OIL AND GAS

Federal court rejects industry challenge of BLM leasing, but larger issues unresolved

A federal appeals court in Denver yesterday dismissed an oil and natural gas industry appeal that argued the Bureau of Land Management cannot indefinitely withhold issuing leases to companies that have submitted winning bids.

But the 10th U.S. Circuit Court of Appeals did not address the central issue targeted by industry that the Mineral Leasing Act requires BLM to issue leases within 60 days of payment by a successful bidder.

Instead, the three-judge appeals panel simply ruled yesterday in a 25-page decision that it does not have jurisdiction to decide the issue until after an administrative appeal before the Interior Board of Land Appeals is resolved.

"The district court recognized that the Interior Department, not the energy industry, holds the reins when it comes to deciding whether and how much to drill on public lands," said Melanie Kay, a Denver-based Earthjustice attorney representing the conservation groups that intervened in the case.

While environmentalists were pleased with the ruling, industry leaders say the issue is far from resolved.

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The Denver-based Western Energy Alliance in 2010 sued the Interior Department, claiming that BLM was illegally delaying the issuance of 118 leases in Wyoming and Utah that were sold as far back as 2002 but not yet issued. WEA argued that the Mineral Leasing Act requires that leases be issued within 60 days of a winning bid.

U.S. District Judge Nancy Freudenthal in 2011 partially sided with the industry, concluding that BLM must make a decision within 60 days. But Freudenthal also wrote that until BLM actually issues the leases, companies have only a "hope or expectation of a lease, and not a vested right" (Greenwire, June 30, 2011).

The appeal spearheaded by WEA challenged that portion of Freudenthal's ruling.

WEA and others argue that amendments to the Mineral Leasing Act approved by Congress in 1987 clearly directed BLM to issues leases within 60 days of their purchase at auction.

That view has not changed, said Kathleen Sgamma, WEA's vice president of government and public affairs.

"The 10th Circuit relied on obscure jurisdictional principles to avoid ruling on whether a statute that plainly states 'Interior shall issue leases within 60 days' means that Interior actually must issue leases within 60 days after receiving payment," Sgamma said. "The circuit specifically did not rule on the merits of the case but sent it back to BLM to exhaust administrative procedures."

Now it could be years before the issue is resolved in court, said Rebecca Watson, a Denver-based attorney representing WEA in the appeal.

"It was an unsatisfactory result," said Watson, who added that her clients have not decided what to do next. "We thought it was a good opportunity for the court to rule on the meaning and intent of the statute [Mineral Leasing Act], and they chose not to."

Meanwhile, eight of the 118 leases in the original lawsuit remain active, all in Wyoming. The two companies holding those leases -- Nerd Gas Co. LLC and Baseline Minerals Inc. -- joined WEA in the appeal.

Baseline Minerals and Nerd Gas have appealed BLM's decision to reject the leases to the Interior Board of Land Appeals but asked that the appeals be suspended pending the outcome of the appeals court ruling.

Environmentalists, however, have accused the oil and gas industry of attempting to pressure Interior into issuing leases, in some cases before regulators had sufficiently studied the full impacts of drilling on the public lands in question.

Indeed, the appeals court decision acknowledges that the Mineral Leasing Act gives the Interior secretary broad discretion and that the secretary "was not obligated to issue any lease on public lands."

"This is a victory for Wyoming and Utah's beautiful public lands," said Kay, the Earthjustice attorney. "Where the lands are scenic wonders with ecological value, the secretary has the full authority to just say no."

Streater writes from Colorado Springs, Colo.

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