BLM’s Hydraulic Fracturing Rule Applicable to Indian Lands Is Back in Play — For Now

Energy Resources Notes, September 13, 2016
By Stuart R. Butzier

Introduction:

In two articles appearing in Modrall Sperling’s companion newsletter, Energy Resources Notes, we reported first on the substantive provisions of BLM’s March 26, 2014 hydraulic fracturing rule (HF Rule),1 and later on the rule’s preliminary injunction postponement of its effectiveness by a United States District Court in Wyoming.2 In a nutshell, BLM’s HF Rule established a program designed to work in tandem with existing BLM programs for oversight and approvals of oil and gas drilling on federal and Indian lands. The HF Rule requires operators to make substantial public disclosures to BLM officials in advance of HF operations as well as after completion (including, among many other things, identifications of chemicals and sources of water to be used in the operations), to diligently assess the casing of wells and address inadequate casings before commencing operations, to monitor operations and carefully manage and handle HF flowback fluids, and to do extensive monitoring of HF operations, take corrective actions when needed, and provide extensive reports (utilizing the widely used FracFocus source) and certifications to BLM during and after the completion of HF operations.

This article provides an update on the current status of the HF Rule and the litigation and congressional activity it has spawned, together with a more focused discussion of the HF Rule’s applicability to Indian lands and bases therefor, as well as the tribal consultation and coordination processes that were both employed in the development of the Rule itself and contemplated in the wake of the Rule’s adoption.

BLM’s HF Rule Struck Down by Federal Judge, But No Longer Enjoined During Appeal:

After postponing the HF Rule in June of 2015,3 and enjoining it in September of 2015,4 the federal court in Wyoming ultimately struck down the HF Rule at the behest of various industry, state and tribal parties, rejecting BLM’s asserted authority for the fracking rule in federal and Indian lands leasing statutes. According to the court’s June 21, 2016 decision on the merits, the federal and Indian lands leasing statutes do not delegate to BLM a broad grant of authority to regulate for the protection of ground water resources or other environmental values, and instead provide BLM authority over oil and gas drilling operations only to the extent of protecting petroleum resources, including protection of those resources against water incursions.5

In late June 2016, the federal government appealed on the merits to the Tenth Circuit Court of Appeals, followed soon thereafter by separate appeals and interventions by various environmental groups. These parties, which had also appealed the trial court’s earlier injunction of the HF Rule, urged the Tenth Circuit to reinstate the HF Rule by lifting the injunction. The Tenth Circuit granted their request on July 13, 2016, resulting in the HF Rule’s reinstatement during the pendency of the continuing appeal on the merits of whether BLM had authority to adopt it in the first place.6

Application of the HF Rule to Indian Lands:

The HF Rule applies to oil and gas operations on federal public lands, as well as operations on Indian lands. BLM derives what authority it has over Indian oil and gas leases on trust lands from a delegation from the Secretary of the Department of the Interior (DOI),7 who, in turn derives her regulatory authority from three federal statutes: an Act of March 3, 1909,8 the Indian Mineral Leasing Act,9 and the Indian Mineral Development Act.10 Pursuant to statutory exclusions, however, the Secretary’s regulatory authority does not extend to Indian oil and gas leases on the Crow Reservation in Montana, the ceded lands of the Shoshone Reservation in Wyoming, the Osage Reservation in Oklahoma, and the coal and asphalt lands of the Choctaw and Chickasaw Tribes in Oklahoma. The Bureau of Indian Affairs’ (BIA) regulations recognize the application of BLM’s leasing regulations appearing at 43 CFR Part 3160 to oil and gas operations on trust and restricted Indian lands, both tribally and individually owned.11

During the comment period leading to adoption of the HF Rule, which largely—though not exclusively—is designed to protect water quality, several commentators questioned BLM’s authority over surface and groundwater given that States and Tribes generally administer and regulate rights to use surface and groundwater. In response, BLM agreed with the observations of these commenters, but nonetheless asserted (and continues to assert) that its authority over oil and gas operations includes, as a “key component of BLM’s jurisdiction and responsibility,” the protection of water zones during well drilling and hydraulic fracturing.12

Tribal Consultation Processes Leading Up to the HF Rule:

According to BLM’s final rulemaking publication, BLM attaches great importance to tribal consultation. Pursuant to statutory responsibilities and executive policies, including DOI’s Tribal Consultation Policy13 and Executive Order 13175, BLM initiated government-to-government consultation with Tribes on the proposed rule and offered to hold follow-up consultation meetings with any Tribe that expressed a desire to have an individual meeting. BLM recites that it held several regional tribal consultation meetings around the West, Midwest and Southwest, to which 175 tribal entities were invited, resulting in substantive participation in regional meetings by 27 Tribes on such issues as the applicability of tribal laws, the validation of water sources, inspection and enforcement issues, wellbore integrity proposals, and water management. Individual consultations occurred as well, in addition to meetings at the National Congress of American Indian Conferences in Lincoln, Nebraska and New Town, North Dakota.

Some comments received argued that, rather than adopt a single HF Rule applicable to both federal and Indian lands, certain differences in the administration of leases on federal versus Indian lands justified different regulatory treatment. Specifically, some argued BLM should promulgate different rules for Indian lands because of BIA’s involvement in cancellation of Indian leases and differing royalty valuation criteria applied for operations on Indian lands. BLM rejected the idea of creating parallel regulations and regulatory personnel within BIA, citing economy of administration as support for fulfilling the Secretary’s trust responsibility.

Other commenters argued that Tribes should be allowed to opt out of the HF Rule, and cited BIA regulations providing for a tribal constitution or charter under the Indian Reorganization Act of 1934 to supersede regulations in 25 CFR Part 211.14 BLM, however, pointed to a proviso in the BIA rule that tribal law may not supersede the requirements of federal statutes applicable to Indian mineral leases, and to the fact that the BIA regulations apply to tribal leases and permits that require the Secretary’s approval.15 BLM also rejected comments to the effect that the HF Rule should become inoperative once a Tribe has demonstrated its regulatory program is sufficient to govern hydraulic fracturing operations, pointing out that the Indian mineral leasing statutes do not authorize tribal primacy. Similar comments urging secretarial delegation to tribal authorities were rejected on essentially the same grounds.

Tribal Consultation Processes Contemplated in the Rule Itself:

According to the BLM’s final rule publication, BLM “will continue its coordination with . . . Tribes to establish or review and strengthen existing agreements related to oil and gas regulation and operations.” BLM stated intent for these coordination efforts will be to “minimize duplication and maximize flexibility” in hopes that new and improved agreements will “reduce regulatory burdens and increase efficiencies” pursuant to the Secretary’s statutory mandate as trustee for Indian lands.16

House Reacts to HF Rule During Appeal:

Attempting to undermine both the HF Rule and the government’s continuation of its appeal on the merits of the Rule to the Tenth Circuit, the House of Representatives on July 13 attached a measure to an annual spending bill for various agencies of the administration including DOI. The White House issued a veto threat that suggests the House’s measure may not have a realistic chance of becoming law.

Take-Away:

Although both opponents and proponents of the HF Rule have scored interim victories, and the preliminary injunction entered by the federal judge in Wyoming has been lifted by the Tenth Circuit, the long-term fate of the HF Rule remains uncertain. The ultimate outcome of the pending appeal will impact the contours of tribal oversight of oil and gas operations on Indian lands, and provide much needed guidance on the extent of BLM jurisdiction afforded by the federal and Indian mineral leasing laws in the areas of oil and gas operations and environmental protection.

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  1. 1. See BLM Publishes New Rule for Hydraulic Fracturing; Oil and Gas Groups Bring Challenge.
  2. 2. See BLM’s Controversial Hydraulic Fracturing Rule is Postponed Nationwide.
  3. 3. See Wyoming, et al. v. U.S. Dep’t of Interior, Cons. Case Nos. 2:15-CV-043-SWS and 2:15-CV-041-SWS, Order Postponing Effective Date of Agency Action (D. Wyo. June 24, 2015).
  4. 4. See id., Order on Mots. For Prelim. Inj. (Sept. 30, 2015).
  5. 5. See id., Order on Pet. for Rev. of Final Agency Action (June 21, 2016); Judgment (June 22, 2016).
  6. 6. Order, State of Wyoming, et al. v. Sierra Club, et al., Case No. 15-8126 (10th Cir. July 13, 2016).
  7. 7. See DOI Departmental Manual (235 DM 1.K).
  8. 8. 25 U.S.C. § 396.
  9. 9. 25 U.S.C. § 396d.
  10. 10. 25 U.S.C. § 2107
  11. 11. See 25 C.F.R. §§ 211.4, 212.4 and 225.4.
  12. 12. 80 Fed. Reg. 16128, 16186 (March 26, 2015).
  13. 13. See Secretarial Order 3317.
  14. 14. See 25 C.F.R. § 211.29.
  15. 15. 80 Fed. Reg. at 16185.
  16. 16. Id. at 16132.

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