Court Opinions
The federal courts, in June 2020, issued two highly-significant decisions relating to public lands and federal oil and gas leasing – one very good, and the other very bad – in the space of two days.
First, the bad news, on federal oil and gas leasing. On June 16, 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. 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 observes 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,” which is small comfort.)
A silver lining to the outcome of this case is that, since the District Court 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 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.
(On the issue of void vs. voidable leases, note the recent affirmation by the Interior Board of Land Appeals, in Southern Utah Wilderness Alliance, et al., 194 IBLA 333 (2019), 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.)
Second, the good news, on public lands. As a part of their all-out campaign against fossil fuels, environmental interest groups have been working hard – and with some degree of success – to rally the public, as well as a number of local governments, in opposition the construction of any new oil or gas pipelines. Ostensibly this opposition is because of environmental risks arising from the pipelines themselves; but that, for the most part, is a mere pretext for the actual objective: to thwart consumption of the products that those pipelines would transport. As one element of the crusade against pipelines, interest groups in 2018 were able to persuade the U.S. Court of Appeals for the 4th Circuit that the Forest Service had acted improperly in approving the 16-mile segment that would run through the George Washington National Forest in Virginia, as a part of the planned Atlantic Coast Pipeline that would carry natural gas for 604 miles from West Virginia to North Carolina. The Court of Appeals reached its conclusion on a number of grounds, one of which raised a novel issue of public land law: the interest groups’ rather clever theory that, because the pipeline through the National Forest would require a 0.1-mile crossing under the Appalachian Trail – albeit 600 feet underground, and with no use whatsoever of the surface of the Trail –, and because the Trail is administered by the National Park Service, the Forest Service was precluded, by a provision of the Mineral Leasing Act, from approving the pipeline at all. That provision, 30 U.S.C. 185, authorizes the granting of pipeline rights-of-way through “Federal lands;” but it excludes “lands in the National Park System” from the definition of “Federal lands.”
On this ground, the U.S. Supreme Court, on June 15, in U.S. Forest Service v. Cowpasture River Preservation Association, reversed. By a substantial majority (6-3 on one of the points discussed in the Court’s opinion, and 7-2 on all of the others), the Court concluded that, while the Mineral Leasing Act provision did indeed remove “lands in the National Park System” from an agency’s authority to grant a pipeline right-of-way, the agreement that had been entered into between the Forest Service and the Interior Department under the National Trails System Act (16 U.S.C. 1241, et seq.), which established the route through the National Forest of the Appalachian Trail under the administration of the National Park Service, was itself a right-of-way agreement – a mere easement –, and did not cause the lands traversed by the Trail to become “lands in the National Park System.” The Court, recognizing the applicability of the legal distinction between easement and ownership in the context of the public lands (with the statement that “easements are not land, they merely burden land that continues to be owned by another”), found that jurisdiction over the lands traversed by the Trail (which the court treated as the equivalent, as between federal agencies, of ownership as between private parties) had not been transferred to the Park Service, but remained with the Forest Service; and so the lands covered by the easement for the Trail had not become “lands in the National Park System,” but remained “Federal lands” that were subject to the Forest Service’s authority for granting a pipeline right-of-way. (An additional principle of property law, although not addressed by the Court, is implicitly in play here: the theoretical notion that ownership of land extends from the surface down to the center of the Earth. If the owners of the state and private lands crossed by the Appalachian Trail retained their full ownership of those lands, subject only to whatever easement was necessary for the Trail’s establishment and administration, then it stands to reason that the burden imposed by the Trail on the federal lands (under Forest Service jurisdiction) that were crossed by it could have been no different.)
It cannot rationally be claimed that Congress, in providing for the creation of a trail a fraction of a mile wide but hundreds of miles long, intended or imagined that trail as an impenetrable obstacle to the crossing of a pipeline beneath it; but it is a closer question whether, by a combination of diverse laws, Congress nevertheless inadvertently compelled such an outcome. The difference between the majority and the dissent in this case is thus a difference in emphasis – with each position perhaps therefore being somewhat result-oriented – between finding authority to carry out Congress’ actual purposes, on the one hand, and seeking to reconcile a variety of laws without regard to Congress’ purposes, on the other. The bottom line, though, is that, but for this decision, the 780 miles of the Appalachian Trail through National Forest lands would have stood as an impassable barrier to the construction of any new pipelines bringing resources produced on one side of the Trail to communities on the other – surely an unintended consequence of the provision in question when it was added to the Mineral Leasing Act in 1973 (a time when providing society with the natural resources needed by it was thought to be a good thing).
(Epilogue: The Court’s decision did not resolve the other grounds on which the Court of Appeals ruled against the pipeline; and, three weeks after the decision, the pipeline company announced that it was abandoning this project. But while that’s a bad outcome for the pipeline itself, the decision remains a victory for the idea that basic property law principles apply to the public lands, and for the rule of reason as well.)
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Federal oil and gas leasing in the Wayne National Forest in Ohio has been put on hold by a 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. However, the court at that time deferred a decision on the appropriate remedy — particularly how already-issued leases should be addressed — pending further briefing by the parties; and upon careful consideration of the arguments presented in those further briefs, 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 leases in the meantime.