Wyoming U.S. District Court Declares Bureau of Land Management's Hydraulic Fracturing Rule Unlawful

On June 21, 2016, United States District Judge Scott Skavdahl granted BakerHostetler's petition for review of final agency action and declared the Bureau of Land Management's (BLM's) hydraulic fracturing rule unlawful. The court's judgment sets aside BLM's hydraulic fracturing rule, and America's independent oil and gas producers can continue their proven business of responsible oil and gas development on federal and Indian lands without the cloud of one more unnecessary regulatory burden.

BLM issued the rule in March 2015, attempting to exert jurisdiction over hydraulic fracturing on federal and Indian lands.

Minutes after BLM issued the hydraulic fracturing rule, BakerHostetler's team filed a legal challenge on behalf of the Independent Petroleum Association of America (IPAA) and the Western Energy Alliance (the Alliance) in the United States District Court for the District of Wyoming. IPAA and the Alliance began what became a much larger lawsuit, which eventually included challenges from four states – Wyoming, North Dakota, Colorado and Utah (the States) – and the Ute Indian Tribe (the Tribe).

IPAA and the Alliance argued that BLM's rule was a remedy in search of a harm, as BLM failed to identify any proven environmental risk or regulatory gap that the rule addressed. IPAA and the Alliance also challenged BLM's assertion of jurisdiction despite specific congressional actions to remove hydraulic fracturing from federal regulation. The States and the Tribe contended that BLM's rule infringed on their respective sovereignty, once again overstepping BLM's regulatory jurisdiction.

On June 21, 2016, the district court agreed, concluding that the industry, state and tribal challengers had proven that BLM lacks the jurisdiction to regulate hydraulic fracturing. In the ruling, Judge Skavdahl supported the position of BakerHostetler's clients, the States, and the Tribe, noting that: "In recent years, as does the BLM here, federal agencies have increasingly relied on Chevron deference to stretch the outer limits of its 'delegated' statutory authority by revising and reshaping legislation. . . . If this Court were to accept [BLM's] argument, there would be no limit to the scope or extent of Congressionally delegated authority BLM has, regardless of topic or subject matter." Unwilling to accept such an attenuated extension of federal regulatory power by administrative fiat, Judge Skavdahl concluded: "Congress has not delegated to the Department of Interior the authority to regulate hydraulic fracturing. The BLM's effort to do so through the Fracking Rule is in excess of its statutory authority and contrary to law."

"From the beginning, the hydraulic fracturing rule has been a solution in search of a problem," said Mark Barron, one of the BakerHostetler attorneys representing IPAA and the Alliance. "Despite independent producers' extraordinary record of safety and environmental stewardship, BLM attempted to promulgate a rule that imposed needless costs on America's small businesses and public treasuries, without any commensurate environmental benefit. We are pleased that the district court recognized such a rule could not be implemented within the bounds of BLM's statutory authority."

In the immediate future, BLM or special interest group intervenors will likely appeal to the United States Court of Appeals for the Tenth Circuit. Even if the Tenth Circuit were to reverse the ruling, a remand to the district court will likely still be necessary to decide IPAA's and the Alliance's multitude of technical and administrative challenges to BLM's unlawful rule – the same technical and administrative challenges that the district court concluded would likely be successful on the merits at the preliminary injunction stage.

With BLM's rule declared unlawful and set aside, independent oil and gas producers are now able to conduct their exploration and production operations on federal and Indian lands without the worry of duplicative and onerous BLM hydraulic fracturing regulations.

EDITOR'S NOTE: BakerHostetler attorneys Mark Barron, Poe Leggette and Alex Obrecht are handling the lawsuit challenging BLM's hydraulic fracturing rule.

A copy of Judge Skavdahl's Order on Petitions for Review of Final Agency Action is available here.

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