CHAPTER 6 THE NEW FRONTIER—OIL AND GAS EXPLORATION, DRILLING, AND PRODUCTION PERMITS
| Jurisdiction | United States |
(Feb 1994)
THE NEW FRONTIER—OIL AND GAS EXPLORATION, DRILLING, AND PRODUCTION PERMITS
Gail L. Wurtzler
Charlie Breer
Davis, Graham & Stubbs
Denver, Colorado
TABLE OF CONTENTS
Page
I. INTRODUCTION
II. EXISTING AND CONTEMPLATED EXPLORATION, DRILLING, AND PRODUCTION PERMIT REQUIREMENTS
A. Federal Permit Requirements
1. Existing Requirements
a. Exploration
b. Drilling
c. Production
2. Changes on the Horizon
a. Proposed Onshore Oil and Gas Order No.1
b. Proposed Onshore Oil and Gas Order No.8
B. State Permit Requirements
1. Existing Requirements in Colorado
a. Exploration
b. Drilling
c. Production
2. Existing Requirements in Wyoming
a. Exploration
b. Drilling
c. Production
3. Existing Requirements in Texas
a. Exploration
b. Drilling
c. Production
4. Changes On The Horizon
a. General
b. Colorado
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C. Local Permit Requirements
1. Existing Requirements
2. Changes on the Horizon
III. LEGAL DISPUTES PRECIPITATED BY ACTION ON PERMIT APPLICATIONS
A. The Focus of Legal Disputes
B. The National Environmental Policy Act
C. The Endangered Species Act
D. Appeals
IV. RECOMMENDATIONS FOR SUCCESS IN THE PERMITTING PROCESS
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I. INTRODUCTION
For decades operators have been required to obtain necessary authorizations before conducting oil and gas operations in the western United States.1 What had been regulatory regimes calculated to ensuring good engineering practices, preventing waste, and protecting correlative rights, however, have evolved into broad-based environmental protection programs, and federal, state, and local agencies are rapidly imposing substantial new permit requirements on the oil and gas industry.2 Moreover, because drilling permit applications typically foretell surface disturbing activities, they have become lightning rods for legal disputes over whether oil and gas activities should be authorized in an area, and if so, under what conditions.3 This paper describes existing and contemplated oil and gas exploration, drilling, and production permit requirements; explores legal underpinnings of disputes that are sometimes precipitated by action on such permits; and recommends a number of steps that may be taken to increase the likelihood of successful and prompt action on permit applications.
II. EXISTING AND CONTEMPLATED EXPLORATION, DRILLING, AND PRODUCTION PERMIT REQUIREMENTS
Oil and gas operations, as a practical matter, are often subject to the jurisdiction of several governmental agencies. For example, oil and gas activities on federal leases are subject to regulation by the Bureau of Land Management ("BLM") and, if the surface is federally-owned and the BLM does not manage it, those activities will also be subject to regulation by the relevant federal surface management agency.4 At the same time, those oil and gas operations may also be subject to state and local regulation.5 This rather inefficient method of regulation, a product of our system of federalism, typically requires an oil and gas operator to have a working understanding of the federal, state, and local requirements discussed below.
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A. Federal Permit Requirements
Oil and gas operations on federal lands are subject to requirements set forth in statutes applicable to federal oil and gas leases, federal actions, and/or federal lands. Unlike other federal statutory schemes, however, those statutes relating to development of the federal government's minerals provide few express standards or criteria to be satisfied by lessees. Rather, the establishment of such standards or criteria has been delegated to the surface management agencies such as the BLM, the United States Forest Service (the "Forest Service") and, for special lands like Department of Defense holdings, the federal agencies with jurisdiction over those lands.6 Regulations promulgated by these agencies address all aspects of oil and gas operations from exploration of unleased lands to abandonment of wells reaching the end of their productive lives. In addition, other more detailed requirements on particular activities are imposed via Onshore Oil and Gas Orders and Notices to Lessees issued by the BLM.7 As a result of this regulatory structure, an oil and gas company, if it is to operate on federal lands, must have a thorough knowledge of the regulations, Onshore Oil and Gas Orders, and Notices to Lessees.
1. Existing Requirements
a. Exploration
Oil and gas geophysical operations on federal lands require prior federal authorization. An oil and gas geophysical operation is defined as an activity relating to the search for oil or gas which "requires the physical presence upon the lands and which may result in damage to the lands or the resources located thereon."8 Such activities include geophysical operations themselves, construction of roads or trails, and cross-country transit of vehicles. Core drilling for subsurface geologic information and drilling for oil or gas are not considered to be geophysical exploration under the regulations, but instead, are authorized only upon the issuance of an oil and gas lease and approval of an Application for a Permit to Drill ("APD").9
BLM authorization must be obtained for oil and gas geophysical operations on public lands, the surface of which the BLM administers, and such operations which are conducted under the rights granted by any federal oil and gas lease, except if the lease is on lands where the Forest
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Service administers the surface.10 In addition, geophysical operations on unleased lands under the jurisdiction of the Department of Defense require the authorization of that department.11
Under current regulations, BLM authorization is not required for operations conducted on private surface overlying public lands unless the operations are conducted by a lessee under the rights granted by a federal oil and gas lease.12 Authorization is also not required for "casual use."13 Casual use is defined as "activities that involve practices which do not ordinarily lead to any appreciable disturbance or damage to lands, resources and improvements."14 Under this definition, activities involving explosives, use of heavy equipment, or off-road travel are not casual use and require authorization. Travel over established roads or trails, however, is considered casual use.
The procedures for obtaining BLM authorization are set forth in 43 C.F.R. Part 3150 (1992). Different procedures apply depending upon the location of the area to be explored.
For exploration outside of Alaska, except on Department of Defense lands, companies wishing to conduct geophysical operations must file a Notice of Intent to Conduct Oil and Gas Exploration Operations with the District Manager of the BLM office with jurisdiction over the lands to be explored.15 The BLM is required to act promptly, and within five working days of the filing of the Notice, the BLM must process it and notify the operator of the practices and procedures to be followed. If that schedule cannot be met, the BLM authorized officer must notify the operator of the delay, the reason for it, and the date when BLM processing will be complete.16
When the exploration operation is concluded, the operator must file a Notice of Completion of Oil and Gas Exploration Operations with the BLM District Manager. Within 30 days after that filing, the BLM authorized officer must advise the operator whether any additional rehabilitation of the lands is required and specify the nature and extent of actions to be taken.17
For exploration in Alaska (other than in the Arctic National Wildlife Refuge), or exploration on unleased Department of Defense lands where the Department has referred an application for exploration to the BLM, the procedures and requirements are more involved.
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Companies desiring to conduct geophysical exploration operations must file an application for an oil and gas exploration permit, together with a $25 nonrefundable filing fee, with the District Manager of the BLM office having jurisdiction over the lands.18 The application must include: the applicant's name and address; the operator's name and address; the contractor's name and address; a description of the lands involved including a map or overlay of the lands to be entered and affected; the period of time when operations will be conducted; and a plan for conducting the exploration operations.19
The regulations establish a time period in which the BLM authorized officer must act, but it is longer than the period provided for non-Alaska or non-Defense lands. Unless compliance with requirements of the National Environmental Policy Act ("NEPA")20 or other statutes requires a longer time, the BLM authorized officer must act on each application for exploration within 90 calendar days of its filing.21 The applicant must be provided written notice of any delays in processing.
The geophysical exploration permit will include terms and conditions "deemed necessary to protect values, mineral resources, and non-mineral resources."22 These permits are valid for one year following their effective date and may be renewed for a one-year period upon application and, if applicable, payment of the $25 filing fee.23
The permittee is required to provide all data and information it obtains through its exploration work to the BLM.24 The BLM may not release that information until a time when release, in the opinion of the BLM authorized officer, will not adversely affect the permittee's competitive position.25 In addition, within 30 days of completion of the work the permittee is required to submit a completion report to the BLM. That report must include: a description of all work performed; charts, maps, or plats depicting the areas in which the...
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