OIL AND GAS:

DOJ is urged to seek stay of Wyo. ruling on NEPA waivers

Top Democrats on the House Natural Resources Committee asked the Justice Department today seek a stay of a Wyoming judge's decision to toss the Interior Department's oil and gas reforms.

Reps. Ed Markey (D-Mass.) and Rush Holt (D-N.J.) said U.S. District Judge Nancy Freudenthal's injunction last month of Interior's reforms to using categorical exclusions, or CXs, for oil and gas wells could imperil human health, archaeological sites, endangered species and their habitats.

Following the ruling, the Bureau of Land Management last month ordered field offices to restore the George W. Bush administration's guidance on categorical exclusions. But today BLM announced it would reissue reforms to clarify its use of CXs through a formal rulemaking and public comment process (E&E Daily, Sept. 9).

BLM Deputy Director Mike Pool told Greenwire that the rulemaking process could take 12 to 18 months.

"We are concerned that returning to the Bush administration policy for implementing [CXs] while the BLM is promulgating these new regulations could lead to more litigation and significant additional environmental harm in the interim," Markey and Holt said in a letter to Assistant Attorney General Ignacia Moreno.

The lawmakers cited a 2009 Government Accountability Office report that found BLM had inappropriately applied CXs from 2006 to 2008, leading to ozone violations at three field offices and habitat fragmentation that has harmed antelope, elk and other wildlife populations.

The report highlighted uncertainties among BLM personnel over whether they were supposed to screen drilling proposals for impacts known as "extraordinary circumstances" before issuing a CX, as well as the level of public disclosure.

The May 2010 memo from BLM Director Bob Abbey clarified that extraordinary circumstances reviews were required. It also modified BLM's implementation of two out of the five CXs written into law by the 2005 Energy Policy Act.

"An appeal and stay of the lower court ruling would eliminate any uncertainty while the BLM completes its rulemaking," the lawmakers wrote.

The proposal was panned by an oil and gas industry official, who said Freudenthal's ruling sent a clear message that BLM's overhaul of CXs negatively affected drillers on public lands in the West.

"It'd be ridiculous to spend taxpayer money when the judge gave them a clear path for implementing a new policy and BLM itself has said, 'Yes, we're going to go out to do a notice and public comment,'" said Kathleen Sgamma, director of government and public affairs for the Denver-based Western Energy Alliance, the group that sued BLM to overturn the CX memo.

"The bigger problem is once you've gone through that extraordinary circumstances review, then the next step could be to do NEPA," she said.

The 2005 law made it clear that NEPA reviews are unnecessary if the five CXs are met, Sgamma said.

Dueling testimony

BLM's Pool said the timeline for conducting extraordinary circumstances reviews varies depending on the quality of prior NEPA reviews for an oil and gas project. GAO found that CXs were granted for about a fourth of wells permitted during the three years studied. Pool said CXs have been granted about 18 percent of the time since the Obama reforms were implemented.

In testimony to lawmakers this morning, Pool said onshore oil production from public lands increased by 5 million barrels in fiscal 2010 from the previous year. The 114 million barrels of oil production from BLM lands was the most since 1997.

He also cited a July oil and gas lease sale in the agency's Montana and Dakotas office that drew more than $66 million in winning bids, the second most successful sale in BLM history and an indication that industry interest in public minerals is high, he said. Many of the parcels were located near the prolific Bakken Shale.

But industry witnesses at the Energy and Minerals Subcommittee hearing emphasized the important role CXs play in allowing timely permitting of drilling on public lands.

Randy Bolles, manager of regulatory affairs for Oklahoma-based Devon Energy's Western division, said the expedited reviews are an important consideration at his company over whether to drill on public lands -- where royalties go to the federal Treasury -- or on state or private lands, where permitting timelines are usually much shorter.

As an example, he cited 75 CXs his company received from the Rawlins, Wyo., field office.

"There is major competition to deploy capital," he said. "Burdensome regulations have an impact."

Republicans on the panel also questioned the need to add more scrutiny to the issuance of CXs.

Subcommittee Chairman Doug Lamborn (R-Colo.) said the Obama rules could halt the use of CXs. He questioned why the administration would encourage the use of CXs for Recovery Act projects but not for oil and gas drilling.

But taking a longer look was warranted given the environmental harm that resulted, said Matt Garrington, deputy director of the left-leaning Checks and Balances Project.

"The Bush administration fundamentally changed the categorical exclusion from a minor bureaucratic tool to an enabler of reckless development of public lands," he said.

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