Wyoming Federal Judge Strikes Down BLM Hydraulic Fracturing Rule, Sides With States and Industry
Author:WINTIN2016 Browsing times:3347 Date:2016-07-01

OnJune 21, 2016, the U.S. District Court for the District of Wyomingstruckdown the U.S. Bureau of Land Management’s (BLM’s) hydraulicfracturing regulations, finding that BLM “lacked Congressional authority topromulgate the regulations.” This decision is a win for industry and states’rights, setting aside a federal rule that is unnecessarily duplicative,burdensome and beyond the scope of BLM’s statutory authority.


Thisis yet another setback for the Obama Administration’s second term regulatorypush, as previous industry challenges have resulted in the stay of other majornew regulatory programs, including EPA’s Clean Power Plan andthe Clean Water Act jurisdictional rule. The districtcourt’s decision is just one of several recent examples where federal courtshave rejected the Administration’s attempts to assert itself (throughregulatory action or enforcement action) on the basis of authority inferredfrom silence in federal enabling statutes.


Recently,the U.S. District Court for the Eastern District of Louisiana dismissed acriminal enforcement action brought by the Bureau of Safety and EnvironmentalEnforcement (BSEE) against offshore contractors involved in the Black Elkexplosion, finding that BSEE lacked authority under the Outer Continental ShelfLands Act (OCSLA) to impose criminal penalties against independent contractorson the Outer Continental Shelf.


RegulatoryBackground


Thedecision from the federal district court in Wyoming is the latest stumblingblock for BLM in its effort to put in place federal regulations applicable tooil and gas activities performed on federal and Indian lands. BLM firstproposed the hydraulic fracturing rule in May 2012. After receiving over170,000 public comments, BLM re-proposed the rule in May 2013 citing a need for“further improvements and clarifications.” On March 20, 2015, BLM finalized thenew hydraulic fracturing regulations, with an effective date of June 24, 2015.


Theday the BLM rule was released, several industry groups filed a petition forreview of the BLM’s final agency action in the federal District Court inWyoming. Shortly thereafter, Wyoming, Colorado, North Dakota and Utah joinedthe lawsuit in opposition of the BLM rule. On June 23, 2015, just one daybefore the rule was to take effect, U.S. District Judge Scott W. Skavdahlpostponed the effective date of the rule as he considered a preliminaryjunction motion.


OnSeptember 30, 2015, Judge Skavdahl granted the motion for preliminary injunction,barring BLM from enforcing the rules. In a signal to his eventual finaldecision, Judge Skavdahl concluded that industry and states were likely tosucceed in their challenge because the court doubted that Congress had grantedor delegated BLM the authority to regulate hydraulic fracturing.


Federal CourtStrikes Down the BLM Rule


AsJudge Skavdahl noted in his decision, “[a] precondition to deference underChevron is a congressional delegation of administrative authority."Therefore, Judge Skavdahl first considered whether BLM acted within the scopeof its congressionally-delegated authority in promulgating the BLM hydraulicfracturing rule.


BLMcited its “broad authority” to regulate oil and gas operations and hydraulicfracturing under several statutes, including the Federal Land Policy andManagement Act of 1976 (FLPMA); the Mineral Leasing Act of 1920 (MLA); theIndian Mineral Leasing Act of 1938 (IMLA),; and the Indian Mineral DevelopmentAct of 1982 (IMDA). The court disagreed, noting that “nothing in FLPMA providesBLM with specific authority to regulate hydraulic fracturing or undergroundinjections of any kind; rather, FLPMA primarily establishes congressionalpolicy that the Secretary manage the public lands under principles of multipleuse and sustained yield. At its core, FLPMA is a land use planning statute.”


Withrespect to the MLA, Judge Skavdahl found that there was no broad authority toregulate protection of the environment contained in the statute and that theMLA “requires only that certain, specific lease provisions appear in allfederal oil and gas leases for the safety and welfare of miners and preventionof undue waste, and to insure the sale of mined minerals to the United Statesand the public at reasonable prices.” The court was also unable to find anyrelevant authority in the IMLA or IMDA.


Judge Skavdahl next considered the impact ofthe hydraulic fracturing-specific legislation contained in the Safe DrinkingWater Act (SDWA) and the Energy Policy Act of 2005 on BLM’s potential authorityunder the FLPMA or MLA. In doing so, Judge Skavdahl discussed that it was theU.S. Environmental Protection Agency (EPA), not BLM, in which Congress vestedthe regulatory authority “for environmental protection of underground watersources.”


JudgeSkavdahl cited the SDWA as the statute establishing a regulatory program“specifically for the protection of underground sources of drinking water.”Judge Skavdahl revisited the long, complicated history of the SDWA andhydraulic fracturing.


Since1974, the SDWA has prohibited “any underground injection” without a permit andhas required EPA to oversee the state’s development of underground injectioncontrol (UIC) programs. The EPA took the position for the first twenty years ofthe SDWA that the hydraulic fracturing process was not subject to the UICprogram because the process was not “underground injection.” In 1997 amidst alegal challenge of Alabama’s UIC program, the Eleventh Circuit rejected EPA’sposition on the SDWA’s applicability to hydraulic fracturing, concluding that“the unambiguous language of the [SDWA] made clear that Congress intended forthe EPA to regulate all underground injection under the UIC programs, and theprocess of hydraulic fracturing obviously fell within the plain meaning of thestatutory definition of ‘underground injection.’”


WhenCongress enacted the Energy Policy Act of 2005, it included an amendmentspecifically excluding “hydraulic fracturing (other than with diesel fuels)”from the definition of “underground injection.” Judge Skavdahl concluded thatthe removal of EPA’s regulatory authority over hydraulic fracturing in the 2005Energy Policy Act also precluded BLM from regulating the process. JudgeSkavdahl noted that “it makes no sense to interpret the more general authoritygranted by the MLA and FLPMA as providing the BLM authority to regulatefracking when Congress has directly spoken to the ‘topic at hand’ in the 2005Energy Policy Act.”


BLMargued that there was no language in the SDWA or Energy Policy Act of 2005 thatexpressly prohibited BLM from regulating underground injection under the FLPMAor MLA. Judge Skavdahl disagreed, noting that “a court does not presume adelegation of power simply from the absence of an express withholding ofpower.” citing Chamber of Commerce of U.S. v. NLRB, 721 F.3d 152, 160 (4th Cir.2013). Judge Skavdahl characterized BLM’s position as making an “end-run aroundthe 2005 Energy Policy Act,” discussing further that:


“Congresshas not directed the BLM to enact regulations governing hydraulic fracturing.Indeed, Congress has expressly removed federal agency authority to regulate theactivity, making its intent clear. If this Court were to accept Respondents'and Intervenor- Respondents' argument, there would be no limit to the scope orextent of Congressionally delegated authority BLM has, regardless of topic orsubject matter.”


OnJune 24, 2016, BLM appealed Judge Skavdahl’s decision to the U.S. Court ofAppeals for the Tenth Circuit, signaling a long battle ahead. Even if the TenthCircuit were to reverse Judge Skavdahl’s decision, legal challenges stillremain for BLM as the district court has yet to consider the industry and statepetitioner challenges under the Administrative Procedure Act.