Amended BLM Right Of Way Regulations

The Bureau of Land Management (BLM) published amended rules governing rights of way granted under Title V of the Federal Land Policy and Management Act (“FLPMA”) and under the Mineral Leasing Act (for oil or gas pipeline rights of way) on December 19, 2016, 81 Fed. Reg. 92,122 (https://www.gpo.gov/fdsys/pkg/FR-2016-12-19/pdf/2016-27551.pdf).  The rules take effect January 18, 2017, assuming they are not affected by Congressional efforts to undo “midnight rules” promulgated by the outgoing Administration.  The amended rules are most significant for their changes to the processes for obtaining authorizations to use federal lands for solar and wind energy development.  However, the amendments will also affect, to a lesser extent, oil and gas operators who seek FLPMA rights of way for roads or water pipelines, or Mineral Leasing Act rights of way for oil and gas pipelines.  Please see our earlier blog discussing the proposed rule amending the right of way regulations at http://www.wsmtlaw.com/blog/blm-buries-change-to-mla-rights-of-way-in-wind-and-solar-leasing-change.html.  

Until now, the BLM’s policy on processing right of way applications for renewable energy projects was contained in instruction memoranda.  Those policies, as modified in the final rule, are now contained in the regulations to be codified in 43 C.F.R. Part 2800.  

The rule seeks to focus wind and solar energy development in areas called designated leasing areas or “DLAs” which BLM has determined, through the land use planning process, as areas having high energy generation potential, access to existing or proposed transmission lines, and low potential for conflict with other resources. The preamble to the rule points to solar energy zones identified in the Solar Programmatic EIS and “development focus areas” identified in the Desert Renewable Energy Conservation Plan for southern California as examples of DLAs.  Outside of the southern California desert, no DLAs for wind energy development have yet been identified and, given the long timeline for BLM planning processes, it seems unlikely that any will be developed in the near term.  With some exceptions, lands within DLAs will be offered for competitive leasing, while solar or wind energy development proposals outside DLAs will be processed for right of way grants.  BLM believes that the issuance of a competitive 30-year lease will increase certainty for developers of wind and solar energy projects as compared to 30-year right of way grants, which are not issued until well into the project development process.  

Another goal of the rule is to ensure that the government receives fair market value for solar and wind energy development on public lands.  It does so by imposing both an acreage rent based on agricultural land values and a megawatt (MW) capacity fee.  The calculation of the MW capacity fee will result in a decrease in fees to solar energy producers but an increase in fees to wind energy developers as compared to current BLM policy.  In addition, the acreage rent had not previously been imposed on wind energy developers.  The fees for linear rights of way such as pipelines and transmission lines should not be significantly affected by the rule as compared to current policy.  

The new rule contains extensive provisions on bond requirements which will be codified in 43 C.F.R. §2805.20.  Solar and wind energy producers must post a performance and reclamation bond, which will be based on a reclamation cost estimate (RCE) but shall be no less than $10,000 per disturbed acre for solar projects or $10,000 per authorized wind turbine with less than 1 MW nameplate capacity or $20,000 per turbine with a nameplate capacity of 1 or more MW.  Although bonds are required for wind and solar projects, the BLM retains the discretion whether to require a performance and reclamation bond for other rights of way, including for oil and gas pipelines (§2885.11(b)(7)).  As in the existing regulation covering oil and gas pipeline rights of way, the BLM can require a bond, or an increased bond amount, either as a condition to the right of way grant or at any time during the term of the grant.  Amended §2885.11(b)(7) states that all “other provisions in §2805.12(b) of this chapter regarding bond requirements for grants and leases issued under FLPMA also apply to grants or [temporary use permits] for oil and gas pipelines issued under this part.”  The reference to §2805.12(b) appears to be in error; the preamble to the new rule notes that this sentence references “new section 2805.20” and §2805.20 is the regulation on bonding requirements.  Among those “other provisions” in §2805.20 is one that provides the bond amount will be determined based on the preparation of a RCE, which the BLM may require the applicant or grant holder to submit.  The RCE is defined as the estimate of costs to restore the land to a condition that will support pre-disturbance land uses, including the cost to remove all improvements made under the right of way authorization, return the land to approximate original contour, and establish a sustainable vegetative community.  The RCE must also include the cost to BLM to administer a reclamation contract.  It is likely that these requirements will result in larger bonds being required for linear rights of way, including oil and gas pipelines. 

The new rule provides that not only transfers of rights of way by assignment be submitted to BLM for approval but also “changes in ownership or other related change in control transactions,” including corporate mergers or acquisitions but not transactions within the same corporate family.  §2807.21.  This change also applies to Mineral Leasing Act rights of way for oil and gas pipelines, §2887.11.  BLM’s rationale for this requirement is that a merger or other corporate acquisition can result in material changes to corporate structure which could affect the financial or technical capability of the grant holder.  Because a change of control is not an “assignment,” we suspect that many grant holders may overlook this requirement to obtain BLM approval for “transfers” of right of way grants in cases of mergers or change of control by a stock transaction.

Operators of wind and solar energy projects on public lands will need to review the new rules in detail.  Because this rulemaking process focused on the changes to the right of way regulations that apply to wind and solar energy projects, it is likely that other current or prospective right of way holders such as pipeline, transmission line or communications facilities operators may not realize the effect of the revised rules on their projects. 

 

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Advisory Council on Historic Preservation Recommends Cancellation of Oil and Gas Leases in Montana

On September 21, the Advisory Council on Historic Preservation (ACHP), an independent federal agency with a key advisory role in National Historic Preservation Act (NHPA) § 106 “effects” determinations, recommended that long-ago issued federal oil and gas leases should be cancelled and that future mineral development should not occur within the Badger-Two Medicine area, located in northwestern Montana. As discussed in posts from April 16 and July 27, in 1982, BLM issued 46 oil and gas leases on Forest Service-managed surface in the Badger-Two Medicine area, an area adjacent to the Blackfeet Indian Reservation. However, in spite of numerous attempts to develop these leases, the leases were indefinitely suspended by BLM. While 29 of the leases have been voluntarily relinquished, 18 leases remain. These 18 leases, held by Louisiana-based Solenex LLC, are the focus of litigation currently pending in the Washington D.C. Federal District Court for the District of Columbia.

The ACHP recommendation raises challenging First Amendment issues concerning the accommodation owed to Native American traditional cultural beliefs under the NHPA. In its recommendation, ACHP stated that oil and gas development could irrevocably harm the 165,588-acre area, which encompasses lands within the Blackfeet Indian Reservation and the Lewis and Clark and Flathead National Forests designated as a “Traditional Cultural District” under NHPA. “The proposed undertaking and the entire Solenex leasehold is located within the Badger-Two Medicine TCD, a historic property of religious and cultural significance to the Blackfeet Tribe. . . The Blackfeet Tribal Business Council described the TCD in Resolution No. 260-2014 (2014) as ‘one of the most cultural and religiously significant areas to the Blackfeet People since time immemorial.’” AHCP Comments (9/21/15) at 4. While the ACHP recommendation argues that BLM should cancel the Solenex leases, none of which are located on the Blackfeet Reservation, the Council’s recommendation goes on to advise against any future oil and gas development in the entirety of the Badger-Two Medicine Area. The Council’s recommendation is not binding on federal agencies, in this case BLM and the U.S. Forest Service, or the courts, but under NHPA the agencies are required to “take into account” the Council’s findings in writing before making a decision. Moreover, given its important role under NHPA as the primary federal historic preservation policy advisor to the President and Congress, its recommendation is likely to carry significant weight as BLM and the Forest Service decide the future of oil and gas development in the area. Meanwhile, if BLM does decide to cancel the Solenex leases, it will be up to the courts to decide if this is authorized under the Mineral Leasing Act and what, if any, compensation is owed to the leaseholders.

ACHP’s recommendation can be found at: http://www.npca.org/assets/pdf/ACHP-Comments-and-Transmittal-Letters.pdf

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Judge Orders “Accelerated” Review of Long-Disputed Montana Oil and Gas Leases

On July 27, 2015, U.S. District Judge Richard Leon ordered the BLM to develop an “accelerated schedule” within the next 21 days to be used to decide whether to authorize development of 18 federal oil and gas leases that were originally issued in 1982, but have been suspended for several decades. As discussed earlier [insert link to NRP post from 4/16/15], while the leases were originally issued over 30 years ago, they were suspended by the BLM in 1992 following controversy over whether any development should occur in the area.

Solenex, LLC, who holds record title to the leases, filed suit in 2013, arguing that the BLM’s decades-long suspension is unlawful and violates the Mineral Leasing Act. On Monday, Judge Leon denied Solenex’s request to order BLM to lift the suspension, instead ordering the BLM and Forest Service to develop a schedule outlining when a final decision will be made. Calling the BLM’s failure to make a decision on the suspension “unreasonable,” Judge Leon stated “[n]o combination of excuses could possibly justify such ineptitude or recalcitrance for such an epic period of time.”

Judge Leon’s order requires the BLM and Forest Service to come up with an “accelerated and fixed schedule” in the next 21 days that identifies the tasks that still need to be completed before a final decision can be made and how long those tasks are expected to take. Attorneys for Solenex have stated that they are disappointed the court did not order the suspensions lifted, but are thankful that the court is taking the issue seriously.

Blackfeet tribal Chairman Harry Barnes stated that the tribe, which considers the area in which the leases are located to be a sacred cultural site, will continue to protest any oil and gas development in the area. “The tribe will never let any drilling go ahead . . . We've fought it for too long, and we're going to continue to fight it.”

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