Independent Oil and Gas Producers Defeat Attempt to Revive Obama-Era Hydraulic Fracturing Regulations

California US District Court Upholds 2017 Rescission of Rules Previously Declared Illegal

Alerts / April 2, 2020

On March 27, 2020, the United States District Court for the Northern District of California granted summary judgment on behalf of BakerHostetler clients Independent Petroleum Association of America (IPAA) and Western Energy Alliance (the Alliance), as well as other defendants, rejecting in full challenges that the State of California and environmental special interest groups raised against the Trump Administration’s rescission of an Obama-era rule intended to regulate hydraulic fracturing on federal and Indian lands. BakerHostetler lawyers Mark Barron, Alex Obrecht, and Poe Leggette have been representing industry in this dispute since 2013, first successfully overturning the Obama regulations in 2016 and now successfully defending the rescission of those regulations.

The California court’s decision represents the latest defeat in special interest groups’ five-year effort to compel implementation of the legally flawed regulations the Obama Administration issued in March 2015 (the HF Rule). Minutes after the Bureau of Land Management (BLM) issued the HF Rule, BakerHostetler’s team filed a legal challenge on behalf of IPAA and 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 the HF 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 statutory jurisdiction.

On June 21, 2016, the Wyoming federal 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 Scott 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 that “Congress has not delegated to the Department of Interior the authority to regulate hydraulic fracturing. The BLM’s effort to do so through the [HF Rule] is in excess of its statutory authority and contrary to law.”

Judge Skavdahl’s decision was appealed to the United States Court of Appeals for the Tenth Circuit. But the Tenth Circuit vacated the appeal without addressing the merits when, in December 2017, the Trump Administration issued an updated regulation rescinding the HF Rule (the Rescission Rule). Shortly after, the State of California and a collection of special interest advocacy groups filed two suits in the United States District Court for the Northern District of California, challenging the Rescission Rule.

On March 27, 2020, Judge Haywood Gilliam rejected the plaintiffs’ challenges, finding that the Trump Administration had adequately explained its decision to rescind the HF Rule. Judge Gilliam pointed to BLM’s observation that numerous states had updated their hydraulic fracturing regulations since 2015. He acknowledged evidence in the administrative record supporting BLM’s conclusion that, despite the HF Rule never having been implemented, adverse impacts from hydraulic fracturing remained rare. And he noted that, irrespective the scale of compliance costs associated with the HF Rule, BLM was entitled to prioritize avoiding those costs. Judge Gilliam’s ruling ensures that independent oil and gas producers can continue conducting their exploration and production operations on federal and Indian lands free from the burden of duplicative and costly regulations.

“The California plaintiffs’ failure to refute that environmentally responsible oil and gas development has continued on federal lands – despite the 2015 hydraulic fracturing rule never taking effect – is conclusive evidence that the 2015 rule would have imposed needless costs on America’s small businesses and public treasuries, without any commensurate environmental benefit,” said Barron. “For more than a half-decade now, courts around the country have repeatedly denied special interest groups’ efforts to compel implementation of the illegal and unnecessary 2015 hydraulic fracturing rule, and we are pleased that Judge Gilliam has endorsed BLM’s very sensible decision to rescind that rule.”

Authorship Credit: Mark Barron, Alex Obrecht and Poe Leggette

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