Resource Development Council

RDC Comment Letter:
Proposed Rule to Designate Critical Habitat for
the Polar Bear (FWS-R7-ES-2009-0042)

July 1, 2010

Public Comments Processing
Attn: FWS-R7-ES-2009-0042
Division of Policy and Directives Management
U.S. Fish and Wildlife Service
4401 N. Fairfax Drive, Suite 222
Arlington, VA 22203

Re: Comments of the Resource Development Council - Proposed Rule to Designate Critical Habitat for the Polar Bear (FWS-R7-ES-2009-0042)

To Whom It May Concern:

This letter is in response to the U.S. Fish and Wildlife Service’s (Service’s) notice reopening the public comment period and seeking additional information on its Proposed Rule to designate critical habitat for the polar bear and its associated Draft Economic Analysis (DEA). See 75 Fed.` Reg. 24,545 (May 5, 2010). The Resource Development Council (RDC) previously submitted extensive comments on the Proposed Rule on December 23, 2009. This letter is intended to supplement RDC’s 2009 comments, which are attached to this document.

RDC is a statewide, non-profit business association comprised of individuals and companies from Alaska’s oil and gas, mining, forest products, tourism and fisheries industries. RDC’s membership includes Alaska Native corporations, local communities, organized labor and industry support firms. Our purpose is to encourage a strong, diversified private sector in Alaska and expand the state’s economic base through responsible resource development.

RDC strongly opposes the overly broad and precedential designation of critical habitat for the polar bear as identified in the Proposed Rule. Polar bears and their habitats are well managed and protected by international agreements, conservation programs, and laws, including the Marine Mammal Protection Act. These and other measures are working, and the polar bear is one of the most protected species in the world. The critical habitat designation would nevertheless take unprecedented steps to designate a massive 187,166 square miles – an area larger than 48 of the 50 states and significantly larger than California – over an area of national significance because of its critical importance to domestic oil and gas production and development. These activities are not the cause of any purported decline in species abundance, but will be significantly and disproportionately impacted by a critical habitat designation.

For the reasons described in detail below, the Service should significantly reduce or
withdraw its proposal to designate critical habitat for the polar bear. Alternatively, the
Service should exclude specific areas identified below where the benefit of excluding
such areas outweighs the benefits of designation. Finally, the Service should revise its flawed economic analysis to accurately reflect the potential impacts of the Proposed Rule. As
written, the DEA severely underestimates economic impacts and improperly dismisses as speculative the very real costs associated with critical habitat litigation, project delays and uncertainty, and secondary impacts to the region and state economy from lost development opportunities.

RDC endorses the separately filed comments of the Alaska Oil and Gas Association (AOGA) and the American Petroleum Institute (API) and encourages the Service to give serious consideration and weight to the comments filed by the State of Alaska, the North Slope Borough, and Arctic Slope Regional Corporation.

No “Special Management” Required; Exclusions Warranted

The Proposed Rule does not meet the legal standard for designating critical habitat. The DEA concludes, based on the Service’s guidance in Appendix C, that existing regulations are adequate to protect polar bear habitat and the designation will therefore result in no changes in polar bear conservation requirements. This conclusion forecloses the Service’s ability to find, as required by the ESA, that “specific areas” – or any area for that matter – “may require special management considerations or protections.” 16 U.S.C. § 1532(5)(A)(i) (emphasis added). The Service simply cannot find that special management may be required
if it knows it will not be required. Because the Service has not met the ESA’s legal standard for designating habitat only in areas that may require special management, it must substantially reduce or withdraw its critical habitat proposal.

Alternatively, if the Service declines to reduce or withdraw its proposal, RDC urges it to use its discretion under section 4(b)(2) of the ESA to exclude from a final critical habitat designation:

  • Current and future oil and gas sites onshore and offshore, including lease sales and corridors;
  • Local communities, including lands of the North Slope and Northwest Arctic Boroughs, Alaska Native corporation lands;
  • Current and proposed mining sites; and
  • The 1002 area of ANWR.

These exclusions are necessary to avoid imposing significant economic and socio-economic costs while providing no benefit to polar bears or their habitat.

As noted above, the Service has concluded that a critical habitat designation will result in no conservation benefits. DEA at ES-4. In addition, the DEA concludes that there will be no economic benefit from the designation. DEA at ES-6. Under section 4(b)(2) of the ESA, the Service may exclude specific areas from critical habitat if the benefits of exclusion outweigh the benefits of inclusion. The DEA makes balancing under 4(b)(2) simple by effectively concluding that the benefits of including any area as critical habitat will be zero – that there will be no conservation benefit and no economic benefit. Meanwhile, the Service identifies administrative costs associated with ESA section 7 consultations on oil and gas projects alone
that, while severely understated as discussed below, are still significantly greater than zero. Given these specific circumstances, where the designation provides no benefit, the Service should exclude all areas above from critical habitat to avoid the unnecessary costs detailed below.

DEA Grossly Underestimates Costs

The Service has concluded that the proposed critical habitat designations would have economic impacts of approximately $669,000 over the next 29 years. Yet one in three jobs and 90 percent of Alaska’s unrestricted general fund revenues are connected to resource development occurring in or near the proposed critical habitat areas. RDC believes the DEA significantly underestimates impacts by focusing primarily on the cost of Section 7 consultations for the oil and gas industry – and significantly understating even those costs. For example, the DEA states that the incremental cost to a third party in a formal Section
7 consultation is $1,750. However, AOGA and API estimate that private industry costs associated with a single Section 7 consultation will be 20 times that number, and that the total incremental administrative costs to third parties for the 36 large scale consultations identified in the DEA alone range from $675,000 to $1.35 million. These numbers do not include the additional costs for preparing biological assessments or conducting critical habitat-related studies, nor do these numbers account for the many individual consultations that oil and gas companies will also be required to undertake for the myriad federal permits associated with normal development activities. These numbers illustrate that the DEA’s projection of a total
of $185,000 in incremental administrative costs for all oil and gas consultations for the next 30 years is not realistic.

Moreover, administrative expenses are certainly not the only cost of the designations. The authors of the analysis are naive to suggest the critical habitat designations will have no impact on oil and gas development and other projects. Environmental groups will likely target with litigation virtually every project within or adjacent to critical habitat, putting them and their associated benefits to local communities, the State, and the nation at risk. At the very least, such litigation is likely to result in significant delays, potentially costing industry and local communities tens, if not, hundreds of millions of dollars. The DEA does acknowledge that the designation of critical habitat will create additional litigation risk and uncertainty for
projects in critical habitat areas, but it then dismisses these concerns and impacts as “too speculative.” While the costs may be challenging to quantify, “they must be considered qualitatively if not quantitatively,” as noted in AOGA’s June 15, 2010 testimony in Anchorage. RDC agrees with AOGA in that “a number of these costs, specifically litigation costs, delay and lost production costs, and increases in risk premiums due to uncertainty, can be reasonably quantified.” These costs, like the incremental administrative costs of considering critical habitat in a Section 7 consultation, will result in no benefit to the polar bear.

Furthermore, economic impacts are likely to go well beyond delayed or blocked oil and gas projects to include local communities, where the building of basic infrastructure, including water and sewer systems, as well as transportation systems, is occurring and is vital to their future. The State of Alaska is independently assessing likely economic impacts, including non-federal incremental costs, to realistically identify the economic impacts of the broad and sweeping proposed critical habitat designations. Preliminary figures from the State indicate hundreds of millions of dollars in lost economic activity resulting from lost or delayed oil and gas production, revenue, royalty revenue, employment, and community infrastructure. As noted by the State of Alaska in its testimony of June 15, 2010: “these impacts are felt on the regional, state, and local level, and all have direct and indirect impacts, which are not addressed in the current analysis. In short, our preliminary assessment indicates the analysis falls woefully short of analyzing the full range of likely economic impacts, which is required under the ESA to assess the economic impact of specifying any particular area as critical habitat.”


RDC urges the Service to revise its DEA and significantly modify the proposed critical habitat designation to avoid the severe impacts the Proposed Rule will undoubtedly have on Alaska, the oil and gas industry, the economy, and the Iñupiat people. The livelihoods of those who live and work on the North Slope and elsewhere are at risk. Their future, as well as Alaska’s economy, largely depends on access to and development of natural resources across Northern and Northwest Alaska. These interests and activities have coexisted with polar bears for decades, yet the burdens of critical habitat designations will fall most heavily on them.

In addition to these comments, as noted earlier, please consider our fully relevant December 23, 2009 comments. RDC appreciates the opportunity to comment on the Proposed Rule and requests the opportunity to comment on any revised economic analysis and Proposed Rule.

Resource Development Council for Alaska, Inc.

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