Red Lodge Clearinghouse

Oil and Gas Resource Development

Oil, gas (including coalbed methane), and coal are the nation's principal non-renewable energy resources. Development of federally owned oil and gas resources is regulated by several federal laws and associated regulations:

Leasing of federal resources is regulated primarily under the Mineral Leasing Act of 1920 (MLA) as amended by the Federal Onshore Oil and Gas Leasing Reform Act of 1987 (FOOGLRA).
Environmental impacts of development are regulated through: federal agency organic acts like the Federal Land Policy and Management Act (FLPMA) and the National Forest Management Act (NFMA); and national environmental laws like the Clean Air Act, Clean Water Act and Endangered Species Act.

State and local laws and regulations also regulate oil and gas development on federal, state and privately-owned lands. State laws and regulations can control the location of exploration and production facilities and the environmental impacts of development. The role of local ordinances varies from state to state. As oil and gas development has accelerated in recent years, some states have responded with stricter regulations requiring broader public participation in leasing decisions. See, e.g., "New rules for Colo., N.M.'s Santa Fe County face challenges," Land Letter, 12/18/2008. A recent investigation raised concerns about the effectiveness of state regulation as drilling has expanded dramatically. See "State oil and gas regulators are spread too thin to do their jobs," ProPublica, 12/30/09.

Federal policies toward oil and gas development have changed with the new presidential administration. Although Secretary of the Interior Ken Salazar pledged that his agency was not "anti-oil-and-gas," he has taken steps in the past year to curtail energy development on public lands, especially in and near ecologically sensitive areas. See below for a discussion of the measures taken to reduce impacts on adjacent protected areas. For a critique of the new policies, see the analysis prepared by the Independent Petroleum Association of Mountain States. For Secretary Salazar's response to this criticism, see "Energy, trade groups spreading 'untruths,' Salazar says," New West, 11/24/09. For a more general discussion of changing policies, see "Interior curbs lease streamlining, expands reviews," Greenwire, 1/6/10, and "Interior chief vows scrutiny of oil and gas leases," New York Times, 1/6/10.

Key Concepts

Leasable Minerals

Federally owned oil, gas, coal, coalbed methane, and oil shale are all "leasable" minerals. The Bureau of Land Management (BLM) has discretion to lease these minerals, generating revenue for the states, tribes and federal government. The MLA does not specifically mention coalbed methane, but it is generally leased as part of the gas resource. All these minerals were originally "locatable" minerals, developed for free on federal lands under the General Mining Law of 1872. The MLA removed the energy minerals (coal, oil, oil shale, gilsonite and gas) from the "free access" rule of the 1872 Mining Law. The 1872 Mining Law still allows development of hardrock minerals like gold, silver and copper without payment of any lease royalty.

Oil and Gas Resources

The Energy Act of 2000, P.L. 106-469 required the Department of the interior (DOI) to inventory federal lands for oil and gas resources. The Energy Policy Act of 2005 (Section 364) expands this mandate to require DOI to identify impediments to the timely granting of leases, post-lease restrictions, development, and transporting resources. DOI must also identify what resources are not developed because of these impediments.

BLM chooses which lands to lease for oil and gas development. The agency is not obligated to lease any particular area for development—even after advertising the area in a lease sale.

See the Trapper's Point bottleneck decision for more information on oil and gas leasing. See also the report released by the General Accountability Office (GAO) in October, 2008, titled "Oil and Gas Leasing: Interior Could Do More to Encourage Diligent Development" which found that BLM issued 47,925 onshore oil and gas leases from 1987 through 1996 and that only 2,386 of them are producing, or 4.98 percent.

Coal-bed Methane: Gas or Coal?

Does WY CBM waste water pumping violate MT water rights on the Yellowstone River?
The State of Montana contends that Wyoming has violated the MT-WY Yellowstone River Compact by taking more water out of the river than is allowed under the compact. Montana contends that groundwater pumped out of the basin by CBM producers must be counted as Wyoming water use under the compact allocation.

Does WY sufficiently regulate disposal of CBM produced water?
In the recent case of William F. West Ranch v. Tyrrell, the Wyoming Supreme Court found that claims of property damage resulting from water discharges could not be determined at that time, but recognized that the ranchers raised serious allegations that should be addressed in the future.

In Colorado, CBM water is put to a "beneficial use" in the development process.
In Vance v. Wolfe, the Colorado Supreme Court determined that the CBM process "uses" water (by extracting it from the ground and storing it in tanks) to "accomplish" a particular "purpose" (the release of methane gas.) The extraction of water to facilitate CBM production is therefore a "beneficial use" under Colorado water law.
Coalbed methane is a form of natural gas that is trapped within coal seams. The gas is attached to the internal surfaces of the coal and held in place by water pressure. Coal miners originally considered coalbed methane a waste gas, producing it mainly to reduce the threat of methane explosions in coal mines, but commercial production started in 1981 and has grown rapidly.

Coalbed methane is produced and transported with much the same process and equipment as methane from a regular gas field. The major difference is that wells are drilled into the coal seam to first remove water. As the water is removed and water pressure in the seam decreases, the gas is released from the coal and flows through fractures in the coal to the well. Generally, a lot of water is produced from a coalbed methane well before much methane can be recovered. The quantity and quality of the water released during production varies throughout the West with deeper coalbed methane wells generally producing less—but poorer quality—water than shallow wells. Disposal of this water is a major controversy in coalbed methane development in the West.

For recent developments on disposing of CBM-produced water, see Clean Water Act: Process Essentials: Section 404 Dredge and Fill Permits. For a story about a BLM study concerning impacts of CBM development on groundwater in Wyoming, see "Water drawdowns won't slow pace of Wyo. methane industry," Land Letter, 8/20/09.

Do Development Impacts Differ Significantly?
Sometimes, yes; sometimes, no.

IF the impacts of CBM development are likely to differ from those of traditional oil and gas, BLM must specifically assess the potential impacts of CBM development - not just oil and gas development - in a NEPA document before leasing. See Wyoming Outdoor Council, et al., 164 IBLA 84 (Pinedale, WY) and Pennaco Energy v. DOI (10th Cir. 2004) (Powder River Basin). See update at "Enviro Groups Continue Battle Against Drilling Plans in Wyo.," Land Letter, 1/29/09.

IF the impacts are not significantly different (e.g., in the Piceance Basin of Colorado), BLM's pre-lease analysis of conventional oil and gas development is a sufficiently "hard look" at the issues to satisfy NEPA. See Western Slope Environmental Resource Council, 163 IBLA 262.

Indian Trust Accounts

In 1887, Congress passed the General Allotment Act authorizing the division of some tribal reservation land into individual plots. These plots were assigned to tribal members but held in trust by the federal government. In the allotment era, Congress tried to dismantle tribes and instill the concept of private land ownership in Native Americans. This era ended with the passage of the Indian Reorganization Act in 1934 but most allotted lands remained in trust. As part of their trust responsibility, the Department of Interior manages Individual Indian Money accounts (IIM) for the many heirs of the allotees. These accounts include revenue from oil and gas leasing, timber sales and mineral extraction.

Alleging that mismanagement of these funds constituted a breach of fiduciary duty, plaintiff Elouise Cobell and others filed a class action suit (Cobell v. Kempthorne) in 1996 on behalf on the beneficiaries of the IIM trust accounts. The litigation also sought a formal accounting of the IIM trust which Congress ordered the Department of the Interior to make in 1994. (Indian Trust Fund Management Reform Act ). The Department claims that such an accounting would cost $10 billion. To read the latest on the case, click here .

Responsible Agencies

Several federal agencies are involved in energy resource development:

The Bureau of Land Management (BLM) is the main federal agency responsible for regulating development of non-renewable, federally-owned energy resources. The BLM is responsible for leasing federal oil and gas, coal, and geothermal minerals, and for supervising the exploration, development and production operations for these resources on both federal and Indian lands.
Other land management agencies—the U.S. Forest Service, U.S. Fish and Wildlife Service, or National Park Service—participate in leasing and development decisions on lands that they manage.
The Mineral Management Service (MMS) collects and disburses mineral revenues generated for federal and American Indian lands and minerals.
The Bureau of Indian Affairs (BIA) manages oil and gas revenues for tribal members with Individual Indian Money (IIM) accounts.
The Environmental Protection Agency (EPA) is ultimately responsible for implementing environmental laws, such as the Clean Water Act and Clean Air Act, to control impacts of oil and gas development.

Agency Coordination
The Energy Policy Act of 2005 included two major provisions directed at cooperation among federal agencies to facilitate oil and gas development:

Section 363 requires DOI to develop an MOU with the Forest Service to establish administrative procedures to:

eliminate duplication of effort,
deal consistently with lease stipulations and assure that they are only as restrictive, as necessary to protect resources,
establish a joint data system for tracking operations, and
establish a joint GIS system for tracking resource values, plans of operations and APDs.

Section 365 established a multi-agency, multi-state Federal Permit Streamlining Pilot Project which:

creates special energy project teams to facilitate development, and
earmarks 50% of lease rentals for use by specific DOI field offices and cooperating agencies for authorizing oil and gas development in these areas.

Split Estates

A "split estate" exists when the landowner does not own the land's minerals. Traditionally, the owner of land controlled "from the heavens to the center of the earth." Congress changed this so that land ownership can be horizontally divided into surface and subsurface "estates." The mineral estate can be further subdivided by minerals—the oil, gas and coal owners can all be different.

Split Estate Study
The Energy Policy Act of 2005 requires DOI to review its current policies and practices for federal oil and gas development under private surface. The DOI report, published in December 2006:

Compares the rights and responsibilities of DOI, the federal lease holder (developer) and private landowners;
Compares surface owner consent requirements for oil and gas development with the more restrictive requirements for federal coal development; and
Makes recommendations of legislative and administrative changes necessary to balance reasonable access for development with surface impacts and owner concerns.

For more information and to access the study, visit BLM's Best Management Practices -- Split Estates web page.

There are three types of split estates:

The federal government owns only the surface;
The federal government owns only the minerals; or,
Different private owners own both the surface and minerals.

Mineral Development with Split Estates

If the private landowner owns only the surface, she does not have the right to develop the minerals and, in most cases, does not have the right to prevent development. Depending on who owns the minerals:

The federal government can lease them, or
The private owner can develop them using as much of the land for well and transport structures as is reasonably necessary.

Before developing oil and gas, the mineral owner or lessee must either get written consent or a waiver from the landowner (a surface use agreement) or pay an agreed-upon amount for damages. If the landowner does not consent to development or agree to a damage amount, the developer can still develop the resource after posting an approved bond.

More detail on BLM's policy for protecting split estate landowners can be found in the Department's Instruction Memorandum 2003-131.

State law on split estates
Several western states have recently considered measures to address the rights of landowners in split estate situations. In 2005, Wyoming's S0060 :

Establishes requirements for beginning development on split estates;
Requires good faith negotiations for a surface use agreements or financial assurances; and
Authorizes compensation for damages and disruptions.

Despite Wyoming's efforts, the law may do little to help landowners. Ten of the 11 million acres of split estate lands in Wyoming involve federal minerals. The Department of the Interior claims that the Wyoming law does not apply where federal minerals are involved.

Carbon Capture and Sequestration
In 2008, Wyoming brought split estate law into the 21st century with anew state law (HB0090) governing ownership of the underground formations thatmay be used for carbon sequestration.

The Western Organization of Resource Councils (WORC) web site provides information on split estates and other oil and gas issues. See, for example their report, Law and Order in the Oil and Gas Fields.

Good Neighbor Agreements

Good Neighbor Agreements (GNA) are a type of negotiated agreement between a community organization and a local pollution-generating company. So far, the agreements have been used primarily in fields such as petrochemicals, but GNAs can also be used for mines and wellfield development. GNAs take a variety of forms, but typically they are agreements promising company concessions and behavioral changes designed to reduce (and more fully disclose) negative community impacts in exchange for community group commitments to forego permit challenges, lawsuits, negative publicity campaigns, and other forms of activism against the company. Despite the positive sentiments evoked by the "good neighbor" terminology, these arrangements are typically the product of hard-fought negotiations.

For more information on Good Neighbor Agreements, see the Stillwater Mine Good Neighbor Agreement story.

Revenue Sharing with States

Click to download Natural Dividends: Wildland Protection and the Changing Economy of the Rocky Mountain West

A large share of the monies collected on federal oil and gas and geothermal leases is returned to the states where the resource was produced. For most federal oil and gas or geothermal leases, the state in which the development occurs receives 50 percent of revenues collected; Alaska receives a 90 percent share. The states can use this money without restriction. In 2005, Federal lands generated $5.4 billion in revenue for the U.S. Treasury, $2.3 billion for special use funds including the Land and Water Conservation Fund, and a record $1.7 billion to 35 states.

Energy Right-of-Way Corridors

Rights-of-way (ROW) for oil and gas development, as well as other purposes, are generally authorized through special use permits issued by the land management agencies. A ROW grant is an authorization to use a specific piece of public land for specific facilities for a specific period of time. BLM grants the majority of its ROWs under Title V of FLPMA (43 U.S.C. 1761-1771) and, for oil and natural gas gathering and transmission pipelines, under special provisions of the Mineral Leasing Act.

The Energy Policy Act of 2005, section 368, requires DOI to consult with several other departments and entities to designate corridors for oil, gas and hydrogen pipelines and electricity transmission and distribution facilities on federal lands in the eleven western states. These entities must also perform the necessary NEPA evaluations and incorporate the corridors into appropriate land use plans.

Preliminary draft maps of potential energy corridors are available for public review. The corridor locations shown in these maps are subject to change until they are officially established in August 2007.

See the BLM's Lands and Realty web page for detailed information on BLM ROWs.

Best Management Practices (BMPs)

Best management practices (BMPs) are innovative, dynamic, and improved environmental protection practices applied to oil and natural gas drilling and production to help ensure that energy development is conducted in an environmentally responsible manner. BMPs help to protect wildlife and landscapes as industry works to develop domestic energy sources. Some BMPs are as simple as choosing a paint color that helps oil and gas equipment blend in with the natural surroundings, while others involve cutting-edge monitoring and production technologies. All are based on the idea that the "footprint" of energy development should be as small and as light as possible.

For more information on BMPS, see the BLM BMP website.

See also the Intermountain West Oil and Gas BMP Project website.This project is a joint effort of the Natural Resources Law Center and many project partners to create a searchable database of BMPs for the Intermountain West.

Process Essentials: Federal, State and Local Regulation

Depending on who owns the land and who owns the minerals (see Key Concepts: Split Estates), oil and gas development may be regulated by federal, state and/or local laws and regulations. For federal lands or minerals, the process can involve all three levels of government. For private or state lands and minerals, the permitting process is mostly state and local, although all development needs to comply with the national environmental laws like the Clean Air Act and Clean Water Act.

The Federal Process

The process for developing oil and gas (including coalbed methane) on federal land with federal minerals is a three or four step process:

1. Planning: Most federal oil and gas development is on BLM or Forest Service managed lands and begins with land use plans prepared under the Federal Land Policy and Management Act (FLPMA) or the National Forest Management Act (NFMA). In their planning processes, the agencies discuss the impacts of development and decide which lands should be open for what kind of development.

BLM uses the "reasonably foreseeable development" scenario (RFD scenario) to project long-term oil and gas exploration, development, production, and reclamation activity in a defined area for a specified period of time. The RFD scenario projects a baseline scenario of activity assuming all potentially productive areas can be open under standard lease terms and conditions, except those areas designated as closed to leasing by law, regulation or executive order. The baseline RFD scenario is the basis for analyzing the effects that management decisions have on oil and gas activity, and it also provides basic information that is analyzed under various alternatives of NEPA documents. For details on RFD reports, see BLM Instruction Memorandum 2004-089.

2. Leasing: Depending on decisions made in the planning process, BLM offers leases for the mineral estate. BLM holds competitive, oral auctions for oil and gas leases at least quarterly. While BLM actually issues the leases, the Forest Service has to authorize them for the lands they manage. A lease gives an operator the right to explore and develop the mineral in accord with stipulations in the lease. Standard lease stipulations include compliance with federal environmental laws such as the Clean Water Act and Endangered Species Act. Special lease stipulations can be added to restrict specific uses of the lease area or the timing of certain activities. Special stipulations might be added to protect wildlife breeding areas. The most stringent stipulations ("no surface occupancy" or NSO stipulations) exclude all exploration and development facilities from the lease area.

To protest a lease sale:
In order to attempt to stop an area from being leased, individuals can protest a lease sale, but must follow BLM procedures modified in July 2005.

BLM must receive the protest 15 days before the proposed sale.
Protesters cannot file protests electronically - protests must be in hard copy or fax.

For a copy of the BLM policy, click here.

Congress Short-Circuits Agency Leasing
In late 2006, the 109th Congress withdrew two important wildlife areas from mining and mineral leasing:

Rocky Mountain Front, MT (HR 6408)
Valle Vidal Unit of the Carson National Forest, NM (Pub. L. No. 109-385)

For text of the laws, see thomas.loc.gov

3. POD: If the operator intends to develop a field rather than just a single well, the operator submits a Plan of Development (POD) to BLM. The POD can be used to consolidate infrastructure—roads, pipelines, waste disposal facilities—used to develop a whole well field. BLM is encouraging use of PODs, also called "multiple APD packages," as part of the Bush administrations effort to expedite permit approvals.

Click to download a .pdf copy.

4. APD: Finally, the operator files an application for a permit to drill (APD) with BLM. The APD—for a well or group of wells—includes a drilling plan, a surface use plan, and plans for reclamation. BLM or Forest Service may conduct an on-site visit to adjust the development plans or add mitigation measures. Before BLM can approve the APD, the operator must post a performance bond.

BLM requirements for obtaining permit approval and conducting environmentally responsible oil and gas operations are available in the BLM Gold Book — The Surface Operating Standards and Guidelines for Oil and Gas Development.

BLM's revised rules governing permitting of oil and gas operations on federal lands are in On Shore Oil and Gas Order No. 1, effective May, 2007.

For a summary of the most important federal laws and regulations governing oil and gas development, see the Intermountain Oil and Gas BMP Project LAWS section.

Energy Policy Act of 2005

New Timeframes for Permit Decisions (Sec. 366):

BLM now has only 10 days to determine if an APD is complete or notify the applicant of deficiencies.
After an application is complete, BLM has 30 days to issue a permit or defer issuance and notify the applicant of needed changes and agency plans.
BLM must hold open the application for two years for the applicant to complete all requirements.
Then, BLM has only 10 days to issue or deny the permit.

DOI to Review Leasing and Permitting (Sec. 361):
DOI must review current onshore oil and gas leasing and permitting practices, including:

Offers to lease
Administrative appeals
Surface use plans
Stipulations

Improve Management of Federal Leasing (Sec. 362)
DOI and USDA must ensure timely action on leases and APDs, by

Ensuring expeditious compliance with environmental and cultural resources laws
Improving consultation and coordination with the states and public
Improving data collection and management
Developing and implementing best management practices
Developing regulations for processing leases and applications
Improving inspection and enforcement

NEPA Analysis

NEPA Analysis

Agencies have wide latitude under NEPA for defining alternatives and evaluating impacts;
BLM need not prepare a single EIS to cover analysis of CBM development in WY and MT portions of the Powder River Basin; but
BLM must consider phased development of CBM in MT.

See Northern Plains Resource Council v. Bureau of Land Management (D. Mont. 2005). To read the Supplemental EIS, see the BLM website.

While the Montana court allowed continued CBM development during preparation of the phased development plan, the 10th Circuit Court of Appeals eventually put a hold on BLM permit approval and continued development of coalbed methane in part of the basin pending their final decision on an appeal.

Federal agencies are required to comply with NEPA and assure compliance with all national environmental laws throughout the oil and gas development process. Clearly compliance includes an assessment of reasonable alternatives and mitigation measures. However, the range of available alternatives and mitigation measures shrinks at each stage of this NEPA review. Once land use plans are adopted and leases issued, the federal land management agencies lose the flexibility to deny mineral development—at least without monetary compensation—or to substantially lessen its impacts.

What "compliance" means, however, has been a major controversy in the Intermountain West for years. This controversy became more heated with the rapid development of CBM. With changes in Forest Service planning rules and passage of the Energy Policy Act, the application of NEPA to oil and gas development is changing - and becoming even more controversial.

RMP Development
BLM provides information and opportunities to comment on management plan revisions on their web sites. See, for example, the Pinedale RMP webpage.

Step 1: Traditionally, both BLM and Forest Service have prepared an EIS while developing a new plan or significant amendments to an existing land management plan. While BLM continues to prepare these EISs, the U.S. Supreme Court in Norton v. SUWA has called into question the enforceability of the plans themselves. Based in part on this Supreme Court ruling, the Forest Service overhauled their planning process and regulations to eliminate most NEPA analysis from their land management planning process. Even when land use plan EISs are available, they may be inadequate to support CBM development as many were prepared before agencies anticipated the extent of CBM development.

Step 2: Many believe that the appropriate time for considering the potential impacts of oil and gas exploration and development in a NEPA document is when BLM proposes to lease public lands for oil and gas purposes. With support of two circuit courts, they believe that leasing, at least without NSO stipulations,

constitutes an irreversible and irretrievable commitment to permit surface-disturbing activity,
results in a significant impact on the human environment, and
preparation of an EIS is, therefore, required.

The Tenth Circuit, with jurisdiction in Colorado, New Mexico, Utah, and Wyoming, disagrees.

While this disagreement remains unresolved, both agencies generally prepare pre-lease NEPA analysis. In 2004, the Interior Board of Land Appeals (IBLA) told BLM it must prepare pre-lease environmental impact documentation (an EIS or EA) before issuing oil and gas leases which allow for surface occupancy. Forest Service uses a two-step process for analyzing its areas for leasing, making leasing decisions for specific lands in the second step. Before making these decisions, the agency must determine that it has adequately addressed leasing of the specific lands in a NEPA document and that leasing is consistent with its land and resource management plan.

Step 3: POD, multiple APD, or field developments are an opportunity to address site specific factors in a NEPA analysis as well as to address cumulative impacts of field development. At this stage of permitting, BLM can best evaluate and require consolidation of infrastructure and develop mitigation measures that could reduce environmental impacts. An EA is usually prepared at this step, but large field developments, like the Pinedale Anticline of Wyoming, can be the subject of major—and controversial—EIS analysis.

Step 4: NEPA review at the final well permitting stage is normally limited to site-specific considerations not previously addressed in broader NEPA documents. APD NEPA documents are often tiered off of EISs or EAs prepared for step 1 or 2 (planning or leasing). Preparation of NEPA documents at this stage is also changing with increased use of categorical exclusions from NEPA.

Energy Policy Act of 2005: Categorical Exclusions for Oil and Gas Development

Disturbance of <5 acres, if <150 acres is disturbed on the lease and previous NEPA analysis was completed
Drilling on an existing well pad drilled within the previous 5 years
Drilling within a developed field if such drilling was a reasonably foreseeable action in a plan approved within the previous 5 years
Placement of a pipeline in an approved corridor within 5 years of corridor approval
Minor maintenance

Preparation of NEPA documents at this stage is also changing with increased use of categorical exclusions from NEPA.

The Energy Policy Act of 2005 created a rebuttable presumption that certain small scale oil and gas development is categorically excluded from NEPA analysis.
In early 2007, the Forest Service expanded this legislative exclusion by administratively creating a categorical exclusion from NEPA analysis for development of up to four drill sites (each could have multiple wells), one mile of road, and three miles of pipeline in any new oil or gas field. (FS 1909.15, chapter 30, exclusion 17)
BLM has also proposed more categorical exclusions for geophysical surveys.

Scoping in Categorical Exclusions:
Even if a project is categorically excluded from NEPA analysis requirements, the Forest Service Handbook (FSH 1909.15, Chapter 10, section 11) requires that the agency "scope out" environmental impacts of their proposed action.

For more information on NEPA and categorical exclusions, see the National Environmental Policy Act section and the Pending Legislation section.

For more details on these steps in the oil, gas and coalbed methane development process, including a discussion of the role of NEPA and opportunities for public involvement in the process, see Western Resource Advocates "Preserving Our Public Lands: A Citizens Guide to Understanding and Participating in Oil and Gas Decisions Affecting Our Public Lands."

For more information on BLM's categorical exclusions, see DOI's Office of Environmental Policy and Compliance web page. For a report criticizing the BLM's interpretation of the Energy Policy Act of 2005, see GAO, "Greater Clarity Needed to Address Concerns with Categorical Exclusions for Oil and Gas Development under Section 390 of the Act," GAO-09-872, 9/16/09.

For a recent federal court decision interpreting NEPA's application to oil and gas drilling in Wyoming, see Theodore Roosevelt Conservation Partnership v. Salazar, Nos. 07-1486, -1709, 39 ELR 20078 (D.D.C. Mar. 31, 2009) (Leon, J.). Similarly, the Ninth Circuit recently decided that the BLM failed to comply with NEPA in planning oil and gas leases on the Otero Mesa in New Mexico. See "US appeals court sides with NM in Otero Mesa fight," Santa Fe New Mexican, 4/29/09.

State and Local Processes

Click to download a .pdf copy of this publication

State permits are required for oil and gas development on federal, state and privately owned lands. State laws vary, but the permitting processes of the state agency—often called a conservation commission—generally govern the location of wells and other facilities and the control of pollutants associated with development. State oil and gas regulatory statutes—called "conservation" statutes—were originally developed to protect the rights of mineral owners to the resource and to prevent waste. Most western states have expanded the statutes in recent years to regulate location, drilling, plugging and abandonment of wells, and, at least to some extent, they protect:

the rights of surface owners;
the general public; and
the environment.

In addition, states frequently have authority to issue federal Clean Air Act and Clean Water Act permits through their departments of environmental quality and more states (CO, MT, ND, NM, and WY in 2005) have proposed laws to protect surface owners in "split-estate" ownership situations.

Some local governments have also begun to regulate oil and gas development. Cities and counties may have zoning ordinances to designate areas open or closed to development. Some local governments also have ordinances to control conditions of use—controlling noise, location of roads and other operating facilities. Whether or not a local government has the power to regulate development depends on what kind of regulation it is, what power they are given by state law, and whether state or federal law has "preempted" local regulation. For example, cities and counties cannot "zone out" development on federal lands within their boundaries, although federal land management agency planning rules may require coordination of agency projects with local land use plans.

Similarly, state law can preempt local regulation if the state legislature has given an agency broad power over oil and gas development. The result is that local governments may be able to more tightly control oil and gas development—especially the environmental impacts of development—if the state legislature has not explicitly given broad power to a state oil and gas regulatory agency or commission.

Colorado

Oil and Gas Operation Exemptions: Will all states follow the federal relaxation of controls?
The Energy Policy Act of 2005 broadened exemptions for oil and gas exploration and development from Clean Water Act stormwater permit requirements. Despite this federal legislation, the state of Colorado decided in January 2006 to continue to enforce its more stringent regulations requiring operators to get stormwater permits for one to five acre construction sites.

For more information on the federal requirements see Controversies: Oil and Gas Exemptions from Clean Water Act..

In Colorado, oil and gas development is regulated by the Colorado Oil and Gas Conservation Commission (COGCC) created by the Oil and Gas Conservation Act. The COGCC's original function was exclusively development oriented, focusing on increasing production by preventing oil and gas waste. In 1984, the Colorado legislature directed the COGCC to adopt rules to protect the health, safety, and welfare of the general public with respect to oil and gas wells. In 1994, the Colorado legislature expanded the Commission role again, charging the COGCC to adopt measures to "prevent and mitigate significant adverse environmental impacts on any air, water, soil, or biological resource resulting from oil and gas operations." In updating the law, the Colorado legislature did not specifically preempt local regulation of oil and gas production, and declared that the act was not intended to affect the existing land use authority of local governmental entities. Since 1994, COGCC has enacted regulations regarding water quality standards, reclamation, safety, and financial security requirements and the State's Department of Public Health and Environment (CDPHE) implements the major environmental laws with which oil and gas operations must comply. In 2007, the Colorado legislature expanded the COGCC to include more environmental interests and enacted the Colorado Habitat Stewardship Act to plan and manage oil and gas operations in a manner that balances development with wildlife conservation. In early 2009, the COGCC adopted new regulations that will:

Require the oil and gas industry to consider threats to human health and wildlife at the time a company applies for a permit.

Establish protection zones around streams situated in watersheds that provide drinking water supplies.

Require companies to tell state and emergency responders what chemicals they use in drilling operations.

Allow state health and wildlife officials to formally consult on oil and gas development applications.

Require that an oil or gas well site be cleaned up to general health standards, once the industrial activity is completed.

Set limits on odors where oil and gas development is occurring near homes and schools in northwestern Colorado.

Manage erosion and limit water pollution from oil and gas operations during storms and snow run-off seasons.

Require landowner notification and public comment periods for development proposals.

Allow industry operators to submit large-scale development plans aimed at expediting or eliminating certain permit reviews.

The rules grandfather most existing operations and will be phased in over several months, taking effect in April on private land and in May on federal land.

See the Intermountain Oil and Gas BMP Project LAWS: Colorado section for a summary of Colorado law related to oil and gas development.

State laws--and small staff--muzzle would-be watchdog
by Jennie Lay, High Country News, March 7, 2005

The Commission's mission to facilitate oil and gas production can conflict with requirement to protect the public's health, safety and welfare
New Commission rules allow landowners to request an on-site inspection
State staff is overwhelmed with workload
An unsuccessful bill in 2005 would have required operators and landowners to reach agreement before drilling

Local communities in Colorado have been the most active in the intermountain West in their attempts to regulate oil and gas development beyond that of their state oil and gas commission. Colorado communities that have regulations on oil and gas development range from the metro-Denver communities of Denver, Aurora, and Lafayette, to more rural Front Range communities like Greeley and Frederick. Colorado communities have, with mixed success, tried to regulate traditional oil and gas development since the early 1990s. More recently, the proliferation of CBM development in the San Juan Basin of southern Colorado prompted counties, notably Las Animas and LaPlata, to adopt comprehensive land use regulations governing oil and gas activity.

Whether these types of regulations are enforceable has been very controversial and is not completely settled. In 1992, before the legislature gave the COGCC its broader mandate, the Colorado Supreme Court decided that state law had given counties authority to regulate land use aspects of oil and gas operations and that the Oil and Gas Conservation Act had not preempted that power. On the other hand, the court made it clear that cities could not totally ban drilling within their city limits. Because oil and gas development was "of concern" to both the state and local government, both levels of government could regulate, but local government ordinances could not conflict with state regulations. Whether there is a conflict between state and local regulations—a conflict that the state regulations would win—has to be decided on a case-by-case basis.

Recent litigation has provided some more guidance to Colorado communities, although many questions still remain. In a 2002 decision, Colorado courts found that even the 1994 law revisions did not completely trump a town's ability to pass effective ordinances. The court found some of the Town of Frederick's provisions invalid, however, because the town tried to regulate the "technical aspects" of development or otherwise conflicted with state regulations.

Frederick could:

require a special use permit, even though it would delay drilling;
impose an inspection fee and a $1,000 application fee; and
require building permits for above-ground structures, access roads, emergency response costs, and the like

Frederick could not:

impose greater setback requirements than the state for the location of wells within the town limits;
regulate noise abatement beyond that required by the state;
regulate the visual impact of oil and gas operations when the COGCC already had detailed requirements; nor
incorporate COGCC's rules and assess penalties in addition to those provided for by the COGCC for violations of those rules.

The court has also laid out some limits for the state, invalidating a state regulation that said that a state-authorized permit to drill would trump any conflicting local governmental permit or land use approval process. The court said that this state regulation went too far and would have allowed oil and gas operators to disregard even appropriate local land use regulation. Legal challenges to Las Animas County's oil and gas regulations were settled out of court with the county agreeing to amend its regulations significantly. Those new regulations include requirements for county permits for both major and minor oil and gas facilities, including performance standards for setbacks, visual impacts, water, wildlife, waste disposal, etc., and provisions for fees, enforcement and fines for violations.

See the Intermountain Oil and Gas BMP Project LAWS section for local government codes and other materials related to oil and gas development in Colorado.

The Colorado Legislature recently approved new oil and gas rules for the state, conducting the required legislative review of rulemaking by the COGCC, and Governor Ritter signed the law authorizing the new rules in late April, 2009. In late June, 2009, state and federal officials negotiated an agreement for application of the state rules on federal lands. See "Feds, Colo. hash out agreement on oil, gas rules," Denver Post, 7/2/09.

In April, 2009, the Colorado Supreme Court ruled that coalbed methane gas wells must get water-well permits, meaning that energy companies must prove to the that their drilling will not interfere with senior water rights in that state.If the CBM wells do affect water supplies, the drilling companies must provide a plan for increasing those supplies. See "Drilling requires water permits," Denver Post, 4/21/09. In response, oil companies and others have begun filing applications for permits to use the produced water. See "Gas groups start filing for water rights," Durango Herald," 1/31/10.

For a summary of the impacts of new regulations in Colorado, see "Colo. governor, Supreme Court hand down new regulations on drillers ," Land Letter, 4/23/09.

Montana

In Montana, the legislature established the Montana Board of Oil and Gas Conservation (MBOGC) in 1953 with the passage of the Montana Oil and Gas Conservation Act. The Board consists of seven members, three of whom must be from the oil and gas industry, and two of whom must be landowners residing in oil- or gas-producing counties in the state. The MBOGC primarily serves to prevent waste of oil and gas, encourage maximum efficient recovery of the resources, and protect mineral owners' right to recover their fair shares. In addition, MBOGC can take measures to prevent contamination of or damage to surrounding land caused by drilling operations. These measures include, but are not limited to, regulating the disposal of produced salt water and the disposal of oil field wastes. Under Montana law, no oil or gas exploration, development, production, or disposal well may be drilled until MBOGC issues a drilling permit. The state has also adopted special rules on coalbed methane development, including drilling wells in the Powder River Basin Controlled Groundwater Area.

Click to download the ROD

The Montana Environmental Policy Act requires state agencies to complete environmental analyses similar to those required under the National Environmental Policy Act. The Montana Board of Environmental Review has also promulgated rules to control pollution related to oil and gas development. One controversial rule essentially bans the discharge of coalbed methane water with high SAR and EC values into Montana waters to prevent water quality degradation. See As EPA approves new Mont. water standards, effects to Wyo. industry feared, Land Letter, 3/6/08. In December of 2008, the Montana Supreme Court affirmed state groundwater quality control standards imposed on coalbed methane drilling operations, denying an appeal from energy developers. See "Mont. courts deal setback to coalbed methane development," Land Letter, 12/18/08.

See the Intermountain Oil and Gas BMP Project LAWS: Montana section for a summary of Montana law related to oil and gas development.

Montana counties and municipalities have authority to adopt local ordinances and zoning regulations necessary to promote the general welfare of their citizens, although only Gallatin County has adopted such regulations for oil and gas. In general, Montana law does not allow local governments to make resolutions or rules that prevent the complete use, development, or recovery of any mineral, forest or agricultural resource. While this does not preclude all local regulation of mineral processing or extraction—local governments can impose reasonable conditions on application approvals—land use and zoning ordinances must allow effective utilization of mineral resources. In exceptional circumstances, counties can adopt interim zoning maps or regulations—including moratoriums on mineral developments—as emergency measures to promote public health, safety, morals and public welfare.

Bozeman Pass--Bridger Mountains
The Greater Yellowstone Coalition has produced When CBM Comes to Your Community: A citizens' handbook with tools and methods for regulating coalbed methane development. To download or order a copy, see the GYC website at www.greateryellowstone.org.

With proposals for coalbed methane development in the area, Gallatin County has been the Montana test case for local regulation. Under its land use and zoning authority, the county considered an application from J.M. Huber for a conditional use permit that would have allowed the company to drill an exploratory coalbed methane well east of Bozeman in the Bridger Canyon Zoning District. But the permit included a long list of conditions; Huber objected to many of these conditions; and the county ultimately denied the permit. Huber is contesting this denial in both state and federal court. One of Huber's suits also charges that the county's denial of their permit is a "taking" of their mineral right and that Huber must be compensated for it.

In 2002, the county invoked its emergency powers to establish a two-year interim emergency zoning district. This Bozeman Pass district, also near Bridger Canyon, covered high potential oil and gas areas-areas with coal deposits-that were not already included in existing zoning districts. The county also declared a moratorium on all permits for oil and gas wells in this emergency district. During the moratorium period, which expired with the emergency district in August 2004, the community worked with the Sonoran Institute to develop a permanent zoning district-the Bozeman Pass Zoning District, which set tough new standards for oil and gas development in the area. In 2006, Huber relinquished four CBM leases in the area.

In recent years, Montana has been engaged in a legal battle with Wyoming over discharges of water from oil and gas operations in Wyoming that impact waters in Montana. Montana adopted water quality standards to restrict these discharges, and the EPA approved the strict standards. In October, 209, however, a federal court remanded the rules for reconsideration, holding that the agency did not give the water quality standards a full review when it approved them in 2003 and 2008. See "Coalbed methane decision adds salt to Mont. farmers' wounds," Land Letter, 10/29/09.

New Mexico

The New Mexico Oil and Gas Act (O&G Act) like many similar state statutes, focuses on preventing the waste of oil and gas resources. The act gives authority over all matters related to conservation of these resources to the Oil Conservation Division (OCD) of the Energy, Minerals and Natural Resources Department and the Oil Conservation Commission (OCC). This authority includes, according to OCD rules, protection of public health and the environment. State permits for drilling set out spacing requirements for drill pads, regulate disposal of wastes (including injection of produced water), and describe the standards for abandonment and reclamation of wells. The agency regulations also cover bonding requirements which are often linked to the depth of the wells.

See the Intermountain Oil and Gas BMP Project LAWS: New Mexico section for a summary of New Mexico law related to oil and gas development.

At least four New Mexico cites have ordinances regulating oil and gas development: Aztec, Carlsbad, Farmington, and Lovington. City ordinances include requirements for obtaining a permit from the city, bonding, local review of the location of wells and structures, and some specifications for drilling practices. As in other states, however, New Mexico law can preempt a local government's ability to regulate either by clearly stating the intention to do so or if the state law and local government's ordinance conflict. New Mexico courts have not, however, specifically addressed whether local governments have exceeded authority in this area. Several New Mexico counties are also developing ordinances related to oil and gas development, including Santa Fe and Rio Arriba counties. N.M Gov. Richardson ordered the OCD to develop special rules to reinforce Santa Fe County's regulations. See "New Rules for Colo., N.M.'s Santa Fe County Face Challenges, " Land Letter, 12/18/08.

The O&G Act does not appear to explicitly preclude all local regulation because it only gives the OCD exclusive authority over matters related to conservation of oil and gas, not all development of oil and gas. In addition, New Mexico law gives counties and municipalities the authority to regulate and restrict the location and use of buildings, structures and land for industry and other purposes. Furthermore, in a similar area of law, the New Mexico supreme court has upheld county and municipal authority to enact zoning and land use ordinances to promote the health, safety, and general welfare of their citizens related to mining. In this context, the court decided that state law does not preempt local ordinances if neither the state law nor the agency's regulations mention traditionally local development issues such as traffic congestion, increased noise, compatibility of the mining with the use made of surrounding lands, appropriate distribution of land use and development, and the effect of the activity on surrounding property values. Since the O&G Act does not mention these issues either, it is likely that New Mexico courts would allow local governments some leeway to regulate oil and gas development. What local regulations will be found valid, if challenged, will be decided on a case-by-case basis.

Utah

In Utah, the Utah Board of Oil, Gas and Mining and its related technical and administrative agency, the Division of Oil, Gas and Mining (DOGM) regulate oil and gas development. The Board's powers include regulation and enforcement related to drilling, testing, completing, operating, producing, and plugging wells; spacing and location of wells; and disposal of salt water and field wastes. Utah law requires operators to take all reasonable precautions to avoid polluting lands, streams, reservoirs, natural drainage ways, and underground water. The Board's rules encourage the development of "surface use agreements" with landowners. If the landowner and operator do not reach an agreement, DOGM will establish minimum well site restoration requirements that must be met before the agency will release the operator's bond.

See the Intermountain Oil and Gas BMP Project LAWS: Utah section for a summary of Utah law related to oil and gas development.

The Utah legislature has also authorized cities and counties to enact all measures necessary to promote the general health, safety, morals, and welfare of their citizens. A few counties have done so for oil and gas development, but Utah courts have not as yet reviewed their validity. As in other states, ordinances could be found invalid if the legislature has passed comprehensive state legislation or local regulations conflict with state law. The Utah Oil and Gas Conservation Act of 1983 is fairly comprehensive—stating that one of its purposes is "to provide exclusive state authority over oil and gas exploration and development" as regulated by the Act. "Exclusive state authority" might not, however, extend to matters of purely local concern such as traffic congestion, noise, and compatibility with surrounding uses, that are not specifically addressed by the law. One DOGM rule even explicitly recognizes the role of local governments, specifying that disposal of waste, including produced water, must be done in compliance with both federal and local regulations or ordinances. Carbon County, which includes both traditional oil and gas and coalbed methane development, provides an example of local regulation in Utah. The county requires that wells on private land meet zoning requirements and that operators obtain conditional use permits for development in the more sensitive zoning categories. Conditions of those permits range from requirements for controlling dust, weeds and odors to fencing and lining produced water ponds.

Wyoming

Wastewater goes unwatched
by J.M. McCord, High Country News, March 7, 2005

Wyoming CBM wells have increased from 427 wells in 1995 to over 21,000 in 2005, with another 30,000 approved
Wyoming's DEQ hired eight new staff in 2004 to deal with the twenty-fold increase in wastewater discharge permit applications since 1997, but many disposal reservoirs remain unpermitted
The state engineer is asking for permission to fine violators

The Wyoming Oil and Gas Commission (WOGCC) is comprised of the governor, the director of the office of state lands and investments, the state geologist, and two additional members from the public appointed by the governor. WOGCC has the authority to require drilling, casing, and plugging of wells in order to prevent escape of oil or gas, bonding for plugging dry or abandoned wells, and monitoring of well performance. WOGCC has the authority to regulate, for conservation purposes, the drilling, producing and plugging of wells, the shooting and chemical treatment of wells, well spacing, disposal of salt water and drilling fluids and development, and the contamination or waste of underground water. In addition, WOGCC has a duty to prevent the waste of natural gas and to keep it from polluting or damaging crops, vegetation, livestock, and wildlife. WOGCC rules require that, owners and operators not pollute streams, underground water, or unreasonably damage or occupy the surface of the leased premises or other lands. The Wyoming Department of Environmental Quality (WDEQ) regulates surface discharge for wastewater disposal through rules created by a Governor-appointed council.

See the Intermountain Oil and Gas BMP Project LAWS: Wyoming section for a summary of Wyoming law related to oil and gas development.

WY Governor has the Last Word
While WDEQ and the Wyoming Environmental Quality Council can make and implement rules, the Governor can approve or reject them. In May 2007, the Governor rejected new rules, prompted by an environmental lawsuit, that would have required that water discharged from CBM operations be suitable for agricultural purposes.

A subsequent version of the rules failed review by out-of-state experts, who deemed them "not reasonable nor scientifically valid." The DEQ announced in September 2009 that it would withdraw the proposed rules and start over, a move supported by the Governor.

Like other states, Wyoming cities and counties have zoning and planning authority that can be used to regulate oil and gas development. The authority of Wyoming counties is more restricted than that of its cities and towns. Cities can regulate construction or use of buildings and land for various reasons, including promoting health and general welfare and encouraging the most appropriate use of land throughout the city or town. Zoning regulations for the City of Gillette, for example, define oil, gas and mineral exploration and production activities as "permitted uses" within the agricultural or heavy industrial districts within the city. Gillette requires a permit to drill wells which the city will issue if it is satisfied that there will be no hazard to the general public and that no undue nuisance will be created.

Powder River Basin wastewater controversy
A district court in Wyoming decided in March 2006 that surface owners cannot necessarily be forced, without legal recourse or monetary compensation, to accept coalbed methane water produced from upstream wells. In this case, the rancher didn't want the water because it might change the natural character of the ephemeral waterway and ruin the creek bottom where his cattle graze. Williams Production argued that the rancher can't refuse the water because it becomes "waters of the state" when the company discharges it to a natural watercourse. The judge decided that the ephemeral drainage was not a "natural watercourse."

If they still want to discharge the water, Williams Production could either appeal the decision or proceed with condemnation efforts to allow their discharge. Ranchers and conservationists hope that the decision will help in their effort to force the state to require truly beneficial uses of coalbed methane produced water.
READ MORE >>

Pinedale Anticline and Jonah Field air quality concerns
Following health warnings regarding high ozone levels issued by the Wyoming Department of Environmental Quality, county officials, citizens and environmental groups are calling for a health impact assessment to help guide development of the two major gas fields in Sublette County.

Counties can also regulate structures and land use, but no county zoning resolution or plan may prevent any use necessary to the extraction or production of mineral resources. Each Wyoming county is unique in its treatment of oil and gas development and the rules are in flux. For example in coalbed methane territory, the Campbell County code explicitly exempts extraction of oil, gas, coal, or other minerals from building permit requirements and Converse county does not have zoning regulations. Johnson county, on the other hand, developed a land use plan in early 2004 to be followed by zoning regulations and zoning designations. The plan and regulations will help the county address noise, dust and visual impacts, damage to roads and other county facilities, placement of infrastructure, air and water discharges and pollution, and reclamation of oil and gas development. As other counties revise their plans, conservation organizations like the Powder River Basin Resource Council will undoubtedly be recommending changes to better address oil and gas development. Even Governor Dave Freudenthal has asked county commissioners if they are interested in gaining more authority over oil and gas development.

In May 2009, the Wyoming Supreme Court ruled against two ranching families who argued the state should do more to regulate water produced by coal-bed methane wells. The Court's opinion stated that the ranchers lack standing not because the state necessarily has managed CBM water correctly, but because the ranchers failed to show how any state failure to do so has caused specific harm to their property. See "Ranchers lose CBM suit in Wyoming Supreme Court," Casper Star Tribune, 5/7/09. But in March 2010, the state Department of Environmental Quality issued a more favorable decision for ranchers, agreeing to review a permit issued to Stephens Energy Company that resulted in discharge of salty water that destroyed a hay meadow and cottonwood trees on a Powder River Basin ranch. See "Wyo ranchers prevail in state CBM water case," Casper Star-Tribune, 3/13/10.

See also "Water drawdowns won't slow pace of Wyo. methane industry," Land Letter, 8/20/09.

In an effort to sort out environmental and property right concerns, a new working group convened in December 2009 at the request of the Wyoming Department of Environmental Quality. See "New group tackles CBM water issues," Casper Star-Tribune, 12/1/09.

For more information on specific state and local regulations, see Links: Other Resources: Natural Resources Law Center at the end of the Oil and Gas section.

Controversies

Hydraulic Fracturing

Hydraulic fracturing is high pressure injection of fluids into a well to crack the rock. Energy companies use the process to increase the flow of oil, gas, and CBM to production wells, allowing them to extract more than they could using conventional drilling techniques. While the value of hydraulic fracturing for production - particularly in Wyoming gas fields - is clear, its impact on groundwater is controversial. The Energy Policy Act of 2005 changed the rules on regulation of this practice.

Until summer 2005, the Environmental Protection Agency (EPA) regulated hydraulic fracturing because it was considered "underground injection" under the Safe Drinking Water Act. In June 2004, EPA released a study concluding that there is no strong link between hydraulic fracturing and pollution of underground drinking water supplies. Yet an EPA environmental engineer challenged the findings and methodology of the study, and correspondence between the vice president's office and the agency shows that EPA officials urged the administration to consider ongoing scientific study into whether the practice could contribute to groundwater contamination. Following urgings of Democratic lawmakers, the EPA Inspector General decided to investigate complaints that the Bush administration has ignored scientific studies that show the fracturing threatens drinking water supplies. Nonetheless, the Energy Policy Act of 2005 included a provision (Section 322) that redefines "underground injection" under the Safe Drinking Water Act to exclude hydraulic fracturing.

In response to concerns about health impacts of this practice, Reps. Diana DeGette (D) of Colorado introduced legislation (H.R. 2766) that would repeal the Safe Drinking Water Act exemption for hydraulic fracturing and force energy companies to reveal the contents of the fracturing fluids. And the spending bill funding environmental agencies for fiscal year 2010 includes a measure that calls on U.S. EPA to conduct a new study on the risks of hydraulic fracturing on drinking water supplies. See "The Halliburton Loophole," New York Times, 11/2/09, and "Congress orders EPA to study hydraulic fracturing risks," Land Letter, 11/5/09. In February 2010, two congressional leaders sent inquiries to companies that work in the business requesting information on the chemicals used in the process, citing the need for further information to determine if current regulations are sufficient. Copies of the letters and the congressmen's memorandum are available at "Waxman, Markey launch hydraulic-fracturing inquiry," Greenwire, 2/18/10.

For a summary of the Obama administration's position on hydaulic fracturing, see "White House official expresses anxiety about fracturing, skirts stance on regs," E&E Daily, 3/10/10.

Colorado counties are split in their opinions of federal regulation of hydraulic fracturing. See, e.g., "Garfield County: No rules on fracing," Durango Herald News, 11/12/09. Wyoming lawmakers have announced opposition. "Senator won't support legislation on 'fracking,'" Jackson Hole Daily News & Guide, 11/30/09.

Use of hydraulic fracturing is widespread in Wyoming
Without the Section 322 exemption, EPA's investigation might have slowed development.

Drilling technique draws scrutiny, Casper Star-Tribune, 3/20/05
Energy task force ignored EPA advice on hydraulic fracturing, Greenwire, 10/15/04
No conclusive link between hydraulic fracturing and water contamination—EPA, Land Letter, 7/15/04

The literature related to hydraulic fracturing is expanding rapidly. for example:

For a copy of the EPA report Evaluation of Impacts to Underground Sources Drinking Water by Hydraulic Fracturing of Coalbed Methane Reservoirs, click here. More recently, EPA studies revealed the presence of a chemical used in hydraulic fracturing in a small Wyoming community's drinking water. See "EPA: Chemicals found in Wyo. drinking water might be from fracking," Pro Publica, 8/25/09, and "EPA investigates water contamination, possible link to frac'ing," Land Letter, 9/17/09.
The Oil and Gas Accountability Project has produced its own report criticizing the EPA study. See also "Buried Secrets: Is Natural Gas Drilling Endangering U.S. Water Supplies?" ProPublica, 11/13/08.
For news bulletins on the fracturing controversy, see "Methods to limit fracturing's impact underused," Greenwire, 12/14/09; "State regulators doing 'good job' overseeing hydrofracking--EPA," Greenwire, 2/16/10.
For a summary of a report published by an energy analysis firm in March 2010, see "U.S. fracking regulations won't halt 'shale gale,'" E&E News PM, 3/10/10.

Oil, Gas and the Clean Water Act

Click to download a .pdf copy of NRDC's Drilling Down: Protecting Western Communities from the Health and Environmental Effects of Oil and Gas Production

NPDES Exemptions

Following a long controversy over oil and gas exemptions from NPDES permitting requirements under the Clean Water Act (CWA), the Energy Policy Act of 2005 expanded the CWA definition of "oil and gas exploration and production activities" in order to expand the existing exemption. Many thought that this change would simply exempt relatively small (one to five acre) oil and gas drill site construction activities from CWA stormwater permit requirements. However, in June 2006, EPA finalized new stormwater regulations to implement the change. A number of Senators contended that the EPA rule went beyond Congress' intended change. The Senators argued that EPA's rule incorrectly interprets the 1987 Clean Water Act by excluding sediment contamination as a factor that may cause a normally exempt oil and gas activity to require a stormwater permit. In 2008, following litigation by the NRDC, the Ninth Circuit Court of Appeals vacated the EPA rules, leaving the old rules and the Energy Policy Act definition in effect.

For more information on the rules in effect see EPA's web page.

CBM Effluent Guidelines

EPA has initiated a study to determine if the agency should develop effluent guidelines to control pollutants discharged in CBM produced water.

For details on the study, see the EPA Effluent Guidelines web page.

Oil and Gas Development and Climate Change

Conservation groups sued the Bureau of Land Management on December 17,2008,claiming that the agency is failing to address global warming pollution produced by oil and gas development on public lands in Montana. The federal lawsuit alleges that the agency violated federal laws by not preparing any environmental analysis to justify the lease sales; relying on nearly 30-year-old decisions, which do not address global warming or the contribution of oil and gas production to global warming; and failing to quantify and reduce greenhouse gas pollution,which contributes to global warming. See "Suit Challenges BLM on Global Warming," Billings Gazette, 12/19/08.

Oil Shale Development

Among other provisions, the Energy Policy Act of 2005 ordered the U.S. Department of Interior to complete a programmatic EIS for a commercial leasing program for oil shale and tar sands on public lands, with an emphasis on potential development in Colorado, Wyoming, and Utah. The Department announced leasing rules for the three states in November of 2008, and amended land use plans to allow future lease sales. In January of 2009, the Bureau of Land Management announced that it would lift a ban on oil shale leasing in areas that had been temporarily withdrawn from development by President Herbert Hoover through Executive Order No. 5327. The new orders, which will affect about 1.7million acres in Utah and about 6 million acres in Wyoming, will take effect Feb. 9, 2009. See full story and links to Utah and Wyoming orders at "Interior revokes 1930 ban on shale development in two states," Greenwire, 1/9/08.

While serving as Colorado's Senator, Secretary of the Interior Ken Salazar worked to slow the Bush Administration oil shale leasing plans, in part out of concerns over impacts on western water resources. Soon after his appointment to the Interior leadership post was confirmed, he expressed enthusiasm for revisiting the former administration's policies concerning oil shale leasing. See "Salazar likely to overturn some Bush regs, including oil shale," Land Letter, 1/29/09, and "Salazar says U.S. keeping options open on Roan Plateau," Rocky Mountain News, 2/6/09. Accordingly, on February 25, 2009, Secretary Salazar announced his intention to withdraw nominations of parcels up to 640 acres in Colorado, Utah, and Wyoming for 10-year oil shale lease agreements. The Department of the Interior will commence a new comment period for input on what conditions should be included in such leases, and then will move ahead with solicitation of a new round of leases. He emphasized the importance of studying potential impacts on land, water, and wildlife in this process. See "Bush's R&D lease plan fails Obama administration's 'smell test,'" E & E News, 2/25/09. In October 2009, the Interior Department announced further investigations into actions late in the Bush Administration to secure favorable lease arrangements and royalties for oil shale development. See "Inquiry to focus on royalty rates for oil shale program," New York Times, 10/20/09. For an analysis of the response of those in the regulated industry, see "Industry chafes over Interior's revised oil shale leases," Land Letter, 10/29/09.

For a summary of conflicting views on the potential environmental and other impacts of oil shale development, see "Oil shale industry group assails studies as negative," Grand Junction Daily Sentinel, 4/15/09. For a report summarizing the history of oil shale development in Colorado, see "What Every Westerner Should Know About Oil Shale," produced by the University of Colorado's Center of the American West (June 2009).

Impacts on Adjacent Protected Areas

A controversial plan to allow oil and gas drilling near national parks in Utah pitted the Bureau of Land Management against the National Park Service and environmentalists. The original sale covered more than 360,000 acres, including parcels near Dinosaur National Monument and Arches and Canyonlands national parks. Environmental groups filed for an injunction in December 2008, arguing that the agency was rushing the environmental review in order to complete the sale before the end of the Bush Administration.

On January 17, 2009, Judge Ricardo Urbina of the U.S. District Court for Washington granted a temporary restraining order preventing the BLM from finalizing 80 of 131 oil and gas leases sold at auction in December, agreeing with the plaintiffs that the agency had not adequately weighed the potential impacts of the development on adjacent protected areas. See "11th Hour Ruling Blocks Utah Oil and Gas Leases," New York Times, 1/17/09, or see full opinion, Southern Utah Wilderness Alliance v. Allred, No. 08-2187, 39 ELR 20018 (D.D.C. Jan. 17, 2009) (Urbina, J.).

On February 4, 2009, Interior Secretary Salazar ordered the BLM to withhold the leases, pending full environmental review of their impacts on protected areas. He also withdrew proposed leases in Colorado, Utah, and Wyoming, indicating a significant shift in federal policy toward the recent build-up of oil and gas activity on public lands in the West. See "Enviros see lease deferrals as sign of changing times under Obama," Land Letter, 2/5/09. In July 2009, the Interior Department appointed a 12-member team to review the blocked leases and make recommendations by September 2009.

Immediately after this withdrawal, a coalition of hunters and anglers filed objections to the BLM's planned oil and gas leases in Utah's West Desert, potentially impacting Great Basin National Park. The group Sportsmen for Responsible Energy Development disagrees with the BLM's preliminary finding that drilling wouldn't have significant impacts on the region's wildlife or lands. See "Enviro, hunting groups protest Utah leases," Land Letter, 3/12/09.

In June 2009, the Interior Department issued a report analyzing this controversial lease process and withdrawal. Although it concluded that the original lease process was flawed, it directed the BLM to conduct additional studies to determine if 30 leases should be reinstated. Secretary Salazar discussed the lease withdrawals in congressional testimony in September, 2009, and announced in October that 52 parcels would be held back pending further study and 17 would be allowed back at upcoming auctions. See "BLM failing to protect sensitive landscapes, panel says," Land Letter, 10/15/09.

In a separate controversy, a federal judge in September 2009 blocked oil and gas drilling on a wildlife refuge that sits next to Great Sand Dunes National Park in south-central Colorado. U.S. District Judge Walker Miller ruled that environmental groups presented adequate evidence that drilling would cause irreparable harm to Colorado's Baca National Wildlife Refuge, not only to wildlife but also to the refuge's "significant 'sense of place' and quiet." See "Federal court blocks drilling in Colo.'s Baca wildlife refuge," Land Letter, 9/10/09.

And, in Wyoming, BLM officials pulled 15 oil and natural gas lease parcels from an auction scheuled for Dec. 1, 2009, and requested guidance from the agency's Washington Office on how to address concerns about impacts on proposed wilderness areas. See "BLM yanks Wyo. lease parcels, requests agency review," Land Letter, 11/5/09.

For a white paper making the case for more aggressive mitigation measures to address the impacts of energy development on western landscapes, see "The Next Generation of Mitigation: Linking current and future mitigation programs with state wildlife action plans and other state and regional plans," produced jointly by The Nature Conservancy and the Environmental Law Institute. Click here to access the executive summary or full report.

In very limited instances, oil and gas development occurs within the boundaries of national parks and other protected areas. In November of 2009, the National Park Service proposed revisions to its regulation of these activities. See "Agancy revising rules for oil and gas drilling in parks," Greenwire, 11/23/09.

The Energy-Water Nexus

In recent years, increasing attention is being directed to the amount of water consumed or otherwise impacted by energy production (as described above in the discussion of coalbed methane water production). At the same time, the energy costs of maintaining reliable water supplies are surprisingly high. According to the California Energy Commission, nearly 20 percent of total electricity and 30 percent of non-powerplant natural gas consumed in California are used to deliver, treat and dispose of water.

Click here for the full report in pdf.

Collaboration in Action

Scope of the Agenda

The agenda of a collaborative group can be narrowly tailored to a specific issue or broadly defined. The group's focus can also evolve over time. Two RLCH stories illustrate collaboration in the oil and gas development arena.

The Muddy Creek Coordinated Resource Management project, for example, began in 1991 to address many of the traditional concerns of rural Wyoming - drought, grazing, erosion, and water quality. The CRM project focused on non-contentious issues and created an atmosphere of trust and open communication that resulted in a number of successful initiatives. The area of south-central Wyoming is now confronted with the possibility of extensive coalbed methane development and the collaborative is faced with a decision on whether and how to deal with this highly contentious issue with many new stakeholders.

In contrast, the Trapper's Point/Pinedale working group formed specifically to address oil and gas development in the Pinedale Anticline. In October 2003, local and regional environmental organizations, ranchers, county and industry officials, Wyoming state agencies, and the BLM began meeting to discuss core issues of oil and gas development near Trapper's Point—a half-mile wide natural bottleneck in a critical wildlife migration corridor. While the group continues to focus on oil and gas issues and is still grappling with group process issues, it plans to expand its discussions beyond Trapper's Point. Controversies continue, including a legal challenge filed by environmtalists claiming that the BLM has mishandled its adaptive management program for the Pinedale Anticline. See "BLM failed to meet 'adaptive management' plan in Wyo. development plan--lawsuit," Land Letter, 10/15/09.

Conservation Buyouts

Collaborative processes often result in an agreement to share resources — with some lands slated for development and others protected for conservation. In rare cases, stakeholders — with the help of Congress — agree to protect an entire area of federal land from oil and gas development. In Montana, the Coalition to Protect the Rocky Mountain Front, Congress, BLM, the Forest Service, and energy companies have worked together to keep oil and gas development out of the Rocky Mountain Front.

In the last days of the 109th Congress, lawmakers passed a permanent moratorium on mineral and geothermal leasing and mining in the Rocky Mountain Front. Title IV, section 403 of the Tax Relief and Health Care Act of 2006, also provides tax incentives for the sale of existing mineral and geothermal rights to tax-exempt entities.

The Coalition will buy out some of those existing leases on federal lands with the help of funding from the Wyss Foundation. For more information on the Rocky Mountain Front, see the Coalition web site. See also, Coalition buys Front leases, By Sonja Lee, Great Falls Tribune.

Oil and Gas Legislation of the 111th Congress

Senator Bingaman (D-NM) introduced S.B.l 531 on March 5, 2009. This bill would provide for the conduct of an in-depth analysis of the impact ofenergy development and production on the water resources of the United States.

Introduced on March 12, 2009, H.R. 1462 would provide for a study by the National Academy of Engineering regarding improving the accuracy of collection of royalties on production of oil, condensate, and natural gas under leases of Federal lands and Indian lands, and for other purposes.

The Omnibus Public Land Management Act, H.R. 146, enacted on March 25, 2009, includes provisions to withdraw from oil and gas leasing 1.2 million acres of the Wyoming Range -- part of the Bridger Teton National Forest that sits south of Jackson Hole and Grand Teton National Park.

Sen. Tester (D-MT) introduced S.719 on March 26, 2009. This bill would direct the Secretary of the Interior to notify surface estate owners incases in which the leasing of federal minerals underlying the land is to be used for oil and gas development.

Rep. Degette (D-AZ) introduced H.R. 2766 on June 9, 2009. The "Fracturing Responsibility and Awareness of Chemicals Act of 2009" would repeal the exemption for hydraulic fracturing in the Safe Drinking Water Act. See also S. 1215, introduced in the Senate by Sen. Casey (D-PA). Six Colorado counties, including Delta, Mesa, Moffat and Rio Blanco counties on the Western Slope, and Morgan and Weld counties in northern Colorado east of the Continental Divide, have adopted resolutions opposing the legislation. See "Cities, counties oppose legislation on gas fracturing," Grand Junction Sentinel, 6/30/09.

On September 8, 2009, Rep. Rahall (D-W.V.) introduced H.R. 3534, which would create a new "Office of Federal Energy and Minerals Leasing" to handle onshore and offshore lease sales, inspection, enforcement and revenue collection and reform the federal royalty system. See "Sweeping Rahall bill would overhaul federal leasing, royalties," Greenwire, 9/9/09. This legislation responds to several GAO reports concerning problems with Minerals Management Service oversight of royalties from oil and natural gas produced from federal lands and waters. See, e.g., "Jury remains out on Interior efforts to improve royalty tracking," E&E News PM, 9/15/09. See also "Interior to eliminate royalty-in-kind program," Land Letter, 9/17/09.

On September 22, 2009, Rep. Fallin (R-Okla.) introduced the "Federal Exploration and Production Reform Act of 2009," H.R. 3616, aimed at expediting oil and gas development on federal lands.

Links

Public Laws

Mineral Leasing Act of 1920 (MLA)
As amended by the Federal Onshore Oil and Gas Leasing Reform Act of 1987, Public Law 100-203
The text of the MLA, as it appears in the U.S. Code, 30 U.S.C. sections 181-287, can be viewed on the Cornell University web site.
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Energy Policy Act of 2005, Public Law 109-58
The text of the law is available on thomas.loc.gov as HR 6 in the 109th Congress or as P.L. 109-58.
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Regulations

Bureau of Land Management Oil and Gas Regulations
at 43 CFR sections 3000 - 3195
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U.S. Forest Service Oil and Gas Regulations
at 36 CFR section 228
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Federal Agencies

Bureau of Land Management - National Energy Office
The web page of the BLM's National Energy Office provides links to a variety of documents including the Bush administration's National Energy Plan, and the Energy Policy and Conservation Act (EPCA) Report, as well as agency policies on split estates, approving applications to drill (APDs) and many other issues.
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Bureau of Land Management - Oil and Gas Resources
This BLM web page provides links for a wide variety of information on federal oil and gas leasing and operations, including the "Gold Book" of surface operating standards.
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Energy Information Administration
The Energy Information Administration (EIA) is a statistical agency of the U.S. Department of Energy that provides policy-independent data, forecasts, and analyses on energy resources. Information can be searched by several categories: geography, fuels, sector, price, process, environment, forecasts, and analysis.
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States

Montana DEQ
The Montana Department of Environmental Quality web site provides links to federal, state and local regulations applicable to oil and gas development and special rules related to coalbed methane development.
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Other Resources

Western Resource Advocates
Founded in 1989, Western Resource Advocates (WRA) is a non-profit environmental law and policy organization dedicated to restoring and protecting the natural environment of the Interior American West. The WRA web site includes information on many public lands and water issues.
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For an introduction to development on oil and gas resources on federal lands, see their report "Preserving Our Public Lands: A Citizens Guide to Understanding and Participating in Oil and Gas Decisions Affecting Our Public Lands."
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Oil and Gas Accountability Project
The OGAP works with communities throughout the Rocky Mountain West and across the country to reduce the social, economic and environmental problems caused by oil and gas development. OGAP is based in southwestern Colorado.
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Wyoming Outdoor Council
WOC is Wyoming's leading advocate for natural resources conservation and environmental protection. The organization works on a variety of Wyoming natural resources issues including coalbed methane development.
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Western Organization of Resource Councils (WORC)
WORC is a regional network of seven grassroots community organizations (including Northern Plains Resource Council, Powder River Basin Resource Council, and Western Colorado Congress) that include 9,500 members and 50 local chapters. WORC helps its member groups through training and by coordinating issue work.
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Last Updated ( Monday, 15 March 2010 )