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Federal Judge Rules BLM Fracking Oversight Unlawful

In a win for the oil and gas industry and its supporters, a federal judge in Wyoming ruled Tuesday that the Department of Interior's (DOI) Bureau of Land Management (BLM) does not have the authority to enforce a rule governing hydraulic fracturing (fracking) on public and tribal lands.

In a 27-page ruling, U.S. District Court Judge Scott Skavdahl disagreed with the BLM's assertion that Congress had given it broad regulatory powers under several federal statutes, and that fracking fell within its "regulatory sphere."

"Congress has not delegated the DOI the authority to regulate fracking," Skavdahl wrote. "The BLM's effort to do so through the fracking rule is in excess of its statutory authority and contrary to law."

The BLM unveiled its rule in March 2015 (see Shale DailyMarch 20, 2015). It would require oil and gas operators to use the FracFocus registry to disclose the chemicals used in fracking and use above-ground tanks to temporarily store produced water, among other things. Four states, two industry groups and an Indian tribe subsequently filed a lawsuit against the rule's enforcement.

Judge: 'No question' Congress did not grant BLM powers

According to Skavdahl, the BLM based its argument that it has the authority to regulate fracking under seven federal laws: the Federal Land Management Act of 1976 (FLPMA); the Mineral Leasing Act of 1920 (MLA); the 1930 Right-of-Way Leasing Act; the Mineral Leasing Act for Acquired Lands; the Federal Oil and Gas Royalty Management Act of 1982; the Indian Mineral Leasing Act of 1938; and the Indian Mineral Development Act of 1982.

But the judge pointed out that Congress enacted the Safe Drinking Water Act (SDWA) in 1974, two years before the FLPMA. The SDWA empowered the U.S. Environmental Protection Agency (EPA) to promulgate rules to protect underground sources of drinking water. Specifically, it established minimum requirements for state underground injection control (UIC) programs.

"For two decades after the enactment of the SDWA, the EPA took the position that fracking was not subject to the UIC program because that technique for enhancing the recovery of natural gas from underground formations did not, by its interpretation, fall within the regulatory definition of 'underground injection,'" Skavdahl said.

The judge said when Congress enacted the Energy Policy (EP) Act of 2005, it included an amendment to the SDWA that revised the definition of "underground injection." In his ruling, Skavdahl wrote "there can be no question that Congress intended to remove fracking operations (not involving diesel fuels) from EPA regulation under the SDWA's UIC program...

"Although the BLM does not claim authority for its fracking rule under the SDWA...it makes no sense to interpret the more general authority granted by the MLA and FLPMA as providing the BLM authority to regulate fracking when Congress has directly spoken to the 'topic at hand' in the 2005 EP Act."

Furthermore, Skavdahl accused the BLM and other federal agencies of increasingly relying on a case from 1984 -- specifically, Chevron USA Inc. v. Natural Res. Def. Council Inc., which requires a court to review whether Congress intended to grant regulatory powers -- and that the government needed to be put in check.

"This case stands in contrast -- Congress has not directed the BLM to enact regulations governing fracking. Indeed, Congress has specifically removed federal authority to regulate the activity, making its intent clear," Skavdahl said. He wrote that if he had ruled in the BLM's favor "there would be no limit to the scope or extent of Congressionally delegated authority BLM has, regardless of topic or subject matter."

Industry, supporters praise ruling

Last September, Skavdahl issued a preliminary injunction against enforcement of the fracking rule (see Shale Daily, Sept. 30, 2015). That decision favored the states of Colorado, North Dakota, Utah and Wyoming; the Ute Indian Tribe of the Uintah and Ouray Reservation; and the Independent Petroleum Association of America (IPAA) and the Western Energy Alliance (WEA). The petitioners had asked Skavdahl to issue a permanent injunction.

"From the beginning, the fracking rule has been a solution in search of a problem," said attorney Mark Barron of Baker & Hostetler LLP, which represented the IPAA and WEA in the case. "Despite independent producers' extraordinary record of safety and environmental stewardship, BLM attempted to promulgate a rule that imposed needless costs on America's small businesses and public treasuries, without any commensurate environmental benefit. We are pleased that the district court recognized such a rule could not be implemented within the bounds of BLM's statutory authority."

WEA’s Kathleen Sgamma, vice president of government and public affairs, said the organization was “overjoyed with the ruling.”

“The judge determined that the federal government lacks the authority to regulate fracking, period,” she said. “He decided exclusively on statutory authority, so there's nothing to remand, no do over. He didn't even rule on our technical Administrative Procedures Act arguments, which we believe are still strong and represent another line of defense if BLM appeals to the circuit court.”

Petroleum Association of Wyoming President Bruce Hinchey said the fracking rule "would have been extremely costly to companies if it had gone in place with companies needing to duplicate information to the state and BLM. [It] would have added unneeded time to the drilling process and costs. We are pleased the court ruled properly and the Obama Administration was not allowed to force an illegal rule on the oil and gas industry."

Sen. Ben Sasse (R-NE) also praised the ruling. "Another day, another decision and another court striking down this runaway administration for unilaterally rewriting another law. Nobody in Nebraska voted to make the DOI a super-legislature. This ruling is an important victory for anyone who wants to protect three separate branches of government."

Separately, Sen. Jim Inhofe (R-OK), chairman of Senate Environment and Public Works Committee, said “time and again the courts are blocking action by the Obama administration that flagrantly goes against the will of Congress and the American people.”

Wyoming Gov. Matt Mead, whose state was the first to regulate fracking, said the BLM rule was an overreach by the federal government. “The court got it right,” he said. “This is of particular importance not only to Wyoming but the country.”

Last March, attorneys for the BLM urged the Tenth Circuit Court of Appeals in Denver to overturn Skavdahl's injunction against the fracking rule (see Shale DailyMarch 22). A coalition of six environmental groups -- the Sierra Club, Earthworks, Western Resource Advocates, Conservation Colorado Education Fund, the Wilderness Society and the Southern Utah Wilderness Alliance -- also urged the injunction be reversed.

The lead case is State of Wyoming v. U.S. Department of the Interior Secretary et al, No. 2:15-CV-00043-SWS. The appellate court cases are State of Wyoming et al v. DOI et al, No. 15-8126, and State of Wyoming et al v. Jewell et al, No. 15-8134.

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