Wyoming Supreme Court Punts on Potential BLM “First in Time, First in Right” Interpretation of Competing Mineral Developers

A recent case before the Wyoming Supreme Court failed to clarify what, if any, remedies are available to conflicting developers of federal mineral rights on overlapping lands. Rather, the Court’s ruling in Berenergy Corporation v. BTU Western Resources, Inc.; School Creek Coal Resources, LLC; and Peabody Powder River Mining, LLC, and BTU Western Resources, Inc.; School Creek Coal Resources, LLC; and Peabody Powder River Mining, LLC v. Berenergy Corporation1 stated it could not decide the issue, while not so subtly asking the Secretary of the Interior and Bureau of Land Management (BLM), which could decide, to no longer “sit this one out.”

Berenergy Corporation (Berenergy) owned three oil and gas leases granted by the BLM. Berenergy originally filed for a declaratory judgment that the rights under its leases were superior to those under coal leases on overlapping lands that the BLM had issued later to affiliates of Peabody Energy Corporation (Peabody). Berenergy sought to prevent Peabody from shutting down Berenergy’s wells for fifteen to twenty years while Peabody mined areas in the overlapping land, and to prevent interference with Berenergy’s operations, including plans to water-flood oil-bearing formations covered in its leases.

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Tenth Circuit Finds Wyoming Statutes Concerning Data Collection on Public Lands Violate First Amendment

In what is being hailed as a victory for conservation groups, the Tenth Circuit recently held that Wyoming Statutes1 concerning data collection on public lands violate the First Amendment. The statutes at issue were passed after fifteen Wyoming ranchers settled with Western Watersheds Project (“WWP”) after filing a lawsuit accusing the group of trespassing on private lands in Fremont, Sublette, and Uinta Counties in order to access public lands to sample water for fecal coliform. The statutes imposed both criminal and civil liability on any individual who entered “open land for the purposes of collecting resource data” without permission of the owner. “Resource data” is broadly defined and includes “numerous activities on public lands, such as writing notes on habitat conditions, photographing wildlife, or taking water samples, so long as an individual also records the location from which the data was collected.”2 In order to fall under the statutes, resource data must have also been submitted to a government agency.3 The criminal statute imposed a maximum penalty of a year in jail and a fine of $1,000.00 for first-time offenders and a minimum of ten days’ imprisonment (maximum of one year) and a $5,000.00 fine for repeat offenders; notably, the fine and imprisonment term were greater than those imposed under Wyoming’s preexisting general trespass statutes.4 The civil statute imposed liability for proximate damages and litigation costs, including attorneys’ fees.5 Additionally, any government agency that received resource data collected after a trespass occurred was required to expunge any collected data from its records.6

Several conservation groups, including the WWP, National Press Photographers Association, Natural Resources Defense Council, PETA and Center for Food Safety, sued the State in Federal District Court7, arguing that the imposition of these greater penalties amounted to a violation of several constitutional rights, including the Free Speech and Petition Clauses of the First Amendment and the Equal Protection Clause of the Fourteenth Amendment, and argued that they were preempted by Federal law. After the State filed a Motion to Dismiss the claims, the Federal District Court allowed the Plaintiffs’ claims regarding the First Amendment and Equal Protection Clause to go forward, but held that the Plaintiffs failed to state a preemption claim.8

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A New Order Under the New Administration: The DOI Seeks to Streamline the Federal Leasing Process

On July 6, 2017, Department of the Interior (“DOI”) Secretary Ryan Zinke signed Secretarial Order No. 3354, “Supporting and Improving the Federal Onshore Oil and Gas Leasing Program and Federal Solid Mineral Leasing Program.” In an accompanying press release, Secretary Zinke touted the Order as a promise the DOI would “be a better neighbor in the new Trump Administration,” and noted that the Order is in “support [of] the President’s goal of American energy dominance.”

The Secretary also highlighted the importance of compliance with the Mineral Leasing Act (“MLA”), the existing federal law governing lease sales, which states “[l]ease sales shall be held for each State where eligible lands are available at least quarterly and more frequently if the Secretary of the Interior determines such sales are necessary [emphasis added].”1 Once a parcel is leased, an Application for Permit to Drill (“APD”) is filed and there is a statutory thirty-day window to either issue the permit, or notify the applicant of a deferred decision and list the reasons for deferral.2 As Secretary Zinke stated in an interview, the current average wait for APD approval is approximately 257 days, and exceeds 500 days at certain Bureau of Land Management (“BLM”) offices.3 Although the Secretary did not mention any pending litigation as grounds for his Order, it is notable that on August 11, 2016, prior to the issuance of the Order, the Western Energy Alliance filed a lawsuit against the Secretary and the BLM centered on the agency’s lack of compliance with the MLA timing mandates discussed above.4

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After Years of Planning, the Forest Service Approves Arapahoe Basin’s Ski Area Expansion (WAHOOOO!)

On March 3rd, the attorneys of Welborn Sullivan Meck & Tooley will embark on our annual ski trip to Arapahoe Basin in the White River National Forest.  We look forward to the trip as a highlight of each winter season and, if we’re being honest with ourselves, a highlight of the year when all the hustle of firm life is exchanged for the exhilaration of a ski day in the Colorado mountains.  It is not too often that we lawyers get outside for an entire day to rip runs and bask in the sun.  

This year we will miss our fearless leader on the slopes and winter’s biggest fan, Chelsey Russell.

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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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Weighing the Scales: Master Leasing Plan Aims to Balance Oil, Natural Gas and Mining with Conservation of Arches and Canyonlands National Parks

Internationally known for rugged landscapes and stunning views, the treasured Arches and Canyonlands National Parks now have a plan, that is, a Master Leasing Plan.  

The Bureau of Land Management (“BLM”) introduced the concept of Master Leasing Plans (“MLPs”) as part of a suite of federal onshore oil and gas leasing reforms rolled out by Secretary Salazar in early 2010.  The MLP’s intended purpose is to harmonize competing resources, i.e., the balancing of oil and gas development with conservation of natural and cultural resources.  MLPs provide BLM with an additional land use planning tool, allowing it to amend a governing resource management plan (“RMP”) to include new terms and conditions imposed by the MLP.  The goal, but not necessarily the reality, is to reduce risk of litigation and community protests over oil and gas leasing by enlisting early stakeholder input about where energy development is appropriate and how to protect other resources.

According to BLM, the purpose of an MLP is to allow for “more in depth review” of areas that are or may be opened to oil and gas leasing than would typically be found in the governing RMP.  Under the framework, BLM can designate certain areas of public lands located as “sensitive landscapes,” or areas containing a “high level of potential resource concerns” as MLP areas. The MLP area is then analyzed on a landscape level, where competing resource values are evaluated. The result is a comprehensive plan for long term oil and gas development in the area, rather than the straightforward designation of “open,” “closed,” or “open with stipulations” as typically found in RMPs.  Because amendments to RMPs must comply with the National Environmental Policy Act (“NEPA”), the MLP analysis and review first takes the form of an Environmental Impact Statement (“EIS”) or an Environmental Analysis (“EA”), the final version of which then modifies the relevant RMP.

In a Record of Decision (“ROD”) signed December 15, 2016, BLM Utah State Director Ed Roberson finalized the multi-year NEPA effort to complete the Moab Master Leasing Plan, the first MLP to be approved in the state.  The agency expressed confidence that the plan “will guide responsible mineral development . . . while also protecting important natural resources, iconic scenery, and recreational opportunities.”

The Moab MLP identifies where oil, gas and minerals development will be allowed within the 785,000-acre planning area.  Notably, the Moab MLP applies only to new leases and aims to provide certainty by informing the oil and gas and mining industries about where development can occur in a region dotted with Native American cultural sites, popular hiking trails, spires, mesas, natural bridges and arches that draw over 2 million visitors a year.

The Moab MLP also closes 145,000 acres of BLM lands near the Arches and Canyonlands National Parks to future mineral leasing, caps well densities on projects in sensitive areas, and places “no surface occupancy” restrictions on about 306,000 acres “that are highly valued for scenery and recreation.”

According to Secretary Jewell, “This plan takes a landscape-level approach to balancing the protection of the iconic scenery in and around Moab with access to the rich energy resources found there.”

Expectedly, conservation groups enthusiastically embrace MLPs as adding what they view as a necessary layer of environmental analysis focused on issues related to oil and gas development and trust that the MLP process is an appropriate addition to BLM’s toolbox.  In response to the announced Moab ROD, conservationists appear to appreciate a planned vision of where energy development can be managed and where other values, like wilderness and recreation, need to be protected.  

By contrast, industry believes that by restricting access to the region’s mineral resources through the Moab MLP, the negative consequence will be $2 billion in lost economic opportunity for surrounding local communities.  Industry estimates that the Moab MLP planning area contains 145 billion cubic feet of natural gas and 32.5 million barrels of recoverable oil.  Industry has serious concerns that BLM has departed from its Federal Land Policy and Management Act of 1976’s multiple use mandate--whereby many uses co-exist, from ranching to energy to recreation on public lands--to managing for a single “use,” preservation. 

Although the Moab plan can be legally challenged, it cannot be undone by the stroke of the presidential pen alone.  

BLM approved, or is or in the process of developing, more than a dozen MLPs across millions of acres of public lands in Colorado, Utah and Wyoming.  In fact, on December 20, 2016 BLM announced its formal commitment to develop a southwestern Colorado MLP for about 71,000 acres in La Plata and Montezuma counties, including parcels near Yucca House National Monument and Mesa Verde National Park. 

For additional background on MLPs, see the firm’s 2014 blog post: So what is a Master Leasing Plan anyway?

 

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With $646 Billion In Annual Spending, The Outdoor Recreation Industry Has Caught The Eye Of The Hill

Private groups estimate that the outdoor recreation industry generates $646 billion in consumer spending each year and supports 6.1 million jobs—more than pharmaceuticals and motor vehicles and parts combined (see chart below). Yet, policy makers have been left in the dark as to the sector’s influence on the national economy because the federal government has never measured the recreational industry’s economic impact. H.R. 4665 seeks to better inform both policy makers and the industry by requiring tracking of the growing economic impacts of outdoor recreation on the national GDP.

Last week, H.R. 4665, entitled Outdoor Recreation Jobs and Economic Impact Act (the “Outdoor REC Act”), moved closer to law after the U.S. House of Representatives approved the bill sponsored by Representative Donald Breyer (D-VA) and Representative Dave Reichert (R-WA), and authored by Representative Peter Welch (D-VT). A true bipartisan bill, the legislation passed the House by voice vote under fast-track consideration.

The vote needed no debate. During the hearing before the House vote all representatives spoke highly in favor of the Outdoor REC Act. For example, Representative Michael Burgess (R-TX) recognized that outdoor recreation is enjoyed by consumers of “all ages, all ethnicities, and all income levels” and Representative Jan Schakowsky (D-IL) argued the bill would be helpful to “getting Americans outside to enjoy our nation’s natural wonders and promotes an appreciation for the natural environment.”

The measure calls for the Secretary of Commerce to “conduct an assessment and analysis of the outdoor recreation economy of the United States” and work with the Bureau of Economic Analysis to consider “employment, sales, and contributions to travel and tourism, and such other contributing components of the outdoor recreation economy of the United States as the Secretary considers appropriate.” In conducting the assessment the Secretary of Commerce will consult with various agency heads including the Secretary of Agriculture, the Secretary of the Interior, the Director of the Bureau of the Census, and the Commissioner of the Bureau of Labor Statistics. Representatives of business, including small business concerns, will also participate in consultation.

The March 2016 introduction of the Outdoor REC Act and its companion bill in the Senate (S.2219), sponsored by Senators Cory Gardner (R-CO) and Jeanne Shaheen (D-NH), led to Secretary of the Interior Sally Jewell’s April 2016 announcement that the Federal Recreation Council will work with the Commerce Department’s Bureau of Economic Analysis to assess the economic impact of the outdoor recreation industry.

To communities throughout the country, and particularly the West, the House’s approval of the Outdoor REC Act symbolizes a step forward toward ensuring that outdoor recreation jobs are counted by the federal government and measured as part of the overall GDP. To put it plainly, the outdoor recreation industry wants to make sure that Washington, D.C. lawmakers give this industry appropriate credit for its economic impact

Over 60 organizations and businesses support the Outdoor REC Act, including the powerhouse Outdoor Industry Association and the U.S. Travel Association. The full Senate must now pass the bill and send it to President Obama for his signature. If it becomes law, for the first time in history the federal government will be measuring the impacts of job creation and consumer spending tied to outdoor recreation activities from fishing and rafting to skiing and ice climbing (and more!).

Outdoor recreation had a big week on the Hill and the Outdoor REC Act was not the only success. Another bill, the National Forest System Trails Stewardship Act (H.R. 845), passed the Senate by unanimous consent on November 16th and now awaits President Obama’s signature. H.R. 845 calls for a national strategy on increasing the involvement of volunteers and nongovernmental organizations in trail maintenance. The Forest Service maintains about 25 percent of the 158,000 miles of agency-owned trails that offer hiking, horseback riding and other activities.

Groups like Volunteers for Outdoors Colorado (“VOC”) have already recognized that the great outdoors faces many challenges, including federal and state land manager budget cuts, and increasing recreational demands and impacts. To address these challenges, the VOC works with land management agencies to provide a workforce of thousands of volunteers annually for outdoor stewardship projects. H.R. 845 aims to augment the capabilities of federal employees to carry out trail maintenance by addressing the barriers to volunteerism and partnerships and to increase trail maintenance by volunteers and partners by 100% within 5 years.

Chief sponsors of the identical National Forest System Trails Stewardship legislation in the House and Senate were Reps. Cynthia Lummis (R-Wyo.) and Tim Walz (D-Minn.) and Sens. Mike Enzi (R-Wyo.) and Michael Bennet (D-Colo.).

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Bears Ears . . . What Does it All Mean?

Last week, Natural Resources Chairman Rob Bishop (R-Utah), formally introduced his revamped House Bill, the Public Lands Initiative, which seeks to designate millions of acres of proposed Wilderness, establish large motorized recreation areas, and expedite the development of oil, gas and minerals in southeastern Utah. The Bill encompasses the controversial Bears Ears, a pair of buttes located in San Juan County, Utah. Bordered on the west by Dark Canyon Wilderness and Beef Basin, on the east by Comb Ridge and on the north by Indian Creek and Canyonlands National Park, the Bears Ears are named for their resemblance to the ears of a bear emerging from the horizon. Various American Indian cultural legends and history stories incorporate the Bears Ears into their lore. Bishop initially introduced the Public Lands Initiative legislation in January but, due to its failed initial reception, the Bill has undergone various changes in the intervening months.

Bishop’s draft legislation from January would have protected 4.3 million acres, including 2.2 million acres of wilderness, in seven counties: San Juan, Grand, Emery, Carbon, Uintah, Duchesne and Summit. The original plan included a conservation designation of 1.1 million acres around the Bears Ears buttes. The new legislation increases the designation to 1.4 million acres of the now proposed 4.6 million acre region as a national conservation area surrounding Bears Ears, but leaves more lands available for multiple uses. The Bill would transfer all federally-owned energy and mineral resources in the southern Utah area to state control, paving the way for new uranium, coal, and oil extraction.

In addition to granting the State of Utah unilateral control over federal energy and minerals across southern Utah, Bishop’s Bill would open Recapture Canyon, one of many areas in the region rich in Native American sacred sites, to motorized vehicles, fulfilling an objective of anti-federal government activists who staged an armed takeover of the area in 2014 under the direction of Cliven Bundy.

Although the Bill seeks to establish use designations and expand certain protections to these federal lands, Bishop has openly and strongly argued against designation of Bears Ears as a National Monument. Meanwhile, the Inter-Tribal Coalition, a five-tribe organization made up of the Hopi Tribe, Navajo Nation, Ute Mountain Ute Tribe, Pueblo of Zuni, and Ute Indian Tribe, is pushing for National Monument protections of the Bears Ears region within Bishop’s Bill. The leaders of the Inter-Tribal Coalition, who walked away from talks with Bishop last December, disapprove of the latest version of Bears Ears protections contained within his revised Bill, released July 14, 2016, and instead are lobbying President Obama to designate a 1.9 million acre section of the land as “Bears Ears National Monument.”

As discussed in a prior WSMT blog post, the path to National Monument designation and protection began in 1906, when Congress passed the Antiquities Act in response to looting and grave-robbing taking place in the Four Corners region, at places like Mesa Verde, Colorado (which is now a World Heritage Site as well). The Antiquities Act grants the President authority to designate National Monuments in order to protect “objects of historic or scientific interest.” The full extent of presidential authority came to light after President Clinton’s surprise proclamation establishing the Grand Staircase-Escalante National Monument in 1996 led Utah counties to sue, arguing that the Antiquities Act violates the Constitution by usurping Congress’s power to manage federal lands. However, the Tenth Circuit Court of Appeals ultimately sided with the White House, holding that courts lack authority to determine whether the President abused his discretion in designating a National Monument. The result is that a president’s power under the Antiquities Act is effectively unlimited. Indeed, the Grand Staircase Escalante decision continues to shape the politics of public lands, frustrating critics of the Antiquities Act.

Clinton’s designations set a template for the Obama Administration which has approached the designation of National Monuments as a way to bolster safeguards for the country’s national treasures. In the case of Bears Ears, those in favor of National Monument designation, including the Inter-Tribal Coalition, assert that the area is imperiled by the kind of looting and pillaging that first inspired the Antiquities Act, as well as the modern threat of unrestricted ATVs ripping through the desert terrain.

Opponents disagree with the need for National Monument designation. Bishop has heard their concerns and, in response, undertaken a swift effort to develop a Bill that maintains balance. His Bill establishes areas outside of the proposed Wilderness as “energy zones” to foster development of oil and gas, coal, and other minerals—important economic staples for Utah. In part, Bishop and his fellow critics look at the Grand Staircase-Escalante decision as a symbol of federal power run amok. Because Clinton carried out the designation in near-total secrecy, it seeded distrust and resentment among state officials. Moreover, critics blasted Clinton for locking up potential for development of the encompassed massive coal deposit and turning the region into a vast playground for Easterners—concerns that hit close to home for opponents of the Bears Ears National Monument. On the other hand, conservationists maintained that protecting Grand Staircase-Escalante was a key step in leveraging the recreational value of BLM lands. Negative reaction in the days following the announcement of Bishop’s redrafted Bill confirms that the Bill is insufficient to bring the contrasting objectives of mineral development and conservation into agreement.

While Utah is already widely known for its spectacular outdoor recreation opportunities at treasured destinations and recreation havens—including, for example, Arches National Park, Dinosaur National Monument, Zion National Park—Bears Ears would add another gem. The state’s public lands bring in dollars from residents, as well as out-of-state and international visitors. According to the Outdoor Industry Association Utah generates $12 billion in consumer spending and $3.6 billion in wages and salaries related to outdoor recreation, no small impact on the state’s economy (and, for that matter, the national economy too).

An important piece of the proposed legislation is the separate and distinct use designations which specifically includes areas that permit motorized recreation, a wildly popular activity in Utah. But there will also be plenty of hiking, biking and other opportunities to appreciate this unique area. Regardless of final form, the Bears Ears Public Lands Initiative Legislation will continue to provide outdoor recreation opportunities in Utah.

Due to the magnitude and complexity of the Bill, Bishop expects it to get a vote this fall after further hearings and committee vetting. However, a National Monument designation may already be a done deal in the eyes of the Obama Administration. Secretary of the Interior Sally Jewell visited the area in the days surrounding Bishop’s announcement of the revised Bill. While her attendance doesn’t necessarily mean a monument decision is imminent, other such visits have foreshadowed National Monument designations.

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BLM Fracking Rule Dead—For Now

It was an interesting week for BLM’s hydraulic fracturing rule first finalized and then immediately challenged on March 26, 2015. On Monday (June 20, 2016), the BLM filed its final brief in the Tenth Circuit arguing that the Wyoming Federal District Court erred when it issued a nationwide injunction of the rule on September 30, 2015. On Tuesday (June 21, 2016), the Wyoming Federal District Court set aside the BLM’s fracking rule, finding "The BLM has attempted an end-run around the 2005 EPAct; however, regulation of an activity must be by congressional authority, not administrative fiat.”

The central question the court addressed was did Congress give BLM the authority to regulate fracking?

In addressing this question, the court examined the broad management authority granted to BLM/Interior in the several statutes relied on by BLM – Mineral Leasing Act (MLA), Federal Land Policy and Management Act (FLPMA) and two Indian mineral statutes—and then analyzed the more narrow authority granted to EPA in the Safe Drinking Water Act (SDWA) to regulate underground injections into drinking water and the specific exemption from the SDWA for non-diesel hydraulic fracturing in the Energy Policy Act of 2005 (EPAct 2005). Judge Skavdahl concluded that neither the MLA nor FLPMA give BLM specific authority to regulate fracking and that, further, neither statute gives BLM environmental regulatory authority.

In examining the MLA, the court found the statute was focused on protecting oil and gas formations—not groundwater— and “surface-disturbing” activities—not downhole activities. The court also rejected BLM’s argument that fracking falls directly within its “regulatory sphere” and that the Bureau had long-regulated fracking. “BLM’s only regulation addressing hydraulic fracturing worked to prevent any additional surface disturbance and impose reporting requirements and did not regulate the fracturing process itself.” The court next examined FLPMA and concluded the statute is a land use planning law and not an environmental law. “Congress delegated regulatory authority for environmental protection of underground water sources to the [EPA], not the BLM.”

Finally, the court looked to SDWA and EPAct 2005. CRS Report on SDWA/fracking. The court determined it was clear that “Congress intended to remove hydraulic fracturing operations (not involving diesel fuels) from EPA regulation under the SDWA’s UIC program.” The court’s decision to invalidate BLM’s fracking rule rested on the rationale that “it makes no sense to interpret the more general authority granted by the MLA and FLPMA as providing the BLM authority to regulate fracking when Congress has directly spoken to the ‘topic at hand’ in the 2005 EPAct.”

The decision is widely expected to be appealed by the BLM and the environmental group intervenors have already declared they will appeal. The BLM’s Tenth Circuit brief on overturning the preliminary injunction of the fracking rule is a likely preview of what those arguments will be. BLM understandably argues that the MLA and FLPMA have been read too narrowly by the court and that, rather, these federal statutes contain “capacious delegations” to BLM to regulate “all operations on federal leases.” BLM adds that, “FLPMA further enhances BLM’s authority to protect natural resources and the environment” and that authority is not limited to planning. Finally, in addressing the crux of the court’s analysis that the SDWA and the EPAct 2005 non-diesel fracking exemption are evidence of a congressional decision to exclude BLM from the regulation of fracking, the government points to legislative history of the SDWA that states, “The committee intends . . . that EPA will not duplicate efforts of the USGS [BLM’s regulatory predecessor] to prevent groundwater contamination under the Mineral Leasing Act.”  Good discussion of legal issues on appeal.

The government has 60 days to file an appeal, but given the importance of this rule, don’t be surprised if an appeal is filed in advance of 60 days.

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Ski Area Water Rights: Federal Water “Grab” Resolved?

The United States Forest Service (“Forest Service”) manages 193 million acres of public lands that provide 20 percent of the nation’s clean water supply worth an estimated $7.2 billion per year. Management of public lands by the Forest Service includes issuance of special use permits for 122 ski area operations in thirteen states. 116 of the ski areas are located in 10 Western states, where water is often scarce. Although the U.S. Government owns the land, the ski areas must appropriate or acquire water rights under state law for snowmaking and other uses. The special use permits do not automatically give water rights to ski area lessees.

In 2011 the Forest Service issued a directive requiring joint ownership of existing water rights by ski areas and the United States. The directive sought to address the concern that ski areas might sell their water rights for a hefty profit rather than allow future operators of the ski area to continue use of the water right after an existing operator’s lease expires. Because the lessee historically held the water rights, this directive would have resulted in either: (1) a transfer of water rights into shared ownership with the Forest Service, or (2) a complete transfer of the water rights to the Forest Service. Critics of the 2011 directive quickly claimed that the proposal amounted to a federal water grab that would complicate operations, undermine the skiing industry, and devalue ski area leases. Opponents claimed that requiring federal ownership of water rights would limit ski areas’ ability to control their assets and operations.

The National Ski Areas Association sued the Forest Service to set aside the 2011 directive, arguing that the Forest Service should have allowed for notice and comment, a process providing for public involvement in federal decision-making. Nat’l Ski Areas Ass’n v. U.S. Forest Serv., 910 F. Supp. 2d 1269 (D. Colo. 2012). The court agreed and ruled that the Forest Service violated its own procedural rules, failed to evaluate the economic impact of the proposed directive, and violated the ski areas’ rights. The court vacated the 2011 directive for these failures to comply with procedural requirements.

The 2011 directive also sparked legislative reaction. Colorado Senator Cory Gardner proposed an amendment to the budget aiming to protect the supremacy of state water law over one clause of the Forest Service directive that sought to supersede state water law. The successful amendment established a deficit-neutral reserve fund relating to “protecting communities, businesses, recreationists, farmers, ranchers, and other groups that rely on privately held water rights and permits from Federal takings.” Similarly, Representative Scott Tipton proposed a specific water rights bill to “protect private water rights from uncompensated federal takings.” Although Representative Tipton’s bill did not pass, the joint Congressional efforts reflect the concern for privately-held water rights.

On June 23, 2014, the Forest Service posted notice of a new proposed directive with amended clauses addressing special use permits and associated water rights. The new proposed directive sought to provide assurances that sufficient water rights remain with the ski area permit for snowmaking and other essential operations (even if the ski resort is sold) but without requiring ski areas to transfer water rights to the Forest Service. The proposal allowed the ski area to continue to own the water rights as a special use permit holder, with the commitment that adequate water stay dedicated to operation of the ski area.

Forest Service Chief Tom Tidwell expressed his support for the proposed new directive: “Chair lifts can be replaced and lodges can be rebuilt, but once the water necessary for ski area operations is no longer available, the public loses opportunities for winter recreation. The economic effects of the loss of water may be far reaching. This issue has implications far beyond the boundaries of ski areas.”

After an extended public comment period, the Forest Service released its Final Directive on Forest Service permits for Ski Area Water Rights on December 30, 2015. The Final Directive requires an applicant for a ski area permit to submit documentation prepared by a qualified hydrologist or licensed engineer that demonstrates there is sufficient water to operate a ski area for the entirety of the ski area permit. “Sufficient water to operate a ski area” means that the applicant has adequate rights, or access to a sufficient quantity of water, to operate the permitted facilities, and to perform the associated activities authorized under the ski area permit under an operating plan. In determining whether a ski area applicant has sufficient water, the applicant’s hydrologist/engineer will consider typical conditions, taking into account variations due to weather and climate, technology, and infrastructure improvements.

The Final Directive further provides that if there is a change in ownership at any time, and a ski area “water facility” (defined as “a ditch, pipeline, reservoir, well, tank, spring, seepage, or any other facility or feature that withdraws, stores, or distributes water”) will no longer be used primarily for operating a ski area, the authorization for the facility under the ski area permit will be terminated and the water facility must be removed from Forest Service lands. If a ski area permit is terminated or revoked, the holder must give a right of first refusal for the water rights associated with the permit to the succeeding ski area permit holder. If the water use right is jointly owned with the United States, the holder must give a right of first refusal to the government.

Water use rights are valuable business assets for ski areas and considered necessary for operation in the arid West. Both the Forest Service and the ski industry consider the Final Directive, which took effect on January 29, 2016, to be a success. Time will tell if the dispute is truly resolved. In the meantime enjoy the powder!

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1725 Hits

BLM Proposes “Planning 2.0” Rules

On February 11, 2016, the Bureau of Land Management (“BLM”) announced significant proposed amendments to its land use planning rules as a part of its Planning 2.0 initiative. The stated goals of the proposed rules are to: (1) improve the BLM’s ability to respond to social and environmental change in a timely manner; (2) provide meaningful opportunities for other Federal agencies, State and local governments, Indian tribes, and the public to be involved in the development of BLM resource management plans (“RMPs”); and (3) improve the BLM’s ability to address landscape-scale resource issues and to apply landscape-scale management approaches.

The Federal Land Policy and Management Act of 1976 (“FLPMA”) requires that BLM develop land use plans “which provide by tracts or areas for the use of the public lands.” The BLM has historically prepared RMPs on a field office basis, but FLPMA does not prohibit the preparation of RMPs on larger or smaller areas of the public lands. The proposed rule allows the BLM Director to designate the area that will be covered by an RMP; presumably, those areas will generally be larger than the boundaries of a BLM field office’s jurisdiction so as to accommodate “landscape-scale management approaches.” However, the proposed rule does not establish any standards or guidelines for how the BLM Director will designate an area to be covered by an RMP; it simply states that the Director will “determine” the planning area for the preparation of each RMP.

A new step in the planning process will be the preparation of a “planning assessment.” The planning assessment will be prepared on the planning area so presumably will not be relied upon for the Director’s determination of the planning area. As a practical matter, BLM already prepares a form of planning assessment under the existing rules as it begins the process of preparing a new RMP, but the proposed rule formalizes that information gathering process and requires public involvement.

While the preamble to the proposed rule mentions the need for a more nimble approach to planning that is responsive to a rapidly changing environment and conditions, the expanded public involvement requirements that would be imposed by the rule will make the process anything but nimble. Public involvement, “appropriate to the areas and people involved,” is required (1) in the preparation of the planning assessment (both during the data gathering phase and on the report that documents the planning assessment which is to be made available for public review); (2) in identifying planning issues (the BLM will notify the public and make available for public review the preliminary statement of purpose and need); (3) by making the preliminary alternatives to be analyzed in the environmental impact statement (“EIS”) for the RMP and the preliminary rationale for those alternatives available for public review before the draft RMP and draft EIS are released for comment; (4) by making available for public review, before release of the draft RMP/EIS, the preliminary procedures, assumptions, and indicators that will be used to estimate the effects of implementing each alternative to be analyzed in the draft; (5) at the time the draft RMP is released for public comment; and (6) after the proposed RMP is released by providing for protests of the proposed RMP.

Although the current planning process provides for comments in response to the scoping notice published at the commencement of the EIS on the plan, comments on the draft RMP, and protests, the proposed rule adds at least three more occasions for which public involvement must be solicited. Interestingly, the proposed rule does not contemplate public involvement in the determination of what area will be covered by an RMP. As discussed by Rebecca Watson in her article on Planning 2.0, State and local governments and Indian tribes may be dissatisfied with what they are likely to view as the dilution of their input into the BLM planning process if RMPs cover “landscape” size areas, rather than the area administered by the BLM field office. See, Rebecca W. Watson and Joshua B. Cannon, “Toward Planning 2.0: The New Landscape of BLM Planning,” 93 Denv. U. L. Rev. Online 49, Nov. 2015. Moreover, the Director’s role in determining the area to be covered by an RMP (with that determination requiring no public involvement) creates the risk that the planning process will become more centralized in Washington—a development with which the word “nimble” is rarely associated.

There will be a 60-day comment period on the proposed rules beginning as of the date of publication of the draft rule in the Federal Register. Publication is anticipated by the end of February 2016.

The text of the proposed revisions to BLM planning regulations is available here.

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Proposed BLM Venting and Flaring Rule

On February 8, 2016, the BLM published its long awaited proposed rule to control venting, flaring and leaks of natural gas from oil and gas operations on onshore Federal and Indian lands. 81 Fed. Reg. 6616. The primary purposes of the rule are to: (1) update regulatory requirements in light of newer technology; (2) increase royalties payable to the government and Indian Tribes by capturing more gas; and (3) address concerns about climate change by reducing the amount of methane released to the atmosphere. The rule would supersede requirements dating back to 1979 – Notice to Lessees and Operators of Onshore Federal and Indian Oil and Gas Leases (NTL-4A), 44 Fed. Reg. 76600 (Dec. 27, 1979).

BLM studied Colorado’s Air Quality Control Commission Regulations and consulted with State regulators, referring to Colorado more than 40 times in the description of the proposed rule. Because Colorado has already adopted aggressive regulations to control methane emissions, the effect of the proposed rule would not be as great in Colorado as in other states. The proposed rule would more significantly affect operators in states such as North Dakota, South Dakota and New Mexico, where over 90 percent of routine flaring of associated gas from development oil wells occurs.

Waste Minimization Plan
A novel feature of the proposed rule that would complicate the drilling of development oil wells is a waste minimization plan that operators must submit with each Application for Permit to Drill (APD). The waste minimization plan must provide a strategy explaining how the operator will capture associated gas upon the start of oil production and include the following information:

The pipeline infrastructure location and capacity in the area of the well or wells; the anticipated timing, quantity, and production decline curve of oil and gas production from the well or wells; a gas pipeline system location map showing the operator’s wells, gas pipelines, gas processing plant(s), and proposed routes for connection to the pipeline; certification that the operator has provided one or more midstream processing companies with information about the operator’s production plans, including the anticipated completion dates and gas production rates of the proposed well or wells; the volume and percentage of produced gas the operator is currently flaring or venting from wells in the same field and any wells within a 20-mile radius of that field; and an evaluation of opportunities for alternative on-site capture approaches, if pipeline transport is unavailable.

Failure to submit a complete and adequate plan would be grounds for denying the APD.

Royalties
Although the proposed rule would not itself raise royalty rates above the current maximum of 12.5 percent, it would give BLM the flexibility to ask for a higher percentage on new leases. Recent BLM data “showed that the royalty rates charged on private and State lands range from 12.5 to 25 percent, and that the average rate assessed exceeds 16.67 percent.” Royalty rates on existing BLM leases would not be affected, but BLM is clearly paving the way to increase royalty rates on certain leases in the future.

BLM would also impose royalties on more flared gas. In addition to royalties that are due on any “avoidably lost” oil or gas, operators would also owe royalties on any gas vented or flared above a certain threshold. No more than 1,800 Mcf per month per well, averaged over all of the producing wells on a lease, could be vented or flared from development oil wells. This limit would be phased in over three years, starting with 7,200 Mcf in the first year. In the second year the limit would be 3,600 Mcf and then drop to 1,800 Mcf in the third and subsequent years.

BLM estimates that engineering compliance and other costs to industry from the proposed rule would be in the range of $117 to 161 million per year. These costs would be partially offset, however, by revenue from the sale of natural gas that would otherwise have been lost. It remains to be seen how much of a disincentive the new rule will be for drilling on public lands. Will the royalties from newly captured gas be more than the revenues lost due to operators deciding to drill elsewhere because of the new rule?

Comments on the proposed rule must be received by April 8, 2016.
The text of the proposed rule may be found at: https://www.gpo.gov/fdsys/pkg/FR-2016-02-08/pdf/FR-2016-02-08.pdf

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“Keep it in the Ground” – Part II

After the President denied the Keystone XL pipeline, climate change activists have turned their attention to federal fossil fuel leasing, discussed in our recent blog post: What’s Next, Post Keystone XL? “Keep it in the Ground!”.  The “Keep it in the Ground” proponents argue the President should abandon his “all of the above” energy policy for one that bans all future leasing of federal fossil fuels.

The argument has resulted in divided opinions—even within the Obama Administration. While Interior Secretary Sally Jewell has called the movement unrealistic and simplistic, EPA’s Administrator, Gina McCarthy, seemed to validate the environmentalists’ position by noting it would not be “extreme” for the government to ban all coal, oil, and natural gas production on federal lands.

Ultimately, for the Obama Administration, and future administrations, this policy argument raises a legal question: Could the Secretary of the Interior completely stop all federal coal and on and offshore oil and gas leasing? To answer that question, the Mineral Leasing Act of 1920 (“MLA”), as amended, the Federal Land Policy and Management Act (“FLPMA”) and the history of federal mineral management must be examined.

As Congress encouraged the settlement of the West, it began to take steps over time to retain management and ownership over federal minerals. Congress passed the Enlarged Homestead Act in 1909, 43 U.S.C. § 218, which allowed individuals to obtain title to up to 320 acre parcels without any reservation of the mineral estate to the government. In the subsequent Stock-Raising Homestead Act of 1916, Congress reserved “all coal and other minerals” to the federal government. 43 U.S.C. § 299; see also Watt v. Western Nuclear, Inc. 462 U.S. 36, 47 (1983) (observing Congress did not wish to entrust the development of valuable minerals to ranchers and farmers). Similarly, in the Coal Lands Acts of 1864 and 1873 the government conveyed lands without reserving the coal, but reversed course in later amendments in 1909 and 1910. The 19th and 20th century railroad acts also evolved from grants without reservation to surface-only grants.

In 1920, Congress enacted the Mineral Leasing Act of 1920, 30 U.S.C. § 181 et seq., to provide for more efficient development of federal oil, gas, and coal deposits. Section 226 of the MLA provides for leasing of oil and gas. Section 226(a) declares that “[a]ll lands subject to disposition under this [Act] which are known or believed to contain oil or gas deposits may be leased by the Secretary.” 30 U.S.C. § 226(a). The U.S. Supreme Court has found this language to provide the Secretary with discretionary authority to lease federal minerals. Udall v. Tallman, 380 U.S. 1, 4, (1965); see also Bob Marshall All. v. Hodel, 852 F.2d 1223, 1230 (9th Cir. 1988) (the MLA “allows the Secretary to lease such lands, but does not require him to do so.... [T]he Secretary has discretion to refuse to issue any lease at all on a given tract”). But does this secretarial authority to choose not to lease a particular parcel or tract of federal minerals extend to termination of the entire federal minerals leasing program? Such action does not appear to be the intent of Congress.

Congress enacted the MLA to “promote the orderly development of the oil and gas deposits in the publicly owned lands of the United States through private enterprise.” Harvey v. Udall, 384 F.2d 883, 885 (10th Cir. 1967). In California Co. v. Udall, the court stated that the Department of the Interior must administer the MLA “so as to provide some incentive for development.” 296 F.2d 384, 388 (D.C. Cir. 1961). The Mining and Minerals Policy Act of 1970, 30 U.S.C. § 21 et seq., emphasized the critical importance of federal mineral development and the essential role of the private sector and directed Interior to “foster private enterprise.”; see also Mountain States Legal Found. v. Andrus, 499 F. Supp. 282, 392 (D. Wyo. 1980) (“The Secretary of the Interior must administer the Mineral Leasing Act so as to provide some incentive for, and to promote the development of oil and gas deposits in all publicly-owned lands of the United States through private enterprise.”).

The Federal Onshore Oil and Gas Leasing Reform Act of 1987 amended the MLA to establish a competitive leasing system. 30 U.S.C. § 226(b)(1)(A). As amended, the MLA mandates the BLM to conduct lease sales “for each State where eligible lands are available at least quarterly and more frequently if the Secretary of the Interior determines such sales are necessary.” 30 U.S.C. § 226(b)(1).

“Keep it in the Ground” supporters argue that the Secretary could use the FLPMA land use planning authority to determine that no eligible lands are available in any state to effectively impose a nationwide moratorium on all new federal leasing. This argument ignores the above statutory mandates and overstates the Secretary’s limited authority to withdraw lands from leasing.

FLPMA established the federal policy to retain federal lands and to manage for multiple uses through the land use planning process to best meet national interests. 43 U.S.C. § 1701(a). FLPMA includes mineral development in its list of permitted multiple uses: “[T]he public lands [are to] be managed in a manner which recognizes the Nation’s need for domestic sources of minerals, food, timber, and fiber from the public lands . . .” Id. at (a)(12). Further, the Act requires that “the United States receive fair market value of the use of the public lands and their resources…” Id. at (a)(9). In this same section at (a)(4) Congress reserved its power to “exercise its constitutional authority to withdraw or otherwise designate or dedicate Federal lands for specified purposes and that Congress delineate the extent to which the Executive may withdraw lands without legislative action,” and specifically limited the Secretary’s withdrawal authority in size and to no longer than 20 years. 43 U.S.C. § 1717(d).

Read together, FLPMA’s management directives suggest that, at a minimum, a decision to withhold lands from leasing would need to be made on a site-specific basis through land use planning and that such withdrawal could not be made permanent without the authorization of Congress. See Norton v. S. Utah Wilderness All., 542 U.S. 55, 58 (2004) (explaining FLPMA’s multiple use mandate and noting lands not compatible with this mandate are identified by the Secretary on a site-specific basis as part of the land use planning process); see also Lujan v. Natl. Wildlife Fedn., 497 U.S. 871, 877 (1990) (discussing FLPMA’s direction that the Secretary “determine whether, and for how long, the continuation of the existing withdrawal of [selected] lands would be, in his judgment, consistent with the statutory objectives of the programs [other than multiple use] for which the lands were dedicated.”). FLPMA’s multiple use mandate—which includes mineral development— must be read in coordination with the MLA and the Mining and Minerals Policy Act. 43 U.S.C. § 1701(a)(12)(“including implementation of the Mining and Minerals Policy Act of 1970”).

As climate activists continue to press the government to transform federal leasing or simply keep federal fossil fuels in the ground, we can expect “policy forcing” litigation to follow. See, e.g., WildEarth Guardians v. Jewell, 738 F.3d 298, 312 (D.C. Cir. 2013) (rejecting the argument that BLM coal leasing in the Powder River Basin failed to properly consider global climate change); see also McKeown, Matthew J., “Emerging Clarity: Trends in Air Quality Litigation Arising from Federal Public Land Mineral Development,” vol. 58, ch. 25 (Rocky Mt. Min. L. Fdn. 2012). Courts and possibly Congress will be the ultimate arbiters of this movement giving a final word on whether the MLA, FLPMA, and the legislative history authorize the Secretary of the Interior to completely stop all federal coal and on and offshore oil and gas leasing.

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2232 Hits

What’s Next, Post Keystone XL? “Keep it in the Ground!”

With the rejection of the Keystone XL pipeline by President Obama as part of the Administration’s “package” of climate change actions to deliver to the UN Conference on Climate Change in December, activists and their political allies have turned to the next battlefield – stopping the leasing of federal minerals. http://goo.gl/mU8qia

On November 4, Senator and presidential candidate Bernie Sanders (I-VT) and Senator Jeff Merkey (D-OR) introduced legislation to stop future federal oil and gas leasing in the Outer Continental Shelf and all federal leasing of onshore coal, oil, tar sands, gas and oil shale. The “Keep it in the Ground Act” also would prohibit the renewal of any “nonproducing” lease and cancel existing leases in federal waters off Alaska. See, S 2238, “To prohibit drilling in Outer Continental Shelf, to prohibit coal leases on federal land and for other purposes.” https://www.congress.gov/bill/114th-congress/senate-bill/2238

The President of the Natural Resources Defense Council ( and former Obama Interior Assistant Secretary) Rhea Suh applauded the legislation, “ Phasing out coal, gas and oil production in our federal lands and waters must be part of our broader strategy to shift from dirty fuels that drive climate change to clean energy.” Suh explained that, “Ending new leases for fossil fuels will prevent the release of 90% of potential emissions from federal fossil fuels. Federal lands and waters should be managed . . . to promote the rapid transition to the clean energy economy by keeping fossil fuels in the ground.” Bill McKibben, 350.org founder and anti-Keystone organizer, told Rolling Stone, “Effective action would require actually keeping most of the carbon the fossil fuel industry would like to burn safely in the soil.” The Center for Biological Diversity has led local “keep it in the ground” protests of BLM oil and gas lease sales in Wyoming and Colorado arguing federal fossil fuels represent 450 billion tons of carbon equivalent that should not be burned.

The movement, an offshoot of the fossil fuel divestment campaign, is informed by two studies that identified the potential GHG emissions from undeveloped fossil fuels. A study published in the journal Nature in January analyzed the question at a global scale and found that 80% of world coal reserves need to stay in the ground to avoid the “tipping point” of an elevation in global temperature of 2 degrees C. In the United States, The Wilderness Society and Center for American Progress retained Stratus Consulting in 2012 and 2014 to analyze the GHG emissions from extracting and burning federal fossil fuels. The 2014 update found that federal lands and waters “could have accounted for 24% of all energy-related GHG emissions in the United States in 2012” and “combustion of coal from federal lands accounts for more than 57% of all emissions from fossil-fuel production on federal lands.” See Center for American Progress (March 19, 2015). https://goo.gl/aPiMwJ .

At the end of September, Sierra Club, WildEarth Guardians, 350.org, EarthWorks among 400 environmental organizations presented a letter to President Obama calling on him to “keep federal fossil fuels in the ground.” The groups, citing the above reports, argue that federal leasing contributes “significantly” to U.S. and global GHG emissions and that under existing laws “you have the clear authority to stop new leases. With the stroke of a pen, you could take the bold action needed to stop new federal leasing of fossil fuels . . . .” An accompanying legal analysis argues that the Mineral Leasing Act, the Surface Mine Control and Reclamation Act, the Outer Continental Shelf Lands Act and the Federal Land Policy and Management Act grant considerable discretion to the Secretary of the Interior on whether to lease and that some of these acts grant the Secretary or the President the authority to withdraw lands from leasing. It is legally doubtful whether these acts would provide the authority to the Executive branch to cease all leasing of federal minerals which under the U.S. Constitution Article IV, Sec. 3 are under the plenary authority of Congress. Moreover in the Mineral Leasing Act (30 U.S.C, § 226(b)(1), Congress has directed quarterly lease sales and in the Mining and Mineral Policy Act of 1970 made clear that, “it is the continuing policy of the Federal Government in the national interest to foster and encourage private enterprise in (1) the development of economically sound and stable domestic mining, minerals, metal and mineral reclamation industries …” 30 U.S. C. § 21a.

While the “Keep it in the Ground Act” stands no chance of passage in this Congress, and Interior Secretary Jewell has rejected this approach has oversimplifying “a very complex situation to suggest we could simply cut off leasing or drilling on public lands and solve the issues of climate change,” she has embraced a suite of regulatory initiatives that environmentalists and their supporters have argued are part of this initiative. For example, in March in a major policy speech previewing BLM regulatory reforms, Secretary Jewell stated, “[W]e also need to do more to address the causes of climate change. Helping our nation cut carbon pollution should inform our decisions about where we develop, how we develop and what we develop.”

The Wilderness Society argues that a soon-to-be issued BLM rule to reduce venting and flaring and the already published draft revisions to Onshore Orders 3, 4 and 5 (https://goo.gl/2Dckrm and https://goo.gl/idRLrd ) to require the installation of meters on federal wells will help to limit GHG emissions from federal leasing. They also argue, and are joined in this argument by Democratic presidential candidate Hillary Clinton, that Interior should raise the royalty rates for coal and oil and gas to account for “the full costs of carbon pollution.” In June, Clinton called for “additional fees and royalties from fossil fuel extraction [to be used] to protect the environment.” Secretary Jewell announced a proposal to consider raising the royalty rate earlier this year. http://goo.gl/eKbNny And, the recently issued BLM resource management plan amendments for the Greater sage-grouse demonstrate the BLM’s willingness to use its FLPMA authority to withdraw millions of acres of federal minerals and limit the leasing of oil and gas for conservation purposes. Each of these requirements will incrementally “keep” a portion of federal fossil fuels “in the ground” which is the goal of that campaign.

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Finally – A Policy to Streamline the BLM Communization Agreement Process – IM 2015-124

Dated and effective July 17, 2015, the Bureau of Land Management (“BLM”) issued Instruction Memorandum 2015-124 (“IM-2015-124”). This BLM guidance significantly changes the way federal Communization Agreements (“CAs”) are administered and, for the most part, eliminates some of the cumbersome issues for operators applying for CAs. CAs are used to combine isolated or small federal mineral and/or tribal parcels with fee minerals to form a spacing or proration unit that complies with state law and allows for development of tracts that could not be independently developed or operated on their own.

In addition to attempting to “clean-up” the CA Process, IM-2015-124 addresses some questionable jurisdictional issues. Before IM-2015-124 was issued, there were concerns by industry that the BLM was attempting to expand its management beyond its authorized jurisdiction over federal minerals to fee minerals. For example, in some instances, the language in approved CAs appeared to require the operator to account to the BLM not only for federal minerals but for all minerals, including fee. However, IM-2015-124 now limits the CA responsibilities of the BLM to federal minerals and the Bureau of Indian Affairs to tribal minerals. We note that many of the jurisdictional issues the IM attempts to clarify were called into question by the BLM’s recently proposed rule modifying Onshore Oil and Gas Order No. 3. For more information on these inconsistencies, see Western Energy Alliance’s comment letter on the proposed changes to Onshore Order No. 3:

http://cdn.westernenergyalliance.org/sites/default/files/FINAL%2010.9.15%20OO3%20comment%20letter.IPAA_.WEA_.pdf

In any event, until the changes proposed in Onshore Order No. 3 are made final, the components of IM-2015-124 will govern. Some of the notable changes to the CA process in IM-2015-124 include:

1. An operator may self-certify that the necessary signatures have been obtained (working interest owners and record title owners in the Federal and Indian leases). Rather than submit all of the necessary signatures, an operator can submit the certification statement, word for word from IM-2015-124, to the BLM with its CA, and the BLM will rely on that statement;

2. CA: Exhibit A – the operator may identify all non-Federal/non-Indian interests as a single tract;

3. CA: Exhibit B – An operator may aggregate all of the non-Federal/non-Indian interests into a single entry entitled “Other Interests,” with total aggregate acreages; and

4. CA: Exhibit B – Due to the revisions to non-Federal/non-Indian interests in Exhibits A and B, an operator does not need to provide the lease information for those interests.

The BLM’s goal is to have all CAs in place prior to the date of first production. In fact, the BLM has required applicants appearing before the Colorado Oil and Gas Conservation (“COGCC”) to include specific language in spacing orders that addresses CAs and timing for the operator to apply and comply with the CA process. The COGCC order language usually requires an operator to submit a CA concurrent with the filing of an APD or at least 90 days before the anticipated date of first production.

Any operators actively submitting CAs to the BLM should be well-versed in the changes addressed in IM-2015-124 affecting BLM Manual 3160-9 and be prepared to submit a CA prior to production of a well affecting Federal or Indian interests.

IM-2015-124 can be found at:  http://www.blm.gov/wo/st/en/info/regulations/Instruction_Memos_and_Bulletins/national_instruction/2015/IM_2015-124.html

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Monument Making And The Presidency

Like presidents before him, President Obama is using the 1906 Antiquities Act, 16 U.S.C. § 431-433, as part of his presidential legacy. In September, 2014, Obama exercised this authority for the 12th time and expanded a national monument, created by his predecessor George W. Bush, from 87,000 square miles to more than 490,000 square miles to take the title as the president with the most acres preserved in the last 50 years. In July, 2015, President Obama designated three monuments, one requested by out-going Senator Harry Reid (NV-D) to protect 704,000 acres in southern Nevada, including a series of strange sculptures by artist Michael Heizer, petroglyphs and a migration corridor for deer and pronghorn – the Basin and Range National Monument. The President also designated the more controversial 330,780 acre Berryessa Snow Mountain National Monument in northern California on BLM and Forest Service land and a five acre monument preserving mammoth remains in Waco Texas.

House Natural Resource Chair Rob Bishop (R-UT) objected to the three monuments, scoffing that the lands were not “antiquities” and that the president’s action was a “land grab” by “the stroke of a pen.” These types of congressional complaints are as old as the Act. The 1906 Act authorizes presidents to proclaim “historic landmarks, historic and prehistoric structures, and other objects of historic or scientific interest” as national monuments and was enacted to prevent the looting and destruction of Native American sites. President Roosevelt established the first national monument in Wyoming – Devils Tower— in 1906 and followed that action with a total of 18 monuments including the designation of the Grand Canyon in 1908 to protect 800,000 acres from mining and development. The move was controversial, but in Cameron v. United States, 252 U.S. 450 (1920) the Supreme Court upheld the use of the Antiquities Act to designate the Grand Canyon. This has been the result for other legal challenges-- the statute is broadly written and courts have affirmed the president’s unilateral power to designate monuments—without public involvement or compliance with NEPA.

Preservationists see the Antiquities Act as a powerful tool to protect lands when Congress won’t act on wilderness bills and the Forest Service and BLM are hamstrung by congressional riders or litigation in the creation of quasi-wilderness lands. See for example the 11 years of litigation over the Clinton-era Roadless Rule and the 2011 congressional rider preventing the designation of “Wildlands” by then-Interior Secretary Salazar. Environmental groups their eye and the President’s ear on other monuments they would like the President to designate before he leaves office—including the 1.7 million acre Grand Canyon Watershed National Monument in Utah and Arizona, 1 million acres of desert in southern California and the 2 million acres surrounding the Canyonlands National Park in Utah.

Although the Republican House recently introduced several pieces of legislation to narrow the president’s power under the Act, (HR 1459, “Ensuring Public involvement in the Creation of National Monuments Act”) to require NEPA review of monuments greater than 5000 acres and an appropriations rider to block funding for monuments in Arizona, California, Colorado, New Mexico, Nevada, Oregon and Utah, it is unlikely that the Act will be changed. One of the last times the Act was changed, which explains the absence of Wyoming from the preceding list, was in 1950, after the creation of the monument that later became Grand Teton National Park. At that time, Wyoming’s first Senator Simpson was successful in enacting a requirement for congressional approval of all future monument designations in the state.

President Obama’s counselor, John Podesta, in 2014 remarks celebrating the Wilderness Act, indicated that President Obama’s national monument “signing pen still has some ink left in it.” If President Obama looks to the last Democratic president as an example, we can expect a lot of monument making in 2016. In his last year in office, President Clinton expanded or designated 18 monuments – the vast majority of the 22 monuments on his watch.

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1844 Hits

Western Energy Alliance and IPAA Move to Enjoin New BLM Fracking Rule

BLM’s new fracking rule is scheduled to take effect on June 24, 2015, but the Western Energy Alliance and Independent Petroleum Association of America moved for a preliminary injunction on May 15 to keep that from happening. They allege irreparable harm because the new rule lacks the factual, scientific, or engineering bases to sustain it. “BLM has neither substantiated the existence of problem this rule is meant to address, identified the gap in existing regulations the final rule will fill, or described the objectives the final rule will achieve.” Motion for Preliminary Injunction at 24.

And BLM’s new rule will cost a lot. BLM concedes that the additional cost will be at least $11,400 per well drilled on federal lands, but the Alliance and IPAA assert that the real extra costs per well, depending on particular circumstances, could be:
• $74,400 for using tanks instead of pits for storage of recovered fluids.
• $75,000 to $100,000 for extra mechanical integrity tests.
• More than $100,000 for obtaining more data on total dissolved solids (TDS), or $8,000 to $12,000 per well if sampling is done only on representative wells.
• $111,200 to run a cement evaluation log (this is BLM’s own estimate, but BLM states it will rarely be an additional burden required by the new rule).

Motion at 36, 38, 41, 48. Despite these significant economic burdens, "BLM has no evidence that its costly proposed rule will be any more effective in practice than existing state regulations protecting water and other environmental values.” Motion at 26.

In addition to the additional costs, the new rule would also cause its own negative environmental impacts by requiring greater use of the surface for water tanks. For example, a 150,000-barrel hydraulic fracturing operation may require approximately 2 acres of surface for a single pit, but 325 tanks used to hold the same water would take up almost 5 acres. Motion at 43.

The Alliance and IPAA conclude by arguing that implementation of the new rule should at least be delayed because their members would suffer irreparable harm and there is no urgent reason for the rule to take effect next month. BLM began work on the final rule in November 2010 and “has not identified a single groundwater contamination incident resulting from site preparation, drilling, well construction, completion, hydraulic fracturing stimulation, or production operations that the agency contends its final rules would have prevented.” Motion at 52. What is the rush?

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1737 Hits

Utah Law Copied by More Western States Attempting to Take Control of Federal Land

Utah’s Transfer of Public Lands Act (“TPLA”) demands that the federal government “extinguish” its title to more than 30 million acres of federal public lands by December 31, 2014. Utah Code Ann. § 63L-6-101 et seq. (2012). When the law was enacted in 2012, former Department of Interior Secretary Ken Salazar charged that the legislation “defied common sense.”

Since then, Utah’s own legislative lawyers and most outside legal analyses have concluded that if challenged, it is likely that courts would find the law unconstitutional. In addition, the state probably could not afford to manage the lands. A report prepared by the University of Utah’s Bureau of Economic and Business Research, Utah State University’s Department of Applied Economics and Weber State University’s Department of Economics concluded that unless all of the 30 million acres were opened to natural resource extraction, the state would not have sufficient funds to manage the land. Even then, the state would have to demand 100% of the royalties (rather than split them 50/50 with the federal government, as it does currently).

Finally, even if the law survived legal challenge, all of the 30 million acres were opened to natural resource extraction, and Utah received 100% of the royalties, the report also concluded that oil and gas prices would have to remain stable and high in order to generate revenue sufficient to cover the cost of managing the land. As recent events in the industry have taught some and reminded others, oil and gas prices, like those of most commodities, do not historically remain stable or high.

This year, Democratic Utah state senator Jim Dabakis introduced a bill that would have required the state attorney general to sue the federal government for state control over 20 million acres of public land by June 2016. According to senator Dabakis, “[t]he intent of the bill is to once and for all settle the question about who owns public lands in Utah[.] . . . It’s about forcing the hand of those who’ve made careers out of this dispute.” By the end of the 2015 legislative session, Senate Bill 105 did not pass, presumably leaving at least some careers in place for now.

Likewise, the law remains in place, unchallenged and unchanged. Perhaps more surprising, despite studies concluding the numerous ways in which Utah’s law “defies common sense,” this year, seven western states joined Utah in laying the groundwork for land transfers by introducing similar bills to their own state legislatures. Although this land grab may be proceeding at geologic pace, its progress appears to be headed toward making a mountain out of a molehill.    

Read more about this issue in an article published in High Country News: http://www.hcn.org/articles/the-taxpayer-money-behind-local-control-demands?utm_source=wcn1&utm_medium=email

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1611 Hits

At Last: A Federal Oil and Gas Lease Sale in the Pawnee National Grasslands

Developing federal lands in the Northern Denver Julesburg Basin (“DJ Basin”), Colorado, has been a challenge for many operators active in the area because of the presence of the Pawnee National Grasslands (“PNG”), an area that has been largely off-limits to oil and gas development. While development of fee minerals in the DJ Basin has been occurring at a rapid pace, leasing in the U.S. Forest Service-managed PNG has been on hold since 2010, when the federal government began preparation of a new oil and gas plan amendment. However, this may be about to change with the finalization of the Forest Service oil and gas plan and the BLM’s decision to include certain parcels in the PNG in the upcoming May 2015 oil and gas lease sale.

The BLM’s delay in leasing was triggered by a lawsuit initiated in 2010 by WildEarth Guardians that argued that the BLM failed to consider the impacts of oil and gas development on air quality in the Front Range non-attainment area, which includes the PNG. The Forest Service responded to the litigation with a decision that the 1997 Forest Plan and NEPA were out of date based largely on the increased oil and gas development in the Northern DJ Basin.

Three years later, in 2013, the Forest Service initiated work on the PNG, Colorado; Oil and Gas Leasing Analysis Environmental Impact Statement (“EIS”), completed the EIS and issued a Record of Decision in 2013. The Record of Decision permits oil and gas leasing to go forward, but places a “no surface occupancy” stipulation on all PNG parcels. As such, all of the parcels located in the PNG will have no surface occupancy lease stipulations in addition to the standard stipulations to protect air, water, wildlife habitat, historic and cultural resources, and reclamation requirements. With the advent of horizontal and directional drilling, access to most of the offered parcels appears possible from adjacent, lands.

On February 13, 2015, the BLM posted an oil and gas lease sale notice offering 42 parcels (containing a total of 25,215 PNG mineral acres) in the PNG to be leased on May 14, 2015. On March 16, 2015, Rocky Mountain Wild and WildEarth Guardians filed protests on the parcels. WildEarth Guardians’ protest focused on the May 2015 lease sale Environment Assessment (“Lease Sale EA”), arguing that the Lease Sale EA violates NEPA and that the BLM has not complied with its obligations under the Clean Air Act and Endangered Species Act. On April 20, 2015 Western Energy Alliance filed a Response to WildEarth Guardians’ protest arguing that the (1) BLM has complied with the requirements of NEPA in preparing the Lease Sale EA, (2) the Lease Sale EA comports with the conformity analysis requirements of the Clean Air Act, and (3) the Lease Sale EA complies with the Section 7 consultation requirements of the Endangered Species Act.

The BLM has not yet ruled on the protest, so it is not yet certain if some, all, or none of the parcels will in fact be offered at the sale. The BLM has until 60 days following the sale to decide the protests.

BLM May 14, 2015 Lease Sale Information: http://www.blm.gov/co/st/en/BLM_Programs/oilandgas/oil_and_gas_lease/2015/may_2015_lease_sale.html

  2013 Hits
2013 Hits

BLM Begins Regulatory Process to Increase Oil and Gas Royalties, Rentals, Minimum Bids, Bonding and Penalties

As promised by Secretary Jewell in March, see previous post, BLM is initiating a rulemaking process-- Announcement of Proposed Rulemaking (ANPR)-- to “solicit public comments and suggestions that may be used to update the BLM’s regulations related to royalty rates, annual rental payments, minimum acceptable bids, bonding requirements, and civil penalty assessments for Federal onshore oil and gas leases.” The comment period will close on June 5, 2015. At the end of the ANPR, the BLM poses a series of questions and readers will want to review the questions carefully for how best to respond to the ANPR. http://www.gpo.gov/fdsys/pkg/FR-2015-04-21/pdf/2015-09033.pdf

The BLM cites three principle reasons that compel their consideration of increasing the cost of developing federal oil and gas. 1) Three GAO reports, two in 2008 and the most recent in 2011, that have questioned whether BLM is obtaining an appropriate royalty for the development of federal oil and gas; 2) the finding that none of the regulatory rates have been adjusted for inflation or changed since they were put in place several decades ago; and 3) in order to ensure a fair return to the taxpayer. This effort will also further three initiatives that the Administration has been pursuing – higher royalties, the concept of “use it or lose it” for federal leases and an emphasis on enforcement and inspection by increasing bonding and penalties to ensure that companies are incentivized to do the right thing.

The current royalty rate is 12.5% and any change in the rate will be for leases issued in the future not existing leases. The proposed royalty changes will not apply to Tribal or Allotted leases issued under the Indian Mineral Leasing Act. BLM admits that adjusting the royalty rate is difficult, it references several studies it has done to get at the question, provides a chart of state royalty rates currently being used in states with federal oil and gas and considers that complex questions of economics are involved. “The BLM acknowledges that current oil and gas prices are low, relative to the average price over the past decade; however, recognizing the historic variability of those process, the BLM would be interested in information on the impacts of any royalty rate change at a range of oil and gas prices.”

In this ANPR, the BLM is also considering whether to raise the minimum acceptable bid for competitive leases; the bid amount has not been changed since enacted in 1987. For non-competitive leases the minimum bid is set by statute and can’t be changed by rule. As to increasing rental rates, “the BLM has not increased the rental rates ($1.50-2.00) since they were initially set in 1987 . . .” Similarly, as to bonding BLM has not “increased the minimum bond since 1960” and wants to consider whether the individual/lease, statewide and nationwide bond amounts are adequate to protect the taxpayer from the costs of reclamation. Finally, BLM, in response to a critical Inspector General report, wants to examine the regulatory caps on the penalties BLM can assess for trespass and other violations of law. Each of these proposed changes has the potential to add considerable cost to the already high cost of doing business on federal lands.

The breadth of the proposal is sure to attract the attention of Congress. Indeed, BLM recognizes that before it can change the minimum bid, the Mineral Leasing Act requires the Secretary to provide 90 days’ notice to the House Natural Resources Committee and the Senate Energy Committee. 30 U.S.C. 226(b)(1)(B). Congress and industry will all need to pay close attention to this process. In particular, it is important for the industry to respond to the questions that BLM has raised as well as the questions they have failed to raise in the ANPR by June 5, 2015.

  1850 Hits
1850 Hits