As we’ve previously reported, a Wyoming federal court issued a preliminary injunction order last year that temporarily halted the Bureau of Land Management’s (BLM) final rule regulating hydraulic fracturing on public lands.  Since that time, the case has split into two proceedings: the Wyoming court moved forward with conducting a full legal analysis of the BLM’s final rule, while several environmental groups who had intervened in the lawsuit appealed the preliminary injunction order to the Tenth Circuit Court of Appeals.  This week we received some clarity on one of those proceedings, while the other remains pending.

District Court Strikes Down BLM Final Rule

On June 21, the Wyoming court struck down the BLM’s final rule, finding the agency lacked the legal authority to promulgate those regulations.

In his order, Judge Scott Skavdahl premised his opinion on whether Congress delegated requisite authority to the BLM to regulate hydraulic fracturing on public lands, and “not whether hydraulic fracturing is good or bad for the environment or the citizens of the United States.”  Ultimately, Judge Skavdahl held, a federal agency “may not exercise its authority in a manner that is inconsistent with the administrative structure that Congress enacted into law.”

To that end, Judge Skavdahl reviewed each side’s arguments on the application of various statutes under which the BLM claimed as authority for their rulemaking, including Mineral Leasing Act (MLA); the Federal Land Policy and Management Act (FLPMA); the Indian Mineral Leasing Act (IMLA); and the Indian Mineral Development Act (IMDA); among several others.

As to the MLA, the court noted that it authorized the BLM “to prescribe necessary and proper rules and regulations and to do any and all things necessary to carry out and accomplish the purposes of the [the MLA],” one of which was to protect “the petroleum resource from the effects of water incursion and not on protection of water resources themselves.”  Based on that mandate, Judge Skavdahl found, the final rule exceeded the scope of authority under the MLA.

Judge Skavdahl also found that neither the IMLA nor the IMDA delegates any more specific authority over oil and gas drilling operations than the MLA, and eliminated other potential sources of authority by stating that “nothing in FLPMA provides BLM with specific authority to regulate hydraulic fracturing or underground injections of any kind.”

Taking an historical view of the BLM’s regulatory activities, Judge Skavdahl also pointed out that the BLM’s only previous regulation addressing hydraulic fracturing worked to prevent surface disturbance and impose reporting requirements; it did not regulate the fracturing process itself.  And he noted that, prior to its promulgation of the final rule, the BLM took the position that it lacked authority or jurisdiction to regulate hydraulic fracturing.

Over the BLM’s arguments that it could act where no statute expressly prohibited its regulation of hydraulic fracturing on public lands, Judge Skavdahl stated that an agency cannot “presume a delegation of power simply from the absence of an express withholding of power.”  In other words, the fact that Congress did not specifically prohibit the BLM from regulating those activities did not mean that Congress authorized the BLM to regulate them.

Moving Forward

As things stand, it is not immediately apparent what action, if any, will be taken on the currently pending appeal of the Wyoming court’s initial preliminary injunction order.  Earlier, several parties to the appeal argued in favor of dismissing the appeal outright in order to let the Wyoming court conduct its full complete evaluation of the BLM’s final rule; the appeal court denied those requests, and the parties have now exchanged significant briefing on the merits of those issues, although oral arguments have not been scheduled.

In addition, we can now wait for the inevitable appeal of Judge Skavdahl’s opinion and order striking down the BLM’s final rule.  It remains to be seen, however, whether that appeal will be consolidated with the existing appeal of the preliminary injunction, whether the existing appeal will become moot in favor of a new appeal on Judge Skavdahl’s recent order, or whether both appeals will move forward separately.

Mineral Law Blog will continue to monitor and report on these legal challenges to the BLM’s public lands hydraulic fracturing rule as they continue.