Interior Board of Land Appeals

 

The following are some notable recent decisions by the Interior Board of Land Appeals relating to oil and gas leasing and public lands:

Royalties; venting and flaring: A lessee must use all reasonable precautions to prevent waste of oil and gas. Consequently, royalties generally must be paid on all gas except gas unavoidably lost. To establish that vented or flared gas is unavoidably lost, and thus not subject to royalties, the lessee must provide BLM with adequate engineering, geologic, and economic data to show that there was no reasonable alternative to the venting or flaring. Petro-Hunt, L.L.C., 197 IBLA 100 (2021).

Reasonable diligence: Among the requirements of a federal oil and gas lease is the exercise of reasonable diligence in the development and production of the leased resources. In Terry Tempest Williams & Brooke S. Williams d/b/a Tempest Exploration Co., LLC, 196 IBLA 386 (2021), the Board upheld BLM’s rejection of noncompetitive lease offers based on the offeror’s stated unwillingness to diligently develop the leases, where the offeror had publicly and repeatedly announced an intention to keep the leased resources in the ground unless and until “science finds a way to use those fossil fuels in sustainable, nonpolluting ways,” or the price of the fossil fuels becomes equal to the social costs of consuming them.

Suspensions of operations and production: When a BLM decision approving a request for a suspension of operations and production states a date on which the suspension will expire, the suspension will expire on that date, even if the lessee could have obtained an extension of the suspension – which was warranted by the circumstances – through a timely request, but did not file such a request on verbal advice from BLM staff that it was not necessary; and even if BLM itself could and should have directed an extension of the suspension, but did not actually do so. (As the Board makes clear, written advice from BLM, in an official decision, possibly might, but probably would not, have led to a different outcome, given the Board’s virtually-insurmountable threshold for estoppel.) Knight Technical Services, LLC, 195 IBLA 333 (2020). Note: This case serves as a reminder that, in any transaction with BLM, a party that wants to preserve its rights must abide by all applicable requirements, even when BLM staff says otherwise.

Unit agreements; standing: Where an appellant had requested State Director Review of a BLM decision approving a unit agreement, the Board, in Southern Utah Wilderness Alliance, 195 IBLA 315 (2020), affirmed BLM’s dismissal of the SDR request for lack of standing. Although the appellant, having protested BLM’s approval of the unit agreement, was a party, and thus met one of the criteria for standing, the Board found that the appellant failed to meet the other criterion: it was not adversely affected because its interest was not likely to be substantially injured by BLM’s decision. Comparing the potentials for injury from unit approval and from lease issuance, the Board recognized a higher bar for standing in the former case, stating (at 325-326), “Unlike lease issuance, unitization does not create a risk of development where none existed before. It is even speculative whether unitization increases the risk of environmental harm. While unitization facilitates and may ultimately expedite development, it also ‘is likely to minimize surface disturbance across the unitized leases, because the cooperative development structure encourages the shared use of roads, well pads, and other infrastructure.’ This stands in stark contrast to leasing in the first instance, or to extending a lease where the record shows likely and imminent development as a result of the extension. . . . [T]he creation of a development risk is sufficient to confer standing when BLM issues a lease, [but] its mere continued existence is not sufficient.” In other words (at 329), “while unitization could ultimately result in the extension of individual leases that might not have otherwise been extended, and possible development on those leases, this possibility is too speculative to serve as a basis for standing to challenge BLM’s decision to approve a unit agreement.”

Standing: In an appeal from BLM decisions dismissing requests for State Director Review, the Board found it necessary to follow a circuitous route to arrive at a correct result. Even where an appellant had no standing to seek SDR in the first place, the Board found that such an appellant, having made the SDR requests, would be a party that is adversely affected by BLM’s dismissals of those requests, and thus can have standing to appeal the dismissals to the Board. But, because the appellant had not in fact been eligible to request SDR, the Board then affirmed the dismissals on the merits. Center for Biological Diversity, 195 IBLA 298 (2020).