Court Opinions

 

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 Plan based on conventional development, and said that that needed to 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 deferred a decision on the appropriate remedy — particularly how already-issued leases should be addressed — pending further briefing by the parties over the next several weeks.


The Interior Board of Land Appeals, in its 2015 decision in Maralex Resources, Inc., 186 IBLA 34, held that BLM may inspect a well located on non-federal lands, for the purpose of determining whether production is being accurately recorded and reported for royalty computation purposes, when the lands are committed to a unit or communitization agreement with federal or Indian lands. The Board found that such a well, under 43 CFR 3161.1(b), is subject to the regulations “relating to site security, measurement, reporting of production and operations, and assessments or penalties for noncompliance with such requirements.” The Board’s decision was upheld in 2017 on judicial review by the U.S. District Court for the District of Colorado. On appeal to the U.S. Court of Appeals for the Tenth Circuit, however, on January 18, 2019, the decision was reversed – but on the very narrow ground that BLM’s enforcement authority did not extend to being able to require an operator or private surface owner to provide BLM with a key to the landowner’s locked gate at the drillsite or to allow BLM to place its own lock on the gate. (Except in that specific regard, the court reaffirmed that, while “BLM representatives may not independently enter [lease sites on privately-owned lands that are subject to a communitization agreement], but instead must seek entry . . . from the operating rights owner or operator,” the operating rights owner or operator “is obligated to allow such entry.”) Maralex Resources, Inc., v. Barnhardt, 913 F.3d 1189.


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, 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 1993, however, BLM, in the face of environmental and Tribal concerns that had been raised, suspended the leases 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.  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, and Moncrief v. U.S. Department of Interior, the U.S. District Court for the District of Columbia, on September 24, 2018, ruled in favor of the two lessees.  The 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!”  Appeals of these decisions to the U.S. Court of Appeals for the District of Columbia Circuit are pending.