Fracking Update - Magistrate Judge Rules that Sale of Fracking Leases Violated NEPA

Center for Biological Diversity v. Bureau of Land Management

__ F.Supp.2d __ (N.D. Cal. 2013)

In the first published case in the State of California concerning hydraulic fracturing, or “fracking,” a Federal Magistrate Judge has ruled that the Bureau of Land Management (“BLM”) did not properly assess the possible risks of hydraulic fracturing before selling four oil and gas leases on federal land. The case offers insights regarding the timing and necessity of BLM’s environmental review under the National Environmental Protection Act (“NEPA”) for projects involving fracking under federal oil and gas leases.

The decision centered on BLM’s preparation of an Environmental Assessment (“EA”) and Finding of No Significant Impact (“FONSI”) in support of the sale of four oil and gas leases covering a total of 2,700 acres of federal land in Monterey and Fresno counties. The EA did not discuss fracking in great detail beyond noting that it was “not relevant to the analysis of impacts . . . because the reasonable foreseeable development scenario anticipates very little (if any) disturbance to the human environment.” BLM believed that it was appropriate to consider a more detailed NEPA review after the lessees applied for drilling permits because analyzing site-specific impacts would be more feasible at that time. BLM’s Decision Record further emphasized that “[a]lthough a lessee generally has the right to develop a lease, BLM retains the authority to require proposals to be relocated or redesigned in such a way as to protect sensitive resources.” Only two of the four leases, however, included a “No Surface Occupancy” (“NSO”) stipulation, which prevents a lessee from using leased land without additional BLM authorization. The other leases did not contain that stipulation. The Center for Biological Diversity and Sierra Club sued, arguing that BLM needed to prepare a more detailed NEPA review before selling all four leases.

The court agreed with BLM, with respect to the NSO leases, that a further NEPA review could wait because the lessees were prohibited from any surface disturbing activities without specific approval from BLM. The NSO leases, therefore, did not constitute an “irretrievable commitment of resources” and did not require NEPA review until such time as the NSO stipulation was removed from the leases. With respect to the non-NSO leases, however, the court found that BLM had passed the “point of commitment” because the government no longer had an absolute ability to prohibit potentially significant impacts on the surface environment. Accordingly, because BLM no longer held a “full range of options for dealing with surface activities after selling the non-ISO leases, BLM was required to conduct a thorough NEPA analysis to determine whether the sale would have a substantial environmental impact.”

BLM further contended that even if the sale of non-ISO leases triggered NEPA review, the EA/FONSI was sufficient to establish that there would be no significant environmental impacts, because historically the leased lands were unproductive, and had not been drilled for wells within the preceding 20 year period. The court rejected the argument because NEPA required BLM to account for all “reasonably foreseeable” possibilities, and the record before BLM indicated that fracking activity in the United States had increased dramatically in recent years. As the court noted, “rather than engaging in this reality by at least considering what impact might result from fracking on the leased lands, whatever its ultimate conclusion, BLM chose simply to ignore it.”

The court declined to grant a remedy for the NEPA violations as part of its ruling, because the issue of remedies had not been briefed by the parties. The court nonetheless noted its broad discretion to formulate equitable relief, including enjoining further surface disturbance pending NEPA review, or invalidating the non-ISO leases. The court ordered the parties to meet and confer to craft an appropriate judgment by April 15, 2013.

The decision comes at the heels of recent efforts by the California Legislature to place a moratorium on fracking until further studies are conducted analyzing the potential risks. (See Fracking Update: Legislature Proposes Fracking Moratorium). Concurrently, California’s Division of Oil, Gas & Geothermal Resources is holding public workshops regarding an early version of proposed “discussion draft” regulations that would allow fracking subject to certain notice, testing, monitoring and reporting requirements. We will continue to provide updates relating to hydraulic fracturing in California as judicial and legislative developments continue to emerge.

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