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Appeals Court Tosses Drilling Ban in Allegheny Forest

A federal appeals court ruled Tuesday that the U.S. Forest Service (USFS) can't refuse to give operators permission to drill in the Allegheny National Forest while it conducts an environmental impact study there.

The three-judge panel at the Third U.S. Circuit Court of Appeals upheld a ruling made last year by U.S. District Judge Sean McLaughlin that Notice to Proceed (NTP) documents -- which the USFS once issued to operators within 60 days of a request to begin drilling in the forest -- don't qualify as drilling permits.

"The [Forest] Service does not have the broad authority it claims over private mineral rights owners' access to surface lands," Judges Julio Fuentes, Michael Chagares and Jane Richards Roth said in their 38-page ruling. "Its special use regulations do not apply to outstanding rights and the limited regulatory scheme applicable to the vast majority of reserved rights in the [Allegheny National Forest] does not impose a permit requirement."

Industry officials praised the court's decision.

"We're very pleased with the ruling," Louis D'Amico, president of the Pennsylvania Independent Oil and Gas Association (PIOGA), told NGI's Shale Daily on Wednesday. "It's very important for a number of reasons for the industry, but it goes beyond that. Frankly it's a property rights issue that should be forthright for all Americans. They need to take a look at what their government is doing."

PIOGA was one of several appellees in the case, also known as Minard Run Oil Company v. United States Forest Service et al. Other appellees include the Allegheny Forest Alliance and Warren County, PA. Appellants in the case include the Sierra Club, the Allegheny Defense Project and Forest Service Employees for Environmental Ethics.

Last July attorneys for the oil and gas industry filed a complaint in U.S. District Court for the Western District of Pennsylvania, asking McLaughlin to find the USFS in contempt for refusing to follow his Dec. 15, 2009 order to process requests by operators to drill in the forest (see Shale Daily, July 21). The plaintiffs also accused the USFS of violating a 1980 federal law on surface landowner rights.

In its ruling the appeals court also predicted that oil and gas companies -- many of whom have filed their own separate lawsuits against the USFS -- would likely prevail, and disagreed with the USFS's argument that the impasse would cause temporary economic losses that were insufficient to establish irreparable harm.

"The District Court found that the [Forest] Service's moratorium on new drilling irreparably harmed appellees because it infringed their property rights and threatened bankruptcy or closure for some businesses," the appeals court said.

D'Amico said the economic toll against the operators totaled "literally millions of dollars."

"With the timing of high oil prices, this would have been a good time for the industry to be operating in the Allegheny National Forest and recovering oil supplies there," D'Amico said. "Unfortunately the drilling was prevented and the operators and producers couldn't take advantage of the [high] pricing of oil."

According to the court documents, other operators that have sued the USFS include Duhring Resource Co., Catalyst Energy Inc. and Seneca Resources Corp.

McLauglin ruled in 2009 that the USFS could not require oil and gas companies to prepare an environmental impact statement on their activities in the forest, nor could the USFS implement a forestwide drilling ban there. But in June a forest supervisor told SWEPI LP -- a Shell Oil Co. affiliate and a PIOGA member -- that the company did not have the right to withdraw groundwater from the forest for hydraulic fracturing at three nearby natural gas wells.

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