CHAPTER 3 PROCESS AND PRACTICE TIPS FOR BLM STATE DIRECTOR REVIEW OF OIL AND GAS DECISIONS

• Jurisdiction: United States

Challenging and Defending Federal Natural Resource Agency Decisions
(Sep 2016)
CHAPTER 3
PROCESS AND PRACTICE TIPS FOR BLM STATE DIRECTOR REVIEW OF OIL AND GAS DECISIONS¹
Travis D. Bargsten
Physical Scientist
U.S. Bureau of Land Management
Cheyenne, WY
Gregory J. Nibert
Partner
Hinkle Shanor LLP
Roswell, NM
Mary Lynn Bogle
Partner
Hinkle Shanor LLP
Roswell, NM

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TRAVIS D. BARGSTEN is a Physical Scientist with the U.S. Department of the Interior Bureau of Land Management (BLM) in Cheyenne, Wyoming. He received a B.S. from Colorado State University in Forest and Range Management. After serving as an Agroforestry Volunteer for the Peace Corps in the Dominican Republic, he worked as a consulting forester for private landowners in the redwood forests of Central California. He began working for the BLM in Rawlins, Wyoming and then moved to the Wyoming State Office where he now works in the Branch of Fluid Minerals and Lands.

GREGORY J. NIBERT is a partner in Hinkle Shanor LLP and a New Mexico Board of Legal Specialization recognized specialist in Oil and Gas Law. He has been listed in The Best Lawyers in America since 1993, and in Chambers USA America's Leading Lawyers for Business since 2005. Mr. Nibert is a past president of the Independent Petroleum Association of New Mexico and continues to serve on its Board of Directors. He has served as Treasurer and Trustee of the Rocky Mountain Mineral Law Foundation, a Chaves County Commissioner (2007-14), President of the Chaves County Bar Association, and Chair of the Natural Resources Section of the State Bar of New Mexico. He has presented papers and speeches to a number of organizations on oil and gas law topics, including the Rocky Mountain Mineral Law Foundation and the American Association of Professional Landmen. Greg received a Bachelor of Arts degree from the University of New Mexico in 1980 and a Juris Doctor degree, cum laude, from Pepperdine University in 1983. He was Editor in Chief of the Pepperdine Law Review for 1982-83. Greg is a native of Roswell, New Mexico. He and his wife, Carolyn, have two sons, Gregory an attorney in Denver, and Jeff, a fishing guide at Vermejo Park Ranch.

MARY LYNN BOGLE is a partner in the Roswell, New Mexico office of Hinkle Shanor LLP. Prior to joining the firm, Ms. Bogle served as Chief Staff Attorney of the Arizona Court of Appeals, Division One in Phoenix, and as a partner in Losee, Carson, Haas & Carroll in Artesia, New Mexico. Ms. Bogle received her Bachelor of Arts degree from Vanderbilt University and graduated from the University of Arizona College of Law, where she wrote for the Arizona Law Review. Ms. Bogle practices in the areas of general civil litigation and appeals, natural resources litigation, administrative law and appeals, oil and gas law, and public lands law. She is a member of the Chaves County Bar, State Bar of New Mexico and State Bar of Arizona, and has been admitted to practice before the United States District Court for the District of New Mexico, the United States District Court for the District of Arizona, the United States Court of Appeals for the Tenth Circuit, the United States Court of Appeals for the Ninth Circuit, the Arizona Supreme Court, and the New Mexico Supreme Court. Ms. Bogle is active in the community and has served as a Trustee of the Saint Andrews Episcopal School, a Member of the Board of Directors of Eastern New Mexico Medical Center, and as an elder of the Dexter Presbyterian Church. A native of Dexter, New Mexico, Ms. Bogle has been a partner in the firm since 2002.

I. INTRODUCTION:

The Regulations pertinent to federal oil and gas leasing, and exploration, drilling, development and production provide an avenue for any adversely affected party to contest an instruction, order, or decision of an Authorized Officer ("AO") of the Bureau of Land Management ("BLM"). The first avenue available to an aggrieved party is to request an administrative review before the State Director.² A State Director Review ("SDR") can be requested to challenge an AO's decision pertaining to administration of Federal minerals and made pursuant to the regulations.³ The purpose of this paper is to provide an overview of the procedure to challenge an adverse decision to the State Director pertaining to onshore oil and gas operations. This paper includes a discussion of when a decision may be reviewed at the State Director level. Additionally, it contains practical guidance and illuminates potential pit-falls that can jeopardize a party's right to a SDR hearing.

II. FEDERAL AGENCY ACTION:

A. Authorization. Oil and Gas Leases issued by the United States though the Secretary of the Interior, Bureau of Land Management, are authorized by the Mineral Leasing Act,⁴ the Mineral Leasing Act for Acquired Lands⁵ and several other applicable acts in unique

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situations.⁶ In each instance, Congress delegated to the Secretary of the Interior authority to regulate and oversee the administration of the leases. For operations administered by the BLM, the Secretary has created an extensive set of regulations, rules, orders and internal policies to meet her statutory obligations.⁷ The terms of the lease as well as the statutes, regulations, orders and internal policies all provide for the Secretary or her designee to oversee and administer the actions of the lessee in the exploration, drilling, development and production of oil and gas on or attributable to the lease. This oversight and administration results in decisions that may be adverse to the lessee or the lessee may find objectionable. The decisions are generally made by staff, delegated the authority by the Secretary, usually an employee of the BLM known as the Authorized Officer, who is attempting to exercise her authority under the statutes, regulations, and orders. The decisions are subject to scrutiny, and the regulations provide a procedure that an aggrieved party, usually the lessee or operator, may take to challenge the decision or action of the AO.

B. Decision and Appeal to BLM State Director. An adversely affected party may seek SDR from any applicable decision of an AO. Typically, a request for SDR will be handled by the oil and gas staff at the BLM state office under the direction of the appropriate Deputy State Director. Most BLM state directors have delegated the authority for SDRs to the Deputy State Director. A decision giving rise to a petition for SDR may arise in a myriad of contexts, but will most notably be a decision adversely affecting a lessee or operator of a federal oil and gas lease. The BLM also has received requests for SDR from split estate surface owners and conservation/advocacy groups, among others. Requests for SDR may involve BLM decisions on permits for lease operations, such as Applications for Permit to Drill ("APDs") or Sundry Notices, and application of lease terms, stipulations, onshore oil and gas orders, restrictions⁸ and regulations⁹ to these permits. A decision may also arise from a notice to a lessee regarding operations and allegations of noncompliance with lease terms, stipulations, approved permit with conditions of approval, onshore oil and gas orders and/or the BLM's regulations at 43 C.F.R. § 3160 . The BLM's internal policies provide guidance on the agency's procedures to identify compliance issues and the types of notifications that will be delivered to a lessee or operator requiring specific corrective action(s).¹⁰ The decision of the AO requiring corrective

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action(s) may arise in several forms: a verbal warning (issued for inadvertent non-recurring minor violations that can be immediately corrected before the inspector leaves the location), a written Incident of Noncompliance ("EMC"), a written order, or an oral order. Sometimes the importance of a written order may not always be readily apparent. It is critical to carefully review the contents of any communication from the BLM to determine whether the party receiving the communication is adversely affected. If so, and if the recipient wishes to contest the decision, it must timely file a petition for SDR. The petition is filed with the BLM State Director for the area in which the federal lease is located or the AO's action was taken.¹¹

Upon receipt of a decision from the BLM, an adversely affected party may question whether administrative review at the State Director level is required before appealing to the Interior Board of Land Appeals ("IBLA"). The operating regulations provide that "any adversely affected party that contests a violation ... assessment... instruction, order or decision of the authorized officer ... may request an administrative review, before the State Director ...,"¹² In comparison, a party contesting a notice of proposed penalty shall request an administrative review before the State Director.¹³ Despite inclusion of the facially non-obligatory "may" language in Section 3165.3(b), it has consistently been held that administrative review by the State Director is mandatory before appealing to the IBLA.¹⁴ In one instance, the State Director granted an untimely request for administrative review that had been initially appealed to the IBLA and dismissed for not first seeking administrative review.¹⁵ While this may indicate the

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State Director has discretion to conduct an administrative review of an untimely filed petition, this is not a recommended practice, and BLM State Directors have more routinely rejected requests for SDR when untimely filed. An aggrieved party should always file a petition for SDR in the time allowed. When a State Director dismisses a petition for administrative review for being untimely filed and an appeal is sought, the jurisdiction of the IBLA, or the Administrative Law Judge, as the case may be, is limited to determining whether the request was properly dismissed as untimely and to affirm the dismissal if proper.¹⁶ The time limitations are...