From This Website


In the Ground

Consider what would happen if further federal leasing, and further approval of drilling permits on federal leases that are already in effect, were ended, and the resources from those lands were subtracted from our domestic total. . . . What would not happen, without currently-adequate alternatives, is a decrease in our need for oil and gas. Instead, once the absence of the public lands’ contribution led to a shortfall in domestic production, that need would have to be met from other oil and gas sources, with at least as much impact on climate change as production from the public lands would have had. . . .

What about just substituting renewable energy sources in place of fossil fuels – can we solve the problem by meeting our needs in that way? The answer is, probably yes – but not overnight; not next year; and not next decade. Oil, whether we like it or not, is still the lifeblood of today’s civilization; and a decision to “keep it in the ground” cannot meaningfully affect the timetable of a transition to other sources, because of how problematic the availability and affordability of those sources still is. Limiting the energy that we get from oil and gas, before we are technologically and economically ready to replace it with energy from renewable sources, would consign our country to years of uncertainty, shortage, and hardship – a circumstance that our adversaries would be certain to exploit.

Having the government encourage the development of new energy technologies that will benefit our nation in the years to come is proper; but having the government hobble the existing technologies that have brought us to this point, before alternative sources are sufficiently widespread and affordable, would be simply wrong.

August 2017

BLM’s Operating Rights Mess

A paper from the 2017 Rocky Mountain Mineral Law Institute draws attention to a truly alarming development in the way that transfers of operating rights are being processed by some offices of the Bureau of Land Management. The paper, written by Jared A. Hembree of the Hinkle Shanor firm in Roswell, and Uriah J. Price of the Crowley Fleck firm in Bozeman, is titled, “Holding a Wolf by the Ears: A Look into BLM’s Policy on the Retroactive Adjudication of Operating Rights Transfers” (63 Rocky Mt. Min. L. Inst. 11-1).

On December 30, 1985, as the paper recounts, BLM issued Instruction Memorandum No. 86-175, declaring that the adjudication of operating rights was not legally required, and directing that – so long as (1) the transferee was qualified . . . , and (2) there was sufficient bond coverage – operating rights transfers should be approved by BLM without adjudication.

This policy, which looked only to BLM’s ability to enforce lease obligations against the record title owner, while disregarding the fact that the working interest – the primary value of the lease – resided with the operating rights owner (who might or might not be the same as the record title owner), was a disservice to the owners of interests in federal leases. . . .

On April 4, 2013, though, BLM – after nearly 28 years of digging itself into a very deep hole in its evaluation and maintenance of records of operating rights ownership – did an abrupt about-face. On that date, as discussed in the paper, Instruction Memorandum No. 2013-105 was issued, directing the BLM State Offices (1) to adjudicate all operating rights transfers, for leases where production began on or after October 1, 2012 . . . ; (2) to adjudicate operating rights transfers only to the extent necessary to enable ONRR to issue payment orders to the proper parties, for leases where production began prior to October 1, 2012; and (3) to “adjudicate all remaining unadjudicated operating rights assignments as time and staffing allow.”

The basic principle behind the 2013 IM – for BLM to resume its responsibility of ascertaining the ownership of working interests in federal leases, after a 28-year hiatus – was highly commendable. . . .

What the paper is concerned with, however, is the way in which some BLM State Offices have taken the instructions to adjudicate pre-2013 operating rights transfers “only to the extent necessary to enable the Office of Natural Resources Revenue (ONRR) to issue proper orders,” and to “adjudicate all remaining unadjudicated operating rights assignments,” as a directive to go back and reconsider all operating rights transfers that were approved – but not adjudicated – between 1985 and 2013. It is difficult to believe that this interpretation was intended by the IM; and it is equally difficult, when the instruction goes on to say that all remaining transfers should be adjudicated “as time and staffing allow,” and BLM offices already are so short-staffed that they struggle to keep up with existing obligations, to comprehend how any of the offices can justify acting on this interpretation.

Nevertheless, the paper describes situations in which some State Offices have done exactly that, in the name of keeping ONRR from looking to the wrong parties for payment obligations. It is undoubtedly true that occasions have arisen where the parties who have had operating rights interests conveyed to them may differ from the parties who actually are responsible for payments to the United States. But that is a problem that is entirely of BLM’s making, and a highly-foreseeable consequence of BLM’s ill-advised practice of 28 years. For BLM to shift the burden for its failings to the lease parties, and to now act in a way that places those parties’ interests at risk, is unconscionable.

Perhaps the starkest example documented by the paper is the implementation of the new policy by BLM’s Colorado State Office. The article reports that, if discrepancies in prior operating rights transfers “are discovered while reviewing a case file, the Colorado State Office considers those transfers null and void from inception. Therefore, . . . it does not provide notice or send out unapproved operating rights decision letters because the transfers were never adjudicated. . . . As a result, curing transfers retroactively deemed invalid could prove difficult. . .” (emphasis added).

The paper goes on to discuss a number of legal arguments that may be made against BLM’s retroactive adjudication (particularly without notice to the parties) of previously-approved operating rights transfers. . . . The paper further makes clear that such retroactive adjudication may have consequences not only for lease title and for payment obligations, but also for lease operations . . . . And all because BLM had created a situation that complicated ONRR’s ability to collect royalties from the proper parties.

With all of this being said, however, one more point needs to be made. Even if BLM has gotten it wrong for 28 years, and is then further getting it wrong in trying to figure out what to do about it, there always has been something that the lease parties can do to protect themselves: examining the actual lease files at the BLM State Office, to determine the correct operating rights ownership – not the ownership based on what was approved by BLM over the years, but the ownership based on what the parties to those transfers really owned at the time as a result of all of the preceding transfers in the chain of title. Which is exactly what I do when a client asks me to furnish a status and title report on a lease. . . .

— August 2018

Of Budgets, Staff Shortages, and a “Let Them Eat Cake” Moment

I wouldn’t ordinarily find myself reading a Board of Land Appeals decision in a grazing matter, let alone commenting on it. But the Board’s opinion in Jeffrey O. Roche v. U.S. Bureau of Land Management, 195 IBLA 266, issued on June 19, 2020, caught my eye. And not in a good way.

In a nutshell, the Board’s decision in this case affirmed a July 2016 ruling by an Administrative Law Judge, that a letter from BLM to a grazing permit applicant, stating “that BLM has assigned his application ‘a low priority at this time,’ and will ‘likely . . . not be able to work on [the] application within the foreseeable future,’” is not an appealable decision. The Board’s decision, on the one hand, is pretty clearly correct on the merits. But on the other, it’s a stark indictment of the state of BLM’s operations (and the Board’s appeal process as well).

The decision describes BLM’s letter as explaining “that BLM had ‘reviewed the Salt Lake Field Office priorities for grazing administration and its current and expected staffing levels. . . . Allotments with Sage Grouse habitat will dominate the Salt Lake Field Office priority for grazing administration for the foreseeable future . . . .’” In other words, BLM states that it is unable to take timely action because of a combination of (1) staff shortages that have been imposed by its budget and (2) arbitrary and inflexible priorities that it has imposed on itself.

It’s interesting to learn that these conditions aren’t confined to BLM’s oil and gas leasing program, where I’ve seen them affect everything from the processing of leasing nominations to the approval of lease assignments  . . . . And it’s up to BLM (not the Board) to reconsider the system of priorities by which BLM has bound itself. . . . Yet the Board, in the relish with which it proclaims that an applicant in this situation has no recourse, is jarringly tone-deaf: “[T]o transform BLM’s courtesy letter informing Roche of his application’s place in the agency’s queue into an appealable decision ‘would discourage BLM from responding to such inquiries, resulting in a chilling effect on the Department’s commitment to government transparency and public access to information.’” Far from expressing concern over BLM’s inability to carry out its responsibilities, the Board, in a “let them eat cake” moment, declares that the applicant should be grateful that BLM responded to his inquiry at all. . . .

But the question of staff shortages and budgets raises a much larger issue. The BLM staff whom I regularly work with on oil and gas matters are all good people, and most of them are highly capable and dedicated. But they can’t be expected to work 24-7 in order to get their jobs done, which – at current staffing levels – is what they’d have to do. So, while I’m not happy about the excessive time that it often takes for BLM staff to act on matters that they’re working on (and do what I can to help maintain their focus), I recognize why it happens.

. . . . BLM’s management of federally-owned natural resources – including oil and gas – inherently falls into the category of things that must be done by the federal government; and – just as no private business can succeed without adequate staff – that means that BLM must be given sufficient funds to retain the staff that it needs to fulfill all of its responsibilities.

. . . . [F]or agencies such as BLM to be able to effectively do their jobs, Congress must rise to its moral obligation, by first establishing which programs the federal government should be responsible for, and then . . . appropriating whatever amount of revenue those programs require.

August 2020

From The Federal Oilpatch


Perception and Fact

There can be little doubt that a key to the overwhelming success of environmental groups in shaping natural resources policy lies in their expert public appeals.  Not many people realize, for example, that the original reason for creation of the National Forests was to maintain a stable timber supply and protect watersheds, rather than to preserve the forests in their original state and provide for recreation.  Most are unaware that the public lands have remained so largely because they are lands that the federal government was virtually unable to give away, and not because they are all another potential Yellowstone or Yosemite.  A great many sincerely believe that those in the oil and gas business are all at best indifferent to protection of the environment.  And that is just the way that the environmental groups would like to keep it.

— December 1992

Legislative and Regulatory Excess

There are 100 Senators and 435 Representatives; but dozens of times as many staff members driving what takes place on Capitol Hill — people who were elected by no one, but who enable the members of Congress to act on thousands of pages of legislation a year about which the members have little or no personal understanding.

I will confess to being a reader of “Prince Valiant” in the Sunday comics, and was motivated to clip out an episode . . . in which a traveler from Iceland related that, in those days, each citizen had to be able to recite from memory all of the nation’s laws:  “This ensures that we do not have too many.”

Our country, of course, is irretrievably beyond the stage where anyone could be expected to know all of the laws by heart.  But, given the legislative and regulatory incontinence that increasingly afflicts our state and national governments, the maxim that “ignorance of the law is no excuse” becomes ever harder to recite with a straight face.

If members of Congress and State legislatures were restrained, by a reduction in staff members who guide or even form their judgments for them, from enacting any law about which they did not have thorough personal knowledge, this would itself reduce the flood of overregulation in our lives to a trickle.

— October 1999

* * *

In the formative period of the nation, it took eight relatively slender volumes to contain all of the laws that, during our first 60 or so years, were needed by Congress to lay the foundation for what came after.  The output in Congressional legislation, by the 94th Congress (1975-76), had grown to 4163 pages.  The 98th Congress (1983-84) produced 4893 pages of statutes; and the 102nd (1991-92), 7544 pages. . . .

These figures speak for themselves.  And the question that they ask is:  At what point does the public, if not the legislators and regulators, conclude that the benefits to individual people and segments of society, from all of the individual laws, are outweighed by the cost in freedom of their cumulative burden?

— February 2000

Public Opinion and America’s Domestic Oil and Gas Industry

When they take their shots at “big oil,” you can be sure that the politicians and environmental organizations have no interest in making any distinctions between the major company and the small independent: their goal is to incite public opinion indiscriminately against the entire oil and gas industry and everyone involved in it, because their ultimate agenda is to put an end to the legitimate development of commodities from the public lands.

Try to imagine, in this day and age, any other group that it is socially acceptable to attack for a livelihood that not only is conducted as responsibly as most but that performs a vital national service.  (After all, it remains a fact that, for the past several decades, and probably for the next couple, oil has been and will continue to be nothing less than the lifeblood of Western civilization.)

The bottom line — it’s been said before, but it needs saying again — is that, for anything to change, the public is going to have to be educated about the realities of the domestic oil and gas industry, to a degree sufficient to overcome the best efforts of that industry’s adversaries; and it is up to those of us in the industry to do it.

— November 2000

Being an Oil and Gas Lawyer

It is entirely possible that I could improve my income several times over by being in some other field such as personal-injury law.

But by specializing in federal mineral leasing and public land law, I get to work with a lot of good people — landmen and lawyers alike; I get to solve some interesting problems; and (at least so far as my work is concerned) I get to sleep at night.

— September 2003