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4 Difficulties in Relating Leasing and Planning With the enacunent in 1976 of the Federal Land Policy and Man- agement Act ALP MA; 43 USC 1701-1782) and the National Forest Man- agement Act (NFMA; 16 USC 16001614), all the basic laws leasing, environmental, and planning that affect oil and gas exploration and de- velopment on public lands were in place. The regulations implementing the planning directives of the F~PMA and NFMA were first promulgated in 1979 and revised in 1982 (Forest Service, 36 CF~ Part 219) and 1983 (BLM, 43 CFR Part 1600~. The first land use plans to be prepared entirely under those two statutes and their rules were begun by 1979. Controversy arose quicldy as the Bureau of Land Management and Forest Service planners struggled to marry the new planning requirements of the NFMA and FLPMA and the environmental analysis requirements of the National Environmental Policy Act (42 USC 4321-4370 [19703) and the Endangered Species Act (16 USC 1531 et seq.) with on and gas leasing and management processes that had been established for decades. Critics maintained that the agencies were failing to comply with the planning and environmental statutes in their decisions to lease, and authorizations to explore and develop, oil and gas. Although the controversy focused on certain geographical areas in the relatively unspoiled terrain of the Rocky Mountain Front in Wyoming and Montana, its significance was national, spawning both legislation and litigation. 44

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45 THE ENERGY SECURITY ACT The initial question was whether decisions on the leasing, and the authorizing of exploration and development, of federal oil and gas should be delayed until existing National Forest land use plans were updated to meet NFMA standards. Congress addressed this issue in 1980. It included in the Energy Security Act adopted that year a provision expressing Congressional "intent . . . that the Secretary of Agriculture . . . process applications for leases . . . and for permits to explore, drill, and develop resources on land leased from the Forest Service, notwithstanding the current status of any plan being prepared under [the NFMA]" (42 USC 8855~. The act did not address leasing and planning on lands administered by the BLM. Subsequently, a federal district court found that the Forest Service had violated tliis provision by suspending, during preparation of a new land use plan, the processing of lease applications on the Bridger-Teton and Shoshone National Forests in Wyoming (Mountain States Legal Foundation v. Hodel, 668 F. Supp. 1466 [D. Wyo. 19873~. But the Energy Security Act did not waive or otherwise affect the requirements of NEPA, which were also applicable to any Forest Service decisions on leases. Therefore, the Forest Service was still obligated to complier with NEPA and to prepare an environmental impact statement before it could make decisions on oil and gas exploration and development on these forests. (Indeed, both the Forest Service and the BLM have for some years routinely prepared planning documents on parallel tracks with NEPA documents, or sometimes simply meshed the two, so that a land use plan may be in the format of an environmental impact statement and satisfy the mandates of both NEPA and the planning statutes.) The failure of Congress to waive the NEPA requirements, in other words, has deprived the Energy Security Act from having real impact on oil and gas leasing, exploration, or development or on the issues before this committee. On the Bridger-Teton National Forest, for example, the Forest Service is still not processing oil and gas lease applications because it has determined that it can best satisfy its obligation to comply with NEPA at the same time as it prepares the new land use plan, and this determination has not been challenged in court. OIL AND GAS LEASING AND WILDERNESS Another issue associated with the controversy over oil and gas leasing has been wilderness designation under the Wilderness Act of 1964 (16 USC 1131-1136~. The process of congressional consideration of lands recom- mended for wilderness designation in the second Forest Service wilderness

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46 review has not been completed, and the process of congressional consid- eration of lands undergoing BLM's wilderness review has just begun. The controversy between wilderness designation and oil and gas leasing has two origins. First, only roadless areas still in a relatively natural condition qual- ify for wilderness designation, and any significant and lasting disturbance from oil and gas activities (including road building) may either disqualify areas from consideration by the agency for wilderness recommendations to Congress or dissuade Congress from designating the areas. Second, once an area is designated by Congress as wilderness, the Wilderness Act proscribes oil and gas leasing and any activities that require structures or mechanized equipment (16 USC 1133~. In recent years, first in annual appropriations acts and now in the 1987 Federal Onshore Oil and Gas Leasing Reform Act (101 Stat. 1330-256), Congress has also prohibited oil and gas leasing in most areas under serious consideration for formal wilderness designation until it decides whether they deserve wilderness status. Furthermore, the controversy may continue even after Congress de- cides against designating a particular area as wilderness. An area not designated is typically "released" by Congress for ordinary multiple-use management, which can include mineral leasing, but this does not sub- sequently prevent the agency from again recommending wilderness desig- nation for the area or Congress from reconsidering and designating the area. The controversy thus continues with wilderness advocates seeking to protect the natural condition of the released area for possible subsequent wilderness designation and proponents of oil and gas exploration and de- velopment seeking to have the area leased before any such designation occurs. This issue is discussed further in Chapter 7. THE COURT DECISIONS NATIONAL ENVIRONMENTAL POLICY ACT The courts eventually became participants in the controversy as lawsuits were filed challenging the agencies' oil and gas leasing and management decisions, primarily on the grounds that the land management agencies failed to comply with the National Environmental Policy Act and the Endangered Species Act (16 USC 1531 et send. The first case to contest onshore federal oil and gas leasing on NEPA grounds, Sierra Club v. Peterson (717 F.2d 1409 [D.C. Cir. 1983], was brought more than a decade after NEPA took effect, and challenged issuance of dozens of leases on the lbrghee and Bridger-~ton National Forests in northwestern Wyoming. In this case, the Court of Appeals for the District of Columbia circuit concluded that the federal government could not postpone compliance with NEPA past the stage of lease issuance unless it reserved,

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47 In the lease, complete power to "preclude surface disturbing activities" (717 F.2d 1409, 1414 tD.C.Cir. 1983] [emphasis in original]). Otherwise, the court said, "the decision to allow surface disturbing activities has been made at the leasing stage and, under NEPA, this is the point at which the environmental impacts of such activities must be evaluated" (717 F.2d 1409, 1414 [D.C. Cir. 1983] [emphasis in originally. The government had argued that the environmental impacts of leasing were not foreseeable at the time of leasing because subsequent exploration activities may or may not be undertaken and may or may not disclose the presence of commercially producible oil and gas, and that production activities would not be planned unless and until successful exploration occurs. The court responded: If . . . the Department is in fact concerned that it cannot foresee and evaluate the environmental consequences of leasing without site-specific proposals, then it may delay preparation of an EIS provided that it reserves both the authority to precede all activities pending submission of site-specific proposals and the authority to prevent proposed activities if the environmental consequences are unacceptable. If the Department chooses not to retain the authority to precede all surface disturbing activities, then an EIS assessing the full environmental consequences of leasing must be prepared at the point of commitment when the leases are issued. The Department can decide, in the first instance, by which route it will proceed. (717 F.2d 1415) (emphasis in original). Four years later, the Court of Appeals for the Tenth Circuit took a somewhat different view of the question in Park County Resource Council v. US. Department of Agriculture (817 F.2d 609 [lOth Cir. 1987~. In this case a federal oil and gas lease had been issued on the Shoshone National Forest in Wyoming in 1982 without an EIS. Although the record is not clear on the point, apparently the lease did not contain an explicit reservation of authority in the federal government to preclude all surface-disturbing activities such as would have satisfied the District of Columbia circuit in the Peterson case. The lessee subsequently submitted an Application for a Permit to Drill (APD), and the BLM and the Forest Service prepared an EIS on this application and approved it. The plaintiffs then challenged not only the adequacy of the EIS on the APD, but also the earlier failure to prepare an EIS on the lease issuance. Because the drilling had already resulted in a dry hole, the court held that the challenge to the APD was moot, but it went on to uphold the lease issuance without an EIS, finding that "in this case, developmental plans were not concrete enough at the leasing stage to require such an inquiry" (817 F.2d 623~. It noted that the Forest Service had prepared an "environmental assessment" (rather than a full EIS) on a cluster of oil and gas leases including the one being challenged, and had included in the lease "appropriate . . . stipulations aimed at protecting the environment" (not described by the court), and therefore the agency's conclusion that

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48 lease issuance itself was "essentially a paper transaction" was not unrea- sonable. The court noted that the environmental plaintiffs had argued that "an EIS must be prepared at the leasing stage because of the eventual cumulative and foreseeable effects of exploratory drilling and then full field development" (817 F.2d 622~. The court responded: This argument would have more force . . . if full field development were likely to occur and could be specifically described at the leasing stage.... Full field development is typical an extremeh~r tentative possibility at best at the leasing stage.... To require a cumulative EIS contemplating full field development at the leasing stage would thus result in a gross misallocation of resources, "would trivialize NEPA" and would "diminish its utility in providing useful environmental analysis for major federal actions that truly affect the environment . . .". . . . When BLM is considering a mere leasing proposal, it has no idea whether development activities will ever occur, let alone where they might occur. When an [application for permit to drill] is submitted [sometime after a lease is issued], BLM then has a concrete, site-specific proposal before it and a more useful environmental appraisal can be undertaken. One then can BLM determine whether a river system is implicated, where access will be needed and how it should be accomplished, and which wildlife is affected. In short, the specificity that NEPA requires is simper not possible absent concrete proposals. (817 F.2d 623~24) (citations omitted). The Tenth Circuit's opinion did not discuss, or mention, the Peterson opinion. The Court of Appeals for the Ninth Circuit addressed a similar issue in Conner v. Burford (848 F.2d 1441 [19873) and reached the same conclusion as the District of Columbia circuit in the Peterson case that an EIS was required at the lease issuance stage if the lease itself made some sort of "irretrievable commitment" to disturb the environment. The court quoted favorably the above passage from the circuit court opinion in Peterson concerning which "route" the land management agency may wish to take- preparation of an EIS or preclusion of all surface-disturbing activities as a condition in the lease. Conner did not discuss, or mention, the Tenth Circuit's opinion in Park Count. In a subsequent case, Bob Marshall Alliance v. Hodel, (852 F.2d 1223 t9th Cir. 1988~), the Court of Appeals for the Ninth Circuit followed its decision in Conner, reaffirming its view that NEPA requires preparation of an EIS prior to issuing an oil and gas lease unless the lease reserves in the agency the authority to deny any significant surface-disturbing activity on the lease on environmental grounds. Once again the Park County decision was not discussed. It is not clear whether these decisions from three different federal appellate courts are in irreconcilable conflict with each other as to the requirements of NEPAL Representatives of the oil and gas industry believe that a conflict exists and asked the Supreme Court to resolve it by reviewing the Ninth Circuit decision in the Conner case. However, the federal

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49 government chose not to join the industry in petitioning for certiorari. Instead, the Solicitor General of the United States took the position before the Supreme Court that the cases were not conflicting, because of the "very different facts present in the cases" (Brief for the Federal Respondents in Opposition to Supreme Court review of Conner v. Burford, p. 10~. The Supreme Court declined to review the Conner decision in early 1989, without comment. THE COURT DECISIONS ENDANGERED SPECIES ACT Critical habitat of species protected by the Endangered Species Act can be found in a variety of places across the country. The question of ESA compliance in onshore federal oil and gas leasing has largely focused on one species and one large area of cryptical habitat the grizzly bear, a listed threatened species, and an area of the northern Rocly Mountains where the bear's habitat overlays portions of the Overthrust Belt of considerable petroleum industry interest. In all but one of the lawsuits discussed above, agency compliance with the ESA on lease issuance was also in dispute. The Conner v. Burford litigation afforded the first occasion to the courts to address the requirements of the ESA as they apply to the onshore federal oil and gas leasing program. In Conner, the Ninth Circuit held that a biological opinion on the likelihood of jeopardy to threatened and endangered species (including the grizzly bear) that was prepared prior to leasing must consider not only the effect of issuing the leases themselves, but also the effect of post-leasing activities, including exploration and development. The court specifically noted that "incomplete information about post-leasing activities does not excuse the failure to comply with the statutory requirement of a comprehensive biological opinion using the best information available" (848 F.2d 1454~. In the Conner case, the court rejected the government's argument for a segmented approach to ESA compliance, one that would have allowed the pre-lease biological opinion to address only those impacts that would necessarily follow from issuing the leases, and to postpone addressing impacts that would follow from agency decisions after such lease issuance, such as whether to approve a lessee's application for permission to drill exploratory or production wells. The courts had previously approved such a segmented approach in considering the ESAs application to federal oil and gas development on the Outer Continental Shelf.1 The Outer Continental Shelf analogy did not work onshore, the Ninth 1 See, e.g., North Slope Borough v. Andws (642 F:2d 589, 608-609 [D.C. Cir. 19803), Village of False Pass v. Clark (733 F.2d 605, 609-612 [9th Cir. 19843~.

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so Circuit determined, because the statutes underlying the two oil and gas leasing programs were different. The Outer Continental Shelf Lands Act (OCSLA; 43 USC 1331-1356) plainly and unequivocally segmented agency decision making among lease issuance, exploration, and develop- ment. Agency approval of one stage gave the lessee no right to proceed to the next stage without an additional, legally independent decision by the agency. Thus there was, in the court's view, a "complementary relationship between the ESA:s requirements and the segmented approach of OCSLA:' (848 F.2d 1456~. On the other hand, the Mineral Leasing Act (at least prior to its amendment in 1987 by the Reform Act discussed on pp. 51-52) did not contain an explicit segmentation of the stages of onshore oil and gas activities from leasing through exploration to production. Therefore, there was, according to the court, "no justification to obviate the ESA's congres- sional mandate that a comprehensive biological opinion be, prepared [at the lease issuance stage]" (848 F.2d 1457 [footnote omitted]~. (One judge dissented from the threejudge panel's ruling on this point, arguing that segmentation of the ESA compliance is as appropriate under the Mineral Leasing Act as under the OCSLA [848 F.2d 1462-1464~.) The Ninth Circuit rea~rmed its conclusion that the ESA requires preparation of a comprehensive biological opinion at the lease issuance stage in Bob Marshall Alliance v. Hodel. By contrast, the Tenth Circuit in Park County Resource Council v. Department of Agriculture upheld the segmentation of ESA compliance in onshore oil and gas leasing, following its determination that NEPA compliance may likewise be segmented, as discussed earlier. The U.S. Supreme Court was asked to review Conner v. Burford on the ground that it was inconsistent with the Park County decision on ESA as well as NEPA grounds, but the Court declined. On the ESA question, the Solicitor General of the United States informed the Supreme Court that, in his judgment, Conner was wrong because the onshore oil and gas leasing program did allow for segmented compliance with the ESA Nevertheless, the Solicitor General recommended that the Supreme Court not review the question because Conner was not in irreconcilable conflict with Park Count, in any event the practical importance of Conner was uncertain, and the agencies should be given an opportunity to comply with it (Brief for the United States, pp. 15-16~. THE COURT DECISION~INDUSTRY SUITS Litigation discussed in the previous two sections was initiated by en- v~ronmental or wilderness advocates. Industry, however, also sought the judiciary's assistance. As noted above, advocates of oil and gas devel- opment successfully challenged the delay in processing oil and gas lease

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51 applications under the Energy Security Act in Mountain States Legal Foun- dation v. Hodel. Earlier, the same group had successfully prosecuted an action challenging agency delay in processing applications by arguing that the delay was a de facto withdrawal that failed to comply with the process for making withdrawals prescribed in the FI=PMA (Mountain States Legal Foundation v. Andrus, 499 F. Supp. 383 [D. Wyo. 1980~. A prospective oil and gas lessee unsuccessfully challenged BLM's refusal to consider leasing a particular area in Learned v. Watt (528 F. Supp. 980 [D. Wyo. 1981~. An industry trade association unsuccessfully challenged the BLM's restrictive interpretation of FLPMA as it pertains to oil and gas leasing in wilderness study areas in Rocky Mountain Oil & Gas Association v. Watt (696 F.2d 734 [lOth Cir. 1982~. An oil company unsuccessfully sought to reverse an Interior Department decision finding that further NEPA compliance was necessary before taking action on the company's application to drill a well on its federal oil and gas lease (Texaco Producing, Inc. v. Hodel, 840 F. Supp. 776 [lOth Cir. 1988~. THE REFORM ACT Also in the period after enactment of the planning statutes late 1970s and early 1980s the oil and gas leasing process itself became increasingly controversial (National Research Council, 1986~. The process suffered several leasing moratoria and litigation over the difficulties in defining the `'known geologic structure," which was the statutory predicate for competitive leasing, and allegations of widespread fraud and speculation at the public's expense in the "lottery" process of noncompetitive leasing (e.g., see Arkla Exploration Co. v. Texas Oil and Gas Corp., 734 F.2d 347 [8th Cir. 1984~. The difficulties encountered in managing the existing leasing process ultimately convinced both the leasing agency BLM and the Congress that the process required statutory reform. Legislation was introduced in 1986 that ultimately became the Federal Onshore Oil and Gas Leasing Reform Act of 1987. Soon after the initiation of legislative deliberations on reform of the leasing process, a number of House members began advocating statutory clarification of the appropriate NEPA analysis and consideration of oil and gas development to be done before leasing, focusing on the land use planning process. The result was section 5 of the version of the Reform Act that passed the House of Representatives (H.R. 2851, 100th Congress, 1987~. That provision would have directed that, by January 1, 1991, new BLM and Forest Service land use plans must be issued, or old plans must be amended, wherever the public has expressed substantial interest in oil and gas leasing or the Secretary of the Interior has found high potential for

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52 oil and gas recovery. The new or amended plans would have been required to include three considerations: (A) The potential oil and gas resources including a map and narrative description indicating those areas with known oil and gas reserves as well as lands already under lease for oil and gas. (B) An analysis of the most likely social, economic, and environmental con- sequences of exploration and development for oil and gas recovery, including the most likely potential consequences of exploration and development of tracts already leased or for which lease applications are pending. (C) An identification of those specific protective stipulations to be applied to oil and gas leases, and the specific areas to which each such stipulation shall apply. The Secretary concerned is authorized to use stipulations which reserve the right to prohibit surface occupancy of the lease area only where the Secretary determines that recovery of oil or gas from such area is feasible without surface occupancy. The Senate-passed version (S.66, 100th Congress, 1987) of the act contained no comparable provisions. The compromise that the House- Senate conferees adopted was section 5111 of the Reform Act, which required this study, and a study by the Comptroller General, of how oil and gas leasing is considered in the BLM's and the Forest Service's land use planning. The Reform Act did make several significant changes in the admin- istration of the onshore oil and gas leasing program of relevance to this study, which are discussed in Chapters 5 and 6. AGENCY REFORM EFFORTS While the courts and the Congress were considering the issues of land use planning and oil and gas leasing on federal lands, the BLM and the Forest Service devised or proposed solutions of their own. Both agencies reexamined, and made a number of modifications in, both their planning and their leasing processes, to address more effectively the exploration and development operations that may ensue from leasing. The BLM's program modifications focused on land use planning and took the form of field instructions (BLM, 1986), which require that each BLM land use plan include, among a number of analyses, a classification of lands into four management categories of lands closed to oil and gas leasing and lands open to oil and gas leasing, with three categories of environmentally related stipulations, identification of the specific stipula- tions for the lands determined to be open for leasing, and analysis of the "cumulative environmental impacts of reasonably foreseeable fluid mineral development."

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53 The Forest Se~ce's program modifications related to its role in the leasing process and took the form of proposed regulations published on January 23, 1989 (54 Fed. Reg. 3326-3339~. Although these proposed rules address the Forest Sen~ce's responsibilities at lease issuance, they require several pre-lease decisions (e.g., the suitability or unsuitability of an area for leasing and the terms of lease stipulations) that the agency ultimately intends to make during the planning process. At the time this report was prepared, no final rules had been issued. REFERENCES Bureau of Island Management, Department of the Interior. 1986. Supplemental Program Guidance: Energy and Mineral Resources Fluid Minerals. November 14. National Research Council. 1986. Committee on Known Geologic Structures. Known Geologic Structures Under the Mineral Leasing Act: Interpreting and Applying the Term "Known Geologic Structure of a Producing Oil and Gas Field."