Tenth Circuit Overturns BLM’s Mancos Shale Oil and Gas APD Approvals

Dine’ Citizens Against Ruining our Environment, an environmental non-governmental organization (NGO) and other environmental groups (collectively, Dine’ CARE), brought suit against the United States Bureau of Land Management (BLM) and the Secretary of the Interior, challenging the BLM’s compliance with the National Environmental Policy Act (NEPA) and the National Historic Preservation Act (NHPA).  On May 7, 2019, a unanimous three-judge panel of the United States Court of Appeals for the Tenth Circuit ruled that the BLM violated the NEPA when it failed to consider the cumulative impacts of Mancos Shale horizontal well development in the San Juan Basin in northwestern New Mexico. Dine’ Citizens Against Ruining Our Environment et al. v. Bernhardt, Tenth Circuit Cause No. 18-2089, Slip Op. (10th Cir., May 7, 2019).

The San Juan Basin’s Mancos Shale Development

For decades, the San Juan Basin (Basin) in northwestern New Mexico has been the target of multiple, productive oil and gas development plays. Since the 1950s, these development programs have included hydraulic fracturing. In part to facilitate and manage further oil and gas operations in the Basin, after a three year process beginning in 2000, the BLM completed a newly proposed Resource Management Plan and Final Environmental Impact Statement in 2003 (2003 EIS), in accordance with the Federal Land Policy and Management Act and NEPA.  At that time, the BLM’s “reasonably foreseeable development scenario” or “RFDS” estimated that an additional 9,970 wells would be drilled on federally managed lands during the next 20 years with a significant focus on development of the Mancos Shale. The prevailing well drilling technologies at the time included vertical well drilling and hydraulic fracturing.  Slip. Op. at 4-6.  Consequently, the environmental impact analysis included in the 2003 EIS focused on impacts from vertical well and hydraulic fracturing operations, not horizontal well operations.

In 2010, the BLM began to receive Applications for Permit to Drill (APDs) for Mancos Shale development.  Consistent with widespread BLM practice, the BLM used the 2003 EIS as the starting point for its NEPA compliance work, and “tiered” further NEPA analysis from the 2003 EIS.[1]  Using the 2003 EIS as the base NEPA document, the BLM prepared site-specific Environmental Assessments (EAs) for each APD, focusing on the environmental impacts of the specific well drilling operations proposed.  Slip Op. at 5.

By early 2014, 70 wells had been completed in the Mancos Shale.  In 2014, the BLM prepared a new RFDS to evaluate further the Mancos Shale’s oil and gas development potential.  The BLM’s 2014 RFDS estimated the potential for 3,960 new Mancos Shale wells, and predicted that operators would use horizontal drilling and multi-stage fracturing techniques. Slip Op. 5-7.  Notwithstanding the foreseeable use of horizontal drilling programs, the BLM continued to tier the well-specific APD NEPA compliance work to the 2003 EIS, but did not consider whether environmental impacts, such as impacts on water resources and air quality, from horizontal drilling were sufficiently different from impacts considered in the 2003 EIS to require further impact analysis in the EAs.

Dine’ CARE and other local and national NGOs filed suit in 2015 challenging the BLM’s NEPA compliance work for approximately 350 APDs and alleging that BLM also violated its consultation and compliance obligations under the NHPA. The media focused on the Dine’ CARE’s interest in preserving the environment in and around Chaco Canyon National Historical Park given the significance of the area to Native American culture and history.[2]  However, the issues and claims presented were not limited to the unique attributes of Chaco Canyon and its environs.

NHPA Consultation and Compliance: BLM Complied with Procedural Requirements

The NHPA Section 106 consultation process is a procedural obligation designed to inform agency decision-making concerning potential impacts of federal agency action on historic properties, including cultural resources of significance to Native American groups, significant archeological sites, among others.  The Tenth Circuit panel reiterated that NHPA Section 106 “’is a procedural statute requiring government agencies to stop, look, and listen before proceeding when their action will affect national historical assets.’” Slip Op. 9, quoting Coalition of Concerned Citizens v. Fed’l Transit Admin., 843 F.3d 886, 905 (10th Cir. 2016).

Here, Dine’ CARE asserted the following NHPA violations (largely stemming from the BLM’s alleged failure to follow a NHPA programmatic agreement,[3] the 2014 State Protocol between the New Mexico BLM and the New Mexico State Historic Preservation Officer (New Mexico SHPO)):

(a) The BLM failed to appropriately designate Areas of Potential Effects or “APEs” for the APDs, asserting that BLM should have designated two-tier APEs, one for direct effects and a wider one for indirect effects, all in alleged accordance with the 2014 Protocol;

(b) The BLM failed to consider the cumulative effects of Mancos Shale development on relevant cultural and historic properties; and

(c) The BLM failed to consult with the New Mexico SHPO as required by the 2014 Protocol.

Slip Op. 23.  In each case, the Tenth Circuit rejected Dine CARE’s claims.  First, the court identified existing Tenth Circuit authority stating the proposition that an agency’s determinations of APEs require “high level of agency expertise” that are “due a substantial amount of discretion.”  Slip Op. 23, quoting Valley Cmty. Pres. Comm’n v. Mineta, 373 F.3d 1078, 1092 (10th Cir. 2004).   Then, interpreting the 2014 Protocol, the Tenth Circuit held, contrary to Dine’ CARE’s contentions, that the Protocol did not require the establishment of a separate APE for indirect effects, but merely allows for such an APE, essentially leaving the determination to the reasoned discretion of the agency.  Slip Op. 26-27.  The court also reviewed the available record, which illustrated that the BLM considered impacts on cultural resources outside the APEs established by BLM.  See Slip Op. 26-29.

Next, the court tackled the allegation regarding BLM’s failure to analyze “cumulative effects of developing hundreds of new APDs across this culturally significant landscape.” Slip Op. 29, quoting Aplts. Br. 38.   The court rejected the claim “because Appellants identify no historic properties with the APE the BLM set.” Slip Op. 29.  The court explained that the applicable NHPA Section 106 regulation requires consideration of adverse effects on “historic properties [only] within the [APE].” Slip Op. 30, quoting 36 C.F.R. § 800.5 (a)(emphasis added by the Court).

Finally, as to Dine’ CARE’s contention that BLM failed to consult with the New Mexico SHPO because defining APEs in the Chaco Canyon area is allegedly “controversial,” the court observed, that the 2014 Protocol indicates that further SHPO consultation is not required when BLM determines to establish APEs of standard dimension.  Slip Op. 31.

Accordingly, the court held that the BLM’s decision is entitled to “a presumption of regularity,” and that the BLM complied with the NHPA based on the limited record before it.  Id. at 32.

NEPA Compliance: BLM’s Environmental Assessments Tiered to the 2003 EIS Failed to Adequately Consider Cumulative Impacts on Water Resources

As foreshadowed in the title to this article, the court found the BLM violated NEPA in tiering recent EAs to a 2003 EIS, because neither the EIS nor the EAs sufficiently addressed cumulative impacts of horizontal drilling on water resources.   Slip Op. 32-40.  The court accepted Dine CARE’s argument that the cumulative environmental impacts on water resources of horizontal Mancos Shale wells “are both (1) different in kind from and (2) greater in magnitude that those considered in the 2003 EIS.” Slip Op. 32.  “Because of this, the 2003 EIS did not fully analyze the environmental impacts associated with horizontal Mancos Shale wells, so the BLM was not authorized to tier the EAS to the 2003 EIS” with respect to such impacts.  Slip Op. 32-33.  Because the EAs did not “consider the cumulative impacts of water resources associated with the 3,960 reasonably foreseeable horizontal Mancos Shale wells,” BLM violated NEPA.  Id. at 33.

According to the court, an EA may tier to an existing EIS, “if the EIS to which it tiers ‘fully analyzed those significant effects.’” Slip Op. 35, quoting 43 C.F.R. § 46.140(c).  “But if the ‘relevant analysis in the [EIS] is not sufficiently comprehensive or adequate to support further decisions, the [EA] must explain this and provide any necessary analysis.’” Id., quoting 43 C.F.R. § 46.140(b).   Here, the court found the BLM failed to include the “necessary analysis” regarding the impacts of horizontal drilling on water resources.  In reaching this conclusion, the court ruled that the 2014 RFDS by definition made the drilling of 3,960 Mancos Shale wells foreseeable.   Therefore, the BLM had to, but failed to, consider the cumulative impacts of substantial water consumption – far greater than the water consumption considered in the 2003 EIS — for the drilling of those horizontal wells. Slip Op. 37-40.

Thus, a lesson learned here is that BLM’s Reasonably Foreseeable Development Scenarios (RFDS) in the oil and gas patch have important significance in relation to an agency’s NEPA cumulative impacts analyses.

The Administrative Record on Appeal: Important Lessons for Entities Challenging Agency Action 

The Tenth Circuit’s opinion has important lessons about the necessity of a complete administrative record for a court to consider issues subject to judicial review.  Here, the suit challenged the validity of 300 to 350 APDs, yet the administrative record on NEPA claims was complete only with regard to 6 APDs.  The record on NHPA claims was insufficient as to all except one set of APDs.  Consequently, the court could not consider the NEPA and NHPA claims as to most of the challenged APDs. See Slip Op. 20-22.  Moreover, the court could not consider Dine’ CARE’s claims that the BLM failed to properly consider cumulative impacts of the foreseeable drilling on air quality because the record was not complete on that subject.  Slip Op. 40-43.

Given the record inadequacies, the fact that the court found NEPA violations as to 5 of the 6 APDs for which the record was complete paints a very different picture of the BLM’s compliance than when one considers that over 300 APDs were challenged and only five were overturned.

The takeaway is that entities challenging agency actions should be sure that the agency’s record delivered to the reviewing court is complete as to the issues challenged.  Where a record is deficient, it is incumbent on the challenger to insist that the record be supplemented.  See Standing Rock Sioux Tribe. v. U.S. Army Corps of Engineers, Cause No. 16-1534 (JEB) (D.D.C.), May 8, 2019 Memo. Op., p. 4.[4]

The Remedy: Vacate and Remand; No Injunction Necessary

Based on the NEPA violations, the court vacated and remanded the APD approvals, stating “once the APDs are vacated, drilling operations will have to stop.”  Slip Op. 50.  Therefore, no injunctive relief is necessary.

Additionally, on May 29, 2019, Interior Secretary David Bernhardt agreed to issue a one-year moratorium on oil and gas leasing near Chaco Canyon, to allow the BLM to draft a new RMP and to give Congress time to consider Senate Bill 1079, proposing to withdraw federal minerals from oil and gas leasing within roughly a 10-mile buffer around Chaco Canyon.



[1] Council on Environmental Quality (CEQ) regulations define “tiering” as “the coverage of general matters in broader environmental impact statements (such as national program or policy statements) with subsequent narrower statements or environmental analyses (such as regional or basin-wide program statements or ultimately site-specific statements) incorporating by reference the general discussions and concentrating solely on the issues specific to the statement subsequently prepared.”  40 C.F.R.§ 1508.28.  In this instance, the 2003 EIS would be the broader NEPA document, followed by subsequent narrower statements.

[2] See https://navajotimes.com/reznews/dine-care-files-lawsuit-to-stop-oil-development-in-eastern-navajo-agency/ (May 21, 2015).

[3] Agencies may enter into NHPA Programmatic Agreements that will govern the implementation of particular programs or the resolution of adverse effects arising from complex projects or multiple undertakings.  See 36 C.F.R. §800.14 (b).

[4] Coincidentally. U.S. District Judge Boasberg, presiding over the ongoing Dakota Access controversy issued an opinion on this important administrative law, judicial review issue the day after the Tenth Circuit’s opinion. This firm has previously reported on the Dakota Access matter.  See https://www.modrall.com/?s=Dakota+Access.

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