In the first decision applying the National Environmental Policy Act ("NEPA") to hydraulic fracturing or fracking, a US District Court in California ruled that the Bureau of Land Management (BLM) violated NEPA when it did not perform an Environmental Impact Statement that considered the impacts of fracking on federal lands.
Central California's Monterey Shale Formation is estimated to contain 15 billion barrels of shale oil equal to 64% of the nation's shale oil reserve. Nearly half of the land in California is controlled by various federal agencies.
In this case, BLM sold four leases to allow drilling on 2700 acres of federal land that contained areas responsible for refreshing important drinking water aquifers, was near two drinking water reservoirs, contained high quality streams, and possessed habitat for a number of federally listed endangered species. Two of the leases contained no-surface occupancy (NSO) conditions, and the other two did not.
NEPA requires federal agencies to prepare an Environmental Impact Statement ("EIS") for any major federal action "significantly affecting the environment." An EIS assesses impacts such as affects on air resources, water resources and wildlife, along with alternatives that may avoid or mitigate those impacts. As a preliminary matter, federal agencies need not prepare a full blown EIS if they find that the action will have no "significant" affect on the human environment ("FONSI").
To allow oil and gas development on land it controls, BLM must follow a three-step process: first, it adopts a land management plan; second, it leases particular parcels of land; and third, it issues drill permits for specific wells. The effect of BLM granting a lease is to afford the lessee a right to develop the resource. At the permit stage, BLM retains the authority to require the driller to relocate or redesign the operation to protect sensitive resources, but it would not be able to prevent drilling or fracking.
BLM determined that its lease sale would not significantly affect the human environment and that no EIS was necessary. In making that decision, BLM did not look at the affects of horizontal drilling and fracking on the environment. BLM instead sought to postpone that consideration until it issued drill permits for specific wells.
For the two leases with NGO provisions, the Court agreed that a NEPA analysis was not required because BLM could still prevent drilling once more information became available.
But for the two non-NGO leases, the Court said that a NEPA analysis was required because otherwise BLM would not be able to avoid serious environmental affects by preventing drilling at the permit stage.
The Court also found that an EIS should have been prepared for the non-NGO leases. BLM did not prepare and EIS because it assumed, based on historical data, that one exploratory well would be drilled on the lease and no other surface activity would take place. It did so despite recognizing that modern fracking and horizontal drilling has dramatically increased the economic feasibility of extracting oil and gas from shale reserves across the nation. The Court found BLM's assumption that horizontal drilling and fracking would not likely occur on the leased land to be unreasonable. The Court said that BLM should have prepared an EIS that considered the impacts of fracking before the non-NGO leases were issued.
The case is Center for Biologic Diversity and Sierra Club v. Bureau of Land Management and Ken Salazar, C-1106174, US District Court, Northern District of California.
