CHAPTER 3 ACCESS TO FEDERAL OIL AND GAS ON PUBLIC LANDS

• Jurisdiction: United States

Surface Use for Mineral Development in the New West
(Feb 2008)
CHAPTER 3
ACCESS TO FEDERAL OIL AND GAS ON PUBLIC LANDS
Karan L. Dunnigan ¹
Office of the Solicitor
Billings, Montana
Holly C. Meyer
Office of the Solicitor
Billings, Montana

I. INTRODUCTION

The Mineral Lands Leasing Act (MLA), as amended,² authorizes the Secretary (Secretary) of the Interior to lease rights to extract Federal minerals, including oil and gas.³ Although a lease provides the lessee with the exclusive right, under its terms, to explore for and to produce oil and gas, that right is subject to regulation by the Secretary.⁴ Moreover, the Secretary has broad authority to include in leases terms and conditions, including stipulations, he deems necessary for the public interest.⁵

The Secretary delegated to the Bureau of Land Management (BLM) his authority to manage oil and gas exploration and development on federal leases. As the Secretary's delegee, BLM manages 258 million acres of public land and 700 million acres of subsurface mineral estate.⁶ BLM administers over 48,000 onshore oil and gas leases, of which nearly 23,000 are currently producing.⁷ The 77,000 Federal onshore oil and gas wells account for eleven percent of the Nation's natural gas production and five percent of domestic oil production.⁸ For Fiscal Years 2001 through 2006, royalty values exceeded nearly $12 billion.⁹

This paper will explore recent legislative, regulatory, and judicial decisions which affect a lessee's right to access public lands to explore for and to produce oil and gas. First, we will briefly describe the Energy Policy Act of 2005 and the BLM's initiatives to improve the leasing and development process. Next, we will discuss the staged decision making process that BLM engages in (1) to determine which lands will be made available for leasing and what conditions and stipulations will be attached to a lease, (2) to offer

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and award lease rights on particular parcels of land, and (3) to grant permission for surface-disturbing activities. Then we will discuss the legal implications of BLM's staged decision making process, particularly as the process relates to compliance with the National Environmental Policy Act, the Endangered Species Act, and the National Historic Preservation Act. Finally, we will address new legal challenges to oil and gas leasing and development.

II. LEGISLATIVE DEVELOPMENTS

In the late summer of 2005, Congress passed and President George W. Bush signed the Energy Policy Act of 2005 (EP Act 2005 or Act).¹⁰ The straightforward stated purpose of the Act, "to ensure jobs for our future with secure, affordable, and reliable energy," belied EPAct 2005's broad scope and range. Provisions of EPAct 2005 require several federal agencies to work independently and together to accomplish mandates that encourage energy efficiency and conservation, promote alternative and renewable energy sources, reduce dependence on foreign sources of energy, and facilitate increased production of domestic oil and natural gas.

As managers and administrators of mineral resources on public lands, the BLM and MMS play central roles in implementing EPAct 2005's provisions and policy mandates with respect to oil and gas production. Several of the nearly 90 sections requiring affirmative action by a DOI agency will impact access to federally managed oil and gas resources. For example, EPAct 2005 required BLM to streamline APD processing, expand its inventory and analysis of onshore oil and gas resources, and transferred administration of certain petroleum reserves to the DOI. In response, DOI recently published two important documents: an inventory of onshore federal oil and gas resources, including an analysis of restraints on access to said resources; and a revised Onshore Order No. 1, both discussed below.

III. BLM INITIATIVES

A. EPCA I and EPCA 2

1. EPCA I

In the Energy Policy and Conservation Act Amendments of 2000, P.L. 106-469 §604, Congress directed the Secretaries of Interior, Agriculture and Energy, to identify onshore oil and gas resources under federal ownership and evaluate the nature and extent of limitations to the development of those resources. In May of 2001, President Bush's National Energy Policy directed that the onshore resource inventory be expedited. The 2001 National Energy Policy further required reassessment and modification of constraints to federal oil and gas leasing. The resulting inventory and analysis, "Scientific Inventory of Onshore Federal Lands' Oil and Gas Resources and Reserves and the Extent and Nature of Restrictions or Impediments to Their Development" (EPCA I), was released on January 16, 2003.

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EPCA I inventoried energy resources located in five major geologic basins in the Interior West: the Paradox/San Juan Basins in Colorado, Utah and New Mexico; the Uinta/Piceance Basins in Colorado and Utah; the Greater Green River Basin in Wyoming, Colorado and Utah; the Powder River Basin in Montana and Wyoming; and the Montana Thrust Belt in Montana. The five basins encompass nearly 104 million acres, of which 59 million acres are managed by the federal government. The EPCA I inventory included lands managed by all federal agencies as well as privately owned lands lying above federally owned subsurface minerals.

EPCA I's analysis of constraints on development took a two-step approach in evaluating factors affecting access to oil and gas resources on federal lands. First, the study attempted to determine whether lands were "open" or "closed" to leasing. Second, the study analyzed the extent to which lease stipulations impinged on access to "open" lands. To this end, EPCA I considered the impact of approximately 1,000 different lease stipulations in ten categories. To focus the analysis of constraints on oil and gas development, the inventory evaluated the extent of public lands (1) in which leasing is permitted under standard stipulations, (2) in which leasing is permitted with increasing limitations on access, primarily seasonal occupancy restrictions, and (3) in which oil and gas leasing is prohibited.

Based on the inventory and analysis of constraints discussed above, EPCA I concluded that approximately 23.1 million acres, or 39% of the Federal land in the five basins was available for oil and gas leasing with standard lease stipulations. Approximately 15.2 million acres, or 25% of the Federal land was available for leasing with restrictions on oil and gas operations beyond standard lease stipulations. Finally, EPCA I determined that approximately 21.2 million acres, or 36% of the Federal land in the five basins was not available for leasing.

2. EPCA II

Section 364 of EPAct 2005 expanded the inventory requirements of EPCA. The completed inventory, "Scientific Inventory of Onshore Federal Lands' Oil and Gas Resources and the Extent and Nature of Restrictions or Impediments to Their Development - Phase II Cummulative Inventory" (EPCA II), supercedes EPCA I. EPCA II covers all five areas included in EPCA I, as well as six additional areas: Northern Alaska (the National Petroleum Reserve- Alaska and the Arctic National Wildlife Refuge 1002 area only); the Wyoming Thrust Belt; Denver Basin; Appalachian Basin; Black Warrior Basin; and the Florida Peninsula. The EPCA II area spans 295 million acres, 99.2 million of which are Federally owned.

Initially, EPCA II built upon the EPCA I inventory to determine and report cumulative oil and gas statistics for the 11 basins. Undeveloped oil resources underlying the 99.2 million acres of Federal lands studied totals approximately 21.2 billion barrels, or 20.6 billion barrels of undiscovered technically recoverable resources and 593 million barrels of reserves growth. Undeveloped gas reserves underlying Federal lands in the

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EPCA II study area comprises 186.9 trillion cubic feet, or 181.9 trillion cubic feet of undiscovered technically recoverable resources and 4.98 trillion cubic feet of reserves growth. Total proved reserves under the Federal lands in the 11 basins total 444 million barrels of oil and 26.3 trillion cubic feet of natural gas.

Next, EPCA II provided a basin-specific analysis of the extent and nature of limitations to the development of Federal onshore oil and gas resources, focusing on lease stipulations and conditions of approval. EPCA II used the same methodology as EPCA I, identifying "open" and "closed" federal lands, and the degree to which federal regulations impact access to "open" lands. To this end, EPCA II analyzed the impacts of approximately 2,130 individual lease stipulations and exceptions to stipulations granted only after an on-site review of a specific project. The Phase II inventory also identified a total of 175 unique conditions of approval, in nine categories, and evaluated their effects on oil and gas development.

In general, lease stipulations and conditions of approval catalogued by EPCA II attempt to mitigate or address a dozen issues that directly or indirectly impact Federal land accessibility for oil and gas development: National Environmental Policy Act (NEPA) compliance, Engangered Species Act (ESA) and sensitive habitat concerns, roadless areas, tribal consultation, National Historic Preservation Act (NHPA) issues, conflicts with coal and other mineral development, visual resources, air quality, clean water and watershed impacts, infrastructure concerns, timeliness of processing drilling applications, and seasonal or topographic considerations unique to each basin. EPCA II includes a series of informative tables that outline specific concerns in each of the basins, as identified by actual BLM offices.¹¹

In light of the direct and indirect impacts to access described above, EPCA II concluded that approximately 24 percent of the Federal land in the areas studied, or 23.8 million acres, is accessible under standard lease terms. This represents a decrease from the...