Court Opinions

 

The Supreme Court, in its June 30, 2022, decision in West Virginia v. Environmental Protection Agency, articulated the major questions doctrine, as a limit on the ability of administrative agencies to adopt regulations that go beyond the statutes on which those regulations are based.

The statute in question, in this case, was a provision of the Clean Air Act directing EPA to determine the “best system of emissions reduction,” which power plants were required to implement; while the regulation determined that implementing the “best system of emissions reduction” meant requiring a transition by power plants from coal to natural gas, and then from coal and natural gas to wind, solar, and other renewables.

The Court was not called upon to consider whether such a requirement could have been imposed by Congress itself, through express statutory language – which Congress clearly could have done; nor whether the requirement was a good idea. Rather, the question before the Court was whether EPA had the authority to impose the requirement under the statute that Congress had enacted.

The Court, in its analysis of that question, observed that “our precedent teaches that there are ‘extraordinary cases’ that call for a different approach – cases in which the ‘history and the breadth of the authority that [the agency] has asserted,’ and the ‘economic and political significance’ of that assertion, provide a ‘reason to hesitate before concluding that Congress’ meant to confer such authority.” There were cases, the Court continued, in which “‘common sense as to the manner in which Congress [would have been] likely to delegate’ such power to the agency at issue . . . made it very unlikely that Congress had actually done so.” Such cases – implicating the major questions doctrine – represented “an identifiable body of law that has developed over a series of significant cases all addressing a particular and recurring problem: agencies asserting highly consequential power beyond what Congress could reasonably be understood to have granted.”

And this, the Court concluded, was a major questions case: However sensible the policy underlying EPA’s regulation might be, “it is not plausible that Congress gave EPA the authority to adopt on its own such a regulatory scheme . . . . A decision of such magnitude and consequence rests with Congress itself, or an agency acting pursuant to a clear delegation from that representative body.”

(Comment: The Court’s analysis for invoking the major questions doctrine can be distilled to two components: (1) “agencies asserting highly consequential power,” (2) “beyond what Congress could reasonably be understood to have granted.” The latter of these presents a fairly objective issue; but the former is highly subjective. A good case can be made for taking the analysis a step further – and perhaps re-visiting some prior rulings in the process – by de-emphasizing the “major” in “major questions,” and thus enlarging the courts’ role in overseeing agency actions: Courts ought to intercede whenever agencies’ assertions of power go “beyond what Congress could reasonably be understood to have granted,” without any need to assess how “highly consequential” that power may be. The presence before the court of an aggrieved party should suffice to establish that an agency’s assertion of power is consequential enough. The question would then become whether the agency’s authority to assert that power is implicit in the statute– a “clear delegation” from Congress – or whether it’s something that Congress would never in a million years have imagined was a logical consequence of what it had enacted.)

 

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On June 16, 2020, the U.S. Court of Appeals for the District of Columbia Circuit, in Solenex LLC v. Bernhardt, reversed the U.S. District Court for the District of Columbia’s 2018 decision in Solenex v. Jewell, which had vacated a BLM decision cancelling a federal oil and gas lease and disapproving an application for permit to drill. The background of the case was that BLM, in the early 1980’s, issued a number of oil and gas leases on National Forest lands within the Badger – Two Medicine area in Montana (an area which was adjoined by – but no part of which lay within – a national park, designated wilderness areas, and an Indian reservation), in accordance with the results of the required environmental and historic-preservation reviews that had been conducted for those lands by BLM and the Forest Service. After further environmental review, applications for permit to drill were approved on some of the leased lands. In 1985, however, BLM, in the face of environmental and Tribal concerns that had been raised, not only set aside action on the APD’s (which afterward were repeatedly approved and then set aside again), but suspended the leases themselves, to allow for additional review; and the suspensions remained in place thereafter. Ultimately, in 2016 and early 2017, the leases were canceled by BLM altogether, on the ground that they had been improperly issued because the pre-leasing environmental and historic-preservation reviews had been deficient – because issues had been deferred to the site-specific APD stage that should have been considered at the pre-leasing stage. BLM’s position, as in many other cases where it has cancelled leases long after issuance on the basis of some asserted procedural deficiency occurring before the leases were issued, was that administrative cancellation in such situations was authorized under the 1963 decision of the U.S. Supreme Court in Boesche v. Udall.

Most of the Badger – Two Medicine lessees accepted the cancellations; but two of them brought suit. In Solenex LLC v. Jewell (as well as in Moncrief v. U.S. Department of Interior), the District Court, on September 24, 2018, ruled in favor of the two lessees. That court declined to determine whether BLM’s cancellation authority, under the Boesche case, was as unlimited as BLM claimed, finding that, even if such authority existed, its exercise in this case was arbitrary and capricious: “Regardless of the lawfulness of the lease’s issuance thirty years ago, the agency’s rescission of the lease must still comply with the [Administrative Procedure Act].” The court explained (with emphasis in the original), “The reasonableness of an agency’s decision to rescind a lease must be judged in light of the time that has elapsed and the resulting reliance interests at stake. . . . Federal defendants appear to argue that no time-period, however long, would prove too attenuated to reconsider the issuance of a lease under newly discovered legal theories. . . . Horsefeathers!”

The Court of Appeals, however, disagreed. That court acknowledged that the Secretary, in cancelling the leases, had characterized them as voidable (rather than void from the outset). But the court nevertheless found, in essence, that the Administrative Procedure Act provided no basis for overturning the cancellation in this case, concluding that both of the premises on which the District Court had found the cancellation to be arbitrary and capricious under the APA were erroneous: first, that the amount of time that has elapsed, however lengthy or unreasonable, cannot by itself make an agency action unlawful; and second, that in this case there were no meaningful reliance interests resulting from the delay – a conclusion which suggests that the ability to rely on a contract that was signed by the federal government in issuing an oil and gas lease is not itself a reliance interest that is protected by the APA. (A footnote to the decision observed that “an agency decision to cancel a lease does not preclude the owner from raising breach-of-contract claims in the Court of Federal Claims;” but a separate case that Solenex brought before the Court of Federal Claims in March 2022, raising just such claims, was dismissed by that court.  Solenex appealed that dismissal to the U.S. Court of Appeals for the Federal Circuit.)

(Since the District Court’s 2018 decision did not reach the issue of the extent to which the Supreme Court’s Boesche precedent gave the Department a blank check for cancelling leases based on pre-leasing procedural deficiencies, that issue was not before the Court of Appeals either; but the outcome at the Court of Appeals nonetheless begs the question of whether federal oil and gas leases – or, by extension, any federal contracts – are worth the paper that they’re written on. As to void vs. voidable leases, the recent decision by the Interior Board of Land Appeals in Southern Utah Wilderness Alliance, et al., 194 IBLA 333 (2019), is worth noting.  There, the Board affirmed that, where an environmental analysis which led to the offering of lands for competitive leasing is legally deficient, the resulting leases are not necessarily void, but may merely be voidable. The distinction that the Board drew was between a lease that was “improperly issued” and was subject to cancellation, and a lease that could be issued properly but had a “procedural flaw” occur during the leasing process: “[W]hen the land is otherwise available for mineral leasing, and the lease ‘has been issued in violation of established procedures,’ the ‘lease is considered voidable rather than void.’” 194 IBLA at 336-337, citing Clayton W. Williams, Jr., 103 IBLA 192 (1988). The deficiency in such a situation, the Board ruled, may be cured by suspending the leases pending the conduct of a proper environmental analysis, and then either lifting the suspension or cancelling the leases depending on the outcome of that analysis.)

On remand to the District Court in the wake of the Court of Appeals’ ruling, Solenex amended its complaint to challenge BLM’s actions on the merits. On September 9, 2022, in Solenex, LLC., v. Haaland, that court found that Solenex’s lease was not improperly issued, and thus the Secretary lacked the authority to cancel it administratively. As to the Supreme Court’s Boesche precedent, the District Court found that that decision “stands only for the proposition that a lease that was ‘invalid[] at its inception'” — that “suffered from some legal defect when first issued” — “could be voided.” In this case, the court concluded that no legal defect of that character existed in the issuance of the lease, and that the Secretary thus lacked authority to rescind it. Further, the court concluded, the Secretary’s disapproval of the previously-approved APD was arbitrary and capricious. Accordingly, the court granted summary judgment in Solenex’s favor as to both of BLM’s actions.

Ultimately, though, on September 1, 2023, Solenex entered into a settlement with the government, accepting financial compensation in exchange for relinquishment of its lease.

 

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Federal oil and gas leasing in the Wayne National Forest in Ohio has been on hold since the March 13, 2020, decision of the U.S. District Court for the Southern District of Ohio, in Center for Biological Diversity v. U.S. Forest Service.  The court, in reviewing a 2016 environmental assessment covering the use of horizontal drilling and hydraulic fracturing in the Forest, found several deficiencies in the EA:  First, the court was unpersuaded that the amount and type of surface disturbance resulting from fracking would not exceed what was anticipated in the applicable Forest Plan based on conventional development, and said that that needed to be resolved prior to leasing rather than at the time of applications for permit to drill.  Second, the court found that the EA had given insufficient consideration to the cumulative effects of fracking in connection with two specific concerns (water depletion and Indiana bat conservation).  And third, the court concluded that air quality was a general issue requiring complete analysis at the pre-leasing stage instead of the site-specific APD stage.  After further briefing, the court, on March 8, 2021, ordered a remand of the matter to BLM and the Forest Service for completion of a revised environmental analysis, but declined to vacate the issued leases in the meantime.

On March 20, 2024, pursuant to the court’s order, BLM’s Northeastern States District Office published a draft supplemental environmental assessment (with the participation of the Forest Service as a cooperating agency). Public comments are being accepted through May 6.