Leasing and Permitting for Oil and Gas Development on Federal Public Domain Lands
Released: 2006-01-26T00:00:00

Introduction

A variety of interrelated statutes and agency regulations govern leasing and permitting foroil and gas development on federal lands. The national mining and minerals policy fosters andencourages the following activities:

private enterprise in ... the development of economicallysound and stable domestic mining, minerals, metal and mineral reclamation industries [and] theorderly and economic development of domestic mineral resources, reserves, and reclamation ofmetals and minerals to help assure satisfaction of industrial, security and environmental needs. (1)

The Bureau of Land Management (BLM) -- part of the U.S. Department of the Interior -- managesmost federal mineral development and is largely responsible for implementing this policy. (2) BLM also manages a largeamount of federal lands. Federal land in the National Forest System (NFS) is under the jurisdictionof the Forest Service, which is part of the U.S. Department of Agriculture. The Forest Service playsa role in authorizing mineral development on NFS lands.

This report addresses the leasing and permitting of onshore, federal public domain lands. "Public domain lands" encompass lands obtained "by treaty, conquest, cession by States, and[certain] purchase[s]." (3) The historical distinction between public domain lands and other federal lands is reflected in thedifferent statutes that apply to the different types of lands.

This report first analyzes the legal framework for oil and gas leasing and permitting onfederal public domain lands managed by BLM and the Forest Service. Second, this report assesseshow the recently enacted Energy Policy of 2005 affects these laws. Finally, this report analyzesselected judicial and administrative decisions regarding what steps federal environmental lawsrequire agencies to take before issuing coalbed methane leases. Coalbed methane is a type of naturalgas that is trapped in coal seams by water pressure; it is leased separately from the coal.

The Legal Framework for Oil and Gas Leasing

At the dawn of the twentieth century, private entities could explore, develop, and purchasefederal public domain lands containing oil with relative ease. The federal government permittedmineral exploration of such lands without any charge. Oil could be developed as a placermineral. (4) Full ownershipof oil lands "could be obtained for a nominal amount." (5) However, Congress's enactment of the Mineral Lands Leasing Actof 1920 (MLLA) ended the private acquisition of title to federal oil lands by authorizing theSecretary of the Interior (Secretary) to issue permits for exploration and to lease lands containing oiland gas and other defense-related minerals. (6) The first section of this report details the legal framework for suchoil and gas leasing.

Public Domain Lands Subject to Leasing for Oil and Gas Development

"Public domain lands" encompass lands obtained "by treaty, conquest, cession by States, and[certain] purchase[s]." (7) The historical distinction between public domain lands and other federal lands is reflected in thedifferent statutes that apply to the various types of lands. The scope of this report does not encompass "acquired lands," which are lands "granted or sold to the United States by a State orcitizen." (8)

The MLLA authorizes the Secretary to lease oil and gas deposits and onshore public domainlands containing oil and gas deposits, with the federal government retaining title to the lands. (9) This leasing authority appliesto National Forest System (NFS) lands that are reserved from the public domain, and to mostreserved subsurface mineral estates. (10) However, it excludes numerous categories of lands such asnational parks and monuments, as well as lands in incorporated cities, towns, and villages. (11) Areas within the NationalWilderness Preservation System cannot be leased, but valid rights existing as of 1984 arepreserved. (12) In sum,all public lands subject to the Secretary's authority under MLLA "which are known or believed tocontain oil or gas deposits may be leased by the Secretary." (13)

However, the Secretary of the Interior cannot issue any lease for National Forest Systemlands reserved from the public domain if the Secretary of Agriculture objects. (14) In addition, the U.S. ForestService has issued separate regulations governing certain aspects of leasing and permitting for oiland gas development on lands within its jurisdiction.

The Secretary is also authorized to withdraw public lands managed by BLM so that some orall potential land uses are proscribed on those lands. (15) A withdrawal involves "withholding an area of Federal landfrom settlement, sale, location, or entry, under some or all of the general land laws, for the purposeof limiting activities under those laws in order to maintain other public values in the area or reservingthe area for a particular public purpose or program." (16) However, limitations on the Secretary's withdrawal authorityexist. (17) For example,Congress can make withdrawals, and the Secretary may not modify or revoke a congressionalwithdrawal. (18)

Development of Resource Management Plans

U.S. Department of the Interior

The BLM manages approximately 262 million acres of public lands under the Federal LandPolicy and Management Act of 1976 (FLPMA). (19) The Secretary of the Interior must develop and revise "land useplans" for the public lands -- officially known as Resource Management Plans (RMPs) -- thatconsider the present and potential future uses for public lands managed by BLM. (20) These RMPs serve as theinitial determinant of which lands may be subject to leasing. All activities performed on these landsmust be consistent with the RMPs. (21) Thus, an RMP must allow oil and gas development in an areain order for it to take place there. (22)

The Secretary generally must apply "multiple use" and "sustained yield" principles whendeveloping RMPs. (23) "Multiple use" principles involve judiciously managing lands in a manner that takes into account theenvironmental, historical, and natural resource values of the lands and prevents their permanentimpairment. (24) "Sustained yield" means maintaining "high-level annual or regular periodic output of the variousrenewable resources of the public lands." (25) In addition, the Secretary is required to provide opportunitiesfor the public and various levels of government to participate in the development of RMPs. (26) This can includeprocedures such as holding public hearings, when appropriate. (27) Regulations require thepreparation of an Environmental Impact Statement (EIS) or an Environmental Assessment (EA)when producing an RMP. (28)

The Secretary's mandate to formulate and revise RMPs extends to all BLM-managed publiclands, no matter how they had been classified before the enactment of FLPMA in 1976. (29) The land use provisionsalso apply to lands that had previously been withdrawn. (30) In addition, FLPMA requires that public lands within BLM'sjurisdiction be inventoried and identified on a continuing basis. (31)

U.S. Forest Service

The Forest Service also manages its lands under multiple use and sustained yieldpolicies. (32) It developsland management plans for NFS lands by considering the desired conditions, objectives, suitabilityof areas for various uses, and other criteria. (33) As with the Department of the Interior's planning process, thelaws governing Forest Service land management and implementation require public notification andopportunities for public participation. (34) When analyzing Forest Service lands for potential leasing, theForest Service classifies lands into three categories:

(1) lands that will be "[o]pen to development subject to the terms andconditions of the standard oil and gas lease form"

(2) lands that will be "[o]pen to development but subject to constraints that willrequire the use of lease stipulations"

(3) lands that will be "[c]losed to leasing, distinguishing between those areasthat are being closed through exercise of management direction, and those closed by law, regulation,etc." (35)

The Forest Service must also comply with the National Environmental Policy Act of 1969(NEPA) when analyzing NFS lands for potential leasing. (36) Once the Forest Service has completed its analysis of which NFSlands will be available for leasing, it notifies BLM of its decisions. (37) Forest Serviceauthorization for BLM to lease specific lands may follow. (38)

The Competitive Leasing Process

The MLLA authorizes both competitive and noncompetitive leasing procedures. Usuallylands go through the competitive leasing process first. When BLM posts a list of lands available forcompetitive leasing, private entities may respond by submitting nominations for parcels to beauctioned. (39) No unitbeing auctioned can exceed 2,560 acres, except in Alaska, where the maximum unit acreage is 5,760acres. (40) In addition,each unit must be "as nearly compact as possible." (41)

The Secretary must provide forty-five days notice before offering public lands for leasing,including a thirty-day period for receiving public comments after notice is published in the FederalRegister. (42) Competitive bidding must be held on a quarterly basis in each state where public lands are availablefor leasing. (43) TheSecretary may also authorize additional opportunities for bidding if he considers them to benecessary. (44)

Once the public notice requirements have been satisfied, the public lands are offered forcompetitive leasing through an oral auction. (45) A national minimum acceptable bid of $2 per acre applies to theauction. (46) Any bidsfor less than the national minimum bid must be rejected. (47) A competitive bid constitutes a legally binding commitment andcannot be withdrawn. (48) The MLLA requires the Secretary to accept the highest bid from a responsible qualified bidderwhose bid meets or exceeds the national minimum acceptable bid. (49)

The winning bidder at a competitive auction must submit the following payments on the dayof sale, unless otherwise specified: (1) the minimum bonus bid of $2 per acre; (2) the first year'srental payment; and (3) a $75 per parcel administrative fee. (50) Then, the balance of thebonus bid, if applicable, is due within ten working days. (51) The lease is issued within sixty days of payment of the remainderof the bonus bid. (52) Thelease is also conditioned upon a royalty payment of at least 12.5% in amount or value of theproduction that is removed or sold from the lease, (53) unless the Secretary suspends, waives, or reduces theroyalty. (54)

The Noncompetitive Leasing Process

If no bids are received at a competitive bidding auction -- or if all bids submitted are for lessthan the national minimum acceptable bid -- the land will be offered for noncompetitive leasingwithin thirty days. (55) This noncompetitive leasing remains available for two years after the competitive biddingauction. (56)

The first qualified person who applies for a noncompetitive lease and pays the $75application fee is entitled to receive the lease without having to competitively bid. (57) All noncompetitive offersreceived during the first business day after the last day of the competitive auction are considered tohave been submitted simultaneously; in such cases, a lottery determines the lease winner. (58) Unlike competitive bids,noncompetitive offers may be withdrawn by the offeror within sixty days of filing the offer if nolease has yet been signed on the government's behalf. (59) As with competitive leases, a noncompetitive lease isconditioned upon payment of a 12.5% royalty in amount or value of the oil or gas removed or soldfrom the lease. (60) Additionally, there are minimum and maximum acreage limitations for noncompetitive leases. (61) If these criteria are met,BLM will issue the lease within sixty days of the Secretary identifying a qualified applicant. (62)

If no application for a noncompetitive lease is submitted during the two years that the landis available for noncompetitive leasing, the process for leasing the land will again be a competitiveoral auction. (63)

NEPA applies to the competitive and noncompetitive leasing processes, possibly requiringpreparation of a supplemental EIS (SEIS) or a new EA or EIS, unless reliance on old documents issufficient or the agency issues a FONSI. (64)

Lease Terms and Conditions

General Statutory Restrictions

In addition to the processes affecting where leasing can take place (discussed above), generalrestrictions on leasing address who can lease and how much land they can lease. First, public landscontaining oil and gas deposits may only be leased to U.S. citizens, associations of U.S. citizens,corporations organized under U.S. laws or the laws of any State, and municipalities. (65) In addition, citizens of acountry that denies similar privileges to U.S. citizens and corporations may not control any interestin federal leases. (66) Second, no entity is permitted to own or control oil or gas leases (including options for such leases)under MLLA in excess of 246,080 acres in any one State other than Alaska. (67) Other aggregate acreagelimitations include limitations pertaining to options (68) and to combined direct and associational/corporate stockholderinterests. (69)

Payment Terms: Royalties and Rentals

Leases are conditioned upon payment to the Government of a royalty of at least 12.5% inamount or value of oil or gas production that is removed or sold from the leased land. (70) Leases subject to rates ineffect after December 22, 1987 must generally pay a 12.5% royalty, but this percentage can increaseif a lease is cancelled because of late payments and then reinstated. (71) The Secretary also has thepower to reduce the royalty on a noncompetitive lease if he deems it equitable to do so or ifcircumstances could "cause undue hardship or premature termination of production" absent such areduction. (72) For oiland gas leases, the royalty must be paid in value unless the Department of the Interior specifies thata royalty payment-in-kind is required. (73) Once the royalty has been paid, the Secretary is required to sellany royalty oil or gas "except whenever in his judgment it is desirable to retain the same for the useof the United States." (74)

In addition to royalties, leases are conditioned upon payment of annual rentals. (75) Generally, the rental ratefor the first five years of a lease is $1.50 per acre per year, with the rate increasing to $2 per acre foreach additional year of the lease. (76) However, there is some variation in rental amounts for certainspecific categories of lands. (77) For leases issued after December 22, 1987, a minimum royaltyin lieu of the rental is due once oil or gas has been discovered on the leased land. (78) The amount of thisminimum royalty is equal to the annual rental that would otherwise have been due. (79) Perhaps most important,rental payments are not due on acreage for which royalties or minimum royalties are being paid,"except on nonproducing leases when compensatory royalty has been assessed in which case annualrental as established in the lease shall be due in addition to compensatory royalty." (80)

The Secretary is authorized to waive, suspend, or reduce rentals and royalties under certainconditions. (81) Moneyreceived from royalties and rentals is initially paid into the U.S. Treasury. (82) Fifty percent of the fundsthen go to the State where the land or mineral deposit is located. (83) Forty percent of the fundsare allocated into the Reclamation Fund under the Reclamation Act of 1902 for projects that providewater to arid Western states. (84) Because Alaska is not served by the Reclamation Fund, 90percent of the funds collected from federal leases in Alaska are allocated to the State of Alaska. (85)

Length of Leases, Extensions, and Cancellations

The primary term for competitive and noncompetitive leases is ten years. (86) Leases can be extendedbecause of, inter alia , drilling operations or oil or gas production. The existence of an approvedcooperative plan can also affect extensions.

First, a lease will be extended for two years because of drilling if three criteria aresatisfied: (87)

(1) actual drilling operations began before the end of the primary leaseterm;

(2) actual drilling operations are being "diligently prosecuted" (88) at the end of the primarylease term; and

(3) rental was timely paid.

Second, a lease that meets these criteria will be extended "so long as oil or gas is being produced in paying quantities." (89) A lease that has been extended because of production does notterminate simply because production stops, as long as the lessee starts reworking or drillingoperations within sixty days after production ceases and conducts them with reasonable diligenceduring the non-productive period. (90) Furthermore, if a lease initially extended because of drillingbegins yielding oil or gas in paying quantities during the two-year drilling extension, the lease canbe extended again. (91)

Finally, lessees may collectively adopt and operate under a cooperative or unit plan for aparticular area if the Secretary considers such a plan to be in the public interest. (92) All leases subject to sucha plan will be extended if any of the leases covered by the plan qualify for a drilling or productionextension. (93)

Any MLLA lease can be cancelled or forfeited if the lessee fails to comply with MLLAprovisions, the lease's provisions, or regulations promulgated pursuant to MLLA. (94) In some situations theSecretary has the authority to cancel the lease, but some circumstances require a judicial proceedingto cancel the lease. (95) In addition, MLLA provides for automatic termination "upon failure of a lessee to pay rental on orbefore the anniversary date of the lease, for any lease on which there is no well capable of producingoil or gas in paying quantities." (96) However, the Secretary may reinstate automatically terminatedleases in some cases. (97)

Applications for Permits to Drill

U.S. Department of the Interior

Operators (98) must submit an Application for a Permit to Drill (APD) for each oil or gas well. (99) Without an approvedAPD, operators cannot begin drilling operations or cause surface disturbances that are preliminaryto drilling. (100) Infact, the APD process must begin at least thirty days prior to the commencement of operations. (101)

A complete APD must include the following: (102)

a drilling plan;

a surface use plan of operations, including drillpad locations and plans forreclaiming the surface;

evidence of bond coverage;

Form 3160-3; and

any other information that may be required.

Once BLM receives an APD, it must post information for public inspection for at least thirtydays before it may act on the APD. (103) Another pre-approval requirement is that BLM must preparean environmental record of review or an environmental assessment. (104) Based on thesedocuments, BLM decides whether an EIS is required. (105) Additionally, an adequate bond or other financial arrangementis required before the operator begins any surface-disturbing activities. (106)

Within five working days of the end of the public notice period, BLM must choose one offour options: (107)

(1) approve the application as submitted;

(2) approve the application with modifications and/orconditions;

(3) disapprove the application; or

(4) delay final action.

BLM must approve a surface use plan of operations addressing proposed surface-disturbingactivities before a permit to drill on lands BLM manages may be granted. (108) BLM and the ForestService have proposed joint regulations regarding surface use plans of operations. (109)

U.S. Forest Service

An approved surface use plan of operations addressing proposed surface-disturbing activitiesis also required before a permit to drill on NFS lands may be granted and before anysurface-disturbing operations may begin. (110) The operator must submit its proposed surface use plan ofoperations to BLM as part of its APD. (111) When the proposal pertains to NFS lands, BLM forwards theproposed surface use plan of operations to the Forest Service. (112)

The level of detail required in a proposed plan varies depending upon the "type, size, andintensity of the proposed operations and the sensitivity of the surface resources that will be affectedby the proposed operations." (113) When evaluating a proposed surface use plan of operations,the Forest Service must ensure that the proposal is consistent with the "approved forest land andresource management plan" for that area of land. (114) During the evaluation process, the Forest Service must alsocomply with NEPA, as well as appropriate Forest Service regulations and policies. (115) In addition, the ForestService can require that the operator increase the amount of its bond if it "determines [that] thefinancial instrument held by [BLM] is not adequate to ensure complete and timely reclamation andrestoration" of the NFS lands. (116)

Ultimately, the Forest Service must decide among four options: (117)

(1) approve the plan

(2) approve the plan "subject to specified conditions"

(3) disapprove the plan

(4) delay the plan because additional time is needed to reach adecision

Once it has made its decision regarding the proposed surface use plan of operations, theForest Service forwards the decision to BLM. (118)

Analysis of the Energy Policy Act of 2005

In August 2005, the Congress passed and the President signed the Energy Policy Act of 2005(2005 EPACT). (119) This comprehensive law touches upon many aspects of U.S. energy regulation, and among itsprovisions were several changes to the law governing federal oil and gas leases on public domainlands. This section of the report highlights selected provisions from the 2005 EPACT relating tothese topics. It also addresses selected provisions that were included in either the House or Senatebill, but were not included in the final legislation. The topics addressed by this section can beclassified into four categories: (1) streamlining and expediting oil and gas development processes;(2) a NEPA-related provision; (3) the Arctic National Wildlife Refuge; and (4) miscellaneousprovisions.

Streamlining and Expediting Oil and Gas Development Processes

The 2005 EPACT requires the Secretary of the Interior and the Secretary of Agriculture toenter into a memorandum of understanding regarding issues such as the establishment of proceduresto "ensure timely processing" of oil and gas lease applications, surface use plans of operation, andAPDs. (120) Thismemorandum must also ensure that lease stipulations are consistently applied and are "only asrestrictive as necessary to protect the resource for which the stipulations are applied." (121)

The Secretary of the Interior -- in consultation with the Secretary of Agriculture when NFSlands are involved -- must also conduct an internal review of Federal onshore oil and gas leasing andpermitting practices and subsequently submit a report to Congress detailing steps to improve theprocess. (122) TheSecretary of the Interior is also required to establish a Federal Permit Streamlining Pilot Project. (123)

Under the 2005 EPACT, the Secretary of the Interior is required to ensure expeditiouscompliance with 42 U.S.C. Â§ 4332(2)(C), which is the NEPA provision that requires the preparationof an EIS for major Federal actions that significantly affect the quality of the humanenvironment. (124) More specifically, the Secretary of the Interior must propose regulations containing deadlines formaking decisions on RMPs, lease applications, surface use plans of operations, and APDs. (125) The 2005 EPACT alsorequires the Secretary of Agriculture to "ensure expeditious compliance with all applicableenvironmental and cultural resources laws." (126)

NEPA-Related Provision

The 2005 EPACT establishes that certain actions taken by either the Secretary of the Interioror by the Secretary of Agriculture (when NFS lands are involved) "shall be subject to a rebuttablepresumption that the use of a categorical exclusion under [NEPA] would apply if the activity isconducted pursuant to [MLLA] for the purpose of exploration or development of oil or gas." (127)

The House bill had included a provision that differed from the NEPA provision adopted bythe Conference Committee. The House bill had declared that certain actions that the Secretary ofthe Interior takes "for the purpose of exploration or development of a domestic Federal energysource" are not subject to the NEPA provision requiring the preparation of an EIS. (128) Exempted actionswould have included drilling an oil or gas well where drilling had previously occurred and drillingan oil or gas well "within a developed field for which an approved land use plan or anyenvironmental document prepared pursuant to [NEPA] analyzed such drilling as a reasonablyforseeable activity." (129)

Arctic National Wildlife Refuge (ANWR)

One much-debated difference between the House and Senate energy bills had been the Housebill's provisions requiring the Secretary of the Interior to establish a competitive oil and gas leasingprogram in the Arctic National Wildlife Refuge (ANWR). (130) The 2005 EPACT does not include these provisions. However, several of the key ANWR provisions under the House billare detailed in the following paragraph, and may be relevant to future legislative proposals.

Under the House bill, ANWR lands would have been available for leasing to any personqualified to obtain a lease under MLLA. (131) Bids would have been submitted as sealed competitivebids. (132) Two uniqueANWR provisions in the House bill included (1) a provision requiring the first lease sale to be forat least 200,000 acres, with additional sales to be conducted as long as there is sufficient interest indevelopment (133) and(2) a provision directing that the State of Alaska would receive 50 percent of ANWR leasingrevenues, with the remainder being divided between a Coastal Plain Local Government Impact AidAssistance Fund and miscellaneous receipts within the U.S. Treasury. (134)

Miscellaneous Provisions

Miscellaneous relevant provisions contained in the 2005 EPACT include the following:

The Secretary of the Interior must reduce the royalty rate for oil and gasproduction on "marginal properties" (i.e., leases or units producing less than a specified amount),under certain conditions. (135)

The Secretary of the Interior may reinstate leases that were terminated becauseof the lessee's failure to timely pay the rental amount due, under certain modified conditions. (136)

The Secretary of the Interior must determine that receiving royalties in-kindwould provide greater or equal benefits than receiving royalties in-value before accepting anyroyalties in-kind. (137)

The Secretary of the Interior must conduct a study regarding split estates. (138)

The Secretary of Energy must conduct a study of petroleum and natural gasstorage capacity and operational inventory levels. (139)

Recent Litigation Surrounding Coalbed Methane Leasing

Coalbed methane (CBM) is a natural gas that is trapped in coal seams by water pressure. Developers extract CBM by pumping water into coal seams to decrease the water pressure, therebyreleasing the CBM. (140) In the second half of the 1990s, CBM production "increaseddramatically to represent a significant new source of natural gas for many Western states." (141) In 1999, the SupremeCourt held that CBM could be leased separately from coal. (142) Recently,environmental groups, developers, and BLM have litigated issues surrounding what actionsconstitute compliance with FLPMA and NEPA in the context of CBM development. These issueshave developed through several cases adjudicated by federal courts and the Interior Board of LandAppeals (IBLA), which is part of the U.S. Department of the Interior.

The Pennaco Decision

In one prominent case, environmental groups challenged a BLM decision to issue CBMleases to Pennaco, an energy developer. (143) When it auctioned the leases, BLM relied on two documentsto purportedly satisfy NEPA requirements: (144)

(1) an RMP and EIS that were prepared before theleases were issued, but did not specifically address CBM extraction ("the BuffaloRMP/EIS")

(2) a draft EIS (DEIS) that was prepared after the leaseswere issued, but did address the potential environmental impacts of CBM development ("theWyodak DEIS")

The BLM also determined that the Pennaco leases conformed with the Buffalo RMP, thus satisfyingFLPMA. (145) However, environmental groups alleged that the environmental impacts from CBM developmentwere different than the impacts from conventional oil and gas development. (146) Thus, they argued thatBLM did not take the requisite "hard look" at the potential environmental impacts of issuing thePennaco leases. (147)

The Interior Board of Land Appeals sided with the environmental groups by finding thatNEPA had not been satisfied and remanding to BLM for "additional appropriate action." (148) The IBLA found theBuffalo RMP/EIS to be inadequate because it did not specifically address CBM development, whichthe IBLA considered to be significantly different than the conventional development analyzed by theBuffalo RMP/EIS. (149) For example, the IBLA concluded that water production resulting from CBM extraction issignificantly greater than water production from conventional oil and gas development and that CBMdevelopment posed unique air quality concerns. (150) Further, the IBLA explained that the Wyodak DEIS did notsatisfy NEPA because it was a post-leasing analysis. (151) In particular, because it was a post-leasing analysis, theWyodak DEIS "did not consider reasonable alternatives available in a leasing decision, includingwhether specific parcels should be leased [and] appropriate lease stipulations." (152) Although the IBLA'sdecision was reversed by a federal district court, (153) the Tenth Circuit Court of Appeals agreed with the IBLA. (154) In Pennaco Energy,Inc. v. United States Department of the Interior , the Tenth Circuit held that "the IBLA gave dueconsideration to the relevant factors and that the IBLA's conclusion was supported by substantialevidence in the administrative record." (155)

Other CBM-Related Decisions

Pennaco appears to be the key Circuit Court decision on the merits of a case applyingFLPMA and NEPA to CBM development in this context. However, a variety of other judicial andadministrative decisions have addressed similar issues. These cases often turn on fact-intensive,case-by-case determinations. Several such decisions are briefly summarized below.

In Northern Plains Resource Council, Inc. v. United States Bureau of Land Management ,BLM had amended an RMP and prepared an EIS to address the impacts of oil and gas leasing inseveral areas. (156) These documents analyzed and allowed small-scale exploratory CBM drilling. (157) However, they statedthat "further environmental studies would have to be completed before commercial production wouldbe allowed." (158) Years later, after receiving APDs for the covered land, BLM completed EAs and made FONSIs fornumerous CBM wells. (159) Based on the FONSIs, BLM approved the APDs withoutpreparing an EIS. (160) BLM later recognized the energy industry's intention to engage in full-field CBM development onsome land, prompting it to prepare a new statewide EIS and proposed RMP amendments addressingthe environmental impacts of large-scale CBM development. (161) The United StatesDistrict Court for the District of Montana rejected the plaintiff's argument that the original RMP andEIS were inadequate, thus violating FLPMA and NEPA. (162) It held that the disputed APDs were all for test wells and thusfell within the scope of the exploratory drilling contemplated by the original documents. (163) Further, the courtexplained that once BLM had begun preparing a new EIS to address full-field development, "it wasnot required to halt lease sales, as long as [the leases] were in conformance with the existingplan." (164) The NinthCircuit Court of Appeals affirmed this decision on procedural grounds because the plaintiff'schallenge was barred by the statute of limitations. (165)

In subsequent litigation, the same plaintiff challenged the new statewide EIS and proposedRMP amendments, which authorized full-field CBM development in some areas. (166) The United StatesDistrict Court for the District of Montana agreed with one of the plaintiff's two primaryarguments. (167) Itheld that BLM should have considered a "phased development alternative" as an alternative tofull-field CBM development. (168) However, it also held that BLM was justified in conductingtwo separate studies of the area, rather than conducting one larger study. (169)

In San Juan Citizens ' Alliance v. Babbitt , plaintiffs argued that BLM had acted arbitrarily andcapriciously -- thus violating NEPA -- by approving CBM wells at twice the density that wascontemplated by existing environmental documents. (170) Prior to approving the challenged CBM wells, BLM hadissued a statewide EIS as well as preparing an EA and making a FONSI for a smaller area within thestate. (171) However,the plaintiffs claimed that BLM should have either created a new EIS or a supplemental EIS (SEIS)to sufficiently address the cumulative environmental impacts of the existing wells combined withthe impacts of the newly approved wells. (172) Plaintiffs asserted that new information shedding light on theenvironmental impacts of CBM development had become available since the issuance of the originaldocuments. (173) Plaintiffs also argued that BLM had violated FLPMA by approving CBM development that allegedlydid not conform to the RMP. (174) The defendants moved to dismiss, and the United StatesDistrict Court for the District of Colorado denied the motion. (175)

Several IBLA decisions also address similar issues. In the 2003 matter of Wyoming OutdoorCouncil , the IBLA ruled that BLM had not taken the NEPA-mandated "hard look" at water qualityissues associated with CBM development in one area. (176) The IBLA found the BLM's water quality analysis to beinadequate because it was based on only one CBM well sample and neither of BLM's EAs addressed"any deleterious impact of CBM discharge water due to its chemical composition." (177) The IBLA also foundthat BLM should have considered the cumulative environmental impacts of the new wells combinedwith some nearby wells that met "the geographical proximity test for inclusion in a cumulativeimpacts analysis." (178)

In the 2004 matter of Western Slope Environmental Resource Council , the IBLA stated:

[T]he appropriate time for considering the potentialimpacts of oil and gas exploration and development is when BLM proposes to lease public lands foroil and gas purposes because leasing, at least without [no surface occupancy stipulations], constitutesan irreversible and irretrievable commitment to permit surface-disturbing activity. (179)

The IBLA went on to hold that the appellants had not proven that the environmental impacts of CBMdevelopment in the disputed area would be different from the impacts of conventional oil and gasdevelopment. (180) Even though the unique environmental impacts of CBM had been recognized in some cases, theIBLA emphasized that the appellants had not met their burden of proof in this particular case. (181) Evidence indicatedthat the disputed coalbeds were located far beneath the surface and that there was a "lack oftransmissivity of the coal." (182) According to the IBLA, this evidence suggested that CBMextraction in this area would not produce a large amount of water, thus limiting the environmentalimpacts that would occur. (183)

List of Acronyms