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NEPA Compliance Required for Certain Oil & Gas Leases in California Due to Concerns Over Fracking

April 21, 2013 by Eric Adair in News with 0 Comments

The reaction to and analysis of the recent decision (pdf) issued by Judge Paul Grewal in Center for Biological Diversity v. Bureau of Land Management has been extensive and fascinating. While the decision will impede the ability of oil and gas operators to conduct hydraulic fracturing, or fracking, operations on certain federal lands in California, at least in the near term, it may not be the watershed decision that some of the headlines have suggested.

We previously reported on the CBD case (here), including a description of the summary judgment motion that led to the recent decision (here). The suit arose out of the Bureau of Land Management’s (BLM) September 14, 2011, lease of four oil and gas parcels totaling approximately 2,700 acres to various lessees. In the suit, Center for Biological Diversity (CBD) and the Sierra Club alleged that BLM’s decision to lease the land violated the National Environmental Policy Act (NEPA) and the Mineral Leasing Act of 1920 (pdf). Specifically, the suit contended that “BLM relied upon an environmental assessment (EA) prepared pursuant to NEPA that failed to analyze many of the significant environmental effects of the oil and gas development that could occur upon development of the leases,” citing concerns for endangered and sensitive species in the area. The suit also warned of potential impacts to water quality and other resources that allegedly result from fracking, which may be employed by oil and gas operators in the leased areas. It also complained that oil and gas activity on the property may result in spills and habitat contamination and emissions of methane gas. Ultimately, CBD and the Sierra Club sought to overturn the leases.

Judge Grewal’s decision first evaluates the applicability of NEPA at the stage at which the oil and gas leases were originally sold, long before any specific oil and gas development was planned or implemented. Second, assuming NEPA applies at that stage, the decision considers whether BLM’s issuance of an environmental assessment was legally sufficient.

At the outset, the Court clarified that the scope of its review, under the Administrative Procedures Act, would be limited to determining whether BLM’s actions were arbitrary, capricious, an abuse of discretion or otherwise not in accordance with law. It added that it would not address “the policy question of whether fracking in the Monterey Shale or anywhere else is a good thing or a bad thing.”

The Court initially agreed with BLM that the obligation to conduct full NEPA review had not yet ripened for two of the four leases. Those two leases — which contained a “No Surface Occupancy” (“NSO”) stipulation — prohibited surface disturbing activities by the lessees and reserved to BLM the right to control future activity on the leases. Thus, as to the NSO leases, BLM had not yet made any “irreversible and irretrievable commitments of resources” that would trigger its NEPA obligation under Conner v. Burford, 848 F.2d 1441 (9th Cir. 1988). As to the other two leases — the so-called “non-NSO” leases — the Court found that “because BLM will no longer hold the full range of options for dealing with surface activities after selling the non-NSO leases, BLM was required to conduct a thorough NEPA analysis to determine whether the sale would have a substantial environmental impact.”

Central to the Court’s finding that BLM had not complied with NEPA on the non-NSO leases was BLM’s failure to take into account all reasonably foreseeable possibilities. The Court was particularly critical of BLM’s failure to evaluate the potential for greatly increased drilling activity on the leases with the advent of fracking and horizontal drilling. Instead, BLM had based its NEPA analysis on the premise that only one exploratory well would be drilled on the four leases, a premise that the Court found logically implausible. Having unreasonably limited its NEPA analysis, the Court concluded that BLM had failed to take the hard look required by NEPA.

Contrary to various media and blog reports, the Court has not yet taken any specific action to invalidate the leases or to block fracking on federal lands in California. While the summary judgment decision will almost certainly delay oil and gas development on the subject leases, the Court has yet to enter a formal judgment enforcing its decision. Instead, the Court explained that it has various remedial options at its disposal, including enjoining surface-disturbing activities pending NEPA compliance or invalidating the leases. “Rather than guess at the appropriate remedy,” the Court directed the parties to meet and confer about the scope of an appropriate judgment and imposed an April 15, 2013, deadline for them to submit such a judgment. The parties later filed a joint request for a one-month extension of that deadline, to May 15, 2013, which the Court granted. Thus, we will expect to see a proposed judgment by the middle of May.

In the wake of their successful motion, CBD and the Sierra Club announced last week the filing of a virtually identical lawsuit challenging BLM’s auction of an additional 17,000 acres in Monterey, San Benito and Fresno counties in December 2012.

For more information regarding California fracking issues, please contact Eric Adair. Follow Eric on Twitter:

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