington and Oregon at 5. See also id. at 20. Thus, different groups of petitioners attack the Secretary’s § 18(a)(2) analysis on contradictory grounds. Both attacks are misplaced, however, because as noted in text the Secretary analyzed the section 18(a)(2) factors on both a planning-area and state-wide basis.
. JA at 1278.
. See, e.g., 43 U.S.C. §§ 1344(a)(2)(F), (c), (f), 1345 (Supp. V 1981).
. Wait I, 668 F.2d at 1311.
. Id at 1313.
. Id at 1320.
. JA at 1256.
. Id
.Under section 18(a)(2)(G), the Secretary must consider the “relative environmental sensitivity and marine productivity of different areas.” (emphasis added).
.JA at 1257.
. Id. ■
. California Brief at 131.
. JA at 1256.
. Id.
. We also reject petitioners’ contention that the Secretary erred in considering safety considerations and mitigation measures in deciding whether to alter the leasing schedule in response to his section 18(a)(2)(G) analysis. California Brief at 146-58. As we noted in Watt I, “the potential for environmental harm cannot be adequately considered and weighed without a like examination of the potential to mitigate such harm.” 668 F.2d at 1317.
. Watt I, 668 F.2d at 1305.
. Id. at 1313.
. Id. at 1315 n. 117. Thus, in Watt I the Secretary’s primary shortcoming with respect to section 18(a)(3) was his “failure to consider and factor in all aspects of section 18(a)(2). This omission precluded him from meeting the requirement of section 18(a)(3) to obtain a proper balance to the maximum extent practicable.” Id. at 1318.
. JA at 2302.
. Id. at 2303.
. Section 18(a)(2)(E) requires the Secretary to consider “the interest of potential oil and gas producers in the development of oil and gas resources as indicated by exploration or nomination.” 43 U.S.C. § 1344(a)(2)(E) (Supp. V 1981).
. JA at 2305. Other section 18 considerations led to the ultimate decision to provide for biennial leasing only in the St. George Basin. Id.
. Section 18(a)(2)(F) requires the Secretary to consider the “laws, goals, and policies of affected States which have been specifically identi- ' fled by the Governors of such States as relevant matters for the Secretary’s consideration.” 43 U.S.C. § 1344(a)(2)(F) (Supp. V 1981).
. JA at 2306.
. Id. at 2301.
. Id.
. Id.
. Watt I, 668 F.2d at 1314-15 (Secretary cannot base timing of lease sales solely on administrative exigencies).
. 43 U.S.C. § 1344(d)(3) (Supp. V 1981).
. Watt I, 668 F.2d at 1295.
. JA at 2301.
. Our conclusion concerning section 18(a)(2) completely defeats petitioners’ argument that the Secretary’s section 18(a)(3) analysis was flawed due to “[t]he manifest errors in the Secretary’s consideration of § 18(a)(2) ... and his failure to base his timing and location decisions on these factors.” California Brief at 150. Since we conclude that the Secretary’s section 18(a)(2) analysis was adequate, his section 18(a)(3) analysis cannot be faulted on that basis.
. 43 U.S.C. § 1344(a)(3) (Supp. V 1981).
. Watt I, 668 F.2d at 1318.
. Id. at 1320-21.
. Id. at 1301, quoting Industrial Union Department, AFL-CIO v. Hodgson, 499 F.2d 467 (D.C.Cir.1974).
. Id. n. 18 (citing Permian Basin Area Rate Cases, 390 U.S. 747, 811, 88 S.Ct. 1344, 1383, 20 L.Ed.2d 312 (1968)).
. 43 U.S.C. § 1344(c)(3) (Supp. V 1981). Congress also apparently contemplated the adoption of a final leasing program within 18 months of the amendment’s effective date. Id., § 1344(d)(3). This undermines Petitioner Florida’s argument that “a minimum of three years for environmental data collection and one year for data synthesis is needed to have the necessary information to perform an adequate cost/benefit analysis as required by ... (Section 18).” Statement of Petitioner Florida at 3.
. Watt I, 668 F.2d at 1317 n. 224, quoting Massachusetts v. Andrus, 594 F.2d 872, 886 (1st Cir.1979).
. JA at 1283.
. Id. at 1251.
. Id. at 1271.
. Id. at 1332.
. Id. at 1316.
. Id. at 1334-35.
. We also reject petitioners’ contention that the Secretary’s net economic value determination was defective because (1) it ignored production cost differences among planning areas, (2) it was based on an assumption that recoverable gas resources would be produced in Alaska and delivered to market, and (3) it was based on a tax rate which was not supported by the record.
The tax rate chosen by the Secretary had no effect on the-net economic value determination, because the Secretary added back into the analysis the exact amount of taxes deducted earlier — 48%. The amount of the assumed tax rate therefore had no impact on the analysis. The Secretary’s assumption on the economic feasibility of producing gas in Alaska could reasonably be drawn from evidence in the record. JA at 1242-43, 1254. Moreover, the Secretary considered the effect of an error in this assumption. Id. at 1254-55. Similarly, his assumption on the production costs in different areas was reasonably based on Department of Interior experience in many areas, supplemented by a Department of Energy Report which was especially helpful in determining the costs in frontier areas. Id. at 1328.
.JA at 1461.
. Id. at 1487.
. Id. at 1486.
. Id. at 1271.
. Id. at 2314.
. The evidence available to the Secretary indicated that the average oil spill under 1000 barrels was only 1.2 barrels. JA at 2495. This shows that the potential impact of such oil spills would be minimal and further justifies the Secretary’s decision to consider those impacts in terms other than dollars.
.JA at 1469.
. California Brief at 89.
. The per barrel cost of cleaning up extremely small spills does not accurately reflect the average cleanup cost because “as the number of barrels spilled increases, the dollar cost of cleanup per barrel decreases. In the case of a small [spill], all the cost of mobilization of [equipment] is incurred, even though not many barrels of oil need to be collected or contained.” JA at 1468.
. The following formula was used by the Secretary to determine net economic value:
Net economic value = Residual Value + 5.8 .52
The equation considered the effects of taxes at a 48% rate (1 - .48 = .52) and royalties of ‘/s (‘/6 of $35 (the estimated market price of oil in the first year of the program) = 5.8). JA at 1328.
. JA at 1327. (emphasis added). The Secretary noted that most economic models calculated residual value in this manner and that “[f]or purposes of this analysis the net economic value per barrel of resource was calculated by finding this residual value per barrel in each area and extrapolating to the net economic value.” Id. at 1327-28. (emphasis added).
. See supra note 98.
. JA 1278. (emphasis added).
. Id.
' Id. at 1332.
. For example, the Secretary noted that the cost portion of his analysis should be used only for very general conclusions.
Given the uncertainty of the data on which the analysis was based, and the necessity of heavy reliance on judgment and opinion, the external cost estimates should be considered, at best, as an order of magnitude approximation. As such, prudent use of these estimates would only make distinction between differences from area to area if they are approximately an order of magnitude in size (that is, one estimate is more than or less than 10 times the other).
Id. at 1277.
. Petitioners’ Supplemental Memorandum concerning the Royalty Issue at 2.
. Lead Industries Association v. EPA, 647 F.2d 1130, 1160 (D.C.Cir.), cert. denied, 449 U.S. 1042, 101 S.Ct. 621, 66 L.Ed.2d 503 (1980).
. 43 U.S.C. § 1344(a)(4) (Supp. V 1981).
. JA at 1355.
. Petitioners particularly emphasize the accelerated rate of leasing, contending that “[i]f more and more tracts are offered, bids will be submitted based on less and less information. Uncertainty will increase. As uncertainty over the value of the resource increases, expected profits from the lease decrease and, as expected profits decrease, the willingness to pay of the prospective bidder decreases.” California Brief at 154 n. 1.
. JA at 1361.
. Id.
. Id. at 1359.
. Id at 2298.
. The Secretary asserts that the “new” tract evaluation procedure is merely a proposal, which will not be implemented until tested. “Until a system is validated it will not be implemented, and the prior procedures will continue to be utilized.” Respondents’ Brief at 97. Petitioners dispute this representation, but do not suggest that the procedures have been implemented. Petitioners’ Reply Brief at 72. We do not need to resolve the dispute, because we
. JA at 2298.
. Id. at 2294.
. Id. at 1282.
. Id at 1488.
. 42 U.S.C. § 4332(B)(i) & (ii) (1976).
. Brief for Petitioners Washington and Oregon at 25 [hereinafter Washington Brief].
. Washington Brief at 30-31.
. Final Supplemental Environmental Impact Statement (FSEIS) at 480-87, 533-37.
. Id at 501.
. Id at 469.
. Id at 886.
. 16 U.S.C. § 1456(c)(1) (1976).
. 43 U.S.C. § 1344(f)(5) (Supp. V 1981) (em- ’ phasis added).
. In California v. Watt, 683 F.2d 1253 (9th Cir.1982) cert. granted, - U.S. -, 103 S.Ct. 2083, 77 L.Ed.2d 295 (1983), the Ninth Circuit held that the Secretary is required to issue a consistency determination under section 307 of the CZMA before actually selling oil and gas leases under section 19 of the OCSLA. The Secretary sought review of that decision, contending that section 307 does not apply to such sales because the sales do not directly affect the coastal zone.
. 43 C.F.R. § 3310.4 (1982).
. S.Rep. No. 95-284, 95th Cong., 1st Sess. 16 (1977) (emphasis added).
. S.Rep. No. 95-1091, 95th Cong., 2d Sess. 105 (1978) (emphasis added).
. Petitioner Florida’s argument that some leasing off its shores should be halted because it has “not been assured that its recommendations [concerning two lease stipulations] have been or will be adopted,” Brief for Petitioner Florida at 8, is premature. Nothing in section 18 requires the Secretary to decide what stipulations will be included in individual leases before he approves the five year program. The House Report on the 1978 amendments recognized that the selection of lease stipulations occurs mid-way through the overall process. H.R.Rep. No. 95-590, 95th Cong., 1st Sess. 63 (1977). If the Secretary refuses to include the stipulation in the leases when the leases are drafted, Florida can seek review of that decision.